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Chapter 1. Estate Planning An Overview. Definitions. KNOW THESE TERMS -- not word for word defini-tions but how they work. Estate Planning Life Interest versus Estate in Fee Simple Absolute Escheat (to the state) Intestate Will (Last Will and Testament) Codicil

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Chapter 1

Chapter 1

Estate Planning

An Overview


Definitions
Definitions

KNOW THESE TERMS -- not word for word defini-tions but how they work

  • Estate Planning

  • Life Interest versus

  • Estate in Fee Simple Absolute

  • Escheat (to the state)

  • Intestate

  • Will (Last Will and Testament)

  • Codicil

  • Equitable Apportionment

  • Residue (Residual) (in a LW&T)

  • Predecease (like if I “predecease” my wife)

  • Donor

  • Donee

  • Grantor


Types of income taxes
Types of Income Taxes

Federal Taxes

  • Income Tax

  • Payroll Taxes

  • Estate Taxes

  • Gift Taxes

  • Excise Taxes

State Taxes

  • Income Tax

  • Property Tax

  • Sales Tax

  • Inheritance Tax

  • Excise Taxes


Income tax vs estate gift tax
Income Tax vs. Estate / Gift Tax

  • What is different between the two??

  • When we say “transfer tax”, what are we referring to??

  • How do the tax rates compare?


Gift tax versus estate tax
Gift Tax versus Estate Tax

  • What is the differences between the two?

  • What are the lifetime exclusions of each?

  • How do the tax rates compare?

  • Why is it necessary to apply transfer tax to lifetime gifts instead of just applying the tax at death??



Chapter 1

What is the objective of Estate Planning??

  • Accumulation (of wealth)

  • Conservation (of wealth)

  • Distribution (of wealth)

    What is this man’s

    Estate Plan??


Chapter 1

“Give your kids enough money so they can do anything, but not enough so that they can do nothing”

“It’s hard to teach a new dog old tricks”

Warren Buffet


Chapter 1

How do we own property?? not enough so that they can do nothing”

  • Fee Simple Absolute ….. outright ownership

  • Life Estate …… ownership for a period of time …….. temporary ownership

    Under what circumstances might we use a life estate??


Chapter 1

What if we die intestate in SC?? not enough so that they can do nothing”

  • Spouse and Children

    Spouse gets everything ….. unless there are children. Then Spouse gets half / children get half.

    ŸWhat about the age of the children?

    ŸIf children predecease but have children (grandchildren), the grandchildren step into the shoes of their parents.

  • No spouse or children ……. Goes to your parents.

  • No parents ……. Goes to brothers and sisters (or children or brothers and sisters (nieces and nephews))

  • Other relatives

  • State of SC

    Note: Anti-Lapse Providsion …….. Name a charity if no “relatives”

    Besides wealth transfer and financial assets, what other BIG question is dealt with in a LW&T?? hint: children??


Roles of advisors in estate planning
Roles of Advisors in not enough so that they can do nothing” Estate Planning

  • Attorney

  • Bank (Trust) Officer

  • Investment Advisor / Financial Planner

  • CPA / Accountant

  • Insurance Agent

    What role does each play??


Chapter 1

The following table shows how the gift-tax rate will decrease over the next several years and how it reverts to pre-tax law levels in 2011 with the expiration of the new tax law:


Chapter 1

2007 Estate and Gift Tax Rates decrease over the next several years and how it reverts to pre-tax law levels in 2011 with the expiration of the new tax law:


Chapter 1

2005 Tax Revenue decrease over the next several years and how it reverts to pre-tax law levels in 2011 with the expiration of the new tax law:($2.2 Trillion) – US Government