Retirement plan assets, when left to children, are subject to both the estate tax and an income tax called the Income in Respect of Decedent tax. Without proper planning, up to 76 percent of your retirement plan assets can be lost to taxes. Lack of Liquidity. In wealth transfer planning, no cash can be devastating. Particularly if your family wealth includes large real estate holdings or a business.
Estate taxes can mean the loss of treasured family assets.
In a recent survey among successors of successful family businesses whose businesses failed after they were passed on to the next generation, 97.9 percent had to sell the business to raise the cash to pay estate taxes. Estate taxes must be paid in cash, usually within nine months, after you are gone. Most people do not structure their wealth with liquidity in mind. Therefore, assets have to be liquidated, regardless of whether it's a good time to sell. A forced sale of an asset can result in not only the loss of the asset, but also a significant loss in value to your family due to the poor timing.