Attorney F. Moore McLaughlin IV is managing partner of McLaughlin & Quinn LLC, a Providence-based law firm that specializes in estate and income tax planning. McLaughlin, who is also a certified public accountant (CPA), contributed to a recently published book, “Estate Planning Strategies – Collective Wisdom, Proven Techniques.” This month, he will hold a three-part Web seminar on the topic. McLaughlin answered questions about estate planning for Providence Business News.
PBN: Obviously, the wealthy can benefit from estate planning, but can you give some examples when estate planning would be essential?
McLAUGHLIN: Unquestionably, the wealthy will benefit from proper estate planning in the form of probate avoidance and tax minimization. But the goals of estate planning reach far beyond monetary savings. A young couple with minor children will want to nominate the guardian of their children. In the event of a second marriage, a parent will want to protect a child’s inheritance rather than losing it to a second spouse. For the elderly, a good estate plan can protect their assets from the crushing costs of nursing homes.
Estate planning will also help a small-business owner pass down his or her business to the next generation in an orderly transition and help a charitably inclined individual leave a lasting legacy.
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PBN: What is your advice to people who are comtemplating a visit to an estate planner?
McLAUGHLIN: Estate planning typically consists of a team, including an attorney, a [certified public accountant] and a financial planner. Each professional is responsible for their own area.
I would advise anyone who is thinking about estate planning to reach out to an experienced professional. In addition, I would advise this person to consider where they want their assets to go, when and how. The estate planning process is much more efficient when the client is well organized and knows how their assets are held. Lastly, they should give serious thought as to who will manage their affairs and take care of them and/or their minor children if they are unable.
PBN: What are most people seeking when they contact you about estate planning?
McLAUGHLIN: The overriding concern is “control,” protecting themselves and their beneficiaries from divorcing spouses, creditors, lawsuits and bankruptcy. Our clients want to maintain control over their assets and affairs for as long as they are physically and mentally able. Then they want to make sure that someone else exercises the same control when they are unable. Lastly, they usually want some measure of “control from the grave.”
Control during life means appointing them as trustees of their own revocable trust or as signatory on a joint account or as a manager of an [limited liability corporation]. During periods of incapacity, control is usually exercised through a power of attorney, a friendly trustee or a health care proxy. [In the event of death], most of our clients would like to see their assets transferred to their children through a trust, and not directly to their children, so that the assets are protected from their children’s creditors.
PBN: As it stands now, Rhode Island’s estate tax is pretty onerous, but Gov. Donald L. Carcieri has proposed doing away with it. What do you see at the benefits and the downside to doing that?
McLAUGHLIN: The benefits of repealing the Rhode Island death tax include allowing Rhode Islanders to keep their hard-earned money on which they have already paid significant taxes over the years. By making Rhode Island a more attractive state to live and die in, from a tax perspective, Rhode Islanders will have the opportunity to remain in the state they love without having to pay a significant penalty for the privilege of doing so.
The downside to repealing the death tax would be the perception that the “rich” are getting another tax break. An individual dying in Rhode Island would owe estate tax on an estate valued at more than $675,000. And, the top tax rate is 16 percent.
PBN: Do you see a lot of cases in which people are moving their primary residence out of Rhode Island to avoid the estate tax?
McLAUGHLIN: I see people moving out of state – especially to Florida – for many reasons, certainly including the Rhode Island estate tax.
Many of our clients who reach a certain age begin thinking of their retirement options. In doing so, the anticipated tax liability often comes to the forefront. If the clients have an option, they would prefer to retire where the taxes are lower, rather than higher. Since many Rhode Islanders vacation or own second homes in Florida, it becomes a natural destination. When the tax savings are entered into the equation, Florida often trumps Rhode Island.
Additional information is available at www.McLaughlinQuinn.com.
