Transcript Creative Wealth Preservation Techniques

Wealth Preservation
Planning for Clients
and their Families
March 2009
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By: John P. Dedon
Odin, Feldman & Pittleman, P.C.
9302 Lee Highway, Suite 1100
Fairfax, Virginia 22031
(703) 218-2131
[email protected]
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Personal Asset Accumulation
Wages
Investment
Income
Qualified Plans
Inheritance
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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
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We want to give our children enough . . .
but we don’t want them to blow it!
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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
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Assets At Risk (4 Areas of Risk)
Potential Creditors
35% Income Tax
IRS
3-6% Probate & Legal Expenses
Estate Tax
(45% Federal)
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Phase-in Schedule :
Year
Exemption Amount
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
$ 1,000,000
$ 1,000,000
$ 1,500,000
$ 1,500,000
$ 2,000,000
$ 2,000,000
$ 2,000,000
$ 3,500,000
No estate tax*
$ 1,000,000
* Income Tax
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50%
50%
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IRS
MONTH
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You have the option to plan your estate
and avoid Death Taxes
Death is Inevitable . . .
IRS
Estate Tax is Not!
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Current Lifetime Gifting Rates
$ 13,000 Annual Exclusion
$1,000,000 : Life Time Gift
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Probate Assets Pass According
to Will or Intestacy Laws
• Assets Passing Without a Will
• Assets Passing With a Will
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Probate
Cost
Time Delays
Publicity
Property In Multiple States
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Benefits of Revocable Living Trusts
I.
Revocable
Trust
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
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BASIC PLANNING
Wills
 Revocable Living Trusts
 Advanced Medical Directives (Living
Wills)
 Powers of Attorney

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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
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Case Study
Dad
Mom
Grandma
2 Children
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Profile
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•
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Married
$2 Million +
Equity in real estate, retirement plans,
other liquid assets, life insurance
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Assets
$ 800,000
$ 300,000
Retirement
Liquid
Insurance
$ 450,000
$100,000
$2,000,000
$250,000
Total
$2,450,000
$350,000
$ 900,000
Grand Total = $4.8 million
$2,000,000
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Objectives
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•
•
•
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Provide for surviving spouse
Eliminate or avoid estate tax
Eliminate probate
Provide for children at second death
Provide for Mom
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Solutions
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•
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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.
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Using Revocable Trust to Reduce Estate Tax
Upon Husband’s Death
$2,450,000
Wife’s
Trust
$2 Million
Joint Property
Marital
Trust
Husband’s
Trust
Tax Free
Marital Share:
Assets > $3.5 Million
$350,000
< $3.5 Million
Inheritance (Tax-Free)
Bypass/Credit Trust
(Husband’s Exemption $3,500,000)
Spouse = Trustee and Beneficiary
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Potential Titling Problems
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Wife dies first, only $350,000
Jointly held property
$1 million exemption amount in 2011?
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Second Death
Special
Needs
Trust
$3.5 Million
$3.5 Million
$$$
25 (1/3)
30 (1/2)
35 Balance
Need Executor, Trustee, Guardian
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