Estates 101 – Fundamentals of Estate Planning

1. Estates 101 – Fundamentals of Estate Planning Presented by: Barbara Flacker, Esq. and Wendy Herbert, Esq.

2. Why do I need a Will? • To name a Guardian of your minor children • To control who receives your property after your death. • To protect loved ones through creation of trusts. • To name an Executor to handle your estate. • To save taxes

3. What happens if I don’t have a Will?“Intestacy” • State law will govern: • Who receives your property. • In what shares your property will be divided. • Who administers your estate. • Posting of a bond/security may be required.

4. What are the components of an Estate Plan? • Documents (may include all or some) • Will • Trust • Durable General Power of Attorney • Living Will/Health Care Power of Attorney • Asset Titling/Beneficiary Designations • IRAs, 401(k)s & other qualified retirement plans • Life Insurance • Follow-up & Periodic Review • Life situation changes • Changes in tax laws

5. Death Tax Considerations • Federal Estate Taxes • No FET in 2010 (replaced by “Basis Adjustment” $1.3M/plus $3M for surviving spouse). • FET in 2011? • If Congress takes no further action FET is reinstated as of January 1, 2011, with $1M exemption. • If Congress does act…what are the possible changes for 2011 & beyond?

6. Death Tax Considerations • State Death Taxes – New Jersey • Estate Tax • Unlimited marital Deduction for property passing to surviving spouse, civil union partner, domestic partner or qualified charity. • “Decoupled” Estate Tax - $675,000 exemption for property passing to “others • Inheritance Tax • No Tax on property passing to surviving spouse, civil union or domestic partner, child, stepchild, grandchild, parent, grandparent or qualified charity. • 11%-16% on more than $25,000 of property passing to sibling, spouse/civil union or domestic partner of child, or surviving spouse/surviving civil union or domestic partner of deceased child. • 15%-16% on property passing to any other person.

7. Death Tax Considerations • State Death Taxes – Choice of Domicile? • Pennsylvania • No State Estate Tax • Inheritance Tax • 0% on property passing to a surviving spouse • 4 ½% on property passing to “lineal” ancestors and lineal descendents (e.g., children, grandchildren, parents, grandparents, and so forth) • 12% on property passing to siblings & spouses of siblings • 15% on property passing to all others • Florida • No State Estate Tax orInheritance tax

8. Planning for Federal Estate Tax and NJ Estate Tax Exemptions • Disclaimer Wills • Credit Shelter Trusts

9. Planning for your Spouse • Outright Bequest? • Bequest in Trust? • Power of Appointment Trust? • “QTIP” Trust? • Qualified Domestic Trust (for non-citizen spouse)

10. Planning for Second Death • After both spouses have died, how will all of the family’s remaining assets pass? • Outright (to children, grandchildren, etc…)? • Trusts for children, grandchildren? • Trusts for “special needs” beneficiary? • Generation skipping trusts?

11. Non-Probate Assets • Non-Probate Assets are those assets that pass outside of your Will: • Jointly Titled Assets • “POD”, “TOD” & “ITF” account designation • Retirement Accounts - IRAs & 401(k)s • Life Insurance • Coordination of disposition of Non-Probate assets with estate plan: • Plan under Will to take advantage of tax exemptions • Intention to create trusts for children or grandchildren • Affect of “tax payments” clause under Will

12. Planning with Life Insurance • Life Insurance can be used as part of an estate plan to add value, increase liquidity, to provide cash for business buy/sell arrangements, as a “wealth replacement” technique to cover anticipated death taxes, etc… • Irrevocable Trusts • Ownership by 3rd Party/Cross ownership

13. Planning with Lifetime Gifts • The lifetime exemption on taxable gifts is $1M • Certain types of gifts are exempt from Federal Gift Tax: • Annual Exclusion Gifts (currently $13,000 per/donee per/year, or $26,000 per/donee per/year with spousal gift splitting) • Direct payments of Medical Expenses • Direct payments of Tuition

14. Planning for Disability • Durable General Powers of Attorney • Living Wills and Health Care Powers of Attorney • Guardianship (an avoidable alternative!) • Long Term Care Insurance • Medicaid Eligibility?

15. Are Revocable Living Trusts necessary or useful? • Advantages: • Organization/consolidation of assets. • Management of assets during lifetime. • Avoid Probate. • Maintain Privacy. • Disadvantages & Misconceptions: • Up front cost to establish trust and transfer assets. • Probate will not be avoided if any assets are left in the decedent’s name. • No “special” Estate, Inheritance or Income tax advantages. • No asset protection from creditors.

16. How do I get started? • Gather your Information: • Family members, names & contact information • List your assets, titles and values • Gather your thoughts: • Who should receive your property, in what percentages and in what manner (outright or in trust)? • Who do you want to serve as your Executors (and Trustees, if applicable) • Who do you want to serve as Guardians of minor children (if applicable)? • Who do you want as to serve as your agent under your Financial and Medical Powers of Attorney? • Charities? • Contact a qualified Estate Planning Attorney to discuss your intentions and to develop your personal estate plan.

17. More questions? Please contact us at: Barbara Flacker, Esquire (215) 299-2846 bflacker@foxrothschild.com Wendy Herbert, Esquire (609) 896-4583 wherbert@foxrothschild.com