it comes to money and family, is there ever a
widow with a toddler child recently confided that her
late husbandís family contacted her right before this
monthís tax-filing deadline.
a confusing phone call, the relative told her the family
wanted to include her sonís Social Security survivor
benefits in a tax return having to do with a family
estate. Including the childís benefits would reduce
the estateís tax bill by several thousand dollars, and
the child would benefit from the proceeds of the trust
later in life, the relative said.
that sounded positive, the widow was rightly concerned
about the details. If her young son is listed on a tax
return now, will it be a red flag for an audit or
otherwise create a tax burden for her son or for her in
there are a host of other issues that potentially could
present problems, experts say.
her case, it sounds like there are a lot of things going
on. People sometimes can be short-sighted in saving tax
dollars today without thinking about longer term
issues," said Janis Cowhey, a partner who
specializes in trusts and estates for Marcum LLP.
example, will the assets given in the childís name
hurt his chances for receiving financial aid for college
down the road?
if the widow trusts that the family isnít trying to
use his Social Security number or income for wrongdoing,
they might still simply be trying to score a small gain
now at a higher future cost, Cowhey said. If the child
has his own trust, for example, does it now have an
offsetting tax obligation from the money
"saved" by the estate?
even families present only enough facts so that it looks
like a no-brainer, but you have to consider everyone
elseís tax implications," she said.
area where families often fail to communicate centers on
timing, said Casey Robinson, a financial planner with
Waldron Private Wealth.
families who donít have multiple millions to pass down
should consider using a revocable living trust to create
a timetable for heirs to receive money, he said. Many
families today stagger inheritances until an heir turns
35 or even older, he said.
donít necessarily want an 18-year-old to get $100,000
all at once," he said, so itís important to let
adult children know the reasons for staggering the
always say, ĎI know my kids,í but even great kids
get into bad business situations or car accidents"
that can strip away unprotected funds quickly, she said.
often recommends giving heirs assets in three tranches,
say, at 25, 35 and 45. She also advocates giving plenty
of discretion to the trustee overseeing the estate.
Trying to control too much ahead of time in a trust
document will invariably fail to take into account
changing fortunes, tax laws or serious health issues,
she urges clients to consider establishing childrenísí
trusts, without setting up mandatory distributions to
receive inheritances, rather than leaving assets to
children directly. This way, if an adult child marries
without a prenuptial agreement, the assets are generally
protected if the marriage fails. Still, itís important
to ask a qualified attorney about the exceptions and
Robinson says, the most important piece is communicating
now, because later might not happen.
had plenty of experience with families who come in after
a death, each one saying grandmaís house was supposed
to be theirs," he said.
be that grandma.