APPENDIX by domainlawyer




Client Letter Financial Planner’s Document Checklist Calendar of Upcoming Conferences & Events About the AICPA Personal Financial Planning Division About the National Association of Estate Planners & Councils Horror story submission



Dear Clients and Friends: President Obama has quickly begun to address the economy, the budget deficit, healthcare, taxes, and many other challenging issues, among them the uncertainty in the federal estate tax law. For 2009, the estate tax exclusion amount is at a historic high of $3.5 million, up from $2 million in 2008, with a flat tax of 45% on the excess. As part of the tax reductions passed in 2001, however, the estate tax has been slated for a single year of full repeal in 2010. Further, the 2001 law was scheduled to expire in 2011 and return the estate tax with a top marginal rate of 55% and an applicable exclusion amount of only $1 million. Most practitioners consider a full repeal followed by a return at higher rates to be unlikely, but no change in the 2001 law has yet been made. On April 29, 2009, Congress agreed to a Budget Resolution “extending the law as in effect for 2009 for the Estate and Gift Tax” through 2019. The Budget Resolution does not specify the exact revisions to be made to the tax code, but at least it indicates the general direction the law will follow. More detailed guidance from Washington can be expected before long. If this Resolution is enacted into law, it will give much needed certainty to the estate planning process. It will be a good time to review estate plans in light of the increased and stable federal exclusion amount. Other factors, such as historically low interest rates and reduced asset values, may also suggest changes, of course. Review of Existing Wills The increase of the federal estate exclusion to $3.5 million (or $7 Million for a couple, with appropriate planning), together with reduced asset values, may allow some clients to simplify their planning. However, many states have not raised their exclusion amounts to match the federal level. These lower and differing exclusions can have significant consequences. Credit Shelter Trusts. Many Wills provide for “credit shelter trusts,” typically created to maximize the amount of assets passing free of estate tax on the surviving spouse‟s death by taking advantage of the maximum federal exclusion. The increased federal exclusion amount may result in a Will creating a trust of up to $3.5 million upon the death of the first spouse to die. Although a trust of this size is advantageous for federal tax purposes and will not trigger a federal estate tax, it may trigger significant Appendix
AICPA Personal Financial Planning Division National Association of Estate Planners & Councils


state estate taxes due to lower state exclusions. For many clients, this result will be an unwelcome departure from a plan originally designed to defer all estate taxes until the second spouse‟s death. Additionally, clients with such Wills may find that the size of the credit shelter trust substantially exceeds the amount originally anticipated, which could affect the surviving spouse‟s access to resources. Under these circumstances, formulae for smaller credit shelter trusts, designed to create trusts which will pass free of both federal and state estate taxes, may be worthy of consideration. Specific and “Cash” Bequests. The proportion of an estate represented by bequests made to family members, other persons or charitable organizations, if in the form of stated dollar amounts or of specific property, may have been altered by declining asset values. Whether such bequests continue to meet a client‟s original objectives relative to the overall value of his or her estate should be re-considered. Estate Planning Techniques With an economic climate of declining asset valuations, reduced retirement savings, financial institutions facing difficulties and recession (or worse) dominating the news, lifetime transfers of assets to younger generations may seem to have a low priority. However, lower asset values combined with historically low interest rates present particularly attractive opportunities for transferring wealth. Grantor Retained Annuity Trust (“GRAT”). This estate planning technique utilizes IRS-approved discount factors to make gifts of assets having the potential for appreciation with minimal or no gift tax consequences. In a GRAT, the client transfers property to an irrevocable trust, retaining the right to a fixed annuity for a term of years, and the value of the gift to the trust for gift tax purposes is reduced by the IRSdetermined present value of the client‟s retained interest. If the client survives the term of the trust, any property remaining in the trust, including any appreciation in the trust assets that exceeds the IRS-assumed rate of interest (which is 3.4% for September, 2009, and is recalculated monthly), passes to the client‟s beneficiaries free of any gift or estate tax. Obviously while some GRATs may appreciate and succeed, others may fail. A GRAT may currently be structured so as to “zero out” the taxable gift with an annuity set at a level so that the present value of the client‟s retained interest is equal to the value of the property transferred to the trust. This approach allows the use of any number of GRATs, some of which are likely to succeed. There is some discussion that Congress may change the law to require that a gift to a GRAT have a value of greater than zero for gift tax purposes, therefore requiring the use of a portion of the client‟s lifetime exclusion for gifts (currently at $1 million, beyond which gift tax would be payable) and discouraging the use of an unlimited number of GRATs. However, low interest rates, Appendix
AICPA Personal Financial Planning Division National Association of Estate Planners & Councils


currently low asset values and favorable law make a GRAT a particularly attractive estate planning tool at this time. Qualified Personal Residence Trust (“QPRT”). A silver lining of the cooling real estate market is the opportunity to use a QPRT to transfer a “personal residence” (e.g. your primary residence of your vacation home) to beneficiaries while values are low. In a QPRT, the client transfers a home to an irrevocable trust, retaining the right to reside in a home rent free for a fixed term of years. The amount of the taxable gift made upon the initial transfer of a home is the value of the residence, discounted by the IRSdetermined present value of a client‟s retained interest. If the client survives the term of the trust, the value of the home, including all appreciation after the creation of the trust, will be removed from the client„s taxable estate. After the trust term ends, a rental arrangement for the client‟s continued use of the home can be structured, and rent payments from the client to the beneficiaries (which can be used to pay property taxes, insurance and other home expenses) can further reduce the client‟s taxable estate. The trust can be extended and appropriate provisions included so that no income tax is payable by the beneficiaries on the rental income, thereby creating more tax savings. Low Interest Loans to Family Members. Low interest loans can transfer significant value to family member without constituting gifts for tax purposes. The IRS prescribes minimum interest rates that must be charged to avoid triggering a taxable gift, but those rates are currently very low. Younger family members may be able to invest the borrowed funds for substantially higher returns. For example, in September, 2009, a client could lend a child (or other family member) an unlimited amount for a nearly nineyear term at the fixed rate of 2.87%. (If the loan term is nine years or longer, the minimum rate is currently 4.38%, and if the loan term is shorter than three years, the minimum rate is 0.84%.) The child‟s income and appreciation on the investment (net of the low interest payments) would belong to the child, free of gift or estate tax. This method is a particularly useful way to assist a child in purchasing a home at today‟s reduced prices. Non-Taxable Gifts. The annual exclusion for gift tax purposes has been increased to $13,000 per donee (or $26,000 for married couples who are “gift-splitting). Annual exclusion gifts remain among the most advantageous estate planning opportunities as they remove from the client‟s taxable estate not only the amounts of the gifts, but also any post-gift income and appreciation on the property. Such gifts could be utilized to transfer a family business or other interests that have declined in value. Gifts to pay tuition and medical expenses can be made in unlimited amounts if paid directly to the educational or medical institution. The special annual exclusion for gifts to non-citizen spouses has increased to $133,000 for 2009, up from $128,000. Life Insurance Trusts. Life insurance continues to be a uniquely favored asset for estate tax purposes. If insurance on a client‟s life is acquired by a properly drafted and administered life insurance trust (or an existing policy is transferred to such a trust and Appendix
AICPA Personal Financial Planning Division National Association of Estate Planners & Councils


the client survives another three years), it is possible for the insurance proceeds to be excluded from the client‟s taxable estate. A life insurance trust is especially useful for a client who is property rich and cash poor, as it can provide the family with a cash flow to pay for estate taxes and administration expenses. Clients considering the purchase of significant life insurance policies, or already having them in place, may wish to consider creating life insurance trusts. Family Limited Partnerships. The IRS continues to attack the use of family limited partnerships and similar entities (such as limited liability companies) to transfer assets to family members at discounted values, but taxpayers have had some court victories in 2008. These cases are very fact-specified but have some common elements. To note a few, an entity is more likely to be respected for favorable tax treatment if: there were legitimate non-tax purposes for forming the entity; there is an ability to document active management of the entity‟s assets; the client refrains from the use of an entity as a “pocketbook” for personal expenses; and sufficient assets are maintained outside the entity to provide for the client‟s support and the payment of estate taxes on the client‟s death. Clients with family limited partnerships or similar entities in existence should ensure, in consultation with counsel and other advisors, that all necessary legal formalities (e.g., tax filings, periodic meetings, etc.) are being observed. Retirement Plans Required Minimum Distributions. On December 23, 2008 President Bush signed the Worker, Retiree and Employer Recovery Act of 2008, which amends various statutes that govern pensions and other qualified retirement plans. Most notably, the Act suspends the application of the minimum distribution rules for 2009 as they apply to IRAs and “defined contribution plans” (such as 401(k) and profit sharing plans). With a few rare exceptions, owners of such accounts and the beneficiaries of deceased account owners will not be required to withdraw funds until 2010. Non-Spousal Rollovers. It is now required that all qualified plans allow rollovers to IRAs not only for spouses who inherit such plans, but also for individual beneficiaries. Although not all of the benefits of spousal rollovers (such as the ability to designate subsequent beneficiaries over whose life expectancy distributions can be deferred) will be available, non-spousal rollovers increase the options for inherited retirement plans. Powers of Attorney It is important to review any law changes affecting powers of attorney. These changes are especially relevant in the estate planning context, as they affect an agent‟s ability to assist the principal with estate planning transactions. Existing documents should be reviewed carefully to ensure that the provisions remain appropriate. General Housekeeping Appendix
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As always, we recommend a review of your estate plan whenever there is a significant change in your family situation, your financial circumstance or the tax law. We also continue to recommend the periodic review of all of your estate planning documents, including your living wills, health care proxies, powers of attorney, and beneficiary designations for life insurance policies and retirement plans. Periodic reviews of life insurance coverage are also recommended in appropriate circumstances to assess whether existing coverage is adequate. We hope you find this information helpful. If you have any questions about any of these concepts or developments discussed in this letter, we at _____________________ would be happy to review them with you. Sincerely,

______________________________ [NAME OF FIRM]

IRS CIRCULAR 230 DISCLOSURE: To comply with IRS Regulations, we inform you that any discussion of U.S. federal tax issues in this correspondence (including any enclosures) is not intended or written to be used, and cannot be used, (1) to avoid any penalties imposed under the Internal Revenue Code, or (ii) to promote, market, or recommend to another party any transaction or matter addressed herein.

AICPA Personal Financial Planning Division National Association of Estate Planners & Councils


Appendix B

James R. Avedisian Attorney at Law Los Altos, California

1. 2. 3.

Verify that the statement of domicile is accurate. Confirm that all of the family is named. Find a separate provision for disposition of tangible personal property, and discuss possible family problems. Determine whether real estate located out of state will require an ancillary probate proceeding. Can it be avoided with a living revocable trust? Discuss whether the bequest to the spouse should be outright or in trust. Make certain whether any bequest to the surviving spouse qualifies for the marital deduction. Check that the bypass trust will not be included in the gross estate of the surviving trust. Discuss the timing, control and amounts of bequests to children and grandchildren. Watch for possible generation skipping transfers. Verify that bequests to charity qualify for a charitable deduction. 7


5. 6.



9. 10.

AICPA Personal Financial Planning Division National Association of Estate Planners & Councils

11. 12.

Discuss the selection and responsibilities of the executor and the trustee. Read each power granted to the executor and trustee to ascertain whether tax planning opportunities are considered. An important power is the power to make non-pro rata distributions. Determine whether the tax clause, if any, reduces the marital or charitable deduction. Make certain that the simultaneous death clause, if any, provides for the most beneficial marital deduction. Discuss the selection and responsibilities of a guardian and possible “compensation.” Verify that the statement of the applicable law for the trust takes advantage of the local law. Watch for trustee powers that are too broad and create adverse tax consequences such as loss of the marital deduction or inclusion in the beneficiary‟s gross estate. Discuss whether income payments from each trust should be mandatory or discretionary. Verify whether gifts in trust qualify for the annual exclusion for gift tax purposes. Determine whether a power of appointment is a general power or a limited power. Find the spendthrift clause. Ascertain whether the trust is revocable or irrevocable. Discuss the advantages and disadvantages of a durable power of attorney for financial affairs. Stress the importance of a durable power of attorney for health care. Work closely with the client‟s attorney.







19. 20. 21. 22. 23.

24. 25.

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Appendix C Calendar of Financial Planning & Tax Conferences & Events (Focusing on why 2009 and 2010 are so important for financial and estate planning)
1. Why 2009 Is So Important for Financial & Estate Planning: Reviews Everyone Should Do Now! (in lay terms – invite your clients to attend) Presented by AICPA PFP Division & National Association of Estate Planners & Councils Date: October 19, 2009, 2:00 to 4:00 p.m. ET Where: Web seminar; click here to register. Included Speakers: Sidney Kess, Martin Shenkman, Jacqueline Patterson, Steven G. Siegel, Daniel L. Daniels and more… Top financial and estate planners around the country will go over the key financial and estate planning issues that clients should be considering and addressing now. The presentation will be in an easy to understand question and answer format. 2. Ultimate Estate, Retirement & Financial Planning Conference Presented by PESI Date: October 21-23, 2009 Where: Las Vegas, Nevada (Bally Hotel) Included Speakers: Daniel L. Daniels, Steven G. Siegel, Sidney Kess 3. National Estate Planning Awareness Week Declared by Congress as third week of October annually When: October 19-23, 2009 4. **PFS Education Series: Estate Planning Presented by AICPA in conjunction with Money Education Date: November 3-19, 2009 (Tuesday & Thursday evenings 6:00 to 9:20 p.m. ET) Where: Online with live instructor Visit for more information 5. *AICPA Briefing on Sophisticated Tax Planning for Wealthy Clients Presented by American Institute of CPAs Date: November 16-17, 2009 Where: New York, New York (Marriott – downtown) Included Speakers: Daniel L. Daniels, Sidney Kess, Martin Shenkman, Steven G. Siegel Appendix
AICPA Personal Financial Planning Division National Association of Estate Planners & Councils


6. 46th Annual Conference of the National Estate Planners & Councils Presented by NAPEC Date: November 11-13, 2009 Where: Amelia Island, Florida (Amelia Island Plantation) Invited Speakers: Some of the nation‟s foremost estate planners 7. The Phase III New York State Society of CPAs Financial & Estate Planning Conference Presented by NY State Society of CPAs in conjunction with Sidney Kess Date: December 4, 2009 Where: NY State Society of CPAs offices Invited Speakers: Sidney Kess Dan Daniels Steve Siegel Marty Shenkman 8. *AICPA Advanced Personal Financial Planning Conference Presented by American Institute of CPAs Date: January 17-20, 2010 Where: Lake Buena Vista (Orlando), FL (newly renovated Contemporary Hotel) Invited Speakers: Bob Keebler Hon. David Walker Michael Kitches Harold Evensky James Shambo 9. *AICPA Tax Strategies for the High Income Individual Conference Presented by American Institute of CPAs Date: May 2-4, 2009 Where: Las Vegas, NV (Bellagio) Invited Speakers: Jacqueline Patterson Martin Shenkman Steven G. Siegel Sidney Kess *AICPA PFP, PFS & Tax section members receive $100 off of the already reduced AICPA member pricing. An additional $75 early bird discount is available for all AICPA conferences when you register by the early bird deadline. **AICPA PFP members receive $150 off of the already reduced AICPA member pricing.

AICPA Personal Financial Planning Division National Association of Estate Planners & Councils


Appendix D Why join the AICPA PFP Membership Section?
The American public is in need of trustworthy financial planning advice. There is no professional better positioned to provide this advice than CPAs who have expertise in the areas of tax, retirement, estate, investment and insurance planning. Take an active role in educating your clients and overseeing all of their financial planning decisions. The AICPA‟s Personal Financial Planning Membership Section helps CPAs who provide estate, tax, retirement, investment and insurance planning to broaden their technical expertise, improve their professional competence and receive resources to deliver high-quality, profitable PFP services. As an adviser to high-income taxpayers, you are likely already doing financial planning as part of your everyday practice and joining the PFP Section will provide valuable additional tools for you. The PFP Section benefit that will be most valuable to you in communicating with and educating your clients is Forefield Advisor (“Forefield”). Forefield is a client communication tool that is written by CPAs and attorneys and covers all areas of financial planning (529 plans & estate planning, key estate planning documents you need, family business succession planning, charitable lead trusts, etc.) through articles, presentations and concept pieces written in a client friendly way. Forefield Advisor, when purchased on its own, is $399 annually. As a PFP Section member, you receive Forefield as part of your benefits included in the $200 annual fee. Click here to join now. As a member of the PFP Section, you will quickly recover your $200 member fee by receiving knowledge that allows you to increase your fee income as well as through discounts to educational conferences, courses and web seminars in various estate, retirement, tax, investment and risk management subject matter. PFP Section Value Advocacy: The PFP section serves as the voice of CPAs that provide financial planning services by promoting and protecting member interests with regulators and other third parties. Professional Development: Education, assessment tools, Web seminars, and initiatives dedicated to helping the CPA financial planner improve expertise and achieve career goals. Community: Networking opportunities – conferences, town hall sessions, networking groups, events, committees and task forces – allow members to connect with their peers. News & Information: Exclusive, essential PFP Web and print resources that provide insight on technical issues and promote client communications and business development. Practice Development: Resources focused specifically on helping CPAs develop or expand their personal financial planning services. Certification: The PFS credential helps CPAs in financial planning combine the objectivity and integrity of their CPA foundation with the distinction of certified PFP expertise and experience. Click here to learn more.
A new benefit is launching in early October…the Bob Veres Inside Information Newsletter Service that many CPA financial planners view as their top must read item. This service cost $349 per year when purchased individually. PFP members receive this as part of their $200 annual fee.

AICPA Personal Financial Planning Division National Association of Estate Planners & Councils


Appendix E About the National Association of Estate Planners & Councils
The National Association of Estate Planners & Councils (NAEPC) is a multi-disciplinary organization of Accredited Estate Planner® (AEP®) and Estate Planning Law Specialist (EPLS) designation holders and approximately 210 affiliated local estate planning councils throughout the country. NAEPC‟s affiliated local councils represent approximately 23,000 members in 45 states, each of whom are the top attorneys, financial planners, trust officers, insurance professionals, accountants, planned giving professionals and those involved in the allied disciplines within their communities. A complete list of affiliated local estate planning councils can be found online at The Accredited Estate Planner® (AEP®) designation is available to attorneys, Chartered Life Underwriters, Certified Public Accountants, Certified Trust and Financial Advisors, Chartered Financial Consultants, and Certified Financial Planners® and is awarded to professionals who meet stringent experience and education qualifications, including two graduate level courses administered by The American College. The designation program has grown steadily since its inception and is truly multi-disciplinary. 22% of the active designees are attorneys, 29% are in the financial planning arena (CFP® or ChFC designees), 31% are primarily insurance professionals, 13% are CPAs and 5% are CTFA designees (as of January 1, 2008). The Estate Planning Law Specialist (EPLS) designation is available to attorneys through the Estate Law Specialist Board, Inc., an attorney-run subsidiary of the National Association of Estate Planners & Councils. Attorneys who become Board-certified under this program demonstrate a high level of professionalism and commitment to the concept of specialization. The program is currently the only program, other than certain state bar association programs, accredited by the American Bar Association to board-certify attorneys as Estate Planning Law Specialists. The NAEPC Foundation The NAEPC Foundation was formed in 2005 to educate the public regarding the benefits of the team concept of estate planning. The organization‟s primary objective is to educate the public on what estate planning is, why it is so important and how to develop a multi-disciplinary team of qualified estate planners to assist with their needs. National Estate Planning Awareness Week was created by NAEPC and The NAEPC Foundation and designated by the United States House of Representatives on September 27, 2008 via House Resolution 1499. It will take place during the third full week in October each year. According to a 2004 survey from, 58 percent of Americans lack a basic will, generally considered to be the first document in an individual‟s estate plan. In addition, 69 percent lack a living will or medical directive. Only one-in-five, or 21%, have created a trust as a part of his/her estate plan. In addition, most that do create a will believe that it is a final document that does not require periodic review in light of changing circumstances and/or laws. NAEPC will work in tandem with the affiliated local councils to produce public estate planning day programs within communities across the country during National Estate Planning Awareness Week.

AICPA Personal Financial Planning Division National Association of Estate Planners & Councils


Appendix F
Horror Stories: Problems Resulting From Failure to Review & Update Financial Plans, Wills and Estate Plans

As a result of the increased federal estate tax exemption in 2009 ($3.5 million); the uncertainty about estate tax changes for the year 2010 & 2011; the decreased value of investments, homes & retirement plans; the declining value of Section 529 plans; and lower interest rates, many clients will need to review their financial plans. Combining these developments with the normal stages of life (new additions to family, death, divorce, remarriage, inheritance) – they all have a continuing impact on the client’s financial plan. Please indicate below some unfortunate events that resulted from the client’s failure to have a will, failure to update an existing will or failure to update their financial plan or other important documents.

Horror story:

How it could have been avoided:

Please return completed form to Sid Kess at Appendix
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