2009 Estate Planning Program
-
Upload
rlechevallier -
Category
Documents
-
view
1.279 -
download
1
description
Transcript of 2009 Estate Planning Program
Estate Planning Taking Care of Your Family
and Minimizing Taxes
Speaker:Robert LeChevallierAttorney at Law
Why Most People Fail To Plan Their Estate!
Why? Fear of mortality Not sure who should handle
estate/trust Not sure how to distribute Does not know the value of
their assets Not aware of tax
consequences of failure to plan
Symptoms! Procrastination Failure to complete estate
plan.
Four Ways Assets Are Transferred On Death
Contract ex. (life insurance and retirement plans
Operation of Law (ex jointly owned property with right of survivorship)
Will (subject to probate)
Revocable Trusts
Irrevocable Trusts
Contract
Payable on Death
Transfer on Death
Life Insurance
Retirement Plans
Operation of Law
Joint Tenants with Right of Survivorship Tenants by the Entirety (husband and
wife) Community Property (WA, CA, ID)
Estate Planning Terms
TERM DEFINITION
Will
A testamentary instrument that is probated. A set of instructions to the probate judge on how the estate should be distributed.
Trust
An entity established by a settlor to hold assets and distribute income and principal to beneficiaries.
Trustee
Person holding and managing property in trust.
Beneficiary
Person who is eligible to receive distributions from a trust.
The Will
If you do not have a will the State “writes” one for you
Assets pass according to the “intestate” law of succession
Advantages of a will: Simpler to manage during lifetime than a trust Court supervision over estate administration Can waive bond requirement
Disadvantage of a will is that it is subject to probate Public information Time and cost to probate estate
Probate Process
Most states allow a small estate to avoid a full probate. Oregon: 50k personal property; 150k real property (2009)
Probate is to assure that the intent of the decedent is followed
Attorney is hired by the personal representative Probate Court takes control of estate, appoints
Personal Representative, supervises payment of debts and orders distribution of assets
Legal notice to interested parties is required to be published in local paper
Decedent’s assets must be inventoried by personal representative and appraised if necessary
Four month creditor waiting period Notice to Estate Admin -Department of Human
Services
Probate
Advantage
Court supervised process
Provides notice and allows objection by heirs and/or creditors
Time limit on claims
Disadvantage
Time Expense Lack of control
by family
Trusts
Revocable Created during the settlor’s lifetime Can be amended so long as the settlor has
capacity Typically used to avoid probate
Irrevocable Revocable trusts become irrevocable upon
settlor’s death Lifetime irrevocable trust for advanced planning Testamentary trusts (trusts established in a
decedent’s will) These are trusts that cannot be modified easily
without consent of settlor, trustee and beneficiaries
Revocable Trust
Person creating trust can be the settlor, trustee and beneficiary until their death, resignation and/or incapacity
Any items not transferred to the Trust will be distributed according to the will
No probate court jurisdiction, therefore no probate fees
Avoids a conservatorship in the event of incapacity
Trust Administration private and quicker than probate
Revocable Trusts
Advantage Private Retain control Not subject to
mandatory timelines like a probate
Procedure available to limit claims
Disadvantage
No court supervision
Beneficiary(ies) have right to enforce terms of trust
Uniform Trust Code
REVOCABLE TRUSTS
Who Should Be My Successor Trustee
Person who has financial capabilities Liability of Trustee- Uniform Trust Code Need to be detail person Ability to relate to beneficiaries Has time available to properly do the job.
Family Members? Short term or long term
Should I use a bank or financial institution?
Private trust companies Costs
What About The Kids?
At what ages should I distribute my estate to my children?
Disabled children Spendthrift
children His and Hers —
second marriages
Additional Uses of Trusts
Discretionary Trusts (income or principal)
Incentive Trusts (i.e. if you graduate…)
Education Trusts (for college) Grandchildren’s Trusts Protect children in event of
spouse’s subsequent marriage(s)
Protect family assets in event of children’s divorce
Spendthrift- protect children from creditors
Additional Estate Planning Documents
Pour-over Will Durable Power of
Attorney Advance
Directive (Living Will)
Tax Planning Terms
TERM DEFINITION
Annual Gift Exemption
An amount you can give to a person each year – currently $13,000.
Credit Shelter
or Bypass Trust
A trust that distributes the income and/or principal to the spouse. On the spouse’s death, the remainder can be distributed to the children. Takes advantage of the exemption of the first spouse to die.
QTIP Trust
A type of trust that requires distribution of net income to the spouse and may provide for principal distributions to spouse. On the spouse’s death, the remainder can be distributed to the children. The trust qualifies for the marital deduction.
Exemption Amount/ Unified Credit
An amount each person can leave to another non-spouse without paying estate or gift taxes.
Marital Deduction
A deduction that allows spouses who are US citizens to make gifts to each other without estate or gift tax liability.
Tax Planning Wills and Trusts
Husband and wife may be able to use federal tax exemption twice
Federal exemption will increase from $2.0 million in 2009 to $3.5 million by 2009, and the federal estate tax repealed in 2010. Unless congress changes the law, the federal exemption will be $1.0 million in 2011.
Oregon exemption is $1.0 million
State Inheritance Tax
Oregon did not match increase in federal exemption.
State Estate Tax on top of Federal Estate taxes Exemption = $1.0 million in 2009 Tax rate between 4% and 16% Oregon Special Marital Election to postpone
state estate tax until surviving spouse passes away
Oregon Trust to track assets WA exemption = $2.0 million in 2009
Oregon Inheritance Tax Rates
Column 1 Column 2 Column 3 Column 4
Adjusted taxable estate equal to or
more than
Adjusted taxable estate less than
Tax on amount in column 1
Rate of tax on excess over amount
in column 1
$ $ $ PERCENT
90,000 140,000 400 1.6
240,000 440,000 3,600 3.2
640,000 840,000 18,000 4.8
1,040,000 1,540,000 38,8000 6.4
1,540,000 2,040,000 70,800 7.2
2,540,000 3,040,000 146,8000 8.8
4,040,000 5,040,000 290,8000 11.2
6,040,000 7,040,000 522,800 12.8
8,040,000 9,040,000 786,800 14.4
10,040,000 ------ 1,082,800 16.0
Disclaimer Wills or Trusts
Allows spouse to “disclaim” and decide how much to fund bypass or credit shelter trust within 9 months of death
Spouse cannot take benefit of asset before disclaimer is filed
Wills Or Trusts With Credit Shelter Provisions
Formula puts portion of estate in trust for spouse who may receive income until death plus principal as needed for health, education, maintenance and support. Upon spouse’s death it will be distributed to children.
No flexibility for surviving spouse
Charitable Deduction
Gift to charities or charitable trust qualify for charitable deduction
IRA’s Gifts of life insurance Gifts of appreciated property (need
appraisal) Gifts to Community Foundations (donor
advised funds) Charitable remainder trusts Charitable lead trusts
How Often Should I Update My Estate Plan?
Remarriage (revokes a will)
Divorce (revokes provision in favor of spouse)
Death of a Spouse Change in family
situation Change in tax laws Review every 5 years
NEXT STEPS!
Prepare a will, a durable power of attorney and advance directive
Prepare a Revocable Trust (if over age 55; high net worth or assets in multiple states)
Do appropriate estate and income tax planning If you have a taxable estate start a gifting
program to family Once family is taken care of, consider charitable
gifts
QUESTIONS?For more information
give us a call (503) 620-8900
3 Centerpointe Drive, Suite 250
Lake Oswego, OR 97035
www.buckley-law.com