Presentation on theme: "OLA 1505 0114 The Legacy Plan: Why Everyone Needs One."— Presentation transcript:
OLA The Legacy Plan: Why Everyone Needs One
2 This material was not intended or written to be used, and cannot be used, to avoid penalties imposed under the Internal Revenue Code. This material was written to support the promotion or marketing of the products, services, and/or concepts addressed in this material. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely solely on their own independent advisors regarding their particular situation and the concepts presented here.
3 You Have Worked Hard to Build a Legacy and Achieve Success Over the years, your goal of accumulating wealth has shifted Now your focus is protecting and planning the transfer of your assets to loved ones Without a comprehensive legacy plan, transfer costs can erode the legacy you worked so hard to build
4 Examples of Transfer Costs that Threaten to Erode Your Legacy Probate Fees Federal Estate Taxes State Estate Taxes State Inheritance Taxes
5 What is Probate? The court-supervised process that is designed to sort out the transfer of a person's property at death Mandatory process if a person dies with or without a will The overall cost of probate will vary according to state law and will generally hinge on the size of the estate—the more you own, the more you owe
6 Examples of Probate Fees Appraisal fees Accounting fees Legal fees Personal representative fees
7 Cost of Probate 1 Estate SizeAdministration Expense 2 $1,000,000 $60,000 $1,500,000 $85,000 $2,000,000 $110,000 $5,000,000 $260,000 $10,000,000 $510,000 $20,000,000$1,010,000 1 Assumes death occurs in Administration expense is assumed to be 5.0% of estate size, plus $10,000 for last illness and burial costs. Administration fees (such as executor’s commissions and attorney fees) and last illness and burial expenses are deductible in determining the federal estate tax. The actual total cost could be more or less than the amount shown, depending on the state in which probate is being undertaken.
8 What is the Federal Estate Tax? A federal tax on all property you own upon your death Tax on the right to transfer property at death Estate tax return must generally be filed within nine months of death Any estate tax liability is due within nine months Estate tax increases with the size of the estate. The larger the estate, the greater the estate tax.
9 Exemption: $5.34 million* Top Tax Rate: 40% * The lifetime estate tax exemption amount is indexed for inflation. In 2014, the exempt amount is $5.34 million. Current Estate Tax Law
10 What is State Estate Tax? A separate estate tax imposed by some states on all property you own upon your death State estate tax exemption amounts are generally much less than federal exemption
11 What is State Inheritance Tax? A tax that is: Imposed by some states in addition to the state estate tax Assessed on the right to receive property by inheritance or legal succession Levied on each of your loved ones designated as beneficiaries based on his or her relationship to you and the amount of property received from your estate
State Taxes Many states have estate taxes; a few have inheritance taxes. Maryland and New Jersey have both. Source: CCH, a Wolters Kluwer business Map (Forbes)
State Exemption Amounts* StateTax TypeExemption**Max Tax Rate ConnecticutEstate2,000,00012% DelawareEstate5,340,00016 HawaiiEstate5,340,00016 IowaInheritance015 IllinoisEstate4,000,00016 KentuckyInheritance50016 MaineEstate2,000,00012 MarylandEstate/ Inheritance1,000,000/15016/10 MassachusettsEstate1,000,00016 MinnesotaEstate1,000,00016 NebraskaInheritance10,00018 New JerseyEstate/ Inheritance675,000/016/16 New YorkEstate1,000,00016 OregonEstate1,000,00016 PennsylvaniaInheritance015 Rhode IslandEstate921,65516 TennesseeInheritance2,000, VermontEstate2,750,00016 Washington DCEstate1,000,00016 Washington StateEstate2,000,00020 * *Source: CCH Wolters Kluwer. Retrieved from **Some states allow greater exemptions for spouses, parents or children.
14 How Do You Prevent Transfer Costs From Eroding Your Legacy? A comprehensive legacy plan can help minimize transfer costs while communicating your wishes to the loved ones you leave behind.
15 Legacy Plan: Why Everyone Needs One A legacy plan is not just for the rich or elderly. A well-designed estate plan can help you: Minimize or eliminate transfer taxes Provide for orderly family business succession Plan for incapacity Avoid probate and probate fees Promote a charitable cause Minimize family discord
16 Arrange for the guardianship of your minor children Preserve wealth throughout generations Protect assets from creditors, divorces and lawsuits Provide for loved ones with special needs while preserving eligibility for government sponsored programs Promote your values throughout generations Legacy Plan: Why Everyone Needs One
17 Life Insurance & Legacy Planning Dealing with the loss of a loved one is hard enough, but imagine that grief compounded by the stress of dealing with financial matters. Will your loved ones have sufficient cash to pay taxes, medical bills, final expenses and other debts?
18 Why Life Insurance? Instant Liquidity A life insurance policy can infuse your estate with the cash necessary for: income replacement paying off debt paying taxes inheritance equalization funding transfer of family business
19 Why Life Insurance? Guarantees With a guaranteed life insurance policy, you can rest assured that loved ones will receive a minimum guaranteed death benefit Self-Completion As long as you pay the premiums for your guaranteed policy, your loved ones will receive the death benefit upon your passing—whether that day comes tomorrow or 20 years from now
20 Why Life Insurance? Tax Efficient Death benefit proceeds are received federal income tax-free Policy cash values grow on a tax-deferred basis and are accessible in a tax-favored manner Establishing a Legacy Trust shelters the death benefit from estate tax
21 Not Subject to Probate A life insurance policy’s death benefit is generally not subject to probate administration The death benefit provides immediate cash which can be used to fund a surviving partner’s living expenses until other assets can be liquidated Why Life Insurance?
22 Everyone needs a legacy plan Without a plan, taxes and transfer costs threaten to erode your hard-earned legacy Life insurance can help you preserve your wealth throughout generations In Conclusion
23 This material was not intended or written to be used, and cannot be used, to avoid penalties imposed under the Internal Revenue Code. This material was written to support the promotion or marketing of the products, services, and/or concepts addressed in this material. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely solely on their own independent advisors regarding their particular situation and the concepts presented here. Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company, (collectively (“Transamerica”), and their representatives do not give tax or legal advice. This material is provided for informational purposes only and should not be construed as tax or legal advice. Clients and other interested parties must consult with and rely solely upon their own independent advisors regarding their particular situation and the concepts presented here. Discussions of the various planning strategies and issues are based on our understanding of the applicable federal income, gift, and estate tax laws in effect at the time of this presentation. However, these tax laws are subject to interpretation and change, and there is no guarantee that the relevant authorities will accept Transamerica’s interpretations. Additionally, this material does not consider the impact of applicable state laws upon clients and prospects. Although care is taken in preparing this material and presenting it accurately, Transamerica disclaims any express or implied warranty as to the accuracy of any material contained herein and any liability with respect to it. This information is current as of January Insurance products underwritten by Transamerica Life Insurance Company, Cedar Rapids, IA 52499, and affiliates. In New York, products underwritten by Transamerica Financial Life Insurance Company, Harrison, NY Transamerica Financial Life Insurance Company is authorized to conduct business in New York. Transamerica Life Insurance Company is authorized to conduct business in all other states. OLA