 Jerry Rhinehart, CIC, CLU, ChFC, RHU Panama City, FL

1. Estate Planning Techniques  Jerry Rhinehart, CIC, CLU, ChFC, RHU Panama City, FL

2. 1 Learning Objectives To understand the importance of Estate Planning and the various options available. To be familiar with the usual misconceptions, or “Myths”, of Estate Planning. To know the law and advantages of “gifting”.

3. 1 Learning Objectives To understand the application, benefits and use of various trusts in Estate Planning.  Living Trust  Charitable Remainder Trust  Testamentary Trust  Bypass Trust

4. Please note the DISCLAIMER

5. 3 The Importance of Estate Planning The Judge said... The impact of the Federal Estate Tax

6. 3 The Cost of Doing Nothing vs. The Cost/Time/Aggravation of Doing it Right! High Federal Estate Tax (FET)

7. Every U.S. Citizen Gets a $5,430,000 Exemption in 2015 (Indexed for future years) Under current law, heirs of a single individual that dies in 2015 with a Net Estate of $6,430,000 (total Fair Market Value of assets less1-mortgages and liens, 2-settlement cost, and 3- final expenses) will owe flat FET of 40% on the $1 million excess ($400,000) within 9 months of the date of death. And, it is payable in CASH (the IRS does not want rental property, accounts receivable, crops in the field, ownership of a family business, etc.) They want CASH… and they will get it!

8. Effective 2002 Effective for 2015 O Single Individuals – No FET if Net Estate is $5.43 Million or less O Married Couples – No FET if Net Estate is $10.86 Million or less O Any excess … subject to flat 40% FET

9. George Steinbrenner (“The Boss”) – World Series Win - 2000

12. $5,430,000 (2015) 40% Payable in 9 Months Payable in Cash! Know This Regarding FET...

13. 3 The Cost of Doing Nothing vs. The Cost/Time/Aggravation of Doing it Right! High Federal Estate Tax (FET) HighProbateCost Delays in Settlement

14. 4 The Importance of Estate Planning Some “famous people” have done a good job of estate planning and some...

15. 4 Estates of Well-Known People

16. 4 Elvis Aaron Presley — 1936-1977 Would you have “wasted your time” calling on Elvis for his estate planning? Did Elvis (or his manager) do a “good job” of estate planning? 73% erosion of his “stuff”. Seven years delay in settlement.

17. Remember Elvis

19. 3 The Cost of Doing Nothing vs. The Cost/Time/Aggravation of Doing it Right! High Federal Estate Tax (FET) High Probate Cost Delays in Settlement Low (or no) FET Reduced (or no) Probate Prompt Settlement

20. 3 The Cost of Doing Nothing vs. The Cost/Time/Aggravation of Doing it Right! Possible liquidity problems for loved ones! Ample cash flow to pay taxes, debts, and provide an income for the life of your spouse!

21. 3 The Cost of Doing Nothing vs. The Cost/Time/Aggravation of Doing it Right! Tough decisions to be made by loved-ones — probably not trained for such a task... Pre-determined decisions that treat loved-ones, benefi- ciaries, charities, employees, etc., based exactly on your wishes!

22. Basic Truths in Estate Planning  You cannot die without a will!

23. Basic Truths in Estate Planning  Just what is a will?  Is it the only “legal document” most people need?

24. Basic Truths in Estate Planning  You cannot die without a will! Everybody has an Estate Plan!

25. 5 Estate Planning “Myths”  Myths Concerning a Will (or no will)

26. 5 Myths Concerning a Will Allows me to avoids probate Will save me estate taxes My loved ones will be treated equally I told my kids how to distribute my possessions … My business is very successful…

27. 5 Estate Planning “Myths”  Myths Concerning a Will (or no will)   “I’m not rich” (life insurance)

28. “Stuff” For Estate Calculation Any FET Due in 2015? 6,340,000 - 1,000,000 5,430,000

29. “Stuff” For Estate Calculation Is Life Insurance "Stuff"?

30. “Stuff” For Estate Calculation OUCH!

31. 5 Estate Planning “Myths”  Myths Concerning a Will (or no will)   “I’m not rich” (life insurance)  “I can do this planning sometime in the future” 

32. 5 Estate Planning “Myths”  Myths Concerning a Will (or no will)   “I’m not rich” (life insurance)  “I can do this planning sometime in the future”   “I don’t have to do anything to get the tax breaks that are available” 

33. 6 Advantages of a Will

34. What About your Wealthy Clients? “The sale would give the Robbies cash to pay off an estate tax bill of about $47 million.” U.S. Today - March 24, 1993

35. 7 The Rules of the Game  $5,430,000 Exemption (‘15) *  40% FET rate (‘15) (per person)  Possible 5% probate expense  FET due in 9 months (exceptions do exist)  CASH – The IRS wants it!  7 years – possible delays

36. 7 “Rules of the Games” Concerning FET  Poor Estate Planning (or no planning) can lead to the potential forced-sale of property to create liquidity  “Garage Sale Problem”  “Dreaded Discount Buyer

37. Cash Business Real Pensions Farm Estate Life Personal Property Insurance For Your “Stuff” Death Taxes Probate Fees Accounting Fees Legal Fees Appraiser’s Fees Executor’s Fee Balance to Heirs 8 8

38. $300,000 $100,000 $250,000 IRS Hose A View of Your “Stuff” - 2014 $1,000,000 $5,000,000 $6,650,000

39. Who Are Your Heirs? OTHER LOVE HATE Mary - daughter John - son Will - son Will, Jr. - G-son Sara (CPA) Barry (atty) IRS Dreaded Discount Buyer Church University Hospital

40. The News... Bad News Ugly News Good News 9 Months 35% - 50% Cash Dreaded Discount Buyer • You’re alive • You have an Estate Plan • Correctable Q-Plans (401k) $1,000,000 2 - Good Deals 2 - Bad Deals 40% (-400K) 600K "Stuff"

41. "Do You Have The Letter?"

42. 9 The Use of Gifts Why Give Away Your “Stuff”?  Reduce current estate size / tax  Enjoyment of the donor  Fund life insurance trust  Gifts to a charity / individuals  Future appreciation to another

43. Intel, Inc. Basis - $1,000 FMV - $10,000 You Sell the stock You Give the stock away during your lifetime The stock is Transferred at your death

44. Intel, Inc. Basis - $1,000 FMV - $10,000 You Sell the stock - 10,000 - 1,000 = 9,000 x 15% Capital Gains Tax -- $1,350 Tax

45. Intel, Inc. Basis - $1,000 FMV - $10,000 You Give away the stock (during your life time) 10,000 - 1,000 = 9,000 x 15% Capital Gains Tax -- $1,350 Tax to Seller

46. Intel, Inc. Basis - $1,000 FMV - $10,000 The stock is Transferred to another person at your death 10,000 - 10,000 (step-up-in basis) = - 0 - No Tax to the Seller

47. What if You Can Not Prove Your Cost Basis? The IRS rules state that without proof of basis — then your basis is ZERO! (Thus ALL gain!)

48. 11 The Use of Gifts  An unlimited amount can be given to a college or medical facility for the benefit of anyone!  Three year rule  Excess gifts — $14,000 maximum / “completed gift” (present interest)  An unlimited amount can be gifted between husband / wife

49. Bank Parties of a Trust  Trustee  Grantor  Beneficiaries

50. 13 Irrevocable Life Insurance Trust (ILIT)  Why is this Trust beneficial for a husband and wife that have an Estate Tax problem?  How does an ILIT work?