1. Planning During Economic Turmoil What Practitioners Can Advise Their Clients

2. (C) Copyright Law Made Easy Press, LLC 2008 2 Estate, Financial, Insurance, Business, Matrimonial….. Every aspect of planning has been impacted. All planning needs to be reviewed. Clients should be encouraged to set up meetings to review and update their plans. Objectives need to be re-evaluated. Do they still apply? How have they changed? Practitioners should communicate with clients.

3. (C) Copyright Law Made Easy Press, LLC 2008 3 Planning is inter- related. Updating business buy-sell Agreements may impact Estate planning As well. Matrimonial planning May be impacted by Estate Planning Matrimonial Planning May impact Business planning

4. (C) Copyright Law Made Easy Press, LLC 2008 4 Illustration of Economic Changes Affecting GRATs Economic decline lowers interest rates Economic uncertainty raises discounts Growing deficit raises specter of tax increases Lower rates improve GRAT leverage GRAT assets now since hurdle rate is lower Further leverage on lower interest rates Get it while you can by locking in long term low rate GRAT Higher discounts improve GRAT leverage Value of assets are lower; this is enhanced by higher discounts More GRATsIf you feel GRATs won’t be repealed, use rolling technique Will the GRAT technique be legislated away? Use a long term GRAT to lock in low rate. Watch impact on investment strategies How risky of an asset should you fund with if repeal is anticipated? Get it while you can.

5. (C) Copyright Law Made Easy Press, LLC 2008 5 Wills: Review and Update Change in relative values of assets impacts intended dispositive scheme. Will intended heirs receive sufficient assets? Should distribution standards in trusts be modified in light of changing values? Should disproportionate inter-vivos gifts be equalized under the will?

6. (C) Copyright Law Made Easy Press, LLC 2008 6 Gift Planning Should gift program be abandoned in light of new economic worries? Do some donees require additional gifts in light of their economic hardship? Should powers of attorney be revised? Consider gifts to 529 plans that can be reclaimed if you wish. Consider dynasty trusts naming you (and your spouse) as beneficiaries.

7. (C) Copyright Law Made Easy Press, LLC 2008 7 Fiduciary Considerations Be sure to have an investment policy statement (IPS) and update existing IPSs. Determine if you have to communicate with beneficiaries. Should you communicate? What should you communicate? Inter-relationship of various fiduciaries (protectors, advisers, etc.). Can initial goals still be achieved?

8. (C) Copyright Law Made Easy Press, LLC 2008 8 GRATs Busted GRATs. Pay it, paper it, roll it! Re-GRAT and continue the plan. Evaluate GRATs holding real estate and business interests to determine if payments can be met and what action to take. Are short term rolling GRATs the way to fly? Long term GRATs warrant consideration. How does GRAT immunization change?

9. (C) Copyright Law Made Easy Press, LLC 2008 9 Note Sales to IDITs Note sale transactions to defective grantor trusts must be evaluated. Will the IDIT have funding to make future note payments? Will equity interests have to be used to make note payments? Watch discount whipsaw. Monitor business operations of the entity owned by the IDIT.

10. (C) Copyright Law Made Easy Press, LLC 2008 10 Discounts and Valuations Are discounts higher in light of current risk, fear and volatility? Are valuations so low that clients should aggressively pursue planning now?

11. (C) Copyright Law Made Easy Press, LLC 2008 11 Charitable Planning During Economic Turmoil Give, give, give. It feels goooood. Clients uncomfortable with current large gifts can consider alternatives: –Insurance funding of deferred gift. –Gift annuity. –Charitable remainder trust. –Defer commitments and pay over time.

12. (C) Copyright Law Made Easy Press, LLC 2008 12 Charitable Giving Planning During Economic Turmoil Charitable Lead Trust (CLT) Burnout. Review and revise charitable bequests under client wills/living trusts. –Are amounts still appropriate? –Will individual beneficiary needs be compromised because of economic changes? Don’t donate depreciated securities.

13. (C) Copyright Law Made Easy Press, LLC 2008 13 Probate During Economic Turmoil Executors must adhere to the Prudent Investor Act – implement an IPS. Estate tax deferral IRC Sec. 6166 – impact of valuation changes on 35% requirement. Alternate valuation date will be far more common. Pressure from disappointed beneficiaries.

14. (C) Copyright Law Made Easy Press, LLC 2008 14 Closely Held Business Planning During Economic Turmoil Business contractions. Bequests of business interests. Impact of valuation changes on dispositive scheme. Cash shortfall - S corporation loans and basis. Business distributions, personal expenses and formalities. Trust fund taxes.

15. (C) Copyright Law Made Easy Press, LLC 2008 15 Closely Held Business Planning During Economic Turmoil Buyout formulas and provisions. Business insurance. FLPs/LLCs and unauthorized distributions/payments – 2036 issues. Firing a partner. Deferring a new partner. Termination agreements. Employee buyouts.

16. (C) Copyright Law Made Easy Press, LLC 2008 16 Financial Planning Through Economic Turmoil Financial planning and estate planning are so inter-related that changes in either will affect the other. Coordination is key. Property and casualty insurance. Asset allocation. –What individual investors really earn. –Re-balancing. –Asset location versus allocation and estate planning.

17. (C) Copyright Law Made Easy Press, LLC 2008 17 Financial Planning Through Economic Turmoil Life insurance planning: –How much is really needed? –Have economic developments increased or decreased coverage needs. –Could excess coverage be sold in the secondary market? –Is more coverage needed to accomplish estate planning goals derailed by the economic downturn?

18. (C) Copyright Law Made Easy Press, LLC 2008 18 Financial Planning During Economic Turmoil Irrevocable Life Insurance Trusts (ILITs) – Steps Trustees should take: –Evaluate continued relevance of trust objectives. –Obtain in force illustration and evaluate policy performance. – Determine required/recommended communications with beneficiaries. –Evaluate level of future gifts to fund payments.

19. (C) Copyright Law Made Easy Press, LLC 2008 19 Financial Planning Through Economic Turmoil Title to assets: –Review bypass trust funding in light of changes in asset values. –Asset protection risks increase in light of economic turmoil. –Monitor insurance limits on bank and securities accounts.

20. (C) Copyright Law Made Easy Press, LLC 2008 20 Matrimonial Planning Through Economic Turmoil Prenuptial agreements. Review provisions, assumptions and economic implications in light of changes in asset values. Planning for children post-divorce impacted: 529 plans, ability to pay for college, trust assets, etc. Family loans. Life Insurance. Etc.