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Updated 1/15/2007 1 Estate Plans That Work www.taflaw.com SERVING CLIENTS IN: AVENTURA BOCA RATON BRISTOL CHATTANOOGA CLEARWATER CORAL GABLES DAYTONA BEACH.

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Presentation on theme: "Updated 1/15/2007 1 Estate Plans That Work www.taflaw.com SERVING CLIENTS IN: AVENTURA BOCA RATON BRISTOL CHATTANOOGA CLEARWATER CORAL GABLES DAYTONA BEACH."— Presentation transcript:

1 Updated 1/15/2007 1 Estate Plans That Work www.taflaw.com SERVING CLIENTS IN: AVENTURA BOCA RATON BRISTOL CHATTANOOGA CLEARWATER CORAL GABLES DAYTONA BEACH DEL RAY BEACH FERNANDINA BEACH FORT LAUDERDALE FORT MYERS GAINESVILLE JACKSONVILLE JOHNSON CITY KEY LARGO KEY WEST KINGSPORT KNOXVILLE MARATHON MIAMI MORRISTOWN NAPLES OCALA ORLANDO PALM BEACH PALM BEACH GARDENS PALM COAST PONTE VEDRA PORT CHARLOTTE SARASOTA ST AUGUSTINE ST PETERSBURG STUART TAMPA VENICE WEST PALM BEACH WINTER PARK OTHER MARKETS IN THE EASTERN UNITED STATES EUROPE ASIA South Florida Office 3020 NE 32 Ave. Suite 302 Fort Lauderdale, FL 33308 Tennessee Office 207 Mockingbird Lane Suite 402 Johnson City, TN 37604 North Florida Office 1200 Plantation Island Dr. Suite 220 St. Augustine, FL 32080 Florida Keys Office 1010 Kennedy Dr. Suite 201 Key West, FL 33040

2 Updated 1/15/2007 2 The Andersen Firm A Professional Corporation IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

3 Updated 1/15/2007 3 “Imagine your life has ended and you’re looking down from your cloud at your loved ones. Everything you’re looking at tells you your estate plan is working perfectly, exactly as you planned it......WHAT do you see? A Question:

4 Updated 1/15/2007 4 Don’t Work In Reality Most Estate Plans. If what you see is what you wanted to happen then what you have is an. Estate Plan That Works

5 Updated 1/15/2007 5 It helps to get past the various “smoke screens”: Wills vs. Trusts Avoid Probate / Save Taxes Hourly vs. Fix Fee Billing “ PTA”: Philosophy / Technical Basics / Application

6 Updated 1/15/2007 6 I. “Philosophy” of an Estate Plan That Works

7 Updated 1/15/2007 7 1. I want to my property while I am alive and well; 2. Plan for my loved ones and me in case I become 3. Give I want, I want, I want, I want; 4. All at a fully disclosed and controlled to me and those I love. Control Disabled WhatTo WhomWhen The Way Cost A. The of an estate plan that works: Definition

8 Updated 1/15/2007 8 B. A new for an estate plan that works: “Paradigm” Shifts:  1492, Columbus and a flat earth The “Traditional” Planning Paradigm: Planning Priorities: 1. 2. 3. 4. 5. Save Taxes / Avoid Probate Protect Wealth Paradigm Enhance Wealth The Family Client / Spouse

9 Updated 1/15/2007 9 The “New Paradigm” Planning Pyramid: 5. 4. 3. 2. 1. Client / Spouse Family / Beneficiaries Enhancing Wealth Protecting Wealth Taxes / Probate End of Philosophy...

10 Updated 1/15/2007 10 So, let’s add a small dose of (semi) “Technical” to understand the TIP of the Pyramid so we can then concentrate on ME and MY FAMILY

11 Updated 1/15/2007 11 II. Technical basics of an Estate Plan That Works

12 Updated 1/15/2007 12 A. Taxes 1.GIFT Tax: up to 45% Each individual can give up to $ To any other individual In any without paying gift tax $ lifetime exemption Unlimited Marital Deduction “TRANSFER” Tax System... 12,000 Year 1,000,000

13 Updated 1/15/2007 13 2. ESTATE Tax: Up to 45% The “Coupon” amount: $ Two Rules:  Expiration Date: “Choose it or Lose it!”  Non-Transferable Unlimited Marital Deduction 2,000,000

14 Updated 1/15/2007 14 3. GENERATION SKIPPING Tax: up to 45% Skip One Generation The “Coupon” Amount: $ The Unlimited Marital Deduction 2,000,000

15 Updated 1/15/2007 15  In 2009, the Federal Coupon will be $3,500,000, but the Tennessee coupon will only be $1,000,000.  In 2010, the Federal Estate Tax will disappear for 1 year, but Tennessee will continue to tax estates of over $1,000,000. Tennessee Inheritance Tax Coupon Federal Estate Tax Coupon The Tennessee Inheritance Tax Gap

16 Updated 1/15/2007 16 A.Tennessee Transfer Tax System 1. GIFT Tax:  Each individual can give up to $12,000 to any direct relative, or  $5,000 to the 1st person and $3,000 to any person thereafter, In any year Without paying State gift tax 2. ESTATE Tax:  The ­TN “Coupon” amount: $1,000,000 → Expiration Date – “Choose It or Loose It” → Non-Transferable → Unlimited Marital Deduction → Counseling will be needed to help plan for the Coupon changes → Designed to pay least possible “death” taxes

17 Updated 1/15/2007 17 B. The LAW The “Magic Rule”: TITLE = RESULT!!! Think about the 3 WAYS you can own property at the time of your death … and what happens in each case

18 Updated 1/15/2007 18 1. Title at death = **WITH or WITHOUT A WILL!! The 3 Big complaints about PROBATE??? A) Time: B) Cost: C) Privacy: Individual 6 – 18 Months 4 – 7 % Public Record Probate

19 Updated 1/15/2007 19 2. Title at death = Ownership passes to other Joint Owner(s). BUT … be aware of the dangers of depending on joint ownership as the ”” of an estate plan Joint Automatically Centerpiece This happens “By operation of Law.” In other words “The Survivor WINS”

20 Updated 1/15/2007 20 3. Title by at death = over how your assets pass. Familiar examples of Title by Contract = Beneficiary Designations for: A) Life Insurance B) Annuities C) IRA’s and 401 – K’s ContractControl End of Technical Basics

21 Updated 1/15/2007 21 Revocable Living Trust  Trustmaker(s)  Trustee(s)  Beneficiary(-ies) 1.The ““ Story: First Step the “Bucket” Second Step the “Bucket” 2. The “” Story: * A Key Distinction : vs. THREE ROLES Bucket Create Fill Babysitter Word ProcessingCounseling

22 Updated 1/15/2007 22 III. Application of an Estate Plan That Works

23 Updated 1/15/2007 23 Husband’s Wife’s Co- (Both Alive) Trustees --------------------------------------------------------------------------------- (After 1st death) Surviving Spouse Beneficiary Trustee Marital Trust Family Trust (“A”) (“Credit Shelter,” “Bypass”, “B”) (After 2nd death) *Protections: (remarriage; creditors &“predators”) $ Total Assets $$ $$ A. Providing for my SPOUSE 5m 2.5m2.5m 500k2m No Tax upon first Death Health, Education & Maintenance

24 Updated 1/15/2007 24 B. Providing for my and / or The KEY question is “How Much” do you want to give your Children / Beneficiaries? ChildrenBeneficiaries Control Access Ownership

25 Updated 1/15/2007 25 OutrightIn Trust Lifetime Protective Trust $ 1/3 at 35 1/3 at 45 1/3 at 55 Lump Sum Phases Stages Conserv. Lifetime Trust In trust for the beneficiary's lifetime; income & principal in the Trustees discretion: No Asset Protection Brother’s Trust Brother as Trustee and Beneficiary w/ Co-Trustee & Sister’s Trust Sister as Beneficiary w /Third Party Trustee Kids House College $$ Health, Education & Maintenance

26 Updated 1/15/2007 26 The Three & of EVERY Estate Plan: PhasesCosts 1.The Upfront Phase: a) Documents... vs... b) Counseling and Design

27 Updated 1/15/2007 27 2. The Updating Phase: (or failing to update!) What Changes???  Life Law Lawyer b) How many Trust buckets are not fully funded? !!! 19.2 90% a) How long (on average) do people go before updating their estate plans? yrs!!

28 Updated 1/15/2007 28 3. The Settlement Phase: Don’t fall for the “Magic Book” myth!! The CHALLENGE: takes responsibility for each phase & its cost and ?? WhoWhen

29 Updated 1/15/2007 29 IV. Advanced Planning Techniques

30 Updated 1/15/2007 30 Qualified Personal Residence Trust Tenants in Common Husband’sWife’s Value of Home + Appreciation out of Estate Home out of reach of creditors Current FMV of Home - Value of right to live in Home = Taxable Gift H’s QPRTW’s QPRT 50%50%Gift to Trusts Right to live in house for # of Years

31 Updated 1/15/2007 31 Buildup Equity Retirement Trust Irrevocable Trust for Transfer into Trust Higher of $ or % of Trust Each Year Spouse Can Use Trust for Property in BERT: Protected from Passes Upon Death 5,0005 Spouses Lifetime Transfer Tax Free Needs Creditors Transfer Tax Free

32 Updated 1/15/2007 32 6%10% Year 5:$29,877$33,578 Year 10:$69,858$87,656 Year 20:$211,735$372,824 Year 30:$634,456 $1,302,031 For Each BERT ! Growth of BERT Assets Slow and Steady Greater of $5,000 or 5% of Trust (assuming 2% inflation)

33 Updated 1/15/2007 33 6% 10% Year 5:$377,879$448,884 Year 10:$586,741$813,875 Year 20:$1,269,317$2,383,485 Year 30:$2,541,699$6,517,169 For each BERT! Year 1 - $240,000 Gift Thereafter - $12,000 Gift Assuming 2% Interest Super Charged Growth of BERT Assets

34 Updated 1/15/2007 34 Limited Liability Company Family Run Company as  Contribute Assets to LLC  Assets LLC may NOT be  Creditors can only get a which is the Right to the Member’s  Creditor of LLC can only Sue the LLC MembersBusiness Unprotected Inside Seized Charging Order Share of Distributions

35 Updated 1/15/2007 35 Limited Liability Company  Company's Value Asset Value Discounts: Most Protection Wyoming LLC: Lowest Valuation Less Than Lack of Marketability Minority Interest


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