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Truth About Estate Planning
Law Offices Of Arthur J. Pauly, Jr.
What You Should KnowBefore You See An Attorney
Proper Estate Planning
Caring for loved ones as if you were still there
• With your resources
• With your love
• With your wisdom
• Control my property while I’m alive and well;
• Plan for me and my loved ones if I become disabled
• Give what I have
–To who I want
–The way I want
–When I want
Estate Planning Defined
Traditional Estate Planning
Gross Estate
Your Will
Non-probate transfers
Jointly owned propertyLife InsuranceIRA’s401(k)’sAnnuities
Planned Distributions
Property titled in your name
ProbateProcess
Wills Can Fall Short of Estate Planning Goals
• Won’t provide for your disability
• Won’t necessarily give what you have:
– to whom you want
– the way you want
– when you want
• Certainly won’t avoid probate
The Living Trust
• It plans for your disability
• It plans for your loved ones
• Contains your loving instructions
• Its private and confidential
• Reflects your hopes, fears, dreams and values
• Its good in every state
How to Distribute to Your Heirs
• No protection
• Creditor protection• Predator protection• Self protection• Estate tax protection
• Outright
• In Trust
Basic Estate and Gift Tax Rules
• It’s a tax on everything• Estate and gift taxes begin at 37%• $11,000 annual exclusion*• Unlimited marital deduction• $1,000,000 unified credit**• Unlimited charitable deduction• Use it or lose it
* Indexed for future inflation * * Varies depending on the year of death
Tom and Cindy Client
Tom: 55 years of age, lawyer, married 3 children.
Cindy: Wife, owns video store, mother of 3 children.
Peter: 25, manages video store, married
Paul: 22, UNLV, lifeguard.
Mary: 14, 8th grade, soccer star.
Tom and Cindy’s AssetsFamily home $ 300,000Furniture, household goods 50,000Automobiles 20,000Stocks 80,000Video Store 350,000Law Practice 150,000Life Insurance 750,000Retirement Plans 300,000
Total $2,000,000
Tom’s WillTom’s Will
Tom’s Will Plan
$0 TaxCindy
$2,000,000
Cindy$2,000,000
$435,000 Peter, Paul& Mary
$1,565,000
Peter, Paul& Mary
$1,565,000
A Better Plan
$0 Tax
FamilyTrust
FamilyTrust
$1,000,000
MaritalTrust
$1,000,000
MaritalTrust
$1,000,000
$0 Tax
Peter, Paul& Mary
Peter, Paul& Mary
$0 Tax
$1,000,000Coupon
$0 Tax$2,000,000
Tax Savings$435,000
Maximizing the Use ofthe Credit Shelter Exemption
• One dimensional planning
– All to spouse
– Wastes one unified credit
• Two dimensional planning
– Use of credit shelter trust on first death
– Saves a minimum of 435,000 in estate taxes
Power of Tax Deferred Investing
Tax Deferred Investment
$1 doubled every year for 20 years tax free
$1,048,567
Taxable Investment
$1 doubled every year for 20 years taxable 29%
$45,700
Beneficiary Designation
• How much I have to take out
• Continued tax deferral on death
• Meeting estate planning goalsGiving what I have
- To who I want- When I want- The way I want
Who Should Be Your Beneficiary?
• Split Your IRA’s– Charity
– Trust
– Spouse
• Use of Disclaimers– Spouse
– Trust