Avoiding Probate Is Key to Protecting Your Legacy

November 25, 2025

Probate is the court process that validates a will, appoints an executor, gathers assets, pays creditors and authorizes distributions. It exists to protect heirs and creditors. However, it can add months of delay, court fees and public filings that many families would rather avoid. Avoiding probate is key to protecting your legacy. The good news is that a handful of simple tools can help most households sidestep the bulk of the process, while keeping their plan clear and coherent.

What Probate Actually Does

Probate converts a will into a court-ordered document. In some states, it is streamlined; in others, it can be slower and more expensive. Either way, it is public by default. Petitions, inventories and some accountings may be part of the court file. If privacy and speed matter to your family, it pays to minimize the amount that must pass through the court.

When Skipping Probate Makes Sense

Avoiding probate is most beneficial when beneficiaries require immediate access to funds for housing, tuition, or medical expenses, when family members reside in different states, or when there is real estate in multiple states that could result in multiple court cases. It also helps when you value privacy and want to minimize the disclosure of net worth and family relationships.

Simple Paths That Bypass Court

Life insurance, retirement plans and many bank and brokerage accounts can pay directly to named individuals or to a trust. Use both primary and contingent beneficiaries, so money has a clear path even if someone dies first.

Transfer on death and payable on death

TOD and POD tools allow many financial accounts, and, in some states, real estate, to pass with a recorded form instead of a court order. Confirm how your state handles deeds and what documentation the custodian or recorder requires at death.

Revocable living trust

A living trust holds assets during life and directs distribution afterward. If funded properly, it lets your trustee act without opening a probate estate. Trusts are especially useful for real estate, closely held business interests and accounts that benefit from centralized management.

Joint ownership

Joint tenancy with right of survivorship can move property to a co-owner at death. Use it sparingly. Adding a name for convenience can create gift issues, creditor exposure and family disputes if expectations are unclear.

Avoiding Conflicts Between Documents

Your will, trust and beneficiary forms must tell one coherent story. If the trust makes staggered distributions for a young or vulnerable beneficiary, do not name that person directly on the accounts. If the trust owns real estate, ensure that the deed is titled in the name of the trustee. Maintain a single asset map that lists each account, its current location, the account’s title and the named beneficiary.

Practical Steps to Avoid Probate Today

Collect and review all beneficiary forms. Add contingents and remove any “estate” beneficiaries that would force court involvement. Record TOD deeds where available and confirm titling on joint property.

Centralize documents, logins and contact information for custodians, so your executor and trustee can act quickly. Finally, add a short letter of instruction that explains what you want sold, what you want kept and how you want personal items handled.

How A Probate Lawyer Can Help

Avoiding probate is key to protecting your legacy. A probate lawyer can estimate the time and cost of court proceedings in your state, then design a bypass plan that utilizes designations, TOD or POD tools and a revocable trust where appropriate. Counsel can harmonize deeds, update forms and coordinate with custodians so paperwork is accepted the first time. If you want a faster and more private transition, schedule a consultation to map your assets, align your titles and forms and limit what must enter the courthouse. If you would like to learn more about probate, please visit our previous posts.

Reference: Forbes (May 24, 2024) “Why Skipping Probate Could Save Time And Money”

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Spousal Lifetime Access Trusts can Protect Your Partner

November 18, 2025

For couples with significant assets, planning for the future is necessary to ensure financial security for the surviving spouse while minimizing tax exposure. Spousal Lifetime Access Trusts can protect your partner when you are gone. Often called a SLAT, it offers an effective way to achieve both goals. Combining long-term protection with ongoing access to funds helps preserve family wealth while maintaining flexibility.

Understanding Spousal Lifetime Access Trusts

A Spousal Lifetime Access Trust is an irrevocable trust created by one spouse for the benefit of the other. The grantor transfers assets, such as investments, real estate, or business interests, into the trust, thereby removing them from their taxable estate. The non-grantor spouse can then receive income or distributions from the trust during their lifetime.

This arrangement provides a balance between tax efficiency and practical access. It allows couples to reduce the size of their taxable estate while keeping resources available should unexpected expenses or financial changes arise.

How SLATs Protect Wealth

One of the main advantages of an SLAT is its ability to shield assets from future estate taxes. With current federal exemption limits set at historically high levels, couples can transfer substantial wealth now and lock in those benefits before potential tax law changes reduce the threshold.

The trust also serves as a form of asset protection. Once transferred, the assets generally cannot be reached by the grantor’s or the beneficiary’s creditors. This makes SLATs appealing to business owners and high-net-worth families seeking long-term security.

In many cases, the trust can also distribute income to the beneficiary spouse, ensuring that the family continues to benefit from the assets even though they are no longer part of the grantor’s estate.

Key Structural Considerations

While powerful, SLATs require careful design. Because they are irrevocable, the grantor cannot reclaim the assets after transferring them. Couples must ensure that they retain sufficient liquidity and income outside the trust to maintain their standard of living.

If both spouses create SLATs for each other, the trusts must differ meaningfully to avoid triggering the “reciprocal trust doctrine.” This IRS rule can invalidate tax benefits if two trusts are too similar, effectively treating each spouse as if they never transferred the assets in the first place.

Working with an experienced estate planning attorney helps ensure that each trust is structured uniquely using different funding sources, timing, or distribution terms to comply with IRS standards.

When to Consider a SLAT

A Spousal Lifetime Access Trust is particularly beneficial for couples with taxable estates who want to take advantage of the current high federal estate tax exemptions, which are set to increase from $13.99 million per person to $15 million for 2026. It’s also ideal for individuals who wish to preserve family wealth without cutting off financial flexibility for their spouse.

In addition, SLATs can complement other estate planning tools, such as irrevocable life insurance trusts or charitable trusts. By layering strategies, couples can maximize protection and tailor distributions to meet both personal and philanthropic goals.

Balancing Flexibility and Finality

Because SLATs are permanent, they require both foresight and discipline. Once assets move into the trust, they are beyond the grantor’s reach. However, that finality is what gives them their power. The trust ensures that estate taxes, legal claims, or financial mismanagement will not erode assets.

Spousal Lifetime Access Trusts can protect your partner when you are gone. Couples who thoughtfully design SLATs often find peace of mind knowing that their partner will be cared for, no matter what happens. If you would like to learn more about SLATS, please visit our previous posts.

Reference: Forbes (Sep. 30, 2025) “Spousal Lifetime Access Trusts: A Strategic Estate Planning Tool”

Portability Doesn’t Happen Automatically

November 13, 2025

Portability allows a surviving spouse to use any “leftover” estate tax exclusion from the first spouse to die. It’s a powerful estate planning technique, according to a recent article in Think Advisor, “This Estate Tax Filing Mistake Can Cost Clients Millions.” However, portability doesn’t happen automatically.

To secure portability, the executor of the first deceased spouse’s estate must file a Form 706—known as an estate tax return—to elect portability, and it must be filed in a timely manner and be properly prepared.

This is necessary even if no estate tax is otherwise due from the deceased spouse’s estate. Given the high federal estate tax exemption, most affluent couples nearing the threshold don’t need to file the form. However, it’s still worth filling it out. Here’s why.

A husband who dies with $5 million in assets passes that along to his wife, who may have $10 million of her own. If she lives another 20 years and is invested in markets, her wealth upon her death could be very close to or over the maximum estate tax exemption for a single person. If she secures portability at the time of her husband’s death, she can use his remaining estate tax exemption amount and avoid significant estate tax when passing wealth onto her heirs.

Even if the first spouse to pass doesn’t come close to the federal estate tax threshold, it still makes sense to take the right steps to secure portability. A recent Tax Court case illustrates how this can go wrong if not done correctly. A successful midwestern business owner died, and the form wasn’t filled out correctly. The filing mistake cost heirs an additional $1.5 million in estate taxes from the surviving spouse’s estate.

The deadline to elect portability of a deceased spouse’s unused federal estate tax exemption is nine months after the date of death. While your estate planning attorney can request a six-month extension, it’s best to do this in a timely manner. If the estate isn’t otherwise required to file an estate tax return, you can use the Revenue Procedure 2022-32. This was added after many estates failed to file for portability because they didn’t realize it was needed until after the federal estate tax return was due.

This process is not easy and involves several important steps, especially if any of the first-to-die spouse’s assets flow to anyone other than the surviving spouse or a charity. In these situations, assets flowing out of the first estate must be assigned a fair market value using a valuation professional.

The IRS provides a valuation method for estates filing solely to capture portability. An executor may use a good-faith estimate of the value. However, securing a professional valuation may be recommended by your estate planning attorney.

The Tax Court case referred to above illustrates how this process can go wrong. The assets passed down by the first spouse to die went to other family members, not her spouse or a charity. A proper valuation was not done. The executor also applied for an automatic extension to file Form 706 but failed to mail the return until five months after the extended deadline. There are some instances when the IRS provides a “safe harbor” for late filing. However, this only applies when the value of the first deceased spouse’s estate is less than the applicable exclusion amount. The return was not complete, nor was it properly prepared.

Portability is a beneficial option and shouldn’t be missed, even when it seems unlikely to be needed. Just remember – portability doesn’t happen automatically. An experienced estate planning attorney should be consulted to protect the estate upon the death of the first spouse to secure portability. If you would like to learn more about portability and estate planning, please visit our previous posts.

Reference: Think Advisor (October 15, 2025) “This Estate Tax Filing Mistake Can Cost Clients Millions”

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End-of-Life Planning is Often Overlooked

October 22, 2025

End-of-life planning is often overlooked. However, it is one of the most meaningful ways to protect your family. Funeral costs can be overwhelming, and without preparation, surviving relatives may face both emotional and financial burdens. Burial insurance and prepaid funeral plans are two tools that can ease this process and make sure your final wishes are carried out.

What Is Burial Insurance?

Burial insurance, also known as final expense insurance, is a type of whole life insurance specifically designed to cover funeral costs, burial expenses and related fees. Policies typically range from $5,000 to $25,000, providing a modest but essential safety net.

Unlike larger life insurance policies, burial insurance focuses specifically on immediate post-death costs. It is generally easier to qualify for, with simplified underwriting and fewer medical exams. This makes it an attractive option for older adults or those with health conditions.

Burial insurance benefits are paid directly to the beneficiary, who can then use the funds to cover funeral services, outstanding medical bills, or other final expenses.

What Are Prepaid Funeral Plans?

Prepaid funeral plans allow you to arrange and pay for funeral services in advance. These plans are typically purchased through a funeral home and may include services such as the casket, memorial arrangements, cremation, or burial plot.

Advantages of Prepaid Funeral Plans

Planning in advance locks in current prices, protecting against inflation in funeral costs. It also relieves loved ones from having to make rushed financial and emotional decisions during a period of grief. Prepaid plans can be tailored to reflect personal wishes, ensuring that the funeral reflects the individual’s values and preferences.

Potential Pitfalls

Not all prepaid plans are created equal. Some may lack portability if you move to another state or wish to change providers later. Others may include hidden fees or restrictions. It is important to review contracts carefully and ensure that the funds are held in trust or covered by insurance to protect your investment.

Comparing Burial Insurance and Prepaid Funeral Plans

Both burial insurance and prepaid plans help families avoid unexpected financial burdens, but they work differently.

Burial insurance provides flexibility since the payout can be used for any expenses, not just funeral costs.
Prepaid plans ensure funeral arrangements are made in advance. However, they may limit how funds are applied.

Many families choose to use a combination of both, securing burial insurance for flexibility while prepaying certain services to lock in costs and preferences.

Integrating These Tools into Estate Planning

End-of-life planning goes beyond financial considerations; it is about protecting loved ones from stress and ensuring that your wishes are carried out. Including burial insurance or prepaid funeral plans in your estate planning provides a complete picture of how your legacy will be handled.

Attorneys can help align these tools with broader estate plans, ensuring that beneficiary designations, trusts and wills all work together. By taking these steps, families can focus on honoring their loved one’s memory rather than worrying about bills or logistics.

End-of-life planning is often overlooked. If you are considering burial insurance or a prepaid funeral plan, now is the time to review your options. An estate planning law firm can help you determine which approach best fits your needs and ensure that your family is protected. If you would like to learn more about end-of-life planning, please visit our previous posts.

References: Forbes (Aug 16, 2023) “Do You Need Burial Insurance?” and Ramsey Solutions (Sep 6, 2023) “Pros and Cons of Prepaid Funeral Plans”

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Your Time to File for Probate Is Limited

October 16, 2025

When someone dies, their estate must be settled according to state probate laws. Probate is the legal process of validating the will, paying debts and distributing assets. While some estates qualify for simplified procedures, many must pass through formal probate, which involves courts and strict timelines. Your time to file for Probate is limited.

Every state sets deadlines for when probate must begin, often ranging from a few months to a year after death. Missing these deadlines can complicate estate administration, leading to penalties, delayed distributions, or even lawsuits among heirs.

Filing Requirements Vary by State

Probate rules are not uniform. Some states require filing within 30 days of death, while others allow several months. Deadlines also depend on whether the estate is small, whether a valid will exists, or whether someone contests the estate. For example, some states permit informal probate for estates under a certain dollar threshold, while others require a complete process regardless of the estate’s size.

Even when the court allows more time, creditors and beneficiaries may push for prompt action. Early filing reduces risks of disputes and preserves estate value.

Why Families Delay Filing Probate

Families often delay probate for emotional reasons. Grief, confusion about the process, or strained relationships among heirs can cause hesitation. Sometimes families assume that because they agree on distribution, probate is unnecessary. Failing to follow legal steps can invalidate asset transfers and expose heirs to potential liability.

Other times, families don’t realize the clock is ticking. Without timely filing, creditors may pursue claims directly, or heirs may face costly court battles in the future.

What Happens if You Miss the Deadline?

Missing a probate deadline can create serious complications:

Beneficiaries may lose rights to certain assets if claims expire.
Creditors may have longer windows to pursue unpaid debts.
Courts may impose additional oversight, requiring more hearings and paperwork.
Heirs may become personally liable if they use estate assets before resolving creditor claims.

In rare cases, failing to file within the statutory time can prevent probate altogether, leaving assets stuck without a clear path to transfer.

Preparing Before Filing Probate

While deadlines are strict, families should prepare carefully before filing. This includes:

Gathering the death certificate, will and estate documents
Identifying all assets and liabilities
Reviewing state rules for exemptions, such as small estate affidavits
Consulting an attorney to determine whether the estate qualifies for simplified probate

Being organized before filing not only ensures compliance but also prevents costly mistakes once proceedings begin.

The Role of Probate Attorneys

Probate attorneys guide families through filing deadlines, paperwork and hearings. They help identify which deadlines apply, prepare petitions and ensure that creditors and beneficiaries are properly notified. Attorneys also protect executors from liability by ensuring that debts and taxes are settled before distributing assets.

For complex estates or when heirs disagree, having a lawyer is crucial. An attorney can keep the process on track and avoid missed deadlines that might otherwise derail the estate’s settlement.

Your time to file for Probate is limited. If you have recently lost a loved one, it is critical to act quickly. Contacting a probate lawyer ensures that deadlines are met and the estate is handled in compliance with state law. If you would like to learn more about probate, please visit our previous posts.

Reference: NerdWallet (Aug. 17, 2025) “How Long Do You Have to File for Probate After a Person Dies?”

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How and Where To Store Your Will

September 18, 2025

If you’ve recently had your will created or your estate plan updated, congratulations! You’ve ticked a big check mark on your grown-up to-do list. However, you’re not done with estate planning, according to a recent article from USA Today, “You Made a Will—Now What? Storing It Properly Is Just as Important.” It is important to identify how and where to store your will.

Less than a third of Americans have a will, which should be concerning for their families and loved ones. Perhaps more worrisome: those who do have a will and other estate planning documents have their materials in a drawer, a filing cabinet, or a home safe they haven’t looked at in years—or decades.

Once the ink is dry, the estate plan isn’t done. If your family doesn’t know where to find the will, and unless it’s updated, secure and accessible, even the best estate planning documents won’t work as intended. If the will can’t be found or is out-of-date, the entire estate will need to go through probate, regardless of all the planning you’ve done. Paperwork piles up, court fees get bigger and families who should be focusing on grieving and helping each other during a major loss are instead dealing with bureaucracy and managing a rudderless ship.

For more tech-savvy individuals, a digital vault may be the solution. These are encrypted, cloud-based platforms used to store wills, trusts, passwords and essential documents in one online location. The goal of the platforms is to allow executors, attorneys and family members to access the documents they need when they are needed. The systems are built with permission and authentication for security.

If you’re not comfortable putting your life online, an alternative is to have a fire- and flood-proof safe in your home and ensure that your spouse, executor and trusted family member know where it is and how to open it when needed.

The digital vault offers some significant benefits. If adult children and grandchildren live in another state or another country, they will be able to access documents regardless of their location. This also allows you to store digital assets, including photos, utility logins and even instructions for final wishes, so that others can access them.

Many people already have a digital vault through their financial advisor’s office. However, they may not have considered that it could also serve as an estate planning tool. Be sure to learn how to share the login information with the intended recipients properly.

If a will can’t be found, if multiple wills are found, or if the will is so out-of-date as to be found invalid, planning can be undone. Securing the will is as important as creating an estate plan. Work with the assistance of an experienced estate planning attorney to determine how and where to store your will. Peace of mind comes from knowing that everything is in place and that anyone who needs your information will be able to access it in a timely manner. If you would like to learn more about creating a will or trust, please visit our previous posts.

Reference: USA Today (Aug. 15, 2025) “You Made a Will—Now What? Storing It Properly Is Just as Important”

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Common Reasons to Avoid Probate Court

August 7, 2025

Probate is the legal process of distributing a person’s assets after death. While it serves an important function, it often comes with drawbacks: delays, expenses and public records. For families seeking to settle affairs smoothly and maintain privacy, avoiding probate through effective planning can be a more efficient approach. There are some common reasons to avoid probate court.

1. Probate Often Involves Significant Delays

Probate cases can take months or even years to resolve. Court schedules, required notices to creditors and potential disputes all slow the timeline. During this period, heirs may not be able to access key assets, which can lead to financial strain, mainly when a surviving spouse or dependent relies on those funds.

2. The Process Can Be Expensive

Court filing fees, executor compensation, attorney fees, appraisals and other administrative costs reduce the value of the estate. These expenses are often paid out of the estate’s assets, leaving less for beneficiaries. In complex or contested estates, costs can escalate rapidly and frequently exceed initial expectations.

3. Public Records Compromise Privacy

Once a will is entered into probate, it becomes a public record. Anyone can review the details of the estate, including its contents, beneficiaries and asset distribution. For families that value discretion, avoiding probate helps keep financial and personal matters private and confidential.

4. Disputes are More Likely

Probate offers an open door for challenges. Heirs, creditors, or estranged relatives may contest the will, resulting in prolonged legal battles and increased stress. With proper estate planning—such as creating trusts or utilizing beneficiary designations—assets can be transferred more directly, thereby reducing the likelihood of conflict.

5. There are Better Alternatives to Probate

Revocable living trusts, payable-on-death accounts and joint ownership arrangements can bypass probate altogether. These strategies enable assets to be passed to beneficiaries quickly and efficiently without requiring court oversight. While not suitable for every asset or family, they offer powerful tools when used correctly in a broader estate plan.

These are just five of the most common reasons to avoid probate court. An estate planning attorney can help you weigh these options and structure your affairs to serve your family’s needs best, during your lifetime and beyond. If you would like to learn more about probate, please visit our many previous posts on the subject.

Reference: Charles Schwab (July 14, 2023) “The Benefits of Avoiding Probate”

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Moving to Another State can Impact Your Will

July 29, 2025

Relocating to a new state often prompts a fresh look at housing, healthcare and taxes. However, many people overlook revisiting their estate plan. A will drafted in one state doesn’t necessarily become void elsewhere. However, differences in state laws can create complications if it isn’t updated. To ensure that your wishes are carried out as intended, it’s important to understand how moving to another state can impact the validity and execution of your will.

Your Will May Still Be Valid—But That’s Not Enough

Most states honor wills created legally in another state. However, just because a will is valid doesn’t mean it’s well-suited to your new residence. Probate laws, witness requirements and rules governing executor eligibility can vary widely. For example, your new state may not accept handwritten wills or may require two witnesses instead of one.

Some states also impose additional requirements on out-of-state executors. If you named someone who lives in your former state, they may be unable to serve without appointing a local co-executor or taking other legal steps. These requirements can delay probate and increase administrative costs for your loved ones.

Community Property and Spousal Rights

If you move from or to a community property state, your spouse’s inheritance rights could change. Community property states treat most assets acquired during marriage as jointly owned, regardless of how they’re titled. This could affect how your estate is divided, especially if your existing will was drafted with different assumptions.

Similarly, elective share laws vary from state to state. In some places, a surviving spouse is entitled to a percentage of the estate even if they are disinherited in the will. These rules can override your stated intentions, particularly if your estate plan hasn’t been updated since the move.

Update Beneficiary Designations and Ancillary Documents

Relocation is also a good time to review related documents, such as powers of attorney, advance directives and healthcare proxies. Some states require specific language or forms for these to be enforceable. A new address or a change in family circumstances may also necessitate revisions to your chosen agents or instructions.

Reviewing beneficiary designations on retirement accounts and life insurance policies is equally important. These assets often pass outside the will, and inconsistencies between documents can lead to unintended results. If you’re not certain your estate plan is robust and consistent, an estate planning attorney can help. If you are planning on moving to another state, work with an estate planning attorney to see how the state’s laws impact your will. If you would like to learn more about estate planning, please visit our previous posts.

Reference: The American College of Trust and Estate Counsel (Jul 17, 2019) “Should I Sign New Estate Planning Documents When I Move to a New State?”

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Using a Disclaimer Trust to Transfer Land

July 7, 2025

A husband dies, with an estate plan presenting two options to his surviving spouse: she can either inherit family farmland outright or disclaim it to a separate trust for her benefit. If she chooses the trust, she will receive income for life, and upon her death, the disclaimer trust will be divided equally among her three children. How to manage this situation is explored in an article from Successful Farming, “Should Land Go Into a Disclaimer Trust or Pass to the Spouse?” There are benefits to using a disclaimer trust to transfer land.

The concern is valid, as only one of the children is farming the land, and he’s concerned about how his siblings will accept the decision. She was told that the trust would be a good option due to its tax advantages. What are her options? There are five key elements to consider:

Estate taxes. In 2025, the federal estate tax exemption is $13.99 million per person. If she disclaims her husband’s portion of the land to the trust, the value won’t count towards her own personal estate. If she keeps the land, she can take advantage of portability for her husband’s exemption under IRS Form 706. Her own estate tax limit will increase to almost $28 million. The ported tax credit will remain flat as the estate’s value grows.

Asset protection. If the land goes into the disclaimer trust, it’s in there for good, and income and principal distribution rules can’t be changed. This is beneficial for protecting assets from creditors, as well as any complications arising from a second marriage or incapacity. However, is it beneficial for the family? If they need protection, the disclaimer trust is the place for the land. However, if they need it to be accessible, it should remain outside of the trust.

Asset control. The trustee is the fiduciary responsible for assets in the disclaimer trust. They can set a rent price and make decisions on capital improvements. Questions need to be clarified regarding requirements in the trust documents. Do these rules work for the family’s best interest, or is it better to have rules as defined in the surviving spouse’s will?

Distribution. Assuming the disclaimer trust ultimately divides the land between the three siblings, it lacks a means of keeping the land together. How will the son continue farming, knowing the land will be divided? Retrofitting a farm succession plan is like trying to move crops from one field to another. They won’t look pretty and may or may not grow.

This scenario is not unlike the situation many small business owners find themselves in when the spouse who has created a business dies and no succession planning has been done. There are benefits to using a disclaimer trust to transfer land. An appointment with an estate planning attorney is crucial for creating a comprehensive plan that encompasses the farm, business and family for both the near and distant future. if you would like to learn more about disclaimer trusts, please visit our previous posts.

Reference: Successful Farming (June 9, 2025) “Should Land Go Into a Disclaimer Trust or Pass to the Spouse?”

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Avoid the Survivor’s Tax Penalty After the Death of a Spouse

June 30, 2025

When one spouse passes away, the surviving partner often assumes their financial obligations will decrease. However, many widows and widowers face a surprising increase in their tax burden. Known as the “survivor’s penalty,” this issue affects individuals who transition from joint filing to single status, often while still receiving the same or similar income. There are some tips to avoid the survivor’s tax penalty after the death of a spouse.

As a result, survivors may end up in a higher tax bracket, lose key deductions and pay more on Social Security or investment income. If you or a loved one is navigating life after a spouse’s death, proactive tax and estate planning can help reduce this burden and preserve your financial stability.

What Is the Survivor’s Penalty?

The survivor’s penalty refers to the increased income taxes surviving spouses may face after switching from “married filing jointly” to “single” or “qualifying widow(er).” This change impacts:

Income tax brackets, which become narrower for single filers
Standard deductions, which are cut nearly in half
Taxation of Social Security benefits, which may be higher if income remains steady
Medicare premiums, which increase with higher taxable income

This situation is prevalent among retirees who rely on Social Security, pensions, or retirement accounts for their income. A surviving spouse may lose only a portion of the household income but still be taxed as a single person, resulting in a higher effective tax rate.

Real-World Impact on Retirees

Consider a couple filing jointly who has a combined income of $90,000. Their federal tax liability may be relatively modest thanks to the wider joint tax brackets and higher standard deduction.

However, if one spouse dies and the survivor continues to receive $70,000 in income, including retirement accounts and survivor benefits, they may be subject to a higher tax bracket. That income could also cause more of their Social Security benefits to become taxable and raise their Medicare Part B premiums.

These hidden costs can take a significant toll on a surviving spouse, especially during an emotionally and financially vulnerable time.

How a Probate Attorney Can Help You Plan Ahead

The best way to avoid the survivor’s penalty is to anticipate it while both spouses are still living. With the help of a probate or elder law attorney and financial advisor, couples can build tax-efficient strategies that reduce exposure.

Some options include:

Roth conversions: Paying taxes on retirement accounts now to reduce taxable income later
Adjusting Social Security claiming strategies: Coordinating timing to maximize survivor benefits
Splitting income-producing assets: Using trusts to distribute income more evenly across heirs or generations
Using the step-up in basis: Taking advantage of tax resets on inherited assets to reduce capital gains

It’s also important to ensure that estate planning documents reflect your current wishes. A surviving spouse who is suddenly left in charge of financial and medical decisions needs clear legal authority through powers of attorney, healthcare proxies and updated wills or trusts.

What to Do after a Spouse’s Death

If you are already a surviving spouse, it’s not too late to act. In the year of a spouse’s death, the surviving partner can still file a joint return. After that, unless they have a qualifying dependent, they must file as single.

Working with a probate attorney can help avoid the survivor’s tax penalty after the death of a spouse. They will help sort through estate settlements, beneficiary changes and tax filings. A CPA or financial planner can also assess how the change in filing status impacts required minimum distributions (RMDs), Medicare and taxes. If you would like to learn more about tax planning after the death of a loved one, please visit our previous posts.

Reference: CNBC (November 6, 2024) “You could face the ‘survivor’s penalty’ after a spouse dies — here’s how to avoid it”

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Category: Surviving Spouse