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 We want to give our children enough... but we don’t want them to blow it!
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 (45% Federal) 35% Income Tax IRS
9 Phase-in Schedule : 2002200320042005200620072008200920102011 $ 1,000,000 $ 1,500,000 $ 2,000,000 $ 3,500,000 No estate tax* $ 1,000,000 Exemption Amount Year * Income Tax
12 Death is Inevitable... You have the option to plan your estate and avoid Death Taxes Estate Tax is Not! IRS
13 Current Lifetime Gifting Rates $ 13,000 Annual Exclusion $1,000,000 : Life Time Gift
14 Probate Assets Pass According to Will or Intestacy Laws Assets Passing Without a Will Assets Passing With a Will
15 Probate Cost Time Delays Publicity Property In Multiple States
16 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
17 BASIC PLANNING n Wills n Revocable Living Trusts n Advanced Medical Directives (Living Wills) n Powers of Attorney
18 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 Profile Married $2 Million + Equity in real estate, retirement plans, other liquid assets, life insurance
21 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
22 Objectives Provide for surviving spouse Eliminate or avoid estate tax Eliminate probate Provide for children at second death Provide for Mom
23 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.
24 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
25 Potential Titling Problems Wife dies first, only $350,000 Jointly held property $1 million exemption amount in 2011?
26 Second Death $3.5 Million $$$ 25 (1/3) 30 (1/2) 35 Balance Need Executor, Trustee, Guardian Special Needs Trust