Transcript Creative Wealth Preservation Techniques

Golden Opportunities for 2012
Estate Planning Ideas That Will
Impact The Bottom Line!
June 14, 2012
By: John P. Dedon
Odin, Feldman & Pittleman, P.C.
9302 Lee Highway, Suite 1100
Fairfax, Virginia 22031
(703) 218-2131
[email protected]
Personal Asset Accumulation
Wages
Investment
Income
Qualified Plans
Closely Held
Business
Inheritance
1
Assets At Risk (4 Areas of Risk)
Potential Creditors
35% Income Tax
IRS
3-6% Probate & Legal Expenses
Estate Tax
(?)
2
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
Attorney’s fees
Estate Taxes
3
Other Fundamental Planning Issues
• Children from a previous marriage and
second spouse
• Children with special needs
• Children with creditor, financial, or marital
problems
• Property in multi-states
• Competency issues in future (parents)
• Spouse who would need help managing and
investing funds
4
Assets Passing Without a Will Go
Through Probate
Assets Passing With a Will Go
Through Probate
5
Probate
Cost
Time Delays
Publicity
Property In Multiple States
Hassle
Avoid Probate With Revocable Trust
6
BASIC PLANNING
SHOULD INCLUDE
Wills
 Revocable Living Trusts
 Advanced Medical Directives (Living
Wills)
 Powers of Attorney

7
Estate Tax :
Year
2010
2011 and 2012
2013
Exemption Amount
No estate tax*
$5 Million**
$1 Million***
? - What will Congress do?
*Income Tax
**35% Estate Tax Rate
***55% Estate Tax Rate
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IRS
MONTH
9
9
Current Lifetime Gifting Rates
$ 13,000 Annual Exclusion
2011 and 2012 - $5 Million
2013 - $1 Million
10
Two Case Studies
Dad
Mom
2 Children
11
Profile
•
•
•
Married
$10 Million +
Equity in closely held business, real
estate, retirement plans, other liquid
assets, life insurance
12
Assets
$ 1,500,000
$ 800,000
Retirement
$ 450,000 $100,000
Liquid
$10,000,000
Insurance
$ 2,000,000 $250,000
Closely Held Business $12,000,000
Total
$14.450,000 $350,000 $12,300,000
13
Grand Total = $10 million +
Objectives
•
•
•
•
•
•
Provide for surviving spouse
Provide for children at second death
Eliminate probate
Eliminate or avoid estate tax
Eliminate or avoid estate tax in
perpetuity
Asset protection to protect
children from divorce, creditors
14
Solutions – Case Study I
Step I
•
Wills, Revocable Trusts with credit trust
and marital trust for surviving spouse,
Powers of Attorney and Medical
Directives.
15
Solutions
Step II
•
•
•
•
Focus on $10 million of marketable
securities
Spousal access Trusts
Each spouse transfers his and her own
assets to the other’s Trust
Use exemption amount and file gift tax
return
16
Trustee
Grantor
Wife’s Trust
$5 Million
Beneficiaries =
Wife and Children
17
Trustee
Grantor
Husband’s
Trust
$5 Million
Beneficiaries =
Husband and Children
18
Why
•
•
Estate and GST Exemption Applied - $10
Million + Appreciation Estate Tax Free
Asset Protection
Each Other
• Children
•
•
Access
19
Problems (and Solutions)
•
•
•
Divorce
Death
Legal Issues
Support
• Reciprocal Trust
•
20
Solutions – Case Study II
Step I
•
Wills, Revocable Trusts with credit trust
and marital trust for surviving spouse,
Powers of Attorney and Medical
Directives.
21
Solutions
Step II
•
•
•
Focus on $12 million closely held
business
Husband transfers discounted non-voting
stock to Trust, per appraisal
Use $10 million exemption amount even
though his name (gift splitting)
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$1.2 Million
10% Equity
100% Voting = 100% Control
Grantor
100% of Non-voting stock
(90% of Equity)
Trustee
Trust
$10,800,000
Before
Discount
Beneficiaries =
Wife and Children
23
Why
•
•
Estate and GST Exemption Applied - $10
Million + Appreciation Estate Tax Free
Asset Protection
Each Other
• Children
•
•
•
•
Access
Husband has control through voting
stock and access Trust during marriage
Wife is Trust beneficiary
24
Problems (and Solutions)
•
•
Divorce
Death
25