1. Chapter 1 Estate Planning An Overview

2. Definitions Estate Planning Life Interest versus Estate in Fee Simple Absolute Escheat (to the state) Intestate Will (Last Will and Testament) Codicil Equitable Apportionment Residue (Residual) (in a LW&T) Predecease (like if I “predecease” my wife) KNOW THESE TERMS -- not word for word defini- tions but how they work Donor Donee Grantor

3. Types of Income Taxes Federal Taxes Income Tax Payroll Taxes Estate Taxes Gift Taxes Excise Taxes State Taxes Income Tax Property Tax Sales Tax Inheritance Tax Excise Taxes

4. Income Tax vs. Estate / Gift Tax What is different between the two?? When we say “transfer tax”, what are we referring to?? How do the tax rates compare?

5. Gift Tax versus Estate Tax What is the differences between the two? What are the lifetime exclusions of each? How do the tax rates compare? Why is it necessary to apply transfer tax to lifetime gifts instead of just applying the tax at death??

6. What is the objective of Estate Planning??

7. Accumulation (of wealth) Conservation (of wealth) Distribution (of wealth) What is this man’s Estate Plan??

8. “Give your kids enough money so they can do anything, but not enough so that they can do nothing” “It’s hard to teach a new dog old tricks” Warren Buffet

9. How do we own property?? Fee Simple Absolute ….. outright ownership Life Estate …… ownership for a period of time …….. temporary ownership Under what circumstances might we use a life estate??

10. What if we die intestate in SC?? 1.Spouse and Children Spouse gets everything ….. unless there are children. Then Spouse gets half / children get half.  What about the age of the children?  If children predecease but have children (grandchildren), the grandchildren step into the shoes of their parents. 2.No spouse or children ……. Goes to your parents. 3.No parents ……. Goes to brothers and sisters (or children or brothers and sisters (nieces and nephews)) 4.Other relatives 5.State of SC Note: Anti-Lapse Providsion …….. Name a charity if no “relatives” Besides wealth transfer and financial assets, what other BIG question is dealt with in a LW&T?? hint: children??

11. Roles of Advisors in Estate Planning Attorney Bank (Trust) Officer Investment Advisor / Financial Planner CPA / Accountant Insurance Agent What role does each play??

12. The following table shows how the gift-tax rate will decrease over the next several years and how it reverts to pre-tax law levels in 2011 with the expiration of the new tax law: Year Applicable Exclusion Limit Maximum gift tax rate 2003$1 million49% 2004$1.5 million48% 2005$1.5 million47% 2006$2 million46% 2007$2 million45% 2008$2 million45% 2009$3.5 million45% 2010Repeal of estate tax35% 2011$1 million55%

13. Column AColumn BColumn CColumn D Taxable amount over Taxable amount not over Tax on amount in Column A Rate of tax on excess over amt. in Column A - Percent 010,000018 10,00020,0001,80020 20,00040,0003,80022 40,00060,0008,20024 60,00080,00013,00026 80,000100,00018,20028 100,000150,00023,80030 150,000250,00038,80032 250,000500,00070,80034 500,000750,000155,80037 750,0001,000,000248,30039 1,000,0001,250,000345,80041 1,250,0001,500,000448,30043 1,500,000..............555,80045 2,000,000..............780,80045 2007 Estate and Gift Tax Rates

14. Personal income taxes: …….. 38% Social security, Medicare, and unemployment and other retirement taxes: … 32% Excise, customs, estate, gift, and miscellaneous taxes: …….. 6% Corporate income taxes: …….. 11% Borrowing to cover deficit ……… 13% 2005 Tax Revenue ($2.2 Trillion) – US Government

15. Social security, Medicare and other retirement (see Footnote 1): 37%. Footnote 1: Social security, Medicare, and other retirement: These programs provide income support for the retired and disabled and medical care for the elderly. Social programs (see Footnote 4): 20%. Footnote 4: Social programs: About 14% of total outlays were for Medicaid, food stamps, temporary assistance for needy families, supplemental security income, and related programs; and the remaining outlays were for health research and public health programs, unemployment compensation, assisted housing, and social services. National defense, veterans, and foreign affairs (see Footnote 2): 24%. Footnote 2: National defense, veterans, and foreign affairs: About 20% of outlays were to equip, modernize, and pay our armed forces and to fund the Global War on Terrorism and other national defense activities; about 3% were for veterans benefits and services; and about 1% were for international activities, including military and economic assistance to foreign countries and the maintenance of U.S. embassies abroad. Physical, human, and community development (see Footnote 3): 10%. Footnote 3: Physical, human, and community development: These outlays were for agriculture; natural resources; environment; transportation; aid for elementary and secondary education and direct assistance to college students; job training; deposit insurance, commerce and housing credit, and community development; and space, energy, and general science programs. Net interest on the debt: 7% Law enforcement and general government: 2%