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    1. 1. Estate Planning <ul><li>A Matter of Choice </li></ul>
    2. 2. What is Estate Planning? <ul><li>Systematic approach for identifying problems and offering solutions. </li></ul>
    3. 3. Who Needs Estate Planning? <ul><li>People with: </li></ul><ul><ul><li>Wealth </li></ul></ul><ul><ul><li>Minor Children </li></ul></ul><ul><ul><li>Special Needs Dependents </li></ul></ul><ul><ul><li>Closely-held Businesses </li></ul></ul><ul><ul><li>Charitable Objectives </li></ul></ul>
    4. 4. Estate Planning Team <ul><li>Estate Planning Team </li></ul><ul><li>Attorney </li></ul><ul><li>Accountant </li></ul><ul><li>Insurance advisor </li></ul>
    5. 5. Key Problems at Death <ul><li>Care of minor children </li></ul><ul><li>Probate administration </li></ul><ul><li>Death taxes </li></ul>
    6. 6. Care of Minor Children <ul><li>How do you plan for the care of minor children? </li></ul><ul><li>Who should you nominate? </li></ul><ul><li>Alternative choices </li></ul>
    7. 7. What Happens to Your Estate at Death <ul><li>Without </li></ul><ul><li>Planning </li></ul>With Planning Depends on You!
    8. 8. Without Proper Planning <ul><li>Taxes </li></ul><ul><li>Fees </li></ul><ul><li>Expenses </li></ul><ul><li>Commissions </li></ul>These costs are paid first
    9. 9. Your Heirs Get What’s Left Over
    10. 10. Proper Estate Planning <ul><li>Wills </li></ul><ul><li>Trusts </li></ul><ul><li>Gifting </li></ul><ul><li>Insurance </li></ul><ul><li>Business agreements </li></ul><ul><li>Other estate planning documents </li></ul>
    11. 11. Reasons For a Will <ul><li>Avoid Intestacy </li></ul><ul><li>Nominate guardians </li></ul><ul><li>Choose executor </li></ul><ul><li>Make specific bequests </li></ul><ul><li>Authorization to continue business </li></ul><ul><li>Peace of mind </li></ul>
    12. 12. What is Probate? <ul><li>Delay </li></ul><ul><li>Cost </li></ul>Court supervised transfer of assets at death
    13. 13. <ul><li>$ 300,000 $ 15,000 </li></ul><ul><li>500,000 25,000 </li></ul><ul><li>1,000,000 50,000 </li></ul><ul><li>1,500,000 75,000 </li></ul><ul><li>3,000,000 150,000 </li></ul><ul><li>5,000,000 250,000 </li></ul>Cost of Probate Gross Estate Typical Fee 5%
    14. 14. Probate Avoidance <ul><li>Joint tenancy </li></ul><ul><li>Totten trusts </li></ul><ul><li>Life insurance </li></ul><ul><li>Lifetime gifts </li></ul><ul><li>Revocable living trusts </li></ul>
    15. 15. Revocable Living Trust <ul><li>Grantor </li></ul><ul><li>Trustee </li></ul><ul><li>Beneficiaries </li></ul>Legally created relationship
    16. 16. Living Trust <ul><li>Probate avoidance </li></ul><ul><li>Private document </li></ul><ul><li>Avoids conservatorship </li></ul><ul><li>Professional asset management </li></ul><ul><li>Orderly transfer of assets </li></ul><ul><li>Collect insurance immediately </li></ul>Advantages
    17. 17. Living Trust <ul><li>Effort to fund </li></ul><ul><li>Cost to establish </li></ul>Disadvantages
    18. 18. <ul><li>What Happens to Your Estate at Death? </li></ul>
    19. 19. Federal Estate Taxes <ul><li>$ 2,000,000 0 </li></ul><ul><li>3,000,000 368,100 </li></ul><ul><li>5,000,000 1,173,580 </li></ul><ul><li>10,000,000 3,119,580 </li></ul><ul><li>15,000,000 5,009,940 </li></ul>Estate Size Estate Taxes
    20. 20. Projected Estate Value <ul><li>Assumes 8% growth rate </li></ul>$600,000 $881,597 $1,295,355 $1,903,301 Taxes 5 Years 10 Years 15 Years $544,485
    21. 21. Projected Estate Value <ul><li>Assumes 5% growth rate </li></ul>$600,000 $765,769 $977,337 $1,247,357 Taxes 5 Years 10 Years 15 Years $254,416
    22. 22. Will There Be Enough Liquidity in Your Estate at Death? <ul><li>Taxes </li></ul><ul><li>Fees </li></ul><ul><li>Income </li></ul><ul><li>Cash funds </li></ul>
    23. 23. Estate Planning Techniques <ul><li>$12,000 annual exclusion </li></ul><ul><li>$2,000,000 by-pass amount </li></ul><ul><li>Unlimited marital deduction </li></ul>
    24. 24. Problems With “All to Spouse Will” <ul><li>Unlimited Marital Deduction </li></ul><ul><li>Asset appreciation </li></ul><ul><li>Progressive tax rates </li></ul><ul><li>Wastes by-pass amount </li></ul>
    25. 25. <ul><li>Your Estate </li></ul><ul><li>$ </li></ul>Survivors Trust By-Pass Trust Children’s Trust
    26. 26. <ul><li>Your Estate </li></ul><ul><li>$ </li></ul>Survivors Trust By-Pass Trust Children’s Trust <ul><li>All income </li></ul><ul><li>All principal </li></ul><ul><li>Revocable trust </li></ul><ul><li>All income </li></ul><ul><li>Principal </li></ul>Distribute outright or pursuant to trust document No tax Tax on estate over $2,000,000 No tax on balance No tax up to $2,000,000
    27. 27. <ul><li>How will your estate taxes be paid? </li></ul>
    28. 28. Four Alternatives <ul><li>Cost per $1.00 of funding </li></ul>1.6 1.4 1.2 1.0 .8 .6 .4 .2 0 Borrowed Funds 0 10 20 30 40 Years Liquidate Assets Cash Life Insurance
    29. 29. Life Insurance <ul><li>Liquidity for final expenses </li></ul><ul><li>Many uses </li></ul><ul><li>Tax-preferred </li></ul>
    30. 30. Second-to-die Life Insurance “Survivorship life” <ul><li>Pays on death of second spouse </li></ul><ul><li>Funds generally used to pay estate taxes </li></ul>
    31. 31. Irrevocable Life Insurance Trust <ul><li>Trust applies for and owns insurance policy </li></ul><ul><li>Money for premium is gifted to the trust </li></ul><ul><li>Annual gift tax exclusion or unified credit used to avoid gift taxes </li></ul><ul><li>Death benefit paid to </li></ul><ul><li>trust and trust controls </li></ul><ul><li>and distributes funds </li></ul>
    32. 32. What About the Insurer’s Financial Strength? The insurer must be able to meet its obligations to policyholders many years in the future.
    33. 33. Estate Planning <ul><li>Benefits </li></ul><ul><li>Care of minors </li></ul><ul><li>Avoid probate </li></ul><ul><li>Reduce death taxes </li></ul><ul><li>Enhance lifetime income </li></ul><ul><li>Tax relief </li></ul><ul><li>More to heirs </li></ul><ul><li>Peace of mind </li></ul>
    34. 34. Getting Started <ul><li>Estate Planning Process </li></ul><ul><li>Estate analysis </li></ul><ul><li>Meet with estate planning team </li></ul><ul><li>Develop or update your estate plan </li></ul><ul><li>Periodic review </li></ul>