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The IRS—Your Hidden Beneficiary

Do your clients know who's getting the biggest part of the estate?

By Don Brown, CLU, ChFC, LUTCF

When you’re talking to people about estate taxes, it’s difficult for them to accept that their estate will be taxed on something that they’ve built and already pay taxes on. They know it’s going to happen, but they don’t like to think about it. Here’s a simple way to help your clients consider ways to work around the inevitable: Have them think about the IRS as a hidden beneficiary.

When you sit down with your client during the factfinder, the dialogue can go something like this:

Agent: How many kids do you have?

Client: I have three.

Agent: Are all your kids going to participate in the wealth that you’ve spent so many years building?

Client: Yeah, of course.

Agent: OK, let’s see, you have four beneficiaries who are going to receive your estate.

Client: No, I just told you I have three kids.

Agent: Yes, you have three kids, but you also have four beneficiaries—the fourth is the IRS.

This sort of dialogue catches your client off guard. Take out a notepad at this point and say, “Let’s say you have a taxable estate of a million dollars. After everything is said and done this fourth beneficiary is going to get 40 percent, and the others are going to get 60. So, let’s see. Each of your three children will receive 20 percent of a million dollars. Does that seem fair to you?”

People who have built their own businesses can appreciate presentations that go for the brass tacks of the argument: You have four beneficiaries, one of them is going to get a higher percentage than the rest and this is how you can avoid it, by implementing trusts, survivorship policies and other insurance products of this nature.

Don Brown, CLU, ChFC, LUTCF, is the membership chair of Florida AIFA.


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