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Estate Tax Law Update

Estate Tax Law Update. Castle Financial Advisors, LLC Like the Knights of Olde, Our Advisors Pledge to Help You Build & Fortify Your Financial Castle. Topics for Review. Estate Planning Issues Estate Tax Law Changes Traditional and Enhanced Estate Planning

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Estate Tax Law Update

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  1. Estate Tax Law Update Castle Financial Advisors, LLC Like the Knights of Olde, Our Advisors Pledge to Help You Build & Fortify Your Financial Castle

  2. Topics for Review • Estate Planning Issues • Estate Tax Law Changes • Traditional and Enhanced Estate Planning • Other Possible Invaders of Your Estate

  3. Estate Planning Issues • Distribution • Administration • Management • Income • Taxes

  4. Estate Planning Issues Personal Property Real Estate Insurance Business Savings Bonds Stocks Residence Vacation Business Personal Pension/Group Business Ownership % Pensions Non-Qualified Plans Will-Title Will - Deed Will - Beneficiary Will - Buy / Sell Voluntary 50% to 60% Loss Due to: Federal Estate Tax State Inheritance Tax Administrative Costs Attorney’s Fees Any Debt of the Estate Expenses Levied Against Estate Probate 6 Months to 10 Years Estate is open to the public, lack of privacy Assets are in temporary receivership, lack of control Probate Delays 6 Month to 10 Years FAMILY enter

  5. Estate Tax Law Changes“Economic Growth and Tax Relief Reconciliation Act of 2001”

  6. Overview of Changes to Estate, Gift and Generation Skipping Transfer Taxes • On 5/26/01– House and Senate passed H.R. 1836 reducing Gift Tax, Generation Skipping Transfer Tax & Estate Tax rates with complete repeal of Estate Tax & Generation Skipping Transfer Tax scheduled for 2010; replaced with carryover basis • Immediate repeal of 5% surtax and rates in excess of 50%; rates further reduced in successive years to a low of 45%

  7. Year ExemptionEquivalent Top Rate Tax Credit 2002 $1,000,000 50% $ 345,800 2003 $1,000,000 49% $ 345,800 2004 $1,500,000 48% $ 555,800 2005 $1,500,000 47% $ 555,800 2006 $ 2,000,000 46% $ 780,800 2007 $2,000,000 45% $ 780,800 2008 $2,000,000 45% $ 780,800 2009 $3,500,000 45% $1,455,800 2010 $0* 35% GT ET Repealed 2011 $1,000,000 55+5%** $345,800 Exemption Equivalentand Tax Credit *$1,000,000 exemption equivalent for gifts still applies; rate equals highest income tax rate (35%). **5% surtax applies.

  8. Summary of the Impactof the 2001 Tax Act • No relief for estates of those who die before 2002. • Large estates will have significant estate tax liabilities until 2009. • The sunset provision of the current law allows for the return of the current tax structure in 2011. • States will need to raise taxes to make up for the reduced tax revenue under the new law. • The carry over basis rules that apply in 2010 Create a new burden of taxes, reporting & record keeping. • The sunset provision of the new law adds to the uncertainty of current and future estate planning decisions.

  9. Credit Shelter Trust Disclaimer Trusts Revocable Living Trusts Irrevocable Living Trusts GRIT’s GRAT’s GRUT’s QPRT’s GST Intentionally Defective Grantor Trusts SCIN’s Private Annuities ILIT’s CRT’s / CLT’s FLP’s LLC’s Life & LTC Insurance Techniques of Traditional Estate Planning

  10. Enhanced Estate Planning • Provides for You in Retirement • Employs Income Tax Savings Strategies • Provides for the Surviving Spouse Next • Maximizes the Eventual Wealth Transfer to Family • Promotes Charitable Giving during Your Lifetime • Adds Flexibility & Avoids Irrevocable Decisions • Leaves You in Control of Your Estate • Protects Your Estate from All Invaders

  11. Asset Protection “Asset protection is probably one of the most important aspects of estate planning and preserving a legacy for your family. It involves more than just providing liquidity for the payment of federal and state estate taxes.”

  12. The Invaders of Your Estate • IRS • Inflation • Poor Investments • Medical Expenses • Divorce • Lawsuit • Creditors

  13. Coordination Of The Four Types Of Plans Accumulation Planning Wealth Accumulation Income Tax Planning Professional Asset Mgmt Fringe Benefit Planning Pension Plans Group Benefits Executive Benefits CFA CAM Business Continuity Planning Retirement Disability or Death Key Person Planning Estate Preservation Planning Wills & Trusts Elder Care Planning Charitable Planning

  14. The information in this presentation is designed to be general in nature and for educational purposes only.

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