Everything the Financial Advisor Needs to Know About Estate Planning (in 45 minutes or less) The Wilsey Law Firm Presents: www.wilseylaw.com

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

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

Why Should You Care??? because your client does!!!

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

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

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

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

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)

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)

Estate Planning Basics

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

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

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

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

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

$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

The Revocable Living Trust More Than a Piece of Paper!!!

Trust Reviews Hidden Gem for Advisors Allow you to bond with client Allow you greater access into assets Be careful of liability

Hidden Gem for Advisors

Allow you to bond with client

Allow you greater access into assets

Be careful of liability

The 10 Revocable Living Trust Keys™ Avoid 100% of Death Probate Fees Avoid 100% of Lifetime Probate Fees Health Care Decisions in the Event of Incapacity Protect Minor Children Minimize Estate Taxes Provide Asset Protection for Surviving Spouse Protect against Surviving Spouse Remarriage Protect Children from Losing Inheritance Prevent 2 nd Estate Tax Comprehensive Estate Plan

Avoid 100% of Death Probate Fees

Avoid 100% of Lifetime Probate Fees

Health Care Decisions in the Event of Incapacity

Protect Minor Children

Minimize Estate Taxes

Provide Asset Protection for Surviving Spouse

Protect against Surviving Spouse Remarriage

Protect Children from Losing Inheritance

Prevent 2 nd Estate Tax

Comprehensive Estate Plan

RLT Survivor BYPASS QTIP RESIDUE RLT Survivor Child Exempt Child Non-Exempt Dynasty Trust

LLCs In Estate Planning New and Improved Family Limited Partnership

3 Benefits of LLCs Creditor Protection Discount at Death Discount in Lifetime Gifting This is the only issue with the IRS

Creditor Protection

Discount at Death

Discount in Lifetime Gifting

This is the only issue with the IRS

RLT Survivor BYPASS QTIP RESIDUE RLT Survivor Child Exempt Child Non-Exempt Dynasty Trust

THE SPOUSAL GIFTING TRUST Understanding the Ultimate Trust

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

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

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

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

How Money Gets in SGT Crummey Gifts Spouse Kids Grandkids Use $1,000,000 exemption Have Trust Purchase Property

Crummey Gifts

Spouse

Kids

Grandkids

Use $1,000,000 exemption

Have Trust Purchase Property

Results (10% growth) $6,948,227.60 $17,370,569.00 $96,000.00 5 30 $2,419,296.00 $6,048,240.00 $96,000.00 5 20 $673,196.80 $1,682,992.00 $96,000.00 5 10 $257,879.50 $644,699.00 $96,000.00 5 5 $42,240.00 $105,600.00 $96,000.00 5 1 Estate Tax Savings Amount in SGTs Annual Gifts made to SGTs Number of Family Members Year of SGT

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

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

Results of Supercharged SGT $10,422,341 $26,055,853 $144,000 33% $96,000 5 30 $3,628,944 $9,072,360 $144,000 33% $96,000 5 20 $1,009,795.20 $2,524,488 $144,000 33% $96,000 5 10 $386,819 $967,048 $144,000 33% $96,000 5 5 $63,360 $158,400 $144,000 33% $96,000 5 1 Estate Tax Savings Total FMV of SGT Actual FMV of Gifts Discount Discounted Value of SGT Gifts # of Family Members Year Of SGT

RLT Survivor BYPASS QTIP RESIDUE RLT Survivor Child Exempt Child Non-Exempt Dynasty Trust Husband Wife

IRA Accounts Good Beneficiaries Spouse Outright Charity Young Individual Stretch IRA Trust Bad Beneficiaries Estate of Client Older Individual Trust for Spouse exceptions

Good Beneficiaries

Spouse Outright

Charity

Young Individual

Stretch IRA Trust

Bad Beneficiaries

Estate of Client

Older Individual

Trust for Spouse

exceptions

Stretch IRA Beneficiary of an IRA taking out only the required minimum distribution according to age Growth exceeds distributions Growth is tax free

Beneficiary of an IRA taking out only the required minimum distribution

according to age

Growth exceeds distributions

Growth is tax free

Option #1 No Stretch Bob $2m real estate $500k business $500k IRA Dies in 2013 IRA worth $765,298.16

Bob

$2m real estate

$500k business

$500k IRA

Dies in 2013

IRA worth $765,298.16

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

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

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

Bob

$2m real estate

$500k business

$500k IRA

Dies in 2013

IRA worth $765,298.16

IRA is properly stretched at death

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

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

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

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

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

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

THE END QUESTIONS???