Estate Planning in 2009

1. Estate Planningin 2009 by Edward P. Ludovici, Esq. 17415 South Dixie Highway Palmetto Bay, FL 33157-5491 305-235-2161

2. What is Estate Planning? • Estate planning is the legal mechanism to manage your property if you become incapacitated and to distribute your property after your death.

3. Who needs Estate Planning? • Anyone who owns anything. Estate planning lets you decide who will receive your property. It also lets you choose your Personal Representative. • Anyone who has children. Estate planning allows you to decide who will be the Guardian of your minor children if you die. • Anyone who wants to provide for someone else. Estate planning can protect your loved ones from expenses and delays.

4. Simple Will • A legal document in which you choose how to distribute your possessions and make arrangements for the care of your minor children. You appoint the Personal Representative (Executor) of your choice to handle these matters after you die.

5. Will with a Testamentary Trust • A will that creates a trust at your death. Ownership of your property is transferred after your death to the Trustee you choose. The Trustee manages your assets according to the instructions you provide in your will. A will with a testamentary trust can be used for the support of a spouse and/or children. If structured correctly, it can reduce inheritance taxes.

6. Codicil to Will • A legal document used to make a minor change to an existing will. It is most useful for changing the Personal Representative or a Guardian for your minor children. It is not recommended for changing the bequest clause of a will.

7. Durable Power of Attorney • A legal document which allows you to name a person or persons to handle your personal financial affairs in the event you become incapacitated. This instrument is not valid after your death.

8. Designation of a Health Care Surrogate • A legal document which enables you to designate a person or persons to make health care decisions on your behalf in the event you become incapacitated.

9. Living Will • A legal document in which you instruct your family and physicians that you do not wish for them to take extraordinary measures to prolong your life when death is imminent.

10. Declaration of a Pre-Need Guardian • A legal document allowing you to name your own Guardian, instead of one appointed by the Probate Court, before you become incapacitated.

11. Living Trust Revocable or Irrevocable • A trust created during your life to manage and distribute your assets. You must also create a simple will known as a pour over will to take care of any non-trust assets that you may own at the time of your death. An irrevocable trust may be used to minimize the impact of inheritance taxes, but involves surrender of control of trust assets while you are alive. A trust will avoid probate as to assets placed in the trust before your death.

12. Federal Estate Taxes • Each U.S. citizen is given an annual gift tax exclusion of $12,000 per donee in 2009. • A gift to a spouse who is not a U.S. citizen is limited to $125,000 in 2009. • The maximum Estate Tax rate is 45% for 2009. • The estate tax exclusion for a U.S citizen is: $3.5 million for 2009; No Tax for 2010; and Reverts to $1 million for 2011. Note that these amounts and rates are likely to change soon, it is believed that Congress will amend the Estate Tax law in 2009. • The estate tax exclusion for a non-U.S. citizen is $60,000.

13. Federal Estate Tax Overview • The Economic Growth and Tax Relief Act of 2001 was signed into law on June 7, 2001. Under this law, the federal estate tax continues but with increasing Unified Credit and decreasing maximum federal estate tax rates until 2010. The federal estate tax is repealed in the year 2010 only. In the year 2011, the federal estate tax will be re-imposed, the Unified Credit will return to $1,000,000 and the top tax rate will again be 55%. • Note that these amounts and rates are likely to change soon, it is believed that Congress will amend the Estate Tax law in 2009.

14. Calculating Estate Taxes • Federal estate taxes are paid on assets that donot go to a surviving spouse or a trust for a spouse’s benefit. • To calculate, ascertain total estate value and add lifetime taxable gifts (if any). This figure will be your total taxable estate. Determine the federal estate tax due from Table 1 and subtract the appropriate Unified Credit for the year of death from the Table 2. This figure will be your federal estate tax due. (See examples)

15. Estate Tax Rates – Table 1 For a Taxable Estate The Federal Estate Tax

16. Unified Tax Credit – Table 2

17. Example # 1 • If Husband predeceases Wife and Wife dies in 2009, with assets valued at $4,000,000, then the Federal Estate Tax calculation would be:

18. Example # 2 • If Husband predeceases Wife and Wife dies in 2009, with assets valued at $2,500,000, then the Federal Estate Tax calculation would be:

19. Thoughts on IRAsNot exactly Estate Planning, but important nonetheless.Needed for retirement – Social Security income may be limited. • In 2008, you can make up to a $5,000 contribution to an IRA. • In 2010, regardless of income you will be permitted to convert your Traditional IRA to a Roth IRA and will have three years in which to pay the tax owed. • You may now make charitable contributions directly from your IRA, thus avoiding income tax from a Traditional IRA. • As of 2008, retirement plans of decedents can now be rolled over by non spouses.

20. Thank You • For a personal consultation to review your estate planning requirements, please call: 305-235-2161 for an appointment Edward P. Ludovici, Esq. Ludovici & Ludovici, P.A. 17415 South Dixie Highway Palmetto Bay, FL 33157-5491 eludovici@ludovici-law.com