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???

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

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

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)

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

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

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

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

The 10 Revocable Living Trust Keys™

1. Avoid 100% of Death Probate Fees

2. Avoid 100% of Lifetime Probate Fees

3. Health Care Decisions in the Event of Incapacity

4. Protect Minor Children

5. Minimize Estate Taxes

6. Provide Asset Protection for Surviving Spouse

7. Protect against Surviving Spouse Remarriage

8. Protect Children from Losing Inheritance

9. Prevent 2nd Estate Tax

10. Comprehensive Estate Plan

RLT

SurvivorBYPASS QTIP

RESIDUE

RLT

Survivor

Child ExemptChild

Non-Exempt

Dynasty Trust

LLCs In Estate Planning

New and Improved Family Limited

Partnership

3 Benefits of LLCs

1. Creditor Protection

2. Discount at Death

3. Discount in Lifetime Gifting– This is the only issue with the IRS

RLT

SurvivorBYPASS QTIP

RESIDUE

RLT

Survivor

Child ExemptChild

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

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

How Money Gets in SGT

Crummey Gifts– Spouse– Kids– Grandkids

Use $1,000,000 exemption Have Trust Purchase Property

Results (10% growth)

Year of SGT Number ofFamily

Members

Annual Giftsmade to SGTs

Amount inSGTs

Estate TaxSavings

1 5 $96,000.00 $105,600.00 $42,240.00

5 5 $96,000.00 $644,699.00 $257,879.50

10 5 $96,000.00 $1,682,992.00 $673,196.80

20 5 $96,000.00 $6,048,240.00 $2,419,296.00

30 5 $96,000.00 $17,370,569.00 $6,948,227.60

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

Results of Supercharged SGT

YearOf

SGT

# of Family Members

DiscountedValue of

SGT Gifts

Discount ActualFMV of

Gifts

Total FMV

of SGT

Estate Tax Savings

1 5 $96,000 33% $144,000 $158,400 $63,360

5 5 $96,000 33% $144,000 $967,048 $386,819

10 5 $96,000 33% $144,000 $2,524,488 $1,009,795.20

20 5 $96,000 33% $144,000 $9,072,360 $3,628,944

30 5 $96,000 33% $144,000 $26,055,853 $10,422,341

RLT

SurvivorBYPASS QTIP

RESIDUE

RLT

Survivor

Child ExemptChild

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

Stretch IRA

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

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

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

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

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

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

THE END

QUESTIONS???