Last fall, there was an interesting news story circulating that some of you may recall. It was the story of Walter Samasko and his house full of gold coins. Poor Samasko, whom neighbors described as quiet, reclusive and strongly anti-government, had died from a heart attack and his body was undiscovered for at least a month. When authorities went to clean Samasko’s house, they discovered boxes of gold coins worth more than $7 million in his garage and crawl space. Samasko had no will, so local authorities used a list of attendants from his mother’s funeral in 1992 to track down his nearest surviving relative, first cousin Arlene Magdanz, a substitute teacher in California. Can you say Eureka?
I can only imagine what it would be like to be told I had inherited $7 million from a long-lost relative. I would like to believe that I would not regret the fact that the government would take over $800,000 in estate taxes and other fees. I mean, this is found money, right? But I am sure there is one person who rolled over in his grave: Walter Samasko. Remember, Samasko had no will or trust and he had not taken the necessary steps to create a plan that would prevent his estate from the taxation he surely would have hated. Rather than die intestate, Walter should have drawn up a will and created a trust leaving his assets to charity. Not only would these documents protect his assets from taxation, the living trust would have prevented probate court, thus preserving the privacy Samasko clearly desired.
The federal estate-tax exclusion now is set permanently at $5 million and is indexed for inflation. But because of inflation, the amount for 2013 works out to $5,250,000 for individuals and $10,500,000 for couples. The federal gift and generation-skipping transfer tax exemption is the same as the estate-tax exclusion amount. The top federal estate-tax rate on the largest estates is now 40%, up from 35% in 2012. Transfers from one spouse to the other typically are tax-free.
These exemptions mean many of us will never need to worry about estate taxes. This does not mean you don’t need an estate plan. Wills, trusts, powers of attorney, living wills and health care powers of attorney are all important documents that allow you to determine who receives your assets, who will have guardianship over your children, who will make decisions for you when you are unable, who will manage your financial and legal affairs and so on.
In our work, we often find people who are reluctant to address the topic of estate and incapacity planning. While I realize this can be a touchy subject, I always think of the old adage, “Those who fail to plan, plan to fail.” So please, don’t be like Walter! If you have not yet created your estate plan, get started today. If you need help finding an estate planning attorney or if you would like some general guidance on estate planning, your financial advisor is happy to assist.
Tracy H. Allen, CFP®