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Citibank Dedon on Estate Planning

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Citibank Dedon on Estate Planning Powered By Docstoc
					Estate Planning Essentials




             By: John P. Dedon
      Odin, Feldman & Pittleman, P.C.
      9302 Lee Highway, Suite 1100
          Fairfax, Virginia 22031
              (703) 218-2131
                                        1
         John.Dedon@ofplaw.com
    Personal Asset Accumulation

                     Wages
                             Qualified Plans
        Investment
          Income

Inheritance




                                        2
3
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


                                            4
 We want to give our children enough . . .




but we don’t want them to blow it!    5
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
                                     6
Assets At Risk (4 Areas of Risk)


                                  Potential Creditors




                                          35% Income Tax




                                                IRS
                                  Estate Tax            7
                                     (?)
  3-6% Probate & Legal Expenses
Estate Tax :
         Year                    Exemption Amount
          2010                    No estate tax*
          2011 and 2012           $5 Million**
          2013                    $1 Million***



                ? - What will Congress do?


        *Income Tax
        **35% Estate Tax Rate
                                                   8
        ***55% Estate Tax Rate
Current Lifetime Gifting Rates


      $ 13,000 Annual Exclusion


      2011 and 2012 - $5 Million
      2013 - $1 Million


                                   9
     Estate Beneficiaries


                         Charity

           IRS     GWU




Family


                                   10
      IRS


MONTH
  9




 11
Probate
  Cost
  Time Delays
  Publicity
  Property In Multiple States




                                12
Assets Passing Without a Will Go
  Through Probate

Assets Passing With a Will Go
  Through Probate



                                   13
Benefits of Revocable Living Trusts
                                            Revocable
I.   Avoids Probate                           Trust

    a. Cost
    b. Time Delays
    c. Publicity
    d. Problems with property in multiple states
II. Incapacity Planning
III. Estate Tax Planning
    a. Bypass and Marital Trusts
    b. GST Planning

                                                        14
       BASIC PLANNING
       SHOULD INCLUDE
 Wills
 Revocable Living Trusts
 Advanced Medical Directives (Living
  Wills)
 Powers of Attorney




                                        15
 Assets Passing at Death
1)   Probate
2)   Revocable Living Trusts
3)   Beneficiary Designations
4)   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)




                                              16
          Case Study

           Dad


Mom
                       Grandma



      2 Children




                                 17
                   Profile

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




                                               18
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           19
Objectives
  •   Provide for surviving spouse
  •   Eliminate or avoid estate tax
  •   Eliminate probate
  •   Provide for children at second death
  •   Provide for Mom
  •   Charity

                                             20
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.
 •   Charitable Distribution                   21
           Using Revocable Trust to Reduce Estate Tax
                          and Probate


  Upon Husband’s Death
  $2,450,000                                                       Wife’s
                                                                            $350,000
                                                                   Trust

                                                                            $2 Million
      Husband’s
      Trust                             Marital                             Joint Property
                                        Trust


                  Tax Free                          < $5 Million
                  Marital Share:
                  Assets > $5 Million


                                         Inheritance (Tax-Free)

Bypass/Credit Trust
(Husband’s Exemption $5,000,000)
Spouse = Beneficiary                                                            22
But 2013 ? $1 Million
              Second Death
                                               Special
                                               Needs
                                               Trust



$$$                $$$                   $$$




      25 (1/3)
      30 (1/2)
      35 Balance
      Need Executor, Trustee, Guardian

                                                     23
              Problems
    Potential Titling Problems

•   Wife dies first, only $350,000
•   Jointly held property




                                     24
Other Estate Tax Problems
 •    $1 million exemption amount in 2013?


Charitable Planning As A Solution
  • Distributions
  • Charitable Remainder and Lead Trusts
  • Life Estates

                                             25

				
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posted:10/8/2012
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