My wife, 50, has terminal cancer. Our estate is worth $18 million. How do we prepare?

By Investor Empires On Nov 3, 2024

Thank you for all your financial advice. I’m not going to ask you if or when I can afford to retire. I know we are financially fortunate and I know it is embarrassing to give advice to wealthy people. What level of estate planning does one need at different levels of wealth, from $1 million to $10 million to a $100 million estate?

I am 51 years old and my wife is 50 years old. We have two children, 19 and 21, one of whom has started law school and the younger one plans to attend medical school. Our property is worth $18 million. Our assets include a primary residence of $2.5 million, approximately $5.4 million in all non-Roth IRA/401(k) accounts, $4.5 million in brokerage and savings accounts, and $6 million in income-producing real estate .

The rest of the estate is divided between cars, furniture, jewelry, etc. I don’t count on any value for the work, and I’m not sure if we’ll ever be able to sell it. I’m also not counting on our projected inheritance of $2 million to $3 million sometime over the next decade, but if that materializes it should be taken into account for estate tax purposes.

Unfortunately, my wife was diagnosed with cancer seven years ago, and after she passes, this will complicate my tax situation. I expect to live around 85-90 years from health and family history. Our career peaked two years ago at about $1.2 million and has since declined due to burnout with current household income of about $750,000 per year. We have no debt.

We hope to pay for all of the children’s higher education costs over the next seven years. We would like to continue tithing at 10%, and giving gifts to the children each year up to the annual limits. Other than that, I’m a simple guy, and I don’t care about the complexity of spending, clutter, maintenance hassles or over-travelling, but enjoy traveling in moderation with family.

How much estate planning does a property like ours need? We continue to max out our retirement/HSA accounts, but, because we feel we invested well, we now spend more of our paychecks on amenities, college expenses, tithing, medical and health insurance expenses, remodeling, car expenses, travel and dining Outside.

What kind of help do we need?

Estate planning man

Your words are encouraging. Complex does not necessarily mean difficult. – MarketWatch illustration

You’re asking all the right questions – and at the right time.

Distributing your assets to your children and their children will create a complicated tax situation, but your words are encouraging. “Complex” does not necessarily mean “difficult.” While you have more important issues on your mind now with your spouse’s diagnosis, you are smart to organize things now rather than later.

You and your spouse can do this together, or you can take the initiative. In either case, estate planning for an estate worth $1 million, $18 million, or $100 million will require the same tools (will, revocable trust, healthcare directive, financial power of attorney) and people (estate planning attorney, financial advisor, and/or CPA) To help manage your assets.

Jennifer L. Campbella partner at Carlin & Peebles in Los Angeles, California, suggests A Transcend trust (Also known as Trust and Shelter). This helps wealthy people avoid estate taxes and probate. In this case, a set amount of assets is placed in the trust, which becomes irrevocable upon your death, and your heirs receive income from the trust.

“The terms of a bypass trust can vary greatly,” she says. “Most often, however, a bypass trust is structured so that it can qualify as a marital deduction trust, which allows the survivor to claim the decedent’s estate exemption and gift exemption as the survivor’s property and allows the assets in the bypass trust to receive a new trust based on the survivor’s death. “

Trusts are usually very flexible and can be written to include distributions to pay for post-graduate education, weddings and other life milestones, Campbell says. “These trusts can be held for life or can be directed to pay out at various ages (and) have the flexibility to plan for the generation-skipping transfer tax, which currently equals the estate and gift tax exemption.”

For assets not placed in a trust: You can name your children as beneficiaries and/or create transfer deeds upon death. Avoid putting their names on bonds so you can take advantage of step-up basis, which will apply capital gains to the fair market value at your death rather than the original purchase price. The counselor will help you build your trust(s) in more detail.

In early October, the Internal Revenue Service announced a new estate tax exemption on wealth transfers during your lifetime and upon the decedent’s death of $13.99 million per person for the coming year, up from $13.61 million in 2024. The annual gift exclusion rose to $19,000. for 2025, up from $18,000 this year; It’s twice that for married people.

But there’s a hitch in the works of the tax code soon: Unless Congress takes action, that exemption is set to “expire” or change to $5 million in 2026; It will be indexed for inflation, which will likely reach $7 million. This is the maximum amount of assets you and your spouse can leave to your heirs without paying federal estate tax.

To take advantage of the lifetime exemption for first to die, you may want to consider a “trust shelter,” he says Neil V CarboneTrusts and Estates Partner at Farrell Fritz PC. He adds that you should also consider the benefits of trust funds for your children. They may have different needs (and desires) as they get older.

“Trust assets can be used to provide funds for their education, first homes, and business ventures, among other things,” he adds. “Before dividing their assets into separate trusts for each child, they can include a trust that will benefit both children until the younger reaches a certain age.”

There are also tax planning strategies to consider in the case of a terminal illness, Carbone says, such as transferring low-basis assets to the terminally ill spouse so they receive a stepped-up basis upon death, provided the spouse survives for at least one year after Transfer procedure.

“Depending on the state you reside in, there may be state inheritance taxes and many states have exemptions that are much lower than the federal exemption amount,” he says. Clay Stevensdirector of strategic planning and partner at Aspiriant in Irvine, California. “Rates can be as high as 15%. In those states, you will need an estate plan specifically drafted to minimize these taxes.

Stevens recommends meeting with your financial advisor regularly. “We recommend that clients review the data every five years and update it every 10 years,” he says. Given possible upcoming changes in property tax rules, he suggests holding annual talks. Who you talk to regularly may also depend on the relationship and how easy it is to work together.

Campbell has a slightly different view: “In terms of who should help you and your spouse with estate planning, you’re going to want to have a team,” she says. “Your estate planning attorney is usually the team leader, with your financial advisor and accountant playing valuable roles in ensuring that the plan you choose will produce the results you envision.”

“Estate planning is not just about what happens when you die, but also what happens if one or both of you are alive but unable to make decisions,” she adds. “Normally, if you are unable to manage your affairs and have done no planning, the court will appoint someone to manage your affairs while you live.” So, the more you do now, the more likely you are to avoid it.

Good luck to you, your wife and your family.

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