Written by attorney Thomas Frederick Asbury



  1. Consider need for liquidity. a. Determine amount of cash that will be needed to meet anticipated expenses on client’s death, including: (1) Expenses of last illness. (2) Funeral expenses. (3) Other debts. (4) Income taxes accruing both before and after client’s death. Federal and state estate tax NOTE: Federal estate taxes are payable in installments in some circumstances, such as when an estate consists largely of an interest in a closely held business. The time extensions are not available, however, for payment of the generation-skipping transfer tax.

(5) Testamentary gifts of cash.

(6) Executor’s compensation.

(7) Attorneys’ fees.

(8) Other administration costs. b. Determine how these cash requirements can be satisfied from estate assets, considering availability of:

(1) Checking and savings accounts. (2) Life insurance payable to estate. (3) Payments on notes, mortgages, and other receivables.

c. If available cash is insufficient to meet anticipated expenses, consider following options: (1) Sale of readily marketable assets.

(2) Exercise of any buy-sell, buy-out, stock repurchase, or similar agreements on closely held business assets. NOTE: If a buy-sell agreement exists, the attorney should review the method of valuation prescribed in the agreement and determine whether that method will be respected for estate tax purposes.

(3) Loans from beneficiaries to meet estate’s cash requirements.

(4) Purchase of sufficient life insurance to meet estate’s cash requirements.

(5) Increase in testamentary gifts to spouse or charities to reduce estate tax liability.

  1. Consider potential changes in client’s personal and financial situation, such as: a. Changes in marital status. b. Changes in number of children or grandchildren. c. Changes in client’s personal feelings toward intended beneficiaries. d. Need for retirement income. e. Need for business capital. f. Medical expenses in old age.

NOTE: Before irrevocably committing any assets of the estate, the attorney should be sure that there will still be sufficient assets to meet the client’s lifetime needs. Inter vivos gifts and irrevocable trusts reduce flexibility, since the assets committed to them are lost to the estate. On the other hand, testamentary transfers and some revocable trusts provide more flexibility since they may be modified up to the client’s death.

  1. Consider financial situations and income needs of intended beneficiaries.

  2. Consider management ability of each intended beneficiary. NOTE: If the beneficiary is experienced and competent in financial matters, an outright testamentary or inter vivos gift may be more advantageous than a trust, because it offers greater flexibility. If the beneficiary is a minor, has limited experience in financial matters, or has previously demonstrated an inability to manage money, a trust offers protection and a steady income with less risk of mismanagement. Business assets present special problems

  3. Consider effect of generation-skipping transfer tax on intended testamentary disposition.

  4. Determine and consider treatment of any property held by client in another state or foreign country and decide whether to recommend that client dispose of such property. NOTE: Property located out of state, particularly real property, may result in additional expenses to the estate if ancillary administration is required. The attorney should determine the treatment of any such property under the law of the state in which it is located and anticipate any administration problems that might be created by such property.

  5. Consider effect of large marital deduction bequest on estate of surviving spouse. NOTE: Any portion of a testamentary gift that remains at the surviving spouse’s death will be included in that spouse’s estate [I.R.C. § 2031]. However, if the surviving spouse dies within ten years after the client’s death, the surviving spouse’s estate will be entitled to a credit for all or part of the estate tax paid by the client’s estate.

  6. Consider advantages of charitable testamentary and inter vivos gifts, either outright or in trust.

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