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Planning After ATRA. Tom Commito, JD, LL.M, CLU, ChFC, AEP LFD - Advanced Sales Group.
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Planning After ATRA Tom Commito, JD, LL.M, CLU, ChFC, AEP LFD - Advanced Sales Group
This seminar is for Educational use only. It is not for use with the general public and is not intended to be a solicitation for any Lincoln Financial Group product or service. It is intended to be accurate and authoritative in regard to the subject matter covered. It is presented with the understanding that I am not engaged in rendering legal or tax advice. Lincoln Financial Group provides the sales concepts discussed for information purposes only. While this seminar discusses general tax aspects and concepts of planning with insurance, we make no representations as to suitability for individual clients. Interested parties should be strongly encouraged to seek separate tax and legal advice before implementing a plan of the type described in this presentation.
IRS Circular 230 Disclosure Any discussion pertaining to taxes in this communication (including attachments) may be part of a promotion or marketing effort. As provided for in government regulations, advice (if any) related to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code. Individuals should seek advice based on their own particular circumstances from an independent tax advisor.
How ATRA Affects The Deficit • Revenue $2,300,000,000,000 • Fed Budget $3,500,000,000,000 • The “Deficit”(Est.) $1,200,000,000,000 • ATRA Yr. Rev. $ 60,000,000,000 • Net Deficit $1,140,000,000,000
ATRAand ACA Rate Changes! • ATRA Kept in Place Prior Law • Main Effect - Rate Increases for Taxpayers with incomes over $400,000 /$450,000 • UIMCT- 3.8% • $200,000 / $250,000 • PEP and Pease is Back • Phaseout at $250,000 / $300,000 • Estate Tax – New 37% and 40% Brackets • AMT Relief - $78,750 Exemption ($50,000 for Single TP) • Raises only $60 Billion per year in revenue • Only New Provision - 401(k) to ROTH.
ATRA and ACA change 2013 rates as follows: Top tax rate on ordinary income rises from 35% to almost 44% an increase of almost 25% The top tax rate on capital gains rises from 15% to almost 24% an increase of almost 60% Top dividend tax rate increases from 15% to almost 24% an increase of almost 60% Estate tax rates rate rises from 35% to 40% an increase of over 14% Increases for Our Clients
2013 Calendar • February 15 – Democratic Alternative to Sequestration • February 19 -House Ways and Means Form Subcommittees on Tax Reform • March 1 – Sequestration Technically Takes Effect • March 27 – Impact Day - Sequestration • March 27 – Current Funding (CR) Expires • April 15 – “No Budget – No Pay” Deadline • August 1 –Debt Ceiling Authorization Expires • August 1 – House Ways and Means Deadline for “Tax Reform” • Sept 30 – FY 2013 Ends
President’s Proposed Substantive Changes Coordination of income and transfer tax rules applicable to grantor trusts. The current lack of coordination between the income and transfer tax rules applicable to a grantor trust creates opportunities to structure transactions between the deemed owner and the trust that can result in the transfer of significant wealth by the deemed owner without transfer tax consequences.. • Basis consistency and reporting requirement for donated and inherited property. The basis of property in the hands of the recipient could be no greater than the value of that property as determined for estate or gift tax purposes • Toughened rules for valuation discounts. Certain additional restrictions (“disregarded restrictions”) would be ignored under Code Sec. 2704 in valuing an interest in a family-controlled entity transferred to a member of the family if, after the transfer, the restriction will lapse or may be removed by the transferor and/or the transferor's family. • Minimum and maximum term for grantor retained annuity trusts (GRATs). A GRAT would be required to have a minimum term of ten years and a maximum term of the life expectancy of the annuitant plus ten years. Also, the remainder interest would have to have a value greater than zero at the time the interest is created and any decrease in the annuity during the GRAT term would be prohibited. These rules would apply to trusts created after the enactment date. • Duration of GST tax exemption limited. On the 90th anniversary of the creation of a trust, the GST exclusion allocated to the trust would terminate. • Extension of estate tax lien on Code Sec. 6166 deferrals. The estate tax lien under Code Sec. 6324(a)(1) would be extended to apply throughout the Code Sec. 6166 deferral period, effective for estates of decedents dying on or after the effective date
Dynasty Trust Presentation Most Effective Estate Planning Concept Can Avoid Federal and State Transfer Taxes – FOREVER Asset Protection Availability of Control Availability to get Income – SLAT or Self-Settled Trust Sales Theme Shows Advantage of Life Insurance within the Dynasty Trust OVERVIEW
With Higher Income Tax Rates, Income Tax Advantages of Life Insurance Becomes More Important Life Insurance is EXEMPT from the new 3.8% UIMCT Tax. SRP Presentation OVERVIEW
With Higher Estate and Income Tax Rates, the Double “Hit” to IRAs and Qualified Plans Becomes More Severe The IRA / Qual Plan Problem OVERVIEW
Use SPIA for Payments from IRA. No 10% Penalty Net Payments Fund an ILIT Life Linc Presentation
Old Idea is Back in High Income Tax / Low Interest Environment Preferred Return LLC Owns Policy. Premium Payor Owns Preferred Interest Beneficiary Owns Non- Preferred Interest Preferred Return Can Be Fixed At Today’s Low Rates (Does NOT have to be AFR) Non-Preferred Interest Can be in An ILIT Preferred Return LLC OVERVIEW
PRODUCT DISCLOSURE Lincoln LifeGuarantee UL (2012)is issued on policy form UL 5049 and state variations by the Lincoln National Life Insurance Company, Ft. Wayne, Indiana Lincoln VUL One (2012) is issued on policy form LN 696 and state variations by the Lincoln National Life Insurance Company, Ft. Wayne, Indiana Lincoln LifeReserve Accumulator is issued on policy form UL 5062 and state variations by the Lincoln National Life Insurance Company, Ft. Wayne, Indiana Nothing herein shall constitute a life insurance policy. All values and case materials are purely hypothetical and contain no guarantees on life insurance cost or values on an express or implicated basis
Director – Sales ConceptsAdvanced Sales GroupLincoln Financial Distributors Mr. Commito is licensed to practice law in the states of Massachusetts and Vermont but does not practice, and nothing herein shall be deemed to be tax advice or the practice of law. All clients or prospects MUST obtain private representation to ascertain whether or not a particular tax plan or strategy is appropriate for their individual needs. Nothing herein shall constitute a warranty or guarantee of a particular tax result in any particular factual situation. Thomas F. Commito, JD, LL.M, CLU, ChFC, AEP Securities and investment advisory services distributed by Lincoln Financial Distributors, Inc., a broker dealer and registered investment advisor. Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates.
