PROBLEM	MAJOR CAUSE OF INDICATOR
Excessive transfer costs	Taxes and estate administrative expenses higher than necessary.
Lack of Liquidity	Insufficient cash.  Not enough assets that are quickly and inexpensively convertible to cash within a short period of time to meet tax demands and other costs.
Improper disposition of assets	Beneficiaries receive the wrong asset or the proper asset in the wrong manner or at the wrong time.
Inadequate income at retirement	Capital insufficient or not readily convertible to income producing status.
Inadequate income, if disabled	High medical costs, capital insufficient or not readily convertible to income producing status, difficulty in reducing living costs or  maintaining living standards.
Inadequate income for family at estate owner's death	Any of the above causes.
Insufficient capital	Excessive taxes, inflation, improper investment planning.
Special Problems	A family member with a serious illness, physical or emotional problem, children of a prior marriage, beneficiaries who have extraordinary medical or financial needs, business problems, or opportunities

WHY Does an Estate Break Up?

Quite often, when people die their estate dies with them ---not because they have done anything wrong but because they have not done anything.  There are numerous forces that, if unchecked, tend to shrink an estate, reduce the usefulness of its assets, and frustrate the objectives of the person who built it.  These include death-related costs, inflation, improper mangement, lack of liquidity, incorrect use of vehicles of transfer and disabilities.

Death-related costs.  Last-illness and funeral expenses are good examples of first-level death related costs.  Most people also die with some current bills unpaid and long-term obligations, such as mortgages, business loans, and installment contracts outstanding.  Unpaid income taxes as well as property taxes also constitute debts, often payable by the deceased's estate.  Second-level death related costs consist of the fees of attorney's, appraisers, and accountants and probate expenses--- so called administrative costs, federal estate taxes, and state death taxes (some states have both inheritance and estate taxes).

Inflation.  Death-related costs are only the tip of the estate-impairment iceberg.  Less obvious but often more damaging  is the profound effect of inflation.  Failure to continuously reapprise and rearrange an estate plan so as to consider the effects of inflation can impair the ability of assets -- liquid, real and personal property, or investments--to provide steady and adequate levels of financial security

Improper Management.  Business assets, as well as some commercial real estate properties, require continuous attention; often the estate beneficiaries are unable or unwilling to provide this needed care.  The failure to note a change in consumer preferences, product or equipment obsolescence may result in a rapid decline in the value of a decedent's business or of various types of assets included within the estate

Lack of Liquidity.   Insufficient cash to cover death costs and other estate obligations has always been a major factor in estate impairment.  Forced sacrifice sales of assets with substantial income-producing power usually result in a disproportionately large loss of assets and family income.  Further, such sales -- of the choicest parcel, farmland or business that has been in the family for generations for instance -- often have undesirable psychological effects on the heirs.  The outcome can be a devasting financial and emotional blow.

Incorrect Use of Vehicles of Transfer.  It would be criminally negligent to put a high-powered car in the hands of a child.  Yet assets are often put into the hands of beneficiares who are unwilling or unable to handle them.  Because of improper usage of vehicles of transfer, property often passes to unintended beneficiaries or to the proper beneficiaries in an improper manner or at an incorrect time.  For example, spendthrift spouses or minors may be left large sums of  money outright in the form of life insurance through joint ownership of a savings account, or as the beneficiaries of an employee fringe benefit plan.

Disabilities.  A prolonged and expensive disability of a family wage earner is sadly often called a living death.  Loss of income due to disability is frequently coupled with a massive financial drain caused by the illness itself.  The financial situation is further complicated by inadequate management of currently owned assets.  This not only threatens the family's financial security but also diminishes the value of the estate at an incredible speed.

The material presented on our web site may contain concepts that have legal, accounting and tax implications. It is not intended to provide legal, accounting or tax advice, you may wish to consult a competent attorney, tax advisor, or accountant.

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