ESTATE PLANNING CONSIDERATIONS

Introduction to Estate Planning

A.   "EP" might stand for: “Emergency Procedure”, “Expensive Process” or "Estate Planning”.

1.         Where there is a "will" there is not necessarily: a plan.  A plan implies: goals and objectives, strategies and action steps.

2.         Three estate planning inhibitors are: lack of commitment, procrastination and lack of knowledge.

B.        Objectives:

1.         The first objective of any estate plan should be: get your property to where it is suppose to go.

(a)        In order to accomplish the objective, you must answer the questions: who, what, when, where and how much.

2.         The second objective is to: save tax and expense.

(a)        Taxes at the Federal level are: estate tax, generation skipping tax and gift tax.

(b)        Taxes at the State level are: estate tax and inheritance tax (some states).

(c)     Other expenses are: tax preparation expenses, probate and administration expenses.

3.         The third objective is to: protect assets from: spendthrifts, disabled, creditors and divorce, second spouse and the court system.

C.        Probate:

1.       The five methods of transferring property to someone else at death are: will, joint tenancy, beneficiary designation, P.O.D. (payable on death) and a living trust.

2.         Probate is necessary because: wills are one sided and no one promises to carry them out.

D.        The Estate:

1.         Estate assets would include: real estate, securities, accounts, tangible personal property, business interests, retirement plans, life insurance, retained life interests and insurance policies transferred within three years.

2.         Estate liabilities would include: debts, mortgages, loans and unpaid bills.

3.         Assets - liabilities = net worth.

E.         Deduction, Credits and Exclusions:

1.         The marital deduction is: unlimited.

2.         The charitable deduction is: unlimited.

3.         The unified credit allows: $1,500,000 in 2005 and $2,000,000 in 2006 through 2008 to pass tax free during: life or at: death.

4.         The generation skipping tax exclusion is: $1,000,000 (indexed annually).

5.         The annual gift tax exclusion is: $11,000 per person per year (indexed annually).

6.         A husband and wife may split gifts.

7.         Tuition and medical payments for someone else are not included as long as the payment is made: directly to the provider of services.

8.         A family-owned business may be exempt from estate taxes to the extent of: $1 million.

F.         Types of Estate Plans: No will, simple will, will with testamentary trust, pour-over will with revocable living trust and pour-over will with funded revocable living trust.