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LBL7166 Allstate Insurance Company 1 Financial Focus Estate Planning for Uncertain Times Not FDIC, NCUA/NCUSIF insured * Not a deposit *

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Presentation on theme: "LBL7166 Allstate Insurance Company 1 Financial Focus Estate Planning for Uncertain Times Not FDIC, NCUA/NCUSIF insured * Not a deposit *"— Presentation transcript:

1 LBL7166 (ADS202) @2006 Allstate Insurance Company 1 Financial Focus Estate Planning for Uncertain Times Not FDIC, NCUA/NCUSIF insured * Not a deposit * No bank or credit union guarantee * Not insured by any federal government agency * May lose value

2 LBL7166 (ADS202) @2006 Allstate Insurance Company 2 This presentation is for informational purposes only. It represents our understanding of generally applicable rules. Lincoln Benefit Life, an Allstate Company, its agents and employees may not give tax or legal advice. We recommend everyone seek and rely upon the advice of his or her own professional advisors for such advice. Important Note

3 LBL7166 (ADS202) @2006 Allstate Insurance Company 3 Introduction to Estate Planning  What is estate planning?  Why should you be interested in estate planning?  How much money should you have before you consider estate planning?

4 LBL7166 (ADS202) @2006 Allstate Insurance Company 4 Estate Planning Goals – While Living  Provide for management of assets in the event of disability or incapacity  Provide instructions for healthcare decisions  Protect assets from long term care costs

5 LBL7166 (ADS202) @2006 Allstate Insurance Company 5 Estate Planning Goals – Before Death  Determine who gets what, how and when after death  Maximize estate by reducing expenses and avoid delays  Minimize estate taxes  Provide liquidity

6 LBL7166 (ADS202) @2006 Allstate Insurance Company 6 Who Should Plan? EVERYBODY! Why?  Children  Assets (farm, business, etc.)  Incapacity  Healthcare  Elder Care  Expenses/Taxes

7 LBL7166 (ADS202) @2006 Allstate Insurance Company 7 Planning All of Us Should Consider Long term care planning  Provides a greater level of independence and dignity when long term care is needed  Affords assistance to maintain an accustomed standard of living  Promotes estate preservation

8 LBL7166 (ADS202) @2006 Allstate Insurance Company 8 Planning All of Us Should Consider Financial Decisions  Financial Durable Power of Attorney Health Care Decisions  Power of Attorney for Healthcare  Living Will

9 LBL7166 (ADS202) @2006 Allstate Insurance Company 9 Planning All of Us Should Consider Will  Legal Document – Takes effect at death – State requirements vary  Benefits – Transfer of assets – Names guardians – Can establish trusts for beneficiaries

10 LBL7166 (ADS202) @2006 Allstate Insurance Company 10 Distributing Your Assets Probate  Court-supervised distribution of assets  Advantages – Distributes assets according to will – Limits time to challenge will – Limits time creditors can make claims

11 LBL7166 (ADS202) @2006 Allstate Insurance Company 11 Distributing Your Assets Probate  Disadvantages – Time – Cost – Publicity

12 LBL7166 (ADS202) @2006 Allstate Insurance Company 12 Distributing Your Assets Assets That Pass Outside of Probate  Joint tenancy with right of survivorship  Assets subject to a beneficiary designation  Assets owned by a Living Trust

13 LBL7166 (ADS202) @2006 Allstate Insurance Company 13 Distributing Your Assets Trusts  Parties to a Trust – Grantor – Creates Trust – Trustee – Manages Trust – Beneficiary – Benefits from Trust  Types of Trusts – Living vs. Testamentary – Revocable vs. Irrevocable

14 LBL7166 (ADS202) @2006 Allstate Insurance Company 14 Distributing Your Assets Living Trusts  Preferred primary estate planning document  Avoid probate – Time – Costs – Publicity  Financial guardianship – Provide protection and management of trust assets if the grantor becomes incompetent.

15 LBL7166 (ADS202) @2006 Allstate Insurance Company 15 Estate Taxes and Your Estate… All Tangible Assets All Intangible Assets At Fair Market Value!

16 LBL7166 (ADS202) @2006 Allstate Insurance Company 16 Your Estate at Death

17 LBL7166 (ADS202) @2006 Allstate Insurance Company 17 Estate Taxes Estate Tax Examples (2006 Credit)

18 LBL7166 (ADS202) @2006 Allstate Insurance Company 18 Economic Growth and Tax Relief Reconciliation Act of 2001  Estate tax “repeal” in 2010  Increased exemptions – $1 million in 2003 – $1.5 million in 2004-05 – $2 million in 2006-08 – $3.5 million in 2009

19 LBL7166 (ADS202) @2006 Allstate Insurance Company 19 Deductions/Credits  Unified credit equivalent ($2,000,000 in 2006 increasing to $3.5 million in 2009)  Unlimited Marital deduction  Unlimited Charitable deduction  Annual gift tax exclusion ($12,000 in 2006)  Lifetime gift tax exemption of $1,000,000

20 LBL7166 (ADS202) @2006 Allstate Insurance Company 20 A/B Trusts – How Do They Work?

21 LBL7166 (ADS202) @2006 Allstate Insurance Company 21 Tax Payment Alternatives  Cash – Liquidity? – Sell business/farm/property?  Borrow – Interest?  Use life insurance proceeds

22 LBL7166 (ADS202) @2006 Allstate Insurance Company 22 Planning Some of Us Should Consider

23 LBL7166 (ADS202) @2006 Allstate Insurance Company 23 Charitable Remainder Trusts  Charitable Remainder Trusts (CRTs) are irrevocable trusts that provide: – an “income” stream during the lifetime of named beneficiaries – remaining property passes to charity at the death of beneficiaries – Income stream can be a set annuity payment (charitable remainder annuity trust – CRAT) or stated as a percentage of the value of the trust each year (charitable remainder unitrust – CRUT)

24 LBL7166 (ADS202) @2006 Allstate Insurance Company 24 Charitable Remainder Trusts  Minimum value of income stream is 5% of the value of property transferred to trust  Trust can be set up for lifetime of beneficiary or beneficiaries or for a term of years  Term of years is limited to 20 years  Estate tax deduction limited to estimate of value of property passing to charity, not for value of property contributed to trust

25 LBL7166 (ADS202) @2006 Allstate Insurance Company 25 Charitable Remainder Trusts – Example  John’s estate is $2.5 million. John wants to provide an income stream for Mary during her lifetime. John’s trust sets up a CRUT for Mary with $1,000,000 and provides that Mary is receive 7% of the value of the trust each year. At the time of John’s death in May 2005, Mary is 75 years old.  The charitable deduction is $510,200 based on IRS interest rate of 5.0% (November 2005)

26 LBL7166 (ADS202) @2006 Allstate Insurance Company 26 Charitable Remainder Trusts – Example  For federal estate tax purposes, John’s estate is now $1,988,000 (2,500,000 – 510,200).  He has provided for Mary and reduced his estate below the estate tax exemption so there are no federal estate taxes to pay.  He has also provided for his favorite charity (or charities) at Mary’s death.

27 LBL7166 (ADS202) @2006 Allstate Insurance Company 27 What Next?  Start with baby steps and review your assets and the titling of the assets.  Use all available resources to help. Your financial advisor is invaluable in this process.  Don’t put off until tomorrow what you should do today.

28 LBL7166 (ADS202) @2006 Allstate Insurance Company 28 Conclusion Thank you for coming!

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