estate planning - indiana farm bureau insurance
TRANSCRIPT
I ndiana Farm Bureau Insurance has been a part of Indiana for more than
70 years. We have agents in every county in Indiana, and only Indiana. It’s
why every auto, home and life insurance policy we offer is based on your
community, your values, your future. And it’s why we can promise that from
Elkhart to Evansville, Terre Haute to Richmond, we’ll be there.
Our multi-line approach allows one agent to cover all your insurance needs –
home, life, auto, business, or farm. Getting your questions answered quickly is our
priority 24 hours a day, seven days a week. Anytime you have a question call us at
1-800-723-FARM or (317) 692-7200. If you prefer the Internet, visit
www.infarmbureau.com for a variety of options to get the help you need. To
make your life a little easier, a choice of convenient payment options by mail,
phone or in person is also available. We accept personal checks, any MasterCard or
Visa credit or debit cards, or electronic funds transfer.
Indiana Farm Bureau Insurance believes in investing in the youth of Indiana to
ensure the future prosperity of our state. We are the only insurance company in
Indiana to make a solid commitment to that future, through programs like the
Teenage Driver Safety and Education Program, the eXceL Awards (formerly
known as Project XL), and an exclusive corporate partnership with the Indiana
High School Athletic Association.
Indiana Farm Bureau Insurance...We’re Part of Your Life.
Estate PlanningAnd The Second To Die Program
www.infarmbureau.com31-999 9/05 www.infarmbureau.comUnited Farm Family Life Insurance Company
Indianapolis, IN
Estate Planning and the Second to Die Program from Indiana Farm Bureau Insurance
A source of satisfaction for most married couples is
to know that the assets they have worked hard to
accumulate through the years stay in their fami-
lies, even after both people are deceased.
All too often, however, this isn’t the case. In fact, federal
estate taxes and settlement fees can not only reduce the
total assets inherited by family members, they can actually
create financial hardships in situations where most of a
couple’s assets are not easily converted to cash.
The Estate Planning assistance and Second to Die
program offered by Indiana Farm Bureau Insurance are
designed to help give you the peace of mind you deserve.
For additional information, call your Indiana Farm
Bureau Insurance agent.
Table of Contents 2 Estate Planning Facts
2 What is Estate Planning?
3 Your Estate Dollars Less Expenses
4 Minimizing the Estate Tax
5 Credit Shelter Trust
6 The Indiana Farm Bureau Insurance Second to Die Program
7 Additional Information About Estate Planning
7 Life Insurance in Trust
8 Revocable Living Trust
9 Unified Rate Schedule for Estate and Gift Taxes
10 Indiana Inheritance Tax Schedule
Indiana Inheritance Tax Schedule
(1) (2) (3) (4) (5) (6) (7) (8)
1%2%3%3%4%
5%6%7%8%
10%
025,00050,000
100,000200,000
300,000500,000700,000
1,000,0001,500,000
$ 25,00050,000
100,000200,000300,000
500,000700,000
1,000,0001,500,000................
$ 0250750
2,2505,250
9,25019,25031,25052,25092,250
$ $ 01,7503,5007,000
17,000
27,00047,00071,000
107,000182,000
$ 7%7%7%
10%10%
10%12%12%15%15%
$ 02,5005,000
10,00025,000
40,00070,000
100,000145,000245,000
$ 10%10%10%15%15%
15%15%15%20%20%
$
VALUE OFINHERITANCE
CLASS ATax on Rate onCol.(1) Excess
CLASS BTax on Rate onCol.(1) Excess
CLASS CTax on Rate onCol.(1) Excess
BENEFICIARY EXEMPTION CLASS A: Child 21 or older* $ 100,000 Child under 21* 100,000 Parent 100,000 Other lineal ancestor or descendent 100,000 CLASS B: Brothers, sisters, their descendants, and child’s spouse, widow or widower $ 500 CLASS C: All others** $100
* “Child ” includes a legally adopted child. Children under age 18, if no surviving spouse, collectively have an allowance of $8,500 which is also exempt from inheritance tax.
** Except a surviving spouse. All property transferred to a surviving spouse is exempt from inheritance tax.
Estate Planning FactsFact: Estateplanningisnotonlyfortherichandelderly.
Fact: TheestatetaxhasNOTyetbeenrepealed.
Fact:Estateplanningisnotonlyforthosewithlargeestates.Itisalsoessentialforsmallerestates.Why?Becausethereare fewerassetstocoverdebts,theestatesettlementcostsandpossibleestatetaxes.
Fact: Ifyoudonotspecifywhowillinheritwhichassetsandwhenthoseassetsshouldbedistributed,statelawswillmake thosedeterminations.Thetermsandtimingmaynotbeconsistentwithyourwishes.
What is Estate Planning?Estateplanningisaprocessthatprovidesanefficientwaytodistributeyourassetswithaminimalamountoflossanddelay.Thepri-
maryobjectiveofyourestateplanshouldbetheavoidanceofunnecessaryshrinkageofyourestateandthefinancialsecurityforyour
heirs.Oneofthemostcommoncausesofestateshrinkageisunder-estimationandinadequatepreparationforthenumerousexpenses
incurredatyourdeath.Estateplanninghelpsprovidesolutionstoadministrativeproblems,likethefollowing:
PotentialProblems• Failuretoorganizeinformationregardingassetsandlocation.
• Failuretomakeknownyourobjectivesandwishesregarding financesanddistributionofassets.
• Failuretounderstandthatifyouownalifeinsurancepolicy onyourownlife,theproceedsareincludableinyourestate.
Solutions• Createafinancialsummary(networthstatement)showing assetsandliabilities.
• Indicateaccountnumbersandotherappropriateinformation.
Execute documents, such as:•AWill-Specifieswhoreceivesyourpropertyatyourdeath. Itcanalsoprovideinstructionsoncreationoftrustsandthe designationofanexecutor(s).
•DurablePowerofAttorney-Givessomeoneyoutrustthe abilitytoactonyourbehalfifyouarelegallyincapacitated.
• Makesomeoneelsetheownerandbeneficiaryofyourlifeinsurance.
ForExample:Ifyouaretheownerandinsuredofa$250,000lifeinsurancepolicy,theentireamountisincludedinyourestateandcouldbereducedasmuchas48%(2004)byestatetaxation.
Unfortunately,yourfamilylikelywillnotreceiveallofthepropertyyouhaveaccumulatedthroughoutyourlife.Suchexpensesasdebts,costsofsettlingyouraffairs,andestatetaxes(forlargerestates)mustbepaidfirst.Yourfamilyreceiveswhatisleft.Thefollowinggraphicshowshowmoneyissiphonedfromyourestatebeforefinallyreachingyourfamily.
2
3
1.Medical Bills
2.Funeral Expenses
3.Debts
4.Accounting Fees
5.Attorney Fees
6.Court Costs
7.Income Tax •Federal •State •Local
8.State Inheritance Tax
9.Estate Tax What is left?
Your family’s portion.Your Estate
Your Estate Dollars Less Expenses
1.Medical Bills:Manytimesmedicalexpensesassociatedwiththelastillnesscandecimateanestate.Proper planningcanhelpprovideforthiscontingency.
2.Funeral Expenses:Theaveragecostoffuneralandburialisontherise.Thiscostcancomprisea substantialportionofasmallerestate.
3.Debts:Adecedent’screditorshavealegalrighttobepaidbeforehisfamilyreceivesanyofhisestate. Debtsmayincludethemortgageonapersonalresidence,automobileloans,creditcardbalances,etc.
4.Accounting Fees:Atdeath,adecedent’staxesmustbepaidincludingincometaxes,inheritancetaxes,and estatetaxes.Whereanaccountantisinvolvedinthepreparation,additionalcostswillaccrue.
5.Attorney Fees:Inmostcases,anattorneydirectsandassiststheexecutorintheestateadministration. Dependinguponthecomplexity,attorneyfeesmaybesubstantial.
6.Court Costs:Filingfeesforopeninganestatearetypicallyminimalbutmustbepaid.
7.Income Tax:Federal,state,andlocalincometaxesthathaveaccruedsincethelastincometaxreturn mustbefiledandpaid.Also,theestatemustfileanincometaxreturnforincomeaccruedduringthe estateadministration.
8. Inheritance Tax: Stateslevyataxontherightofabeneficiarytosucceedtotheownershipofthe decedent’sproperty.
9.Federal Estate Tax: Adecedentwhodiesowningpropertyworthinexcessof$1.5million(fair marketvalueintheyear2005)willhavehisestatesubjectedtofederalestatetax.Thisvalueincreases eachyearuntil2010(seeRateScheduleforEstateandGiftTaxes).
4
TheUnifiedGiftandEstateTaxCredit
BothyouandyourspouseareentitledtotheUnifiedGiftandEstateTaxCreditwhichsheltersacertainamountofassetseachyear.Thecreditisadollarfordollarreductionwhichoffsetsanygifttaxesonlifetimetransfersofassets.Theremainingcreditisappliedagainstanyfederalestatetaxesthataredueatdeath.
ThemostefficientuseofthiscreditismadeinconjunctionwiththeUnlimitedMaritalDeduction.First,theUnifiedCreditisusedtoitsmaximumextentatthefirstdeathandthentheremainderoftheestateistransferredtothesurvivor’sestateusingtheUnlimitedMaritalDeduction.Second,anotherUnifiedGiftandEstateTaxCreditisusedagainwhenthesurvivorspousedies.AnotherlookattheestateofJohnandAnne.
TotalassetsavailabletotheheirsofJohnandAnneincludethe$1,500,000fromJohn’sestate,transferredtothechil-drenathisdeath,usingtheUnifiedGiftandEstateTaxCredit:$3,775,000($1,500,000+$2,275,000).Comparethiswiththefirstexamplewhereonly$3,100,000waslefttotheheirs.
Minimizing the Estate TaxTheUnlimitedMaritalDeduction
TheUnlimitedMaritalDeductionisasimpleandpowerfulestateplanningtoolwhichwillallowyoutotransferanunlim-itedamountofassetstoyourspousewithoutpayinganyfederalestatetax(atdeath)oragifttax(whileliving).Itisimportanttorememberthatthetransferonlydelaystheestatetaxationuntiltheseconddeathandinmanycases,theestatewillgrowsig-nificantlybeforethesurvivingspousedies-creatinganevenlargerfederalestatetaxliabilityfortheheirstopay!ConsidertheexampleofJohn(age60)andAnne(age58)whosecombinedestatetotals$4million.JohnandAnnesharetheestateequally.
Example 1:John Dies 2005 / Anne Dies 2008
$2,000,000 John’s Estate+2,000,000 Anne’s Estate
$4,000,000
$1,680,800 TentativeTax–$780,800 UnifiedCredit
$900,000 EstateTax
$4,000,000 Estate Value– 900,000 Estate Tax
$3,100,000 Available to heirs.
Example 2:
A)$2,000,000 John’s Estate –500,000 To Anne’s Estate $1,500,000
$1,500,000 To Children via Unified Credit $555,800 Tax –555,800 Unified Credit $0 Estate Tax
$1,500,000 To Children via Unified Credit –0 Estate Tax $1,500,000 Credit Shelter Trust
B) $2,000,000 Anne’s Estate +500,000 Unlimited Marital Deduction $2,500,000 Initial Assets
$1,005,800 Tentative Tax – 780,800 Unified Credit $ 225,000 Actual Estate Tax
$2,500,000 Initial Assets – 225,000 Actual Estate Tax $2,275,000 To Anne’s Heirs
C) $2,275,000 To Anne’s Heirs +1,500,000 Credit Shelter Trust $3,775,000 Available to Heirs
ACreditShelterTrust(alsoreferredtoasaBy-PassTrust,FamilyTrust,orTrustBinanA-Bplan)allowsamarriedcoupletotakefulladvantageoftheUnifiedCreditavail-abletoeachindividual,therebyreducingtheirestatetaxesandprobatecosts,andpassingmoreoftheestatetotheheirs.ThemajorcharacteristicsofaCreditShelterTrustare:
1.Atthefirstdeath,thewillorrevocablelivingtrustprovides fortheestablishmentofatrustequaltotheamountthat couldbepassedtaxfreethroughtheUnifiedCredit.
2.Thebalanceoftheestatetypicallypassestothesurviving spouseoutrightorinatrustwhichqualifiesfortheunlimited maritaldeduction.
3.AproperlydraftedCreditShelterTrustcanprovide incomeandlimitedamountsoftheprincipaltothesurviving spouseand/orfamilymembers.
These provisions may include: a. allincomepaidannuallytothesurvivor; b.thesurvivor’srighttodemandupto5%ofthe trustassetsannually; c. thetrustee’sdiscretiontopayforthemaintenance, education,support,andhealthofthesurvivor; d.thetrustee’sdiscretiontoterminatethetrust duetotheextremeneedofthesurvivor.
4.Caremustbetakenthatnorightbegrantedthatcausesthe trustassetstobeincludedinthesurvivingspouse’sestate.
5. Atthedeathofthesurvivingspouse,theassetsremainingin theCreditShelterTrustshouldnotbetaxedintheestateof thesurvivingspouse.
1.TheassetsremainingintheCreditShelterTrustatthe deathofthesurvivingspousecanpassoutrighttothe heirsorintrustfortheirbenefitavoidingbothfederal estatetaxationandprobateexpensesatthesurviving spouse’sdeath.
2.Moreoftheestatepassestotheheirsthanwouldthrough theuseofaSimpleWill.Themoneysavedfromthe reductionoftaxesgoesdirectlytotheheirs.
3.TheUnifiedCreditworkstocreatea$1.5million(2005) exemptionforeachpersonsubjecttotheestatetax.This personalexemptionisscheduledtoincreaseto$2million in2006,followedbyanexpansionto$3.5millionin2009. In2010theestatetaxwillbetemporarilyrepealed.However thetaxisscheduledtoreappearin2011,witha$1million perpersonexemption.Throughproperplanningamarried couplemayuseaCreditShelterTrusttocombinetheir personalexemptions,transferringupto$3million(2005) totheirchildrenorotherbeneficiariesfreeofestatetaxes.
4.Thesurvivingspousemaybeabeneficiaryofthe CreditShelterTrust.
5.Providespeaceofmindbecausethedecedentmayspecify whowillreceivetheremainingassetsatthedeathofthe survivingspouse.
6. Ifapersonselectsacorporatefiduciarytoserveastrustee, thebeneficiariesreceiveprofessionalassetmanagement.
7. Theamountoftheestatepassingtothesurvivingspouse (inexcessofwhatisputintheCreditShelterTrust) qualifiesfortheunlimitedmaritaldeductionandtherefore passesestatetax-freeatthedeathofthefirstspouse.
Regardlessofthesizeoftheestate,thedebtandestatesettle-mentcostexpenseswilloccur,plusestatetaxesmaybedueonestateslargerthan$1.5million.Eachoftheseexpensescanreduceor“shrink”theestate’svalue.AsshownintheestateexampleofJohnandAnne,thereisaspecialneedforestateliquidityattheseconddeathtopaytheestatetaxandothersettlementcosts.ThereareanumberofwaystoprovidethenecessarycashwhenAnnedies:
1. Sellestateassetstomeetthecashneeds.Thisoftenresultsin forcedliquidationlosses.
2.Keepenoughcashonhandtopaythecosts.Thiscouldmean keepinglargeamountsofmoneyinlow-yieldliquid investments.Also,theseassetsmaybeunnecessarilysubjected totheprobateprocess,whichinvolvesprovingtothe probatecourtthevalidityofthewill.
3.Borrowthecashandforcetheheirstopayintereston theloan.
4.Prepaytheexpensesusingalifeinsuranceprogramthatpays proceedsattheseconddeathwhenthemoneyisneeded.
5
Credit Shelter TrustHow It Works
Benefits of a Credit Shelter Trust
The Need for Estate Liquidity
Herearesomeoftheadvantagesofusingalifeinsuranceprogramthatpaysproceedsattheseconddeath:
1.Providesnecessaryliquiditytopayestate taxesandothersettlementcostswithout liquidatingpartoftheestate.
2.Deathbenefitispayableatthesecond deathwhenestatetaxesaredue.
3.Providesaneconomicalsolution- supplieslargeamountsofcashtomeet estateliquidityneedsusingdiscounted dollars.Lifeinsurancepoliciesare designedtopaymoreindeathbenefits thantotalpremiumspaidin. (Itmayonlycost$.25toreceive $1.00ofbenefits.)
4.ProceedsareFederalincometaxfree tothebeneficiaries.
5.Structuredcorrectly,theproceedsavoidtheprobateprocess, inheritancetaxandestatetax.
Ourprogramprovideslifeinsuranceprotectionthatpaysadeathbenefitattheseconddeathwhenfundsareneededtopaythecostsofsettlingtheestate.Weassessthehealthofbothapplicants,designatingoneastheInsuredunderthebasepolicy,whiletheotherapplicantisdesignatedastheSecondInsured.
IftheSecondInsureddiesfirst,thesurvivingInsuredcontinuestopaypremiumsonthe$225,000basepolicytopaytheestatesettlementcostsdueattheseconddeath.However,theIndianaFarmBureauInsuranceSecondtoDieProgramisUNIQUEinthatifthebaseInsureddiesfirst,thesurvivor/SecondInsuredwillautomaticallyreceiveapaidup$225,000lifeinsurancepolicy(orequaltothecur-rentnetdeathbenefitatthetimeofdeathifdifferent).Nounderwritingisrequiredregardlessofthesurvivor’shealth.Thenewpolicywillprovidefundsneededtopayestatesettlementexpensesattheseconddeathasplanned.
Regardlessofwhodiesfirst,therewillalwaysbeinsurancepro-tectionthatprovidesataxfreedeathbenefitpayableatthesec-onddeath.Plus,iftheInsuredunderthebasepolicydoespre-deceasetheSecondInsured,therecanbe“residualdeathbenefit”availabletothebeneficiaries.ResidualDeathBenefit-anotheruniqueIndianaFarmBureauFeature!
Example:RecallthepreviousexamplewhereAnne’spolicyfaceamountis$225,000topaytheestatetaxesdueonthe$4millionestateattheseconddeath.IfsheunexpectedlydiesbeforeJohntenyearsfromnow,the$225,000deathben-efitisusedtopurchaseapaiduppolicyforthesamefaceamountonJohn’slife-providingcashtopayestatetaxeswhenhedies.Thereisresidualdeathbenefitof$138,600payabletothebeneficiaries.
$225,000DeathBenefitFromAnne’sPolicy–155,700SinglePremiumCostofJohn’s$225,000PolicyatAge70
$69,300ResidualDeathBenefitPayabletotheBeneficiaries
TheresidualdeathbenefitprovidescashatthefirstdeathonlywhenandiftheInsuredunderthebasepolicydiesbeforetheSecondInsured.
6
The Indiana Farm Bureau InsuranceSecond to Die Program
John and Anne Example -$225,000 Estate Liquidity Need
Underwriting - Determining the Insured under the base policy
Oneoftheindividualswillbedesignatedasthe“Insuredunderthebasepolicy”whiletheotherpersonisdesignat-edasthe“SecondInsured”-regardlessofthehealthstatusoftheSecondInsured.
Example of information disclosed in the joint application:
•JohnisAge60andisinfairhealth.
•AnneisAge58andisingoodhealth.
•AnneisnamedtheInsuredofthebasepolicy. JohnisdesignatedastheSecondInsured.
•IfJohn(theSecondInsured)diesfirst,Anne continuestopaythepremiumsonthepolicy,with theguaranteethatthepremiumwillnotincrease.
•IfAnne(theInsuredunderthebasepolicy)dies beforeJohn,ourprogramisauniquesolution providingcontinuouslifeinsurancecoverageon John’slifefornoadditionalpremium.Inaddition, ourprogramcanprovideFederalincometaxfree cashtothebeneficiariesasa“residualdeathbenefit.”
What Other Program Offers All of These Features?
•Lifeinsuranceproceedsattheseconddeathtopay forestatesettlementcost.
•ThepossibilitytoreceiveFederalincometax-free proceedsatboththefirstdeathandtheseconddeath withnofurtherpremium.
•IftheInsuredunderthebasepolicypredeceasesthe SecondInsured,nofurtherpremiumsarerequired.
•NounderwritingrequirementsfortheSecondInsured.
•Guaranteedpremiumsthatwillnotincrease.
IndianaFarmBureauInsuranceofferssuchaprogramalongwithafreeanalysisofyourownestate!
Additional Information About Estate PlanningLife Insurance in a TrustHow It WorksIngeneral,theproceedsofalifeinsurancepolicypassfreeofprobateunlessthebeneficiaryofthepolicyistheinsured’sestate.Iftheinsured’sestateisthebeneficiary,thepro-ceedsofthepolicyarepayabletotheinsured’sestateandaresubjecttotheprobateprocess.
Thevalueofanypoliciesownedbyanindividualatdeatharesubjecttoestatetaxes.Ifanindividualpossessescertainrights(knownasincidentsofownership)overapolicyinsuringhisorherownlife,theproceedsofthepolicyaregenerallyincludedintheindividual’sgrossestateforestatetaxpurposesattheindividual’sdeath.
Frequently,acouplewillthinktheyaresafefromestatetaxesiftheyownpoliciesoneachother.Theymaynotbe.Takeforexamplethehusbandwhoistheownerandbeneficiaryofapolicyonhiswife.Thewifediesfirst.Thehusbandgenerallyreceivestheproceedsofthelifeinsurancepolicyfreeofincomeandestatetaxes,butthefundsremainingathisdeathbecomepartofhisgrossestateforestatetaxpurposes.
Lifeinsurancepoliciesareoftentransferredtoanirrevocablelifeinsurancetrustinordertoavoidtheestatetaxesthatmayresultfromowningapolicyorfromholdingincidentsofowner-shipinone.Otherobjectivesmayalsobeaccomplishedbysuchatransfer.
PitfallsofLifeInsuranceinaTrustTheGrantorcannotterminateorchangethetermsofanirre-vocablelifeinsurancetrustonceitisestablishedandhedoesnothaveaccesstothefundsinit.
Iftheinsuredtransfersanexistingpolicyandthendieswithinthenextthreeyears,theproceedsofthepolicyareincludableintheestateforestatetaxpurposesundertheThreeYearRuleofIRCSection2035.Toavoidthispossiblepitfall,thetrusteeofthelifeinsurancetrustoftenpurchasesanewpolicyusingcashinthetrust,sotheinsuredisnottransferringapolicytothetrust.Frequently,thepolicypremiumsforapolicyintrustwillbepaidbythetrustwithmoneyreceivedasagiftformtheGrantor.Thesetransferstothetrustforpremiumpaymentsmaynotqualifyfortheannual$11,000gifttaxexclusionbecausetheyareconsideredtobegiftsofa“futureinterest”ratherthanapresentinterest.Toavoidthispossiblepitfall,thebeneficiariesofthetrustareoftengivenalimitedpowertowithdrawfunds(knownasa“CrummeyPower”).Properwithdrawalrightsgenerallymakethegifta“presentinterest”andmayallowthegifttoqualifyfortheannualgifttaxexclusion.Giftstoanirrevocabletrustwhichdonotqualifyfortheannualgifttaxexclusionmaytriggeragifttaxorareductionintheavail-ableunifiedcreditforfederalestatetaxpurposes.
Thegifttaxexclusionisadjustedannuallyforinflation.Adjustmentsareroundedtothenextlowestmultipleof1,000.
Revocable Living TrustHow It WorksARevocableLivingTrustisaflexibleestateplanningtoolthatcanbeusedtoreduceprobateandadministrativecosts.ItisatrustcreatedbytheGrantorduringhisorherlifetimeinwhichtheGrantorretainstherighttoterminatethetrust,changeitsterms,orremovetrustproperty.Itmaybefundedduringhisorherlifetime(toobtainprobateavoidancebenefits)orremainunfundeduntiltheGrantor’sdeath.SincetheGrantorhasn’tirrevocablydisposedofthetrustassets,theentiretrustwillbeincludableintheGrantor’sgrossestateforestatetaxpurposes.However,totheextentthetrustisfundedduringhisorherlifetime,theformalprobateprocessisavoided.ThemajorcharacteristicsofaRevocableLivingTrustare:
1.TheGrantorestablishesthetermsandconditions bywhichassetsinthetrustwillbemanagedand namesthebeneficiariestowhomthetrustwill ultimatelybedistributed.
2.Propertyistransferredtothetrustduringthe Grantor’slifetimeor“poursover”tothetrust underthetermsoftheGrantor’sWill.
3.Thetrustcanreduceprobateandadministrative costs,simplifyassetmanagementandprovide greaterprivacyforthedistributionofassets atdeath.
Advantages of a Revocable Living Trust1. Intheeventofthementalorphysicalincapacityof theGrantor,theTrusteecontinuestomanagetrust assetswithoutinterruptionortheneedforacourt- appointedguardian.
2.Byavoidingtheformalprobateprocess,the Grantor’sfamilymaybeaffordedprivacywith respecttothenatureandamountoftrustassets andtheidentityofthebeneficiaries.
3. TheTrusteecandistributeormanagetrustassets immediatelyupontheGrantor’sdeathanddoesnot needtowaitforadmissionoftheWillorothertime consumingprobatedelays.“Ancillary”probate proceedingsforpropertylocatedinanotherstate canbeavoided.
4.Probateandadministrativecostscanbereduced duringtheGrantor’slifetimeandatdeath.
5.Someestateplanningcanbeaccomplished.
Disadvantages of a Revocable Living Trust1.AlltrustassetsareincludableintheGrantor’sgross estateforestatetaxpurposes.
2.Establishmentofthetrustmaygeneratelegalcosts andtrusteefees.
3.Ifprobateavoidanceisdesired,assetsgenerally needtobetransferredtothetrustduringthelifetime oftheGrantor.
8
Unified Rate Schedule for Estate and Gift Taxes
9
Foryearofdeath2005,theUnifiedGiftandEstateTaxCreditis$555,800basedonanexemptionequivalentof$1,500,000.
Foryearofdeath2006,theUnifiedGiftandEstateTaxCreditis$780,800basedonanexemptionequivalentof$2,000,000.
Foryearofdeath2007,theUnifiedGiftandEstateTaxCreditis$780,800basedonanexemptionequivalentof$2,000,000.
Foryearofdeath2008,theUnifiedGiftandEstateTaxCreditis$780,800basedonanexemptionequivalentof$2,000,000.
Foryearofdeath2009,theUnifiedGiftandEstateTaxCreditis$1,455,800basedonanexemptionequivalentof$3,500,000.
Foryearofdeath2010,theestatetaxhasbeenrepealed.Allpropertymaybepassedwithoutuseofacredit.
Foryearofdeath2011,theUnifiedGiftandEstateTaxCreditis$345,800basedonanexemptionequivalentof$1,000,000.*
*Assumes sunset provisions have taken effect.
Gift and Estate Tax Tables
From: To:
1,500,0002,000,0002,500,0003,000,000
10,000,00017,184,000
$ 2,000,0002,500,0003,000,000
10,000,00017,184,000................
$
VALUEOFESTATE
Tax RateonCol.(1) Excess
LOWERBRACKETS(2005-2009,2011)
555,800780,800
1,025,8001,290,8005,140,8009,451,200
$ 45%49%53%55%60%55%
VALUEOFESTATE
Tax RateonCol.(1) Excess
From: To:
010,00020,00040,00060,00080,000
100,000150,000250,000500,000
1,000,0001,250,000
$ 10,00020,00040,00060,00080,000
100,000150,000250,000500,000
1,000,0001,250,0001,500,000
$ 01,8003,8008,200
13,00018,20023,80038,80070,800
155,800345,800448,300
$ 18%20%22%24%26%28%30%32%34%37%39%43%
UPPERBRACKETS(2011andLater)
UPPERBRACKETS(2005)
From: To:
1,500,0002,000,000
$ 2,000,000................
$ 555,800780,800
$ 45%47%
UPPERBRACKETS(2006)
From: To:
1,500,0002,000,000
$ 2,000,000................
$ 555,800780,800
$ 45%46%
UPPERBRACKETS(2007-2009)
From: To:
1,500,000$ ................$ 555,800$ 45%
Estate Planning and the Second to Die Program from Indiana Farm Bureau Insurance
A source of satisfaction for most married couples is
to know that the assets they have worked hard to
accumulate through the years stay in their fami-
lies, even after both people are deceased.
All too often, however, this isn’t the case. In fact, federal
estate taxes and settlement fees can not only reduce the
total assets inherited by family members, they can actually
create financial hardships in situations where most of a
couple’s assets are not easily converted to cash.
The Estate Planning assistance and Second to Die
program offered by Indiana Farm Bureau Insurance are
designed to help give you the peace of mind you deserve.
For additional information, call your Indiana Farm
Bureau Insurance agent.
Table of Contents 2 Estate Planning Facts
2 What is Estate Planning?
3 Your Estate Dollars Less Expenses
4 Minimizing the Estate Tax
5 Credit Shelter Trust
6 The Indiana Farm Bureau Insurance Second to Die Program
7 Additional Information About Estate Planning
7 Life Insurance in Trust
8 Revocable Living Trust
9 Unified Rate Schedule for Estate and Gift Taxes
10 Indiana Inheritance Tax Schedule
Indiana Inheritance Tax Schedule
(1) (2) (3) (4) (5) (6) (7) (8)
1%2%3%3%4%
5%6%7%8%
10%
025,00050,000
100,000200,000
300,000500,000700,000
1,000,0001,500,000
$ 25,00050,000
100,000200,000300,000
500,000700,000
1,000,0001,500,000................
$ 0250750
2,2505,250
9,25019,25031,25052,25092,250
$ $ 01,7503,5007,000
17,000
27,00047,00071,000
107,000182,000
$ 7%7%7%
10%10%
10%12%12%15%15%
$ 02,5005,000
10,00025,000
40,00070,000
100,000145,000245,000
$ 10%10%10%15%15%
15%15%15%20%20%
$
VALUE OFINHERITANCE
CLASS ATax on Rate onCol.(1) Excess
CLASS BTax on Rate onCol.(1) Excess
CLASS CTax on Rate onCol.(1) Excess
BENEFICIARY EXEMPTION CLASS A: Child 21 or older* $ 100,000 Child under 21* 100,000 Parent 100,000 Other lineal ancestor or descendent 100,000 CLASS B: Brothers, sisters, their descendants, and child’s spouse, widow or widower $ 500 CLASS C: All others** $100
* “Child ” includes a legally adopted child. Children under age 18, if no surviving spouse, collectively have an allowance of $8,500 which is also exempt from inheritance tax.
** Except a surviving spouse. All property transferred to a surviving spouse is exempt from inheritance tax.
I ndiana Farm Bureau Insurance has been a part of Indiana for more than
70 years. We have agents in every county in Indiana, and only Indiana. It’s
why every auto, home and life insurance policy we offer is based on your
community, your values, your future. And it’s why we can promise that from
Elkhart to Evansville, Terre Haute to Richmond, we’ll be there.
Our multi-line approach allows one agent to cover all your insurance needs –
home, life, auto, business, or farm. Getting your questions answered quickly is our
priority 24 hours a day, seven days a week. Anytime you have a question call us at
1-800-723-FARM or (317) 692-7200. If you prefer the Internet, visit
www.infarmbureau.com for a variety of options to get the help you need. To
make your life a little easier, a choice of convenient payment options by mail,
phone or in person is also available. We accept personal checks, any MasterCard or
Visa credit or debit cards, or electronic funds transfer.
Indiana Farm Bureau Insurance believes in investing in the youth of Indiana to
ensure the future prosperity of our state. We are the only insurance company in
Indiana to make a solid commitment to that future, through programs like the
Teenage Driver Safety and Education Program, the eXceL Awards (formerly
known as Project XL), and an exclusive corporate partnership with the Indiana
High School Athletic Association.
Indiana Farm Bureau Insurance...We’re Part of Your Life.
Estate PlanningAnd The Second To Die Program
www.infarmbureau.com31-999 9/05 www.infarmbureau.comUnited Farm Family Life Insurance Company
Indianapolis, IN