A $2,000,000 Fee?

In the mid-90’s I received a call from a client asking me to invest a lot of money. I asked him how much money, but he was reluctant to answer because of the large sum. He was the sole beneficiary of his uncle’s estate. He was delighted but nervous to be in a position to receive a substantial inheritance. When the money arrived, we parked it in a six-month T-Bill until we developed a plan.   

My client’s uncle did not have an estate plan, and, as a result, he wrote a $2,000,000 check to pay the estate tax! It was the most significant check he had ever written, and it went to pay taxes.

After he paid the IRS, we established a plan so his beneficiaries would not worry about paying an estate tax when he and his wife passed away.  I referred him to an attorney who established several trusts to protect their assets. I assembled a portfolio of California tax-free municipal bonds and high-quality dividend-paying stocks. When they passed, their heirs did not pay any taxes.

Why a $2,000,000 fee?  After he wrote his check to the IRS, he asked me what the fee would be to set up the investment accounts and family trusts. I said it would be less than $2,000,000. He chuckled at my comment because he knew his plan would protect his family for generations.

Next year, under the American Families Plan tax proposal, the estate tax exemption may drop to $5.85 million per person, or $11.7 million per couple – a 50% reduction from current levels. If your net worth is near $6 million, please call your estate planning attorney or financial advisor to ensure your assets are titled correctly. A little planning can go a long way, potentially spanning generations.

The only difference between death and taxes is that death doesn’t get worse every time Congress meets. ~ Will Rogers

October 7, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.