November 2021

Steve Aucamp Weighs In: Biggest Tax, Estate Planning Issues for Surviving Spouses | Financial Advisor IQ

Published by Financial Advisor IQ
Article By Rita Raagas De Ramos
November 10, 2021

FA-IQ reached out to advisors to ask: What are the biggest tax and estate planning issues a surviving spouse may face, and how can financial advisors help them navigate these issues?

Steve Aucamp, managing director at Tiedemann Advisors. Washington, D.C.-based Aucamp has been in the industry for 18 years and has around $1.7 billion in client assets.

“The death of a spouse is one of the most difficult things imaginable. Unfortunately, poor financial planning can add to the emotional toll of the loss. In a marriage, it’s common for one spouse to be more involved with the family finances, including tax and estate planning, which may leave the surviving spouse left to navigate a complex financial situation they’re completely unfamiliar with.

Time is Limited

If the spouse recently passed away, we recommend that the widow/widower understand that there are deadlines for making some decisions. Even amid grief, it's important for the surviving spouse to reassess finances and review the estate plan in a timely manner. For example, the surviving spouse may ‘disclaim’ his/her interest in some of the decedent’s assets to allow them to transfer to other beneficiaries, but this must be done within nine months from the decedent’s death. This can be a powerful wealth transfer tool as it allows the surviving spouse a ‘second look’ at the overall estate plan. The surviving spouse may also need to make a ‘portability’ election on the decedent’s estate tax return to maximize the amount transferred estate-tax free to the next generation.

Review All Puzzle Pieces

Steve Aucamp Besides the emotional toll, surviving spouses typically confront complex financial circumstances. At Tiedemann, when a client passes away, we review the entire estate of the decedent and the survivor. In several instances we have found incomplete or inaccurate beneficiary designations and incorrect titling of assets. In one situation we discovered assets that the survivor was unaware of, which allowed for planning opportunities to transfer wealth tax-free. With the loss of a spouse's income, these kinds of discoveries can serve to ensure financial security for a surviving spouse.

Legislative Changes are Coming

The Biden administration has proposed significant changes to the estate tax regime, including a possible reduction in the exemption amount, elimination of a step-up in basis, and a curtailment in certain wealth transfer strategies. While the outcome of the proposed legislation is unknown, it is likely some changes will occur. As such, we believe it is important for the surviving spouse to be engaged in the estate planning process now to assure that the couple’s goals and objectives are met.

Trust is Key

From an advisor perspective, building trust is the key to helping widowed spouses navigate complex tax and estate issues. History suggests that most surviving spouses terminate the engagement of the family’s wealth advisor soon after the death of the spouse, most often because the surviving spouse does not have a relationship with the advisor. It’s important for advisors to build relationships with both spouses to avoid this situation. Doing so puts the advisor in the position of the family confidant, assuring continuity for both the client and the advisor.

In situations where trust is lacking, we recommend that the advisor seek to build a relationship with the surviving spouse by over-communicating with him/her throughout the estate administration process. Whenever possible, in-person meetings are a preferred method of building a strong relationship. Trust takes time to develop, but it also can be lost quickly.”

Original article published here on Financial Advisor IQ.

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