Transcript Creative Wealth Preservation Techniques

2013 VADA
Family
Convention
2013 VADA MADA
Family
Convention
Greenbrier
Estate Planning In The
Post Fiscal Cliff Era
By: John P. Dedon
1775 Wiehle Avenue, Suite 400
Reston, Virginia 20190
(703) 218-2131
[email protected]
Virginia Business Magazine
January 4, 2013
Congress Provides Business Owners
A Grappling Hook
By: John P. Dedon
Yes Virginia, there is a Santa Claus, and yes
Virginia business owners, Congress did provide estate
tax relief by enacting the American Taxpayer Relief
Act of 2012. The relief is not a first class ticket off
the cliff, as that would have been estate tax
elimination, but considering the alternatives, it is a
soft descent down the cliff.
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2012 Law Highlights
• $5 million exemption indexed for inflation
• 40% estate tax rate
• Gift opportunities remain…for now
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Discounting
Dynasty Trusts
GRATs and Intentionally Defective Trusts
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Remaining Threats To Family
Assets
Potential Creditors
39.6% Income Tax
IRS
3-6% Probate & Legal Expenses
40%
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TAKE CARE OF BASICS
Wills
 Revocable Living Trusts
 Advanced Medical Directives (Living
Wills)
 Powers of Attorney

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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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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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Probate
Cost
Time Delays
Publicity
Property In Multiple States
Hassle
Avoid Probate With Revocable Trust
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Estate Tax :
Year
Exemption Amount
2013 Forward:
$5 Million gift and estate
exemption: 40% tax rate
Permanent?
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IRS
MONTH
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Two Case Studies
Mr. and Mrs. Auto Dealer
Dad
Mom
2 Children
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Profile
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Married
$10 Million +
Equity in closely held business, real
estate, retirement plans, other liquid
assets, life insurance
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Assets
$ 1,500,000
$ 800,000
Retirement
$ 450,000 $100,000
Dealership, R.E., LLC $12,000,000
Liquid
$10,000,000
Insurance
$ 2,000,000 $250,000
Closely Held Business $12,000,000
Total
$26,450,000 $350,000 $12,300,000
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Grand Total = $10 million +
Objectives
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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
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Solutions – Case Study I
Step I
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Wills, Revocable Trusts with credit trust
and marital trust for surviving spouse,
Powers of Attorney and Medical
Directives.
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Solutions
Step II
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Focus on $12 million Dealership, R.E.,
LLC
Husband transfers non-voting LLL
assignee interest to Trust
Use $10 million exemption amount (gift
splitting)
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$1.2 Million
10% Equity
100% Voting = 100% Control
Trustee
Grantor
90% of Equity
Dealership, R.E., LLC Assignee Interest
Trust
$10,800,000
Before
Discount
Beneficiaries =
Wife and Children
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Why
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Estate and GST Exemption Applied - $10
Million + Appreciation Estate Tax Free
Asset Protection
Spouse
• Children
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Access
Husband has control through LLC voting
interest and access through Trust during
marriage
Wife is Trust beneficiary
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Problems (and Solutions)
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Divorce
Death
• Life
Insurance (for protection
and as an investment)
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Solutions – Case Study II
Step I
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Wills, Revocable Trusts with credit trust
and marital trust for surviving spouse,
Powers of Attorney and Medical
Directives.
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Solutions
Step II
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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
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Trustee
Grantor
Husband’s
Trust
$5 Million
Beneficiaries =
Wife and Children
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Trustee
Grantor
Wife’s Trust
$5 Million
Beneficiaries =
Husband and Children
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Why
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Estate and GST Exemption Applied - $10
Million + Appreciation Estate Tax Free
Asset Protection
Each Other
• Children
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Access
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Problems (and Solutions)
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Legal Issues
Support
• Reciprocal Trust
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Divorce
Death
• Life
Insurance (for protection
and as an investment)
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