Rick Gendemann, Manning Elliot - Estate Tax Planning
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Rick Gendemann, Manning Elliot - Estate Tax Planning

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Rick Gendemann, Manning Elliot - Estate Tax Planning

Rick Gendemann, Manning Elliot - Estate Tax Planning

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Rick Gendemann, Manning Elliot - Estate Tax Planning Rick Gendemann, Manning Elliot - Estate Tax Planning Presentation Transcript

  • Estate TaxPlanning Presented by: Rick Gendemann, CA September 15, 2010
  • ESTATE TAX PLANNING• Goals and Objectives to Estate Planning• Overview of Taxation Issues on Death• Tax Planning Strategies for: • Tax minimization on death • Structuring your estate for your beneficiaries
  • ESTATE TAX PLANNING• Goals and Objectives to Estate Planning • Peace of Mind • Organization of Financial Affairs • Structured Plan for Wealth Preservation • Effective Transition of Your Estate to Your Beneficiaries • Tax Minimization • Probate Fee Minimization
  • ESTATE TAX PLANNING• Estate Planning for Your Family Structuring your financial affairs to: • Minimize taxes on death • Maximize wealth preservation for your beneficiaries • Planned asset/wealth transfer to beneficiaries
  • ESTATE TAX PLANNING• Review of Tax Issues on Death • Current regime of estate/death taxes • Deemed disposition of assets at fair market value • Options to defer effect of deemed dispositions • Transfer of assets to spouse • Transfer of assets to a spousal trust • Transfers to family trust or family holding company
  • ESTATE TAX PLANNING• Deemed Dispositions of Assets on Death • Generally all assets deemed sold at market value of assets at that time • Will trigger capital gains on property which has appreciated in value • Income taxes payable on net capital gains realized • Option to defer capital gains where assets are transferred to spouse or trust established for sole benefit of spouse
  • ESTATE TAX PLANNING• Planning Strategies for Tax Minimization Consider careful structuring of Will to utilize spouse and spousal trust tax deferred rollovers to: • Defer capital gains until death of surviving spouse • Defer deemed collapse of deferred income plans (RRSP’s and RRIF’s) • Caution, specific rules must be met for spousal trust to qualify for tax deferral
  • ESTATE TAX PLANNING• Planning Strategies for Tax Minimization Planned Giving ( donations in year of death) • May claim donations to reduce 100% of net income in year of death • Excess donations not claimed on final tax return may be carried back to prior year to recover taxes
  • ESTATE TAX PLANNING• Planning Strategies for Tax Minimization Donations created through provisions of a Will • Care must be taken to ensure Will is specific to ensure donation credit is available on final tax return
  • ESTATE TAX PLANNING• Planning Strategies for Tax Minimization Effective tax planning for trusts created by the deceased’s Will (Testamentary Trust) • Create spousal trust for benefit of spouse • Provide income for spouse during lifetime • Preserve capital for children • Create multiple trusts to split income & save taxes • Utilization of marginal tax rates to save taxes
  • ESTATE TAX PLANNING• Structuring your financial affairs to: • Avoid payment of probate on death (1.4% of Estate) • Avoid public disclosure of deceased’s assets • Planned asset/wealth transfer to beneficiaries without potential for Will’s variation challenges • Substitute for power of attorney (representation agreement)
  • ESTATE TAX PLANNING• Planning to Minimize Probate Fees • Two available types of Inter Vivos Trusts: » Alter Ego Trust » Joint Partner Trust
  • ESTATE TAX PLANNING• Alter Ego and Joint Partner Trusts • Conditions for use: • Taxpayer (settlor of trust) must be 65 • Taxpayer (and/or spouse) entitled to receive trust income during lifetime • No other person entitled to income or capital until death of taxpayer (and spouse)
  • ESTATE TAX PLANNING• Advantages of Structuring and Using Alter Ego and Joint Partner Trusts • Avoid provincial probate fees • Family asset protection • Assets held in trust offers protection from creditor claims versus assets held personally • Avoidance of potential Will’s variation action • Confidentiality • no public disclosure as in the case of probate application
  • ESTATE TAX PLANNING• Advantages of Structuring and Using Alter Ego and Joint Partner Trusts • Administrative ease • Ownership of assets can be centralized • Transfer of assets less complex • Trustee can distribute assets with out court approval or probate application • Management of trust property will continue seamlessly until distributed
  • ESTATE TAX PLANNING• Advantages of Structuring and Using Alter Ego and Joint Partner Trusts • Alternative to Power of Attorney • Allows greater flexibility for incapacity planning • Terms of the trust can be tailored to meet the specific needs of the client • Third parties recognize trustee relationship (particularly if there are assets held in multiple jurisdictions) • Avoids possible multiple Powers of Attorney for assets held in multiple jurisdictions
  • ESTATE TAX PLANNING• Disadvantages of Structuring and Using Alter Ego and Joint Partner Trusts • Cost to implement and administer plus added complexity • Required to file annual tax returns, etc. • Loss of access to capital gains exemption claim • Testamentary spouse trust could have provided for this • Loss of low tax bracket planning otherwise available with testamentary trusts created through a Will
  • ESTATE TAX PLANNING• Disadvantages of Structuring and Using Alter Ego and Joint Partner Trusts • Loss of tax deferred intergenerational transfers • No tax deferred rollover otherwise available for qualified farm property or shares of qualified farm corporation • Post mortem planning where shares of companies involved may be adversely affected • May create future double tax on appreciated value of assets in company if assets sold by company
  • ESTATE TAX PLANNING• Disadvantages of Structuring and Using Alter Ego and Joint Partner Trusts • Principal residence designation issues • May cause multiple loss of residence exemption for all beneficiaries • Charitable donation planning • No ability to carry back excess donation credits
  • ESTATE TAX PLANNING• Freezing the Value of Your Estate Locking in today’s value of investments • Fix the capital gain to be realized on death • Provide sufficient capital for retirement • Allow for growth of investments to accrue to beneficiaries of your Estate
  • ESTATE TAX PLANNING• Freezing the Value of Your Estate • Transfer your investments to a family holding company or a family trust • Allows for continued control over assets during your lifetime • Ability to draw down capital in a structured manner • Can plan for tax effect each year of draw down • Provides capital growth for beneficiaries
  • ESTATE TAX PLANNING• Freezing the Value of Your Estate Summary of Advantages • Freezes amount of taxes payable on death • Provides for growth in asset value to accrue for the benefit of beneficiaries ( Wealth Preservation ) • Provides structured retirement income planning • Maintain control over assets during lifetime • Potential to defer taxes on asset growth to next generation
  • ESTATE TAX PLANNING• Closing Thoughts and Comments • Estate planning is on ongoing process • To achieve your family goals and objectives requires you to create a plan of attack • Planning process needs to be monitored and evaluated to ensure your goals and objectives continue to be met
  • ESTATE TAX PLANNINGOpen forum for Discussion and Comments