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Fundamental Estate Planning Fall 2009

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Fundamental Estate Planning Fall 2009. 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. Qualified Plans. Investment Income. Inheritance.

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Presentation Transcript
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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]

personal asset accumulation
Personal Asset Accumulation

Wages

Qualified Plans

Investment

Income

Inheritance

proper planning will allow you to
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!

other fundamental planning issues
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
assets at risk 4 areas of risk
Assets At Risk (4 Areas of Risk)

Potential Creditors

35% Income Tax

IRS

Estate Tax

(45% Federal)

3-6% Probate & Legal Expenses

phase in schedule
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

Phase-in Schedule :

Exemption Amount

Year

* Income Tax

you have the option to plan your estate and avoid death taxes
You have the option to plan your estate and avoid Death Taxes

Death is Inevitable . . .

IRS

Estate Tax is Not!

current lifetime gifting rates
Current Lifetime Gifting Rates

$ 13,000 Annual Exclusion

$1,000,000 : Life Time Gift

probate assets pass according to will or intestacy laws
Probate Assets Pass According to Will or Intestacy Laws
  • Assets Passing Without a Will
  • Assets Passing With a Will
probate
Probate

Cost

Time Delays

Publicity

Property In Multiple States

benefits of revocable living trusts
Benefits of Revocable Living Trusts

Revocable

Trust

  • Avoids Probate
    • Cost
    • Time Delays
    • Publicity
    • Problems with property in multiple states
  • Incapacity Planning
  • Estate Tax Planning
    • Bypass and Marital Trusts
    • GST Planning
basic planning
BASIC PLANNING
  • Wills
  • Revocable Living Trusts
  • Advanced Medical Directives (Living Wills)
  • Powers of Attorney
assets passing at death
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

case study
Case Study

Dad

Mom

Grandma

2 Children

profile
Profile
  • Married
  • $2 Million +
  • Equity in real estate, retirement plans, other liquid assets, life insurance
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Assets

$ 800,000

$ 300,000

Retirement

$ 450,000

$100,000

Liquid

$ 900,000

Insurance

$2,000,000

$250,000

Total

$2,450,000

$350,000

$2,000,000

Grand Total = $4.8 million

objectives
Objectives
  • Provide for surviving spouse
  • Eliminate or avoid estate tax
  • Eliminate probate
  • Provide for children at second death
  • Provide for Mom
solutions
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.
using revocable trust to reduce estate tax
Using Revocable Trust to Reduce Estate Tax

Upon Husband’s Death

$2,450,000

Wife’s

Trust

$350,000

Marital

Trust

$2 Million Joint Property

Husband’s

Trust

< $3.5 Million

Tax Free

Marital Share:

Assets > $3.5 Million

Inheritance (Tax-Free)

Bypass/Credit Trust

(Husband’s Exemption $2,000,000)

Spouse = Trustee and Beneficiary

potential titling problems
Potential Titling Problems
  • Wife dies first, only $350,000
  • Jointly held property
  • $1 million exemption amount in 2011?
second death
Second Death

Special Needs Trust

$2 Million

$$$

$2 Million

25 (1/3)

30 (1/2)

35 Balance

Need Executor, Trustee, Guardian

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