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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 John.Dedon@ofplaw.com. Personal Asset Accumulation. Wages. Qualified Plans. Investment Income. Inheritance.

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By: John P. Dedon

Odin, Feldman & Pittleman, P.C.

9302 Lee Highway, Suite 1100

Fairfax, Virginia 22031

(703) 218-2131

John.Dedon@ofplaw.com


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Personal Asset Accumulation

Wages

Qualified Plans

Investment

Income

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

Estate Tax

(45% Federal)

3-6% Probate & Legal Expenses


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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




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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 Taxes

$ 13,000 Annual Exclusion

$1,000,000 : Life Time Gift


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Probate Assets Pass According to Will or Intestacy Laws Taxes

  • Assets Passing Without a Will

  • Assets Passing With a Will


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Probate Taxes

Cost

Time Delays

Publicity

Property In Multiple States


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Benefits of Revocable Living Trusts Taxes

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


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BASIC PLANNING Taxes

  • Wills

  • Revocable Living Trusts

  • Advanced Medical Directives (Living Wills)

  • Powers of Attorney


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Assets Passing at Death Taxes

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 Taxes

Dad

Mom

Grandma

2 Children


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Profile Taxes

  • Married

  • $2 Million +

  • Equity in real estate, retirement plans, other liquid assets, life insurance


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Assets Taxes

$ 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


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Objectives Taxes

  • 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 Taxes

  • 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 Taxes

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


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Potential Titling Problems Taxes

  • Wife dies first, only $350,000

  • Jointly held property

  • $1 million exemption amount in 2011?


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Second Death Taxes

Special Needs Trust

$2 Million

$$$

$2 Million

25 (1/3)

30 (1/2)

35 Balance

Need Executor, Trustee, Guardian