Let’s look at the case of the Nortons from Minneapolis. Jack is a 68-year old retired pharmaceutical executive with an IRA worth about $850,000. His beneficiary is his 64-year old wife, Martha. Martha’s 401k is worth near $150,000. Together, the Norton’s have about $350,000 in savings and carry a non-IRA equity portfolio worth $450,000. Jack is starting to show signs of Alzheimer’s but Martha appears in great shape, both in health and in her ability to care for Jack if something goes wrong. Looking at the total worth of their estate, about 2.4 million, they realize they should start thinking about estate planning, but aren’t happy about the taxes associated.
In order to help our hypothetical couple, we presented this scenario to Elaine Bedel, president of Bedel Financial Counseling, along with the question, “What taxation issues might the Norton’s encounter?”
Elaine Bedel, who’s had more than 30 years in financial services industry, had this to say about Jack and Martha’s dilemma: