How to gift to your spouse and children to avoid estate tax and maintain access to the assets. Must act by Dec. 31.

1. Your Year-End Action Plan
Clark J. Allison, Esq
Counsel Protect, LLP
www.counselprotect.com

2. What Should You Do?
• First, do not let the uncertainty stop you
from acting. We will always have
political uncertainty.
• Second, make sure your basic estate
plan is in place.
• Third, consider taking advantage of
advanced planning techniques before
the end of the year.

3. Review Your Estate Planning Goals
• All state-of-the-art estate planning starts with
an inventory of your goals
Desired distributions Asset protection
Probate avoidance Appreciation removal
Naming decision makers Generation skipping
Tax avoidance Retention of financial benefit
Exemption leveraging Retention of control

4. Don’t Ignore Basic Estate Planning
• Most goals of your family are met with the
documents in the modern estate plan.
– Revocable Living Trust
– Pour-Over Will
– Financial Power of Attorney
– Health Care Power of Attorney and Living Will
or Advance Health Care Directive
– HIPAA Authorization
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5. Immediately Consider Other Opportunities
• Revocable trusts help with many of your family goals, but
other techniques will allow you to take advantage of the high
exemptions and lower tax rates still available
• Consider beneficial techniques that are still available that
may go away:
– Family Controlled Entities ( Partnerships and Limited
Liability Companies)
– Irrevocable Life Insurance Trusts (ILITs)
– Family Bank Trusts (FBTs)
– Grantor Retained Annuity Trusts (GRATs)
– Roth IRA Conversions
• Changes will likely be effective from the date of enactment-
there is still some time to act.

6. Where do we stand?
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7. Making The Next 60 Days Count
Tax Planning Window Will Close
Favorable Interest Rates (1% for intra-family gifts)
Favorable Estate/Gift Taxes (35% not 55%)
Favorable Charitable Deductions (fully deductible not limited to 28%)
Favorable Capital Gains Rates (15% not 20% or more)
Favorable Dividend Rates (15% not 39.6% or more)
Favorable Available Strategies (not legislated away, yet?)
VS.
Unfavorable Federal Deficit and Spending
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8. The Case for New Taxes
U.S. Tax Revenue 2,310,000,000,000
Federal Budget 3,614,000,000,000
New Debt 1,304,000,000,000
National Debt 16,219,000,000,000
Recent Budget Cuts 385,000,000,000
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9. If Spendthrift’s Budget – Serious Cuts?
Annual Income 23,100
Money Spent 36,140
New Credit Card Debt 13,030
Outstanding CC Debt 162,190
Total Budget Cuts 3,850
Just drop (8) zeros
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10. Who Is Paying Taxes?
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11. Capital GAINS Tax Changes in 60 Days
Long Term Gains 2012 2013
State Tax (Say) 7% 7%
Federal Tax –without legislation 15% 20%
Healthcare Surcharge if AGI is greater than $200,000/$250,000 -- 3.8%
TOTAL 22% 30.8%
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12. Dividend Tax Changes in 60 Days
Qualified Dividends 2012 2013
State Tax (Say) 7% 7%
Federal Tax – without legislation 15% 39.6%
Healthcare Surcharge if AGI is greater than $200,000/$250,000 -- 3.8%
TOTAL 22% 50.4%
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13. Income Taxation Changes in 60 Days
Ordinary Income, Rents & Short-term Gains 2012 2013
State Tax (Say) 7% 7%
Federal Tax - without legislation 35% 39.6%
Healthcare Surcharge if AGI is greater than $200,000/$250,000 -- 3.8%
TOTAL 42% 50.4%
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14. Federal Estate Tax and Gift Tax in 60 Days
2012 2013
Estate Tax Exemption $5,120,000 $1,000,000
Rate of Tax on Excess 35% 55%
Gift Tax Exemption $5,120,000 $1,000,000
Rate of Tax on Excess 35% 55%
Generation Skipping Tax $5,120,000 $1,400,000
Exemption 35% 55%
Portability of Unused Federal Exemption Possible No
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15. Here Is The Wealth Transfer Opportunity
John wants to make a gift of $5.12 million to his son. What
is the difference between making a gift in 2012 versus a
death transfer (estate) in 2013.
Example 2012 2013 (under current law)
Gift/Estate $5,120,000 $5,120,000
Taxable gift $5,120,000 $5,120,000
Tentative tax $1,730,800 2,456,250
Unified credit (1,730,800) (345,800) (Shelters $1M)
Gift tax owed $0 $2,110.450 Tax on John’s estate

16. How Much is State Estate Tax?
2012 2013
MD/DC State Tax Exemptions $1,000,000 $1,000,000
Rate of Tax Return on Excess 16% 16%
Portability of Unused Exemption NONE NONE
Most State Gift Tax Exemption Unlimited Unlimited
Is State Estate Tax Avoidable?
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17. The Most Favorable Interest Rates for Planning
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18. More Changes Coming?
• Other estate tax proposals:
– Making all grantor trusts subject to estate tax,
including intentionally defective grantor trusts,
such as Family Bank Trust and irrevocable life
insurance trusts.
– Eliminate 2 year rolling GRATs, 10 year
minimum GRAT term
– 90-year limit on the GST exemption, eliminating
the true effectiveness of Dynasty Trusts
– Restrict Family Controlled Entities

19. Family Controlled Entities
Limited Partnerships and LLCs
• Strategy to transfer and retain business and investment
interests within a family.
• Most effective when combined with trusts
• Used to maximize life time exemption.
• When capital assets (i.e., rental property, family businesses,
and investment portfolios) are transferred into an entity,
appraisals will adjust by 25% - 30% or more. There are
minority control and restricted marketability discounts.
• Provides substantial asset protection
• Business purpose required.
• Entity formalities must be observed

20. More Reasons for Gifts or Sales Now
• Interest rates are at historical lows, - an ideal
time to make intra-family loans thru trusts
– Direct loans or sale of appreciating assets
for interest only notes - rates as low as 1%
in November 2012.
• Depressed property values = ideal timing

21. WHAT ARE THE OPTIONS FOR ESTATE
TAX PLANNING BEFORE YEAR’S END?
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22. • Do nothing
• Die before Dec. 31(not optimal)
• Outright Gifts/Sales
• Gifts/Sales into Irrevocable Trusts
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23. Planning Considerations
IF YOU DO NOTHING, DON’T COUNT ON…
EXEMPTION PORTABILITY
• Expires in 60 days
• Insures highest state estate tax will be paid
• Requires timely filed 706
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24. IRREVOCABLE TRUSTS
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25. Typical Estate Tax Planning
Testamentary By-pass Trusts
• Tax planning technique for couples
• Asset protection
• Federal Estate Tax Avoidance
• State Estate Tax Avoidance
• Multi-generational protection
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26. Innovative Estate Tax Planning
Family Bank Trust
• Mimics By-Pass Trust for spouse
• Grantor Trust for income tax
• Making Income Taxes a “Tax Free” Gift
• Completed gift
• All growth is out of grantor’s estate
• All growth is out of spouse’s estate
• State Estate Tax Solution
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27. Irrevocable Trusts – Why?
Irrevocable Trusts can be set up to control the
use of the asset and have the availability of
the asset to the donor/spouse…
AND PROVIDE:
• Asset/divorce protection
• Estate Tax Avoidance
• Income Tax Neutrality (Advantages)
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28. Family Bank Trusts
• Solves the “I cannot afford making a gift…”
argument because it’s an inter-spousal gift
• Becomes a “Family Bank” for loans at favorable
interest rates for funding homes or businesses for
generations
• Can be used to own and fund Life Insurance on
donor/spouse and others
• Permanently grandfathers the state estate tax and
federal estate tax avoidance
• Full asset and divorce protection multi-
generationally
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29. What About Step-up In Basis?
Estate Tax Capital Gains*
Rate 55% 20%
Immediately upon death Only when recognized
Due
(9 months) (Postponable)
* Unrelated third-party may hold a power to grant to
beneficiary/spouse a general power of appointment
thereby including the asset in the estate of the
beneficiary/spouse achieving step-up in basis.
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30. Tax Planning Window Will Close
Favorable Interest Rates (1% for intra-family gifts)
Favorable Estate/Gift Taxes (35% not 55%)
Favorable Charitable Deductions (fully deductible not limited to 28%)
Favorable Capital Gains Rates (15% not 20% or more)
Favorable Dividend Rates (15% not 39.6% or more)
Favorable Available Strategies (not legislated away, yet?)
VS.
Unfavorable Federal Deficit and Spending
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31. What To Do Now
If you could transfer a major part, if not all, of your property
without ever owing gift or estate tax on it and still be able to
retain many of the benefits of owning the property, would you
do it?

32. Thank you!
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