Estate Planning Seminar
August 24, 2011
By: John P. Dedon
Odin, Feldman & Pittleman, P.C.
9302 Lee Highway, Suite 1100
Fairfax, Virginia 22031
(703) 218-2131
John.Dedon@ofplaw.com
1
Personal Asset Accumulation
Wages
Investment
Income
Qualified Plans
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
3-6% Probate & Legal Expenses
Estate Tax
(?)
7
Estate Tax :
Year
2010
2011 and 2012
2013
Exemption Amount
No estate tax*
$5 Million**
$1 Million***
? - What will Congress do?
*Income Tax
**35% Estate Tax Rate
***55% Estate Tax Rate
8
State Estate Tax Exemptions
DC
Exemption
$1,000,000
Tax Rate
16%
Maryland
$1,000,000
16%
Also has inheritance tax
Virginia
10%
Repealed
9
Current Lifetime Gifting Rates
$ 13,000 Annual Exclusion
2011 and 2012 - $5 Million
2013 - $1 Million
10
Estate Beneficiaries
Charity
IRS
GWU
Family
11
IRS
MONTH
9
12
Probate
Cost
Time Delays
Publicity
Property In Multiple States
13
Assets Passing Without a Will Go
Through Probate
Assets Passing With a Will Go
Through Probate
14
Benefits of Revocable Living Trusts
I.
Revocable
Trust
Avoids Probate
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
15
BASIC PLANNING
SHOULD INCLUDE
Wills
 Revocable Living Trusts
 Advanced Medical Directives (Living
Wills)
 Powers of Attorney

16
Assets Passing at Death
1)
2)
3)
4)
Probate
Revocable Living Trusts
Beneficiary Designations
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)
17
Beneficiary Designations
1) Retirement Accounts (IRAs, 401(k)’s)
2) Life Insurance
3) P.O.D. Accounts
18
Individual Retirement Accounts
1) Participant Dies Before Distributions
Begin
- 5-year default rule, unless…
- Designated Beneficiary
2) Distributions Begin During Participant’s
Lifetime
- Longer of participant’s life expectancy
or Designated Beneficiary’s Lifetime
19
Estate Taxes for
U.S. Citizens and Residents
Taxed on Worldwide Assets, including probate
and non-probate assets, i.e., personal property,
joint property, real estate, stocks, bonds, mutual
funds, life insurance, present value of surviving
spouse’s pension, bank accounts, business
interests, etc.
20
Estate Taxes for
Non-Residents
Taxed only on U.S.-Situs Assets, except:
U.S. Bank accounts
 Life insurance proceeds
 Pension from International Organizations

21
Estate Tax Residency Test
Estate and Gift Tax Test:
Domicile Test = physical presence with
intent to remain in the U.S.
22
Marital Deduction for U.S.
Citizen Spouse
If a decedent is survived by a U.S. Citizen
spouse, the unlimited marital deduction delays
estate tax until the death of the surviving
spouse.
Need Qualified Domestic Trust if spouse is not
a U.S. Citizen.
23
Case Study
Dad
Mom
Grandma
2 Children
24
Profile
•
•
•
Married
$2 Million +
Equity in real estate, retirement plans,
other liquid assets, life insurance
25
Assets
$ 800,000
$ 300,000
Retirement
Liquid
Insurance
$ 450,000
$100,000
$2,000,000
$250,000
Total
$2,450,000
$350,000
$ 900,000
Grand Total = $4.8 million
$2,000,000
26
Objectives
•
•
•
•
•
•
Provide for surviving spouse
Eliminate or avoid estate tax
Eliminate probate
Provide for children at second death
Provide for Mom
Charity
27
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
28
Using Revocable Trust to Reduce Estate Tax and
Probate
Upon Husband’s Death
$2,450,000
Wife’s
Trust
Husband’s
Trust
$2 Million
Joint Property
Marital
Trust
Tax Free
Marital Share:
Assets > $5 Million
$350,000
< $5 Million
Inheritance (Tax-Free)
Bypass/Credit Trust
(Husband’s Exemption $5,000,000)
Spouse = Beneficiary
But 2013 ? $1 Million
29
Second Death
Special
Needs
Trust
$$$
$$$
$$$
25 (1/3)
30 (1/2)
35 Balance
Need Executor, Trustee, Guardian
30
Problems
Potential Titling Problems
•
•
Wife dies first, only $350,000
Jointly held property
31