The Estate Tax:   What’s on the Horizon?  Prepared for   Workman Securities Corporation September 23, 2010
How to Turn a $2.5M Estate into a $1.6M Estate…. <ul><li>DO NOTHING! </li></ul><ul><li>or </li></ul><ul><li>Get planning a...
Current Status <ul><li>At Present  </li></ul><ul><ul><li>No Federal Estate Tax </li></ul></ul><ul><ul><li>MN State Estate ...
2001 Economic Growth and Tax Relief Reconciliation Act <ul><ul><li>Reduction of rate schedule </li></ul></ul><ul><ul><li>I...
What is the Problem? <ul><ul><li>Planning during the past ten years has assumed high exemption amounts or no estate tax </...
Do Not Forget the State Estate Taxes  <ul><li>MN Tax calculator used to determine taxation </li></ul><ul><li>Mandatory fil...
We Suggest… <ul><ul><li>Assume a $1 million exemption </li></ul></ul><ul><ul><li>Assume all estates will be taxed until de...
Where Are We Going? <ul><li>Taxes are going up </li></ul><ul><li>There will be uncertainty in taxes </li></ul><ul><li>Regi...
We Suggest… <ul><ul><li>Registered Representatives and Financial Advisors work with lawyers to coordinate estate planning ...
Basic Estate Planning Documents <ul><ul><li>Will </li></ul></ul><ul><ul><li>Trust(s) </li></ul></ul><ul><ul><ul><li>Revoca...
Will <ul><li>Provides guidance to the court </li></ul><ul><li>Nomination of fiduciaries </li></ul><ul><li>Payment of expen...
Trust <ul><ul><li>On-going management of assets  </li></ul></ul><ul><ul><li>Distributions to beneficiaries, may be discret...
Health Care Directive <ul><ul><li>Appoints health care agent </li></ul></ul><ul><ul><li>Provides some direction as to wish...
How does this affect your clients? <ul><li>Two Examples: </li></ul><ul><li>Mr. Swenson with a $2M estate </li></ul><ul><ul...
Scenario: Mr. Swenson <ul><li>Possible solutions for 2011 </li></ul><ul><ul><li>Will </li></ul></ul><ul><ul><li>Trust(s) <...
Scenario: Mr. & Ms. Jones <ul><li>Possible solutions for 2011 </li></ul><ul><ul><li>Will with exempted amount to trust </l...
Costs & Process <ul><li>Single person, no children – $400 </li></ul><ul><li>Married w/children – $700-$2,400 </li></ul><ul...
Questions?
Thank You!   For further information, please contact: Ben Skjold Litigation & Business Attorney Licensed in MN and IL [ema...
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Estate Tax Webinar

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Estate Tax Webinar

  1. 1. The Estate Tax: What’s on the Horizon? Prepared for Workman Securities Corporation September 23, 2010
  2. 2. How to Turn a $2.5M Estate into a $1.6M Estate…. <ul><li>DO NOTHING! </li></ul><ul><li>or </li></ul><ul><li>Get planning advice, which will cost less than 1% of penalty of non-action </li></ul>
  3. 3. Current Status <ul><li>At Present </li></ul><ul><ul><li>No Federal Estate Tax </li></ul></ul><ul><ul><li>MN State Estate Tax (counterintuitive) </li></ul></ul><ul><ul><li>Basis Issues </li></ul></ul><ul><li>2011 </li></ul><ul><ul><li>Maximum 60% tax on estates in excess of $1M </li></ul></ul><ul><ul><li>MN State Estate Tax expected to remain as-is </li></ul></ul>
  4. 4. 2001 Economic Growth and Tax Relief Reconciliation Act <ul><ul><li>Reduction of rate schedule </li></ul></ul><ul><ul><li>Increased exemption amounts </li></ul></ul><ul><ul><li>Fewer taxable estates </li></ul></ul><ul><ul><li>2010 – no estate tax </li></ul></ul><ul><ul><li>2011 - $1 million exemption and maximum rate of 60% (55% +5%) </li></ul></ul>
  5. 5. What is the Problem? <ul><ul><li>Planning during the past ten years has assumed high exemption amounts or no estate tax </li></ul></ul><ul><ul><li>Therefore, nearly all planning is philosophically flawed </li></ul></ul>
  6. 6. Do Not Forget the State Estate Taxes <ul><li>MN Tax calculator used to determine taxation </li></ul><ul><li>Mandatory filing if estate more than $1M </li></ul><ul><li>Decoupled from federal estate tax </li></ul>$99,600 $2,000,000 $391,600 $5,000,000 $64,400 $1,500,000 $38,800 $1,100,000 Total Due Total Gross Estate
  7. 7. We Suggest… <ul><ul><li>Assume a $1 million exemption </li></ul></ul><ul><ul><li>Assume all estates will be taxed until demonstrated to be otherwise </li></ul></ul><ul><ul><li>Review gifting options </li></ul></ul><ul><ul><ul><li>Effect of basis </li></ul></ul></ul><ul><ul><ul><li>Effect of future growth rate </li></ul></ul></ul><ul><ul><ul><li>Effect of earnings of gift property </li></ul></ul></ul>
  8. 8. Where Are We Going? <ul><li>Taxes are going up </li></ul><ul><li>There will be uncertainty in taxes </li></ul><ul><li>Registered Representatives and Financial Advisors do a lot of financial planning inadvertently by selecting beneficiaries of retirement plans that may conflict with estate plans </li></ul><ul><li>Registered Representatives and Financial Advisors will probably have a fiduciary duty </li></ul>
  9. 9. We Suggest… <ul><ul><li>Registered Representatives and Financial Advisors work with lawyers to coordinate estate planning strategies </li></ul></ul><ul><ul><li>Move life insurance contracts to non-insured owner, beware of gifting concerns </li></ul></ul><ul><ul><li>Review all Buy/Sell Agreements and funding plans </li></ul></ul><ul><ul><ul><li>Update valuations </li></ul></ul></ul><ul><ul><li>Use gifting, insurance to fund cabin trust or cabin LLC </li></ul></ul><ul><ul><li>Consider potential inheritances </li></ul></ul>
  10. 10. Basic Estate Planning Documents <ul><ul><li>Will </li></ul></ul><ul><ul><li>Trust(s) </li></ul></ul><ul><ul><ul><li>Revocable – “Living Trust” </li></ul></ul></ul><ul><ul><ul><li>Irrevocable </li></ul></ul></ul><ul><ul><ul><ul><li>ILIT </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Supplemental Needs Trust </li></ul></ul></ul></ul><ul><ul><li>Healthcare Directive </li></ul></ul><ul><ul><li>Power of Attorney </li></ul></ul>
  11. 11. Will <ul><li>Provides guidance to the court </li></ul><ul><li>Nomination of fiduciaries </li></ul><ul><li>Payment of expense and taxes </li></ul><ul><li>Distribution provisions </li></ul><ul><li>No on-going management </li></ul><ul><li>Prompt closing of estate </li></ul><ul><li>Public information </li></ul>
  12. 12. Trust <ul><ul><li>On-going management of assets </li></ul></ul><ul><ul><li>Distributions to beneficiaries, may be discretionary </li></ul></ul><ul><ul><li>Generally not court supervised </li></ul></ul><ul><ul><li>Privacy </li></ul></ul>
  13. 13. Health Care Directive <ul><ul><li>Appoints health care agent </li></ul></ul><ul><ul><li>Provides some direction as to wishes </li></ul></ul><ul><ul><ul><li>Medical treatment </li></ul></ul></ul><ul><ul><ul><li>Donation of organs </li></ul></ul></ul><ul><ul><ul><li>Disposition of remains </li></ul></ul></ul>
  14. 14. How does this affect your clients? <ul><li>Two Examples: </li></ul><ul><li>Mr. Swenson with a $2M estate </li></ul><ul><ul><li>Unmarried, no children </li></ul></ul><ul><li>Mr. & Ms. Jones with a $3.5M estate </li></ul><ul><ul><li>Two children, four grandchildren </li></ul></ul>
  15. 15. Scenario: Mr. Swenson <ul><li>Possible solutions for 2011 </li></ul><ul><ul><li>Will </li></ul></ul><ul><ul><li>Trust(s) </li></ul></ul><ul><ul><ul><li>Gifting with life insurance to an ILIT </li></ul></ul></ul><ul><ul><ul><li>Structure gifts to nieces and nephews </li></ul></ul></ul><ul><ul><ul><li>Charitable trust options </li></ul></ul></ul><ul><ul><ul><li>Gift $1M of depreciated assets – Real Estate </li></ul></ul></ul><ul><ul><li>Health Care Directive (No spouse or children) </li></ul></ul><ul><ul><li>Power of Attorney (No spouse or children) </li></ul></ul>
  16. 16. Scenario: Mr. & Ms. Jones <ul><li>Possible solutions for 2011 </li></ul><ul><ul><li>Will with exempted amount to trust </li></ul></ul><ul><ul><li>Gifting with life insurance to an ILIT </li></ul></ul><ul><ul><li>Gift $1M to remove appreciation </li></ul></ul><ul><ul><ul><li>Cabin Trust </li></ul></ul></ul><ul><ul><li>Charitable trust options </li></ul></ul><ul><ul><li>Review beneficiaries of retirement plans and insurance policies </li></ul></ul>
  17. 17. Costs & Process <ul><li>Single person, no children – $400 </li></ul><ul><li>Married w/children – $700-$2,400 </li></ul><ul><li>Process </li></ul><ul><ul><li>Estate planning form </li></ul></ul><ul><ul><li>Meet and plan </li></ul></ul><ul><ul><li>Draft and review </li></ul></ul><ul><ul><li>Execute documents </li></ul></ul><ul><ul><li>Re-title property or other implementation </li></ul></ul>
  18. 18. Questions?
  19. 19. Thank You! For further information, please contact: Ben Skjold Litigation & Business Attorney Licensed in MN and IL [email_address] Paul Christensen Estate and Tax Attorney Licensed in MN and TX [email_address] [p] 612.746.2560 ■ [f] 612.746.2561 www.skjold-barthel.com

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