1 Wealth Preservation Planning for Clients and their Families March 2009.
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Transcript of 1 Wealth Preservation Planning for Clients and their Families March 2009.
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Wealth Preservation Wealth Preservation Planning for Clients Planning for Clients and their Families and their Families
March 2009March 2009
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By: John P. DedonOdin, Feldman & Pittleman, P.C.9302 Lee Highway, Suite 1100
Fairfax, Virginia 22031(703) 218-2131
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Personal Asset Personal Asset AccumulationAccumulation
WagesQualified PlansInvestment
Income
Inheritance
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Proper Planning Will Allow You to . Proper Planning Will Allow You to . . .. .
Give what you have,Give what you have,To whom you want,To whom you want,
When you want, andWhen you want, andIn the way you wantIn the way you want
And Pay Less for:And Pay Less for: Court CostsCourt Costs
Attorney’s fees Attorney’s fees Estate TaxesEstate Taxes
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Other Fundamental Planning Issues
• Children from a previous marriage and Children from a previous marriage and second spousesecond spouse
• Children with special needsChildren with special needs• Children with creditor, financial, or Children with creditor, financial, or
marital problemsmarital problems• Property in multi-statesProperty in multi-states• Competency issues in future (parents)Competency issues in future (parents)• Spouse who would need help managing Spouse who would need help managing
and investing fundsand investing funds
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Assets At Risk (4 Areas of Assets At Risk (4 Areas of Risk)Risk)
Potential Creditors
3-6% Probate & Legal Expenses
Estate Tax(45% Federal)
35% Income Tax
IRS
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Phase-in SchedulePhase-in Schedule : :
20022002200320032004200420052005200620062007200720082008200920092010201020112011
$ 1,000,000$ 1,000,000$ 1,000,000$ 1,000,000$ 1,500,000$ 1,500,000$ 1,500,000$ 1,500,000$ 2,000,000$ 2,000,000$ 2,000,000$ 2,000,000$ 2,000,000$ 2,000,000$ 3,500,000$ 3,500,000
No estate tax*No estate tax*$ 1,000,000$ 1,000,000
Exemption AmountYear
* Income Tax
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Death is Inevitable . . .
You have the option to plan your estate and avoid Death Taxes
Estate Tax is Not!IRS
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Current Lifetime Gifting Current Lifetime Gifting RatesRates
$ 13,000 Annual $ 13,000 Annual ExclusionExclusion
$1,000,000 : Life Time Gift$1,000,000 : Life Time Gift
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Probate Assets Pass Probate Assets Pass According to Will or According to Will or
Intestacy LawsIntestacy Laws
• Assets Passing Without a Will• Assets Passing With a Will
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Benefits of Revocable Living TrustsBenefits of Revocable Living Trusts
I. Avoids Probatea. Costb. Time Delaysc. Publicityd. Problems with property in multiple states
II. Incapacity PlanningIII. Estate Tax Planning
a. Bypass and Marital Trustsb. GST Planning
RevocableTrust
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BASIC PLANNINGBASIC PLANNING
WillsWills Revocable Living TrustsRevocable Living Trusts Advanced Medical Directives Advanced Medical Directives
(Living Wills)(Living Wills) Powers of AttorneyPowers of Attorney
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Assets Passing at Death Assets Passing at Death 1) Beneficiary Designations2) 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) Probate4) Revocable Living Trusts
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ProfileProfile
• Married• $2 Million +• Equity in real estate, retirement
plans, other liquid assets, life insurance
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Assets
$ 450,000 $100,000
$ 800,000
Retirement
$ 300,000
Liquid
Insurance
$ 900,000
$2,000,000 $250,000
Total $2,450,000 $350,000 $2,000,000
Grand Total = $4.8 million
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Objectives
• 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
• 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 Using Revocable Trust to Reduce Estate TaxTax
Upon Husband’s Death
Husband’sTrust
Bypass/Credit Trust(Husband’s Exemption $3,500,000)Spouse = Trustee and Beneficiary
Tax FreeMarital Share:Assets > $3.5 Million
< $3.5 Million
Inheritance (Tax-Free)
Marital Trust
$2,450,000 $350,000
$2 Million Joint Property
Wife’sTrust
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Potential Titling Problems
• Wife dies first, only $350,000• Jointly held property• $1 million exemption amount in
2011?