[If anyone needs] proof of the importance of revisiting their estate plans annually, consider the case of a wealthy family that sold its retailing business to Best Buy.
Perhaps you have heard that 2012 is a unique year for planning. However, did you know that 2010 was just that much more unique and many families are still either jubilant or remorseful for disrupted plans?
It just goes to show that changing laws matter, and that your estate plans must change accordingly.
For fresh evidence of the necessity for annual visitation of the estate plan, and for the oddities of 2010, Financial Planner magazine recently published an article titled “Family Feud: Review Estate Plans Annually.” It’s the case of the family behind Magnolia Audio Visual, and the couple that sold its retail rights to Best Buy and accumulated a cool $100 million estate in the process. Unfortunately, the parents weren’t as savvy with their estate planning.
The estate plan provided that the maximum amount allowable under the federal estate tax threshold would be passed down to the children, with the rest to pass to the surviving spouse to thereby avoid immediate estate taxation. Unfortunately, the plan didn’t account for the fact that 2010 didn’t have an estate tax.
The wife died. When the husband nevertheless claimed the estate that was to pass to the children under the estate tax planning, the children were noticeably irked. It seems they had been passed over and were in danger of losing a fortune afforded under the once-in-a-lifetime and quite unintended tax loophole. Accordingly, the children filed suit against their father on the grounds of “non-compliance, forgery and the use of undue influence.”
If nothing else, this case illustrates the necessity to revisit estate plans with greater frequency, especially in these uncertain financial times.
Reference: Financial Planning (September 1, 2012) “Family Feud: Review Estate Plans Annually”