InKnowVision HNW Technical Webinar - Grantor Deemed Owned Trusts (GDOTs) Part 3

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We call them GDOTs. Others call them IDGTs also know as intentionally defective grantor trusts. The bottom line is that this tool remains a critical component in most high net worth succession and estate plans and you must understand not only the basics but the techniques for successfully presenting the concept.

Grantor Deemed Owned Trusts are also know as Intentionally Defective Grantor Trusts. They are a powerful estate planning tool. In this second of a two part serious you will learn the technical aspects of IDGTs also known as GDOTs.

What is a Grantor Deemed Owned Trust( GDOT) also know as an Intentionally Defective Grantor Trust (IDGT)? A GDOT is a complete transfer to a trust for transfer tax purposes but an incomplete, or “defective,” transfer for income tax purposes. The trust is irrevocable for estate and gift purposes. Because the grantor does not retain any powers that would cause estate tax inclusion, the future value of the assets transferred is removed from the grantor’s gross estate on the date of the trust’s funding.

Learn more by viewing this session by Scott Hamilton, CEO of InKnowVIsion.

Learn more at www.inknowvision.com

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InKnowVision HNW Technical Webinar - Grantor Deemed Owned Trusts (GDOTs) Part 3

  1. 1. GDOTs Grantor Deemed Owned Trusts SCOTT HAMILTON, CEO INKNOWVISION, LLC WWW.INKNOWVISION.COM 630-596-5090 X80Copyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  2. 2. Agenda  Putting GDOTs to work  Working with InKnowVisionCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  3. 3. Putting The Tools To Work GST Planning Family Bank Income Tax Neutral Divorce ProtectionIncentive Provisions Special Needs Planning Charitable Flexibility Funding Other Trusts Business Transfer Asset Protection Supercharge Life InsuranceCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  4. 4. Basic GDOT Structure Sale Grantor $20M Assets Loan GDOT BeneficiariesCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  5. 5. Dynasty GDOT Planning  $5M Limit to GST Exemption and appreciation   Use it if possible with gifts to Dynasty GDOTs  GDOT allows unlimited appreciation   Sell $20m assets growing at net 5% (after loan interest)   Remove $1m per year, compounded, out of estate and GST tax   Over 10 years – $12.5m out of estate tax and gst tax forever (assumes 5% return)  GDOT allows tax free growth-no tax burnCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  6. 6. Dynasty GDOT-No Gifting Sale $20M Assets Grantor Loan Net Growth-5% Over 10 years – $12.5m out of estate Dynasty GDOT tax and GST tax forever Children Grandchildren Future GenerationsCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  7. 7. Family BankCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  8. 8. Family Bank  No need to dump large inheritance on kids  Encourage responsible behavior  Can be used very creatively  Keep family capital together and growing foreverCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  9. 9. Family Bank Beneficiary Family Bank Loan • Business • Houses Beneficiary buys • Education assets • CharitableCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  10. 10. Family Bank  Asset protection for assets collateralized by loansCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  11. 11. Family Bank-Asset Protection Beneficiary Family Bank Loan Assets pledged as Beneficiary buys collateral for loan assets Beneficiarys Net Worth? $0Copyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  12. 12. Family Bank  Good source of credit – friendly loan officer  Good terms   Fixed rates   No demand provisions   No excessive collateral (unless beneficial)   No feeling like a proctology examCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  13. 13. Supercharge Life Insurance  Purchase LI in GDOT  Purchase LI in ILIT-funded by GDOT  Pay premiums from cash flow  Pay premiums from principal  Tie in with premium financeCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  14. 14. Life Insurance in GDOT Grantor LLC /CORP S Election GDOT Distributions from LLC Owns Life Insurance can fund life insurance Children Grandchildren Other Loved OnesCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  15. 15. Life Insurance in ILIT Grantor LLC /CORP S Election Distributions from GDOT GDOT can fund ILIT Owns Life Insurance Other Beneficiaries ILITCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  16. 16. GDOT Provisions in QPRT  Post QPRT term-keep assets in QPRT/GDOT  Rent is income tax freeCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  17. 17. Post QPRT Term Grantor QPRT/GDOT Rent Rent payments are income tax free Other Beneficiaries ILITCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  18. 18. Business Transfer/Succession  Use separate shares to direct business to one or more specific beneficiaries  Equalize in trust with other assets or life insuranceCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  19. 19. Business Succession/Equalization Grantor GDOT Business and Other Assets Use business income to fund life insurance Other assets and/or Business to kids in life insurance used the business to equalizeCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  20. 20. Asset Protection  To extent permitted by state law   Asset protection for beneficiaries   Divorce – Property division protection   But maybe not alimony protectionCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  21. 21. Working With InKnowVisionCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  22. 22. Back Office Model  Fee only planning service - $18k   Data review   Cash flow   Balance sheet   Document review   Tax return review   Plan preparation and deliveryCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  23. 23. High Touch - Concierge Model  Qualified Client   $20M or more in net worth   Open and interested in comprehensive planning  Service   Fit meeting   4-6 meetings   Plan Development and Delivery  Compensation   Planning Fee - $50k-100k   Fee splits   Insurance commissions shared (if allowed)Copyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  24. 24. Concierge Service-Advantages  Takes the load off you and your firm  Allows you to concentrate on core business  You stay in the key relationship role  The client is yours  Puts you on the same side of the table as the client  Much higher success rate on implementationCopyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11
  25. 25. Our Goal  Support you  Help your clients succeed InKnowVision.com 630-596-5090Copyright 2011, InKnowVision, LLC and Scott Hamilton 8/23/11

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