1 George Washington University Estate Planning Essentials October 2, 2010

2 By: John P. Dedon Odin, Feldman & Pittleman, P.C Lee Highway, Suite 1100 Fairfax, Virginia (703)

3 Personal Asset Accumulation Wages Qualified Plans Investment Income Inheritance

4

5 Proper Planning Will Allow You to... Give what you have, To whom you want, When you want, and In the way you want And Pay Less for: Court Costs Court Costs Attorney’s fees Attorney’s fees Estate Taxes Estate Taxes

6 but we don’t want them to blow it! We want to give our children enough...

7 Other Fundamental Planning Issues Children from a previous marriage and second spouseChildren from a previous marriage and second spouse Children with special needsChildren with special needs Children with creditor, financial, or marital problemsChildren with creditor, financial, or marital problems Property in multi-statesProperty in multi-states Competency issues in future (parents)Competency issues in future (parents) Spouse who would need help managing and investing fundsSpouse who would need help managing and investing funds

8 Assets At Risk (4 Areas of Risk) Potential Creditors 3-6% Probate & Legal Expenses Estate Tax (?) 35% Income Tax IRS

9 Phase-in Schedule : $ 1,000,000 $ 1,500,000 $ 2,000,000 $ 3,500,000 No estate tax* $ 1,000,000 Exemption Amount Year * Income Tax ? - What will Congress do?

10 50%

11 MONTH 9 IRS

12 Death is Inevitable... You have the option to plan your estate and avoid Death Taxes Estate Tax is Not! IRS

13 Estate Beneficiaries Family Charity GWU IRS

14 Current Lifetime Gifting Rates $ 13,000 Annual Exclusion $1,000,000 : Life Time Gift

15 Probate Assets Pass According to Will or Intestacy Laws Assets Passing Without a Will Assets Passing With a Will

16 Probate Cost Time Delays Publicity Property In Multiple States

17 Benefits of Revocable Living Trusts I.Avoids Probate a.Cost b.Time Delays c.Publicity d.Problems with property in multiple states II.Incapacity Planning III.Estate Tax Planning a.Bypass and Marital Trusts b.GST Planning Revocable Trust

18 BASIC PLANNING n Wills n Revocable Living Trusts n Advanced Medical Directives (Living Wills) n Powers of Attorney

19 Assets Passing at Death 1) Beneficiary Designations 2) Titling of Assets - Tenants In Common - Tenants By The Entirety (Assets Pass to Surviving Spouse) - Joint Tenants with Right of Survivorship (Assets Pass to Surviving Owner) 3) Probate 4) Revocable Living Trusts

20 Case Study Mom Dad 2 Children Grandma

21 Profile Married $2 Million + Equity in real estate, retirement plans, other liquid assets, life insurance

22 Assets $ 450,000$100,000 $ 800,000 Retirement $ 300,000 Liquid Insurance $ 900,000 $2,000,000$250,000 Total$2,450,000$350,000$2,000,000 Grand Total = $4.8 million

23 Objectives Provide for surviving spouse Eliminate or avoid estate tax Eliminate probate Provide for children at second death Provide for Mom Charity

24 Solutions Wills, Revocable Trusts with credit trust and marital trust for surviving spouse, Powers of Attorney and Medical Directives. At second death, trusts for children, with distributions at ages 25, 30, and 35. Special Needs Trust for Grandma. Charitable Distribution

25 Using Revocable Trust to Reduce Estate Tax Upon Husband’s Death Husband’s Trust Bypass/Credit Trust (Husband’s Exemption $3,500,000) Spouse = Trustee and Beneficiary Tax Free Marital Share: Assets > $3.5 Million < $3.5 Million Inheritance (Tax-Free) Marital Trust $2,450,000 $350,000 $2 Million Joint Property Wife’s Trust

26 Second Death $3.5 Million $$$ 25 (1/3) 30 (1/2) 35 Balance Need Executor, Trustee, Guardian Special Needs Trust

27 Potential Titling Problems Wife dies first, only $350,000 Jointly held property

28 Other Estate Tax Problems $1 million exemption amount in 2011? Charitable Planning As A Solution Distributions Charitable Remainder and Lead Trusts Life Estates