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Estate Plans That Work

www.taflaw.com

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South Florida Office3020 NE 32 Ave.

Suite 302Fort Lauderdale, FL 33308

Tennessee Office207 Mockingbird Lane

Suite 402Johnson City, TN 37604

North Florida Office1200 Plantation Island Dr.

Suite 220St. Augustine, FL 32080

Florida Keys Office1010 Kennedy Dr.

Suite 201Key West, FL 33040

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The Andersen FirmA Professional Corporation

IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

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“Imagine your life has ended and you’re looking down from your cloud at your loved ones. Everything you’re looking at tells you your estate plan is working perfectly, exactly as you planned it . . . . . .WHAT do you see?

A Question:

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Don’t Work In Reality Most Estate Plans .

If what you see is what you wanted to happen then what you have is an .Estate Plan That Works

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It helps to get past the various “smoke screens”:

Wills vs. Trusts Avoid Probate / Save Taxes Hourly vs. Fix Fee Billing

“PTA”: Philosophy / Technical Basics / Application

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I. “Philosophy” of an Estate Plan That Works

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1. I want to my property while I am alive and well;

2. Plan for my loved ones and me in case I become

3. Give I want, I want, I want,

I want;

4. All at a fully disclosed and controlled to me and those I love.

Control

Disabled

What To Whom When

The Way

Cost

A. The of an estate plan that works: Definition

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B. A new for an estate plan that works:

“Paradigm” Shifts:

1492, Columbus and a flat earth

The “Traditional” Planning Paradigm:

Planning Priorities:

1.

2.

3.

4.

5.

Save Taxes / Avoid Probate

Protect Wealth

Paradigm

Enhance Wealth

The Family

Client / Spouse

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The “New Paradigm” Planning Pyramid:

5.

4.

3.

2.

1. Client / Spouse

Family / Beneficiaries

Enhancing Wealth

Protecting Wealth

Taxes / Probate End of Philosophy . . .

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So, let’s add a small dose of (semi) “Technical” to understand the TIP of the Pyramid so we can then concentrate on

ME and MY FAMILY

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II. Technical basics of an Estate Plan That Works

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A. Taxes

1.GIFT Tax: up to 45%

• Each individual can give up to $

• To any other individual

• In any without paying gift tax

• $ lifetime exemption

• Unlimited Marital Deduction

“TRANSFER” Tax System . . .

12,000

Year

1,000,000

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2. ESTATE Tax: Up to 45%

• The “Coupon” amount: $

• Two Rules:

Expiration Date: “Choose it or Lose it!”

Non-Transferable

• Unlimited Marital Deduction

2,000,000

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3. GENERATION SKIPPING Tax: up to 45%

• Skip One Generation

• The “Coupon” Amount: $

• The Unlimited Marital Deduction

2,000,000

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In 2009, the Federal Coupon will be $3,500,000, but the Tennessee coupon will only be $1,000,000.

In 2010, the Federal Estate Tax will disappear for 1 year, but Tennessee will continue to tax estates of over $1,000,000.

Tennessee Inheritance Tax Coupon

Federal Estate Tax Coupon

The Tennessee Inheritance Tax Gap

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A.Tennessee Transfer Tax System1. GIFT Tax: Each individual can give up to $12,000 to any direct relative,

or $5,000 to the 1st person and $3,000 to any person thereafter,In any year Without paying State gift tax2. ESTATE Tax:

The TN “Coupon” amount: $1,000,000

→Expiration Date – “Choose It or Loose It”

→Non-Transferable

→Unlimited Marital Deduction

→Counseling will be needed to help plan for theCoupon changes

→Designed to pay least possible “death” taxes

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B. The LAW The “Magic Rule”: TITLE = RESULT!!!

Think about the 3 WAYS you can own property at the time of your death … and what happens in each case

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1. Title at death =

**WITH or WITHOUT A WILL!! The 3 Big complaints about PROBATE???

A) Time:

B) Cost:

C) Privacy:

Individual

6 – 18 Months

4 – 7 %

Public Record

Probate

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2. Title at death = Ownership passes

to other Joint Owner(s).

BUT … be aware of the dangers of depending on joint ownership as the ” ” of an estate plan

Joint Automatically

Centerpiece

This happens “By operation of Law.” In other words “The Survivor WINS”

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3. Title by at death = over how your assets pass.

Familiar examples of Title by Contract = Beneficiary Designations for:

A) Life Insurance

B) Annuities

C) IRA’s and 401 – K’s

Contract Control

End of Technical Basics

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Revocable Living Trust

Trustmaker(s)

Trustee(s)

Beneficiary(-ies)1. The “ “ Story:

First Step the “Bucket”

Second Step the “Bucket”

2. The “ ” Story:

* A Key Distinction: vs.

THREE ROLES

Bucket

CreateFill

Babysitter

Word Processing Counseling

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III. Application of an Estate Plan That Works

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Husband’s Wife’s

Co- (Both Alive) Trustees ---------------------------------------------------------------------------------(After 1st death)

Surviving Spouse

BeneficiaryTrustee

Marital Trust Family Trust(“A”) (“Credit Shelter,” “Bypass”, “B”)

(After 2nd death) *Protections:(remarriage; creditors &“predators”)

$

Total Assets$ $

$ $

A. Providing for my SPOUSE

5m2.5m 2.5m

500k 2m

No Tax upon first Death

Health, Education & Maintenance

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B. Providing for my and / or

The KEY question is “How Much”

•

•

•

do you want to give your Children / Beneficiaries?

Children Beneficiaries

Control

Access

Ownership

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Outright In Trust

Lifetime

Protective

Trust$

1/3 at 35

1/3 at 45

1/3 at 55

Lump Sum Phases Stages Conserv.

Lifetime

Trust

In trust for the beneficiary's lifetime; income & principal in the Trustees discretion:

No Asset ProtectionBrother’s Trust

Brother as Trustee and Beneficiary w/ Co-Trustee

&

Sister’s Trust

Sister as Beneficiary w /Third Party Trustee

Kids

House

College

$ $

Health, Education & Maintenance

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The Three & of EVERY Estate Plan: Phases Costs

1.The Upfront Phase:

a) Documents . . .

vs. . .

b) Counseling and Design

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2. The Updating Phase: (or failing to update!)

What Changes???

Life

Law

Lawyer

b) How many Trust buckets are not fully funded? !!!

19.2

90%

a) How long (on average) do people go before updating their

estate plans? yrs!!

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3. The Settlement Phase:

Don’t fall for the “Magic Book” myth!!

The CHALLENGE:

takes responsibility for each phase & its cost and ??Who When

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IV. Advanced Planning Techniques

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Qualified Personal Residence Trust

Tenants in Common

Husband’s Wife’s

Value of Home + Appreciation out of Estate

Home out of reach of creditors Current FMV of Home

- Value of right to live in Home

= Taxable Gift

H’s QPRT W’s QPRT

50% 50%Gift to Trusts

Right to live in house for # of

Years

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Buildup Equity Retirement Trust

Irrevocable Trust for Transfer into Trust

Higher of $ or % of TrustEach Year

Spouse Can Use Trust for

Property in BERT:Protected from Passes Upon Death

5,000 5

Spouses Lifetime

Transfer Tax Free

Needs

CreditorsTransfer Tax Free

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6% 10%Year 5: $29,877 $33,578

Year 10: $69,858 $87,656

Year 20: $211,735 $372,824

Year 30: $634,456 $1,302,031

For Each BERT !

Growth of BERT AssetsSlow and Steady

Greater of $5,000 or 5% of Trust (assuming 2% inflation)

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6% 10%

Year 5: $377,879 $448,884

Year 10: $586,741 $813,875

Year 20: $1,269,317 $2,383,485

Year 30: $2,541,699 $6,517,169For each BERT!

Year 1 - $240,000 Gift Thereafter - $12,000 GiftAssuming 2% Interest

Super Charged

Growth of BERT Assets

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Limited Liability Company

Family Run Company as

Contribute Assets to LLC

Assets LLC may NOT be

Creditors can only get a which is the Right to the Member’s

Creditor of LLC can only Sue the LLC

Members Business

Unprotected

Inside Seized

Charging OrderShare of Distributions

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Limited Liability Company

Company's Value Asset Value

Discounts:

Most Protection

Wyoming LLC:Lowest Valuation

Less Than Lack of Marketability

Minority Interest