everything the financial advisor needs to know about estate planning
DESCRIPTION
A presentation guiding financial advisors on estate planningTRANSCRIPT
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Everything the Financial Advisor Needs to Know About Estate Planning(in 45 minutes or less)
The Wilsey Law Firm Presents:
www.wilseylaw.com
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What You’ll Learn
Why Should You Care? Estate Planning Basics Where the Estate Tax is Headed How to Pass Wealth from One Generation to
the Next How to Protect Assets from Creditors and
Predators How to Plan for Qualified Retirement Plans
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Why Should You Care???
because your client does!!!
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Wealth Manager v. Investment Generalist
Russ Alan Prince, “Cultivating the Middle Class Millionaire”– Clients with Net Worth of $3 to $10 million
83.8% want to work with “Wealth Manager”, as opposed to “Financial Advisor” or “Investment Advisor”
True “Wealth Managers” have double the average gross production as “financial advisors” or “investment advisors” according to Prince
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Wealth Manager???
Holistic approach used to enhance client’s entire financial and family situation
– Investments– Estate Planning– Insurance– Credit
77.9% of Advisors describe themselves as Wealth Managers– 8.4% of advisors actually are according to Mr. Prince’s definition
These advisors fail to manage a client’s overall wealth situation– They lose business as a result
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Where does estate planning fit in???
Client’s with $3 to $10 million– 93.6% want to make sure their heirs are
adequately taken care of. 53% worry about having enough money for retirement
– Far and away the largest concern is estate planning
If you can address this concern, then you can address their financial concerns (and your business concerns)
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Estate Planning Basics
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Estate Tax
Not Going Away You Clients should plan now, not wait to see
“where it settles”– Its never going to settle– Their assets will only appreciate
Lack of action will make the problem worse
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Estate Tax Exemption
Maximum Amount passing free of estate taxes (double for spouses)– 2007 $2,000,000– 2008 $2,000,000– 2009 $3,500,000– 2010 no estate tax– 2011 $1,000,000
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Gifting Rules
$12,000 per person per year to as many people as desired
$1,000,000 gifting during the life – above $12,000 annual limit – cumulative, not gifts per person
Money left to charity passes free of estate tax
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The Revocable Living Trust
More Than a Piece of Paper!!!
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Trust Reviews
Hidden Gem for Advisors Allow you to bond with client Allow you greater access into assets Be careful of liability
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The 10 Revocable Living Trust Keys™
1. Avoid 100% of Death Probate Fees
2. Avoid 100% of Lifetime Probate Fees
3. Health Care Decisions in the Event of Incapacity
4. Protect Minor Children
5. Minimize Estate Taxes
6. Provide Asset Protection for Surviving Spouse
7. Protect against Surviving Spouse Remarriage
8. Protect Children from Losing Inheritance
9. Prevent 2nd Estate Tax
10. Comprehensive Estate Plan
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RLT
SurvivorBYPASS QTIP
RESIDUE
RLT
Survivor
Child ExemptChild
Non-Exempt
Dynasty Trust
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LLCs In Estate Planning
New and Improved Family Limited
Partnership
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3 Benefits of LLCs
1. Creditor Protection
2. Discount at Death
3. Discount in Lifetime Gifting– This is the only issue with the IRS
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RLT
SurvivorBYPASS QTIP
RESIDUE
RLT
Survivor
Child ExemptChild
Non-Exempt
Dynasty Trust
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THE SPOUSAL GIFTING TRUST
Understanding the
Ultimate Trust
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Spousal Gifting Trust
Removes Assets From Estate Protects Assets from Creditors Allows for Greater Gifting to Kids in Future Allows you to Retain Control of Assets Flexible Investment Options
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What it is
Husband Creates Trust for Wife Wife Creates Trust for Husband Each spouse is trustee of the other’s Trust
– Each spouse can use their trust for Health, Education, Maintenance and Support
Each spouse is main beneficiary of the other’s Trust– Passes to kids, grandkids, upon death– Not to other spouse
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How Money Gets in SGT
Crummey Gifts– Spouse– Kids– Grandkids
Use $1,000,000 exemption Have Trust Purchase Property
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Results (10% growth)
Year of SGT Number ofFamily
Members
Annual Giftsmade to SGTs
Amount inSGTs
Estate TaxSavings
1 5 $96,000.00 $105,600.00 $42,240.00
5 5 $96,000.00 $644,699.00 $257,879.50
10 5 $96,000.00 $1,682,992.00 $673,196.80
20 5 $96,000.00 $6,048,240.00 $2,419,296.00
30 5 $96,000.00 $17,370,569.00 $6,948,227.60
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Supercharge the SGT
Combine with discounts in LLC to produce amazing results
Example– 5 family members (spouses, three kids)– $12k per year each family member– 10% growth– 33% discount
$18k per person instead of $12k $1,500,000 exemption instead of $1,000,000
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Results of Supercharged SGT
YearOf
SGT
# of Family Members
DiscountedValue of
SGT Gifts
Discount ActualFMV of
Gifts
Total FMV
of SGT
Estate Tax Savings
1 5 $96,000 33% $144,000 $158,400 $63,360
5 5 $96,000 33% $144,000 $967,048 $386,819
10 5 $96,000 33% $144,000 $2,524,488 $1,009,795.20
20 5 $96,000 33% $144,000 $9,072,360 $3,628,944
30 5 $96,000 33% $144,000 $26,055,853 $10,422,341
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RLT
SurvivorBYPASS QTIP
RESIDUE
RLT
Survivor
Child ExemptChild
Non-Exempt
Dynasty Trust
Husband Wife
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IRA Accounts
Good Beneficiaries– Spouse Outright– Charity – Young Individual
Stretch IRA Trust
Bad Beneficiaries– Estate of Client– Older Individual– Trust for Spouse
exceptions
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Stretch IRA
Beneficiary of an IRA taking out only the required minimum distribution – according to age
Growth exceeds distributions Growth is tax free
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Option #1 No Stretch
Bob– $2m real estate– $500k business– $500k IRA
Dies in 2013– IRA worth $765,298.16
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Result
Estate Tax-55%-$420,913.00 Income Tax-35%-$147,319 State Income Tax-9.3%-$39,145 Taxes-$607,378-79% of IRA Probably closer to 70% in reality $157,919 to beneficiaries
– Of $765,298.16 IRA
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Option #2 Stretch IRA Trust
Bob– $2m real estate– $500k business– $500k IRA
Dies in 2013– IRA worth $765,298.16
IRA is properly stretched at death
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Stretch Results
Jack (Bob’s son) inherits IRA at age 50 Jack dies at age 80 $7,299,862.71 in distributions Still $3,146,894.13 in IRA $10,895,441.81 in family wealth created
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Further Avoiding the Estate Tax
Use client’s $1,000,000 exemption as effectively as possible
GRAT– Takes all appreciation out of client’s estate
Alphabet Soup– QPRT– IDGT– CRUT
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Avoid the Estate Tax Entirely
Use a Testamentary Charitable Lead Annuity Trust (TCLAT)– At Death
Any amounts subject to estate tax go to TCLAT– Estate Tax Free– Zero Out the Remainder using 7520 rate– Whatever’s left goes to kids tax free
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THE END
QUESTIONS???