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Deathbed Estate and Tax Planning

April 5, 2010

When Death Is Imminent, Some Quick Moves Can Make a Great Deal of Sense

Deathbed Income Tax Planning

Capital losses should be recognized, as they will be lost upon death.

If the qualified plan or IRA will be subject to income taxation shortly after death due to the minimum distribution method selected, a conversion to a Roth IRA should be considered to allow future tax-free accumulations for the beneficiaries.

Post-death medical bills and U.S. savings bond interest can often be added to the decedent’s final income tax return.

Deathbed Estate Planning

A guardian or conservator can petition the Probate Court to implement an estate plan for the incompetent person. (I once got one of these through Norfolk County Probate Court from start to finish in 5 days.)

If the dying person ever received any type of MassHealth benefits, a post-death estate recovery claim can be avoided if probate is avoided.

An imminent death creates a deadline to create a special needs trust to preserve the governmental benefits of a disabled person who is to inherit; to establish a bypass/credit shelter trust; to establish a generation-skipping trust for the benefit of a wealthy person who is to inherit; to make annual exclusion gifts; and to create valuation discounts.

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