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#twitter-hashtag
Estate and Gift Taxes
& Planning Opportunities
November 6, 2013
#twitter-hashtag
Anita Hamilton, CPA
Anita is a tax partner in the Jackson, TN, HORNE LLP office. She primarily provides
s...
#twitter-hashtag
Objectives
Overview of estate and gift tax systems
• Current Law
• Compliance
Planning ideas
• Family
• B...
#twitter-hashtag
Reasons for Planning
Personal
• Providing for family
• Protecting assets
• Creating a legacy
Financial
• ...
#twitter-hashtag
Estate Planning
Determining WHEN your assets will be transferred
• During life
• After death
Determining ...
#twitter-hashtag
Reasons for Planning Opportunities
Low interest rates
Depressed values
Available discounts
Generous estat...
#twitter-hashtag
Two Tax Systems
Income tax system
Estate and gift tax system
7
#twitter-hashtag
Estate and Gift Tax System
Gift Tax
• During Life
Estate Tax
• After Death
Generation Skipping Transfer T...
#twitter-hashtag
Current Law – 2013 and Forward
Permanent
Repealed “Sunset” provision for reversion to 2001
law
9
#twitter-hashtag
Current Law – 2013 and Forward
10
#twitter-hashtag
Current Gift Tax Law
Annual exclusion = $14,000 per donee
Annual gifting program = great estate shifting ...
#twitter-hashtag
Gifts in Excess of Annual Exclusion
Lifetime gift exemption
• 2013 $5.25 Million
• 2014 forward $5.25 Mil...
#twitter-hashtag
Current Estate Tax Law
2013
• Gross estate > $5.25 million
• Estate tax rate = 40%
2014 forward
• Gross e...
#twitter-hashtag
Current Generation Skipping Transfer Tax Law
Applies to transfers to donees more than one generation
belo...
#twitter-hashtag
Portability
Ability to transfer unused portion of married
decedent’s lifetime exclusion to surviving spou...
#twitter-hashtag
Portability Malpractice Traps
Election must be made on a timely-filed estate tax
return.
• No election ca...
#twitter-hashtag
Portability Issues
Utilizing the estate tax exemption at first spouse’s
death vs. transferring the exempt...
#twitter-hashtag
Portability Recordkeeping
Estate tax returns containing a portability election
(including all supporting ...
#twitter-hashtag
Portability Recordkeeping
Ask if any DSUE’s exist when preparing gift tax
returns for a new client. Docum...
#twitter-hashtag
The Estate Tax Return
Form 706
• Due date = 9 months after date of death
20
#twitter-hashtag
• Real estate
• Stocks and bonds
• Interests in closely held
businesses
• Cash, checking accounts,
saving...
#twitter-hashtag
Value of the Gross Estate
Fair market value (FMV)
• Date of death
• Alternate valuation date:
- Six month...
#twitter-hashtag
The Gift Tax Return
Form 709 is the gift tax return.
• Due date = April 15th
Current law filing requireme...
#twitter-hashtag
Gifts in Excess of Annual Exclusion
Each person has $5.25 million lifetime gift exclusion.
If a gift exce...
#twitter-hashtag
What is the difference in an asset received by
gift versus an inherited asset?
BASIS !!!
Gift: Basis = do...
#twitter-hashtag
Example - Gift
Client owns ABC stock.
Purchased 20 years ago for $5,000.
2013
• Gifts stock to only child...
#twitter-hashtag
Example - Inheritance
Client owns ABC stock.
Purchased 20 years ago for $5,000.
2013
• Client dies.
• FMV...
#twitter-hashtag
Example – Joint Property
Personal residence owned jointly by husband and
wife.
Cost 10 years ago = $200,0...
#twitter-hashtag
Does the beneficiary have to pay gift or
estate taxes on the amount received as a gift
or an inheritance ...
#twitter-hashtag
Does the beneficiary have to pay income
taxes on the amount received as a gift or as
an inheritance?
Gene...
#twitter-hashtag
Do you have to pay income taxes when you
die?
If married, Form 1040 filed by surviving spouse.
• 100% of ...
#twitter-hashtag
How is income after DOD reported?
Income earned after DOD reported on Form 1041 for
the estate.
Form 1041...
#twitter-hashtag
How is income after DOD reported?
(Cont.)
Due date of estate 1041 is 15th day of the 4th month
after year...
#twitter-hashtag
Does a beneficiary have to pay income taxes
on their inheritance?
No. Not on the actual inheritance.
If t...
#twitter-hashtag
Medicare Tax on NII for Trusts and Estates
Tax = 3.8% times lesser of:
• Undistributed net investment inc...
#twitter-hashtag
Medicare Tax on NII for Trusts and Estates
(Cont.)
Net investment income (NII) includes:
• Interest
• Div...
#twitter-hashtag
Medicare Tax on NII for Trusts and Estates
(Cont.)
Net investment income (NII) does NOT include:
• Trade ...
#twitter-hashtag
Medicare Tax on Trusts and Estates
Can the trust or the estate be treated as materially
participating in ...
#twitter-hashtag
Distribution Planning for Medicare Tax on
Trusts and Estates
Distributions can carry out income and save ...
#twitter-hashtag
Distribution Planning for Medicare Tax on
Trusts and Estates (Cont.)
Trustee may not have appropriate aut...
#twitter-hashtag
Annual gifting
Lifetime transfers
Utilize lifetime
exemptions
Credit shelter trust
Inta- family loans
Fam...
#twitter-hashtag
Family Planning Ideas
Implement a current annual gifting program
• Make annual family gifts
• Utilize ann...
#twitter-hashtag
Family Planning Ideas
Utilize lifetime exemptions properly
• Review wills periodically
• Review listing o...
#twitter-hashtag
Family Planning Ideas
Intra-family loans.
• AFR interest rate is so low.
• June 2013 annual long-term rat...
#twitter-hashtag
Business Planning Ideas
Buy-sell agreement
Family limited partnership
45
#twitter-hashtag
Buy-Sell Agreement
Legal contract.
Prearranges the sale.
Allows control until triggering event.
Types of ...
#twitter-hashtag
Buy-Sell Agreement
Price and sales terms prearranged.
Valuation critical to set the share price.
• Determ...
#twitter-hashtag
Family Limited Partnership
Parents contribute business and investment assets
to a partnership in exchange...
#twitter-hashtag
Family Limited Partnership Cont.
Gift of partnership interest rather than direct
interests in underlying ...
#twitter-hashtag
Family Limited Partnership
Advantages
• Creates valuation discounts for gifts (not as significant with th...
#twitter-hashtag
Planning Ideas for the Charitable Minded
IRA required minimum distributions
Noncash gifts
51
#twitter-hashtag
Planning Ideas for the Charitable Minded
IRA required minimum distributions
• Available for 2013 only
• P...
#twitter-hashtag
Life Insurance
Uses
Life insurance trust
Beneficiary designations
Policy reviews
53
#twitter-hashtag
Life Insurance
Uses
• Liquidity to pay debts, expenses, taxes
• Support for family
• Equalize inheritance...
#twitter-hashtag
Life Insurance
Review beneficiaries of life insurance, retirement
accounts, etc.
• Crucial if there has b...
#twitter-hashtag
Objectives of Today’s Presentation
Overview of estate and gift tax systems
• Current law
• Compliance
Pla...
#twitter-hashtag
Conclusion
Complex area
Estate and gift area is constant target when law
changes mentioned-current law ma...
#twitter-hashtag
Conclusion
Each person/family is unique
There is a no “one size fits all” plan
Planning can range from si...
#twitter-hashtag
Today’s Presenter
Anita Hamilton, Partner, HORNE LLP – Tax
Anita.Hamilton@horne-llp.com
731.668.7070
59
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FINAL Estate Planning Forecast - AICPA Presentation in Las Vegas 2013

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FINAL Estate Planning Forecast - AICPA Presentation in Las Vegas 2013

  1. 1. #twitter-hashtag Estate and Gift Taxes & Planning Opportunities November 6, 2013
  2. 2. #twitter-hashtag Anita Hamilton, CPA Anita is a tax partner in the Jackson, TN, HORNE LLP office. She primarily provides services in federal and state tax compliance for individuals, partnerships, corporations, trusts, non-profit entities and bankruptcy work. Anita works closely with clients who need multi-state taxation assistance. She assists closely-held businesses and individuals with complex areas of tax law including entity structuring and resolving difficult tax controversies with state and federal agencies. Anita provides comprehensive tax, estate, and other personal financial consulting services to high net worth individuals and family groups and also provides retirement planning consulting services. Anita has more than 20 years of public accounting experience including real estate tax law, tax ramifications and estate planning and guidance in compliance with government filings. Anita earned a Bachelor of Business Administration from Union University. Professional Affiliations -American Institute of Certified Public Accountants, Real Estate Tax Conference Committee -Tennessee Society of Certified Public Accountants, Board Member -Tennessee Society of Certified Public Accountants, State Taxation Committee Community Involvement -Union University, Board of Regents -Exchange Club - Carl Perkins Center for Prevention of Child Abuse, Board Member -Jackson Exchange Club, Exchangite of the Year -University School of Jackson, Past Chairman of the Board, and Finance Committee -Jackson Symphony – Finance Chair and Board Member Anita Hamilton CPA Partner 26 Security Drive Jackson, TN 38305 Main: 731.668.7070 Direct: 731.664.3706 anita.hamilton@horne-llp.com 2
  3. 3. #twitter-hashtag Objectives Overview of estate and gift tax systems • Current Law • Compliance Planning ideas • Family • Business • Charity • Life insurance 3
  4. 4. #twitter-hashtag Reasons for Planning Personal • Providing for family • Protecting assets • Creating a legacy Financial • Minimizing estate tax exposure • Preserving and maintaining assets • Providing for charitable desires 4
  5. 5. #twitter-hashtag Estate Planning Determining WHEN your assets will be transferred • During life • After death Determining WHERE your assets will be transferred • Family • Outsiders • Charity • IRS 5
  6. 6. #twitter-hashtag Reasons for Planning Opportunities Low interest rates Depressed values Available discounts Generous estate and gift exemptions Low tax rates 6
  7. 7. #twitter-hashtag Two Tax Systems Income tax system Estate and gift tax system 7
  8. 8. #twitter-hashtag Estate and Gift Tax System Gift Tax • During Life Estate Tax • After Death Generation Skipping Transfer Tax • During Life or • After Death 8
  9. 9. #twitter-hashtag Current Law – 2013 and Forward Permanent Repealed “Sunset” provision for reversion to 2001 law 9
  10. 10. #twitter-hashtag Current Law – 2013 and Forward 10
  11. 11. #twitter-hashtag Current Gift Tax Law Annual exclusion = $14,000 per donee Annual gifting program = great estate shifting tool • Single person can move $14,000 per donee per year out of their estate at no tax cost • Married couple can move $28,000 per donee per year at no tax cost Carryover basis of assets received through lifetime transfer 11
  12. 12. #twitter-hashtag Gifts in Excess of Annual Exclusion Lifetime gift exemption • 2013 $5.25 Million • 2014 forward $5.25 Million + (inflation adjusted) Gift > annual exclusion • Utilize lifetime exemption. • Reduce amount of estate lifetime exemption Gift tax and estate tax reunified 12
  13. 13. #twitter-hashtag Current Estate Tax Law 2013 • Gross estate > $5.25 million • Estate tax rate = 40% 2014 forward • Gross estate > $5.25 million + (inflation adjusted) • Estate tax rate = 40% Step up in basis of inherited assets to date of death value. Portability of lifetime exemption. 13
  14. 14. #twitter-hashtag Current Generation Skipping Transfer Tax Law Applies to transfers to donees more than one generation below donor. In addition to estate/gift tax. 2013 • Exemption = $5.25million • GST tax rate = 40% 2014 forward • Exemption = $5.25million + (inflation adjusted) • GST tax rate = 40% No portability of lifetime GST tax exemption. 14
  15. 15. #twitter-hashtag Portability Ability to transfer unused portion of married decedent’s lifetime exclusion to surviving spouse. Must file a timely Form 706. Made permanent effective January 1, 2013 Example: • Husband dies in 2013. His net taxable estate is $3 million and is offset by $3 million of his $5.25 million lifetime exclusion (assuming he has not utilized any during lifetime). His remaining $2.25 million of unused lifetime exclusion can be transferred to his surviving spouse. Surviving spouse now has a lifetime exclusion of $7.5 million ($5.25 million of hers + $2.25 million unused by husband). 15
  16. 16. #twitter-hashtag Portability Malpractice Traps Election must be made on a timely-filed estate tax return. • No election can be made on a late-filed return. Statute of limitations remains open on the first-to- die’s estate tax return until the statute has run on the surviving spouse’s estate tax return. • “Adequate disclosure” rules (applying to post – 1997 gifts) do not apply. • IRS can audit the deceased spouse’s estate tax return (even after the normal statute of limitations has run) and add any increase in tax to the surviving spouse’s estate tax return. 16
  17. 17. #twitter-hashtag Portability Issues Utilizing the estate tax exemption at first spouse’s death vs. transferring the exemption to the surviving spouse • Size of combined estate • Anticipated growth of the surviving spouse’s estate • Changes in the future estate tax law • Asset protection issues • Additional basis step-up of property in surviving spouse’s taxable estate • Malpractice risks for advisors 17
  18. 18. #twitter-hashtag Portability Recordkeeping Estate tax returns containing a portability election (including all supporting documentation) should be saved indefinitely because of the extended statute of limitations. Track any last deceased spouse’s unused exemption amount and its use to document how much was used and when. The “when” is vital in the event of the demise of a later spouse. GST exemption will need to be monitored carefully since it will differ from the estate exemption. Portability is not available for the GST lifetime exemption. 18
  19. 19. #twitter-hashtag Portability Recordkeeping Ask if any DSUE’s exist when preparing gift tax returns for a new client. Document whether they exist or not. Monitor and track DSUE’s if ordering rules are created. Consider attaching a schedule to any gift tax return listing the source of all prior DSUE’s and their use to assure that the records are available. These records will prove helpful since all gift tax returns have to be attached to the future estate tax return of the surviving spouse. 19
  20. 20. #twitter-hashtag The Estate Tax Return Form 706 • Due date = 9 months after date of death 20
  21. 21. #twitter-hashtag • Real estate • Stocks and bonds • Interests in closely held businesses • Cash, checking accounts, savings accounts • Partnership interests • Interests in trusts • Life insurance • Annuities • Retirement accounts, IRA accounts • Crops in field at time of death • Payments due from employer if still work at DOD • Mortgages, notes, loans to others • Personal effects, jewelry, silver, guns, antiques • Automobiles • Contents of their safe deposit box • Debts: mortgages, loans, credit cards • Charitable bequests • Prior taxable gifts • Any other assets What is Reported on the Estate return? 21
  22. 22. #twitter-hashtag Value of the Gross Estate Fair market value (FMV) • Date of death • Alternate valuation date: - Six months after DOD - Value of gross estate must have decreased • Special use valuation: - Farm property - Real property used in a closely held business 22
  23. 23. #twitter-hashtag The Gift Tax Return Form 709 is the gift tax return. • Due date = April 15th Current law filing requirements. • Present interest > $14,000 • Gift splitting is elected - even if split gift < $14,000 • Gift of future interest - even if gift < $14,000 23
  24. 24. #twitter-hashtag Gifts in Excess of Annual Exclusion Each person has $5.25 million lifetime gift exclusion. If a gift exceeds annual exclusion, excess is offset by this lifetime exclusion. Use of this lifetime gift exclusion reduces the amount of the estate exclusion. 24
  25. 25. #twitter-hashtag What is the difference in an asset received by gift versus an inherited asset? BASIS !!! Gift: Basis = donor’s basis Inheritance: Basis = FMV on decedent’s DOD 25
  26. 26. #twitter-hashtag Example - Gift Client owns ABC stock. Purchased 20 years ago for $5,000. 2013 • Gifts stock to only child. • FMV = $20,000. • Gift reported at FMV of $20,000 on gift tax return. • Child’s basis = $5,000 (same as father’s basis). Later • Child sells stock when FMV = $22,000. • Taxable gain = $17,000 ($22,000 FMV - $5,000 basis). 26
  27. 27. #twitter-hashtag Example - Inheritance Client owns ABC stock. Purchased 20 years ago for $5,000. 2013 • Client dies. • FMV = $20,000. • Stock reported at FMV of $20,000 on estate tax return. • Child’s basis = $20,000 (FMV on parent’s DOD). Later • Child sells stock when FMV = $22,000. • Taxable gain = $2,000 ($22,000 FMV - $20,000 basis). 27
  28. 28. #twitter-hashtag Example – Joint Property Personal residence owned jointly by husband and wife. Cost 10 years ago = $200,000. FMV on husband’s DOD = $300,000. Wife’s basis after husband’s DOD = $250,000. • Her original basis $100,000 ($200,000 x 50%) • Her inherited basis 150,000 ($300,000 x 50%) • Her “new” basis $250,000 28
  29. 29. #twitter-hashtag Does the beneficiary have to pay gift or estate taxes on the amount received as a gift or an inheritance when he receives the property? No. • Gift tax paid by donor. • Estate tax paid by decedent’s estate. 29
  30. 30. #twitter-hashtag Does the beneficiary have to pay income taxes on the amount received as a gift or as an inheritance? Generally, no – not on the actual gift or inheritance. • As the asset starts producing income (such as dividends from stock), this income is taxable to the beneficiary. • When the beneficiary sells the asset, he will have to pay income tax on the appreciation (if any). • Exception – asset that produces “income in respect of a decedent” (IRD). - Generally, retirement accounts or crops in field at death. - Produces taxable income to the beneficiary as periodic payments are received. 30
  31. 31. #twitter-hashtag Do you have to pay income taxes when you die? If married, Form 1040 filed by surviving spouse. • 100% of surviving spouse’s income. • Income of decedent earned from January 1 to DOD. If single, final Form 1040 filed by executor. • Income of decedent earned from January 1 to DOD. Form 1040 due date is normal April 15th due date. 31
  32. 32. #twitter-hashtag How is income after DOD reported? Income earned after DOD reported on Form 1041 for the estate. Form 1041 is required if gross income > $600. Estate begins the day after DOD. TIN required for estate. Year end of estate: • Discretionary – does not have to be December 31st. • Cannot be more than 12 months. • Great planning opportunity for shifting of income and related income tax. • Example: - DOD 9/27/13 - Year end could be as late as 8/31/14. 32
  33. 33. #twitter-hashtag How is income after DOD reported? (Cont.) Due date of estate 1041 is 15th day of the 4th month after year end. Example before: - Year end = 8/31/14 - Due date = 12/15/14 Form 1041 required for estate as long as estate is open. • Must wait for closing letter from IRS if Form 706 was filed. 33
  34. 34. #twitter-hashtag Does a beneficiary have to pay income taxes on their inheritance? No. Not on the actual inheritance. If they receive a distribution from the estate, they may be allocated part of the income of the estate. Distribution from an estate is deemed to come first from the income of the estate then from the principal. This income is reported on Form 1041, Schedule K-1. Estate gets a deduction for amount paid to beneficiary so the income is not taxed twice. Planning opportunity with distributions to minimize 3.8% Medicare tax surcharge by looking at beneficiary and estate (both are subject). 34
  35. 35. #twitter-hashtag Medicare Tax on NII for Trusts and Estates Tax = 3.8% times lesser of: • Undistributed net investment income, or • Amount by which AGI > $11,950 Exempt: • Charitable trusts • Qualified retirement plan trusts • Charitable remainder trusts • Grantor trusts • Trusts subject to tax on UBTI 35
  36. 36. #twitter-hashtag Medicare Tax on NII for Trusts and Estates (Cont.) Net investment income (NII) includes: • Interest • Dividends • Annuity distributions • Royalties and rents (unless trade or business) • Other gross income from any passive trade or business including pass - through entities • Net gain from disposition of non-trade or business property or non-active assets • Deductions allocable to NII (investment interest expense, advisory fees, expenses related to royalties and rents, SIT allocable to NII items) 36
  37. 37. #twitter-hashtag Medicare Tax on NII for Trusts and Estates (Cont.) Net investment income (NII) does NOT include: • Trade or business income • Tax exempt interest • Retirement distributions • Wages, salaries, etc. 37
  38. 38. #twitter-hashtag Medicare Tax on Trusts and Estates Can the trust or the estate be treated as materially participating in the business, generating a net investment income (NII) if the trustee or executor is materially participating? Yes, if the trustee is directly involved in the operations of the business. 38
  39. 39. #twitter-hashtag Distribution Planning for Medicare Tax on Trusts and Estates Distributions can carry out income and save tax $’s to trust. Potential tax is shifted to beneficiary. • Trust MAGI limit for Medicare tax = $11,950 • Individual MAGI limit for Medicare tax = $200,000 (if single) or $250,000 (if MFJ) Utilize 65-day distribution election for estates and complex trusts • Distributions made within 65 days after year end are treated as if made on December 31st of prior year • It’s 65 days – not 2 ½ months – typically around March 4th, 5th, or 6th • Election must be made by due date of return 39
  40. 40. #twitter-hashtag Distribution Planning for Medicare Tax on Trusts and Estates (Cont.) Trustee may not have appropriate authority per trust agreement to make additional distributions. • Most trust agreements provide for distributions to meet ascertainable standards (health, education, etc.) and don’t include tax savings strategies as a reason to make additional distributions. 40
  41. 41. #twitter-hashtag Annual gifting Lifetime transfers Utilize lifetime exemptions Credit shelter trust Inta- family loans Family Planning Ideas 41
  42. 42. #twitter-hashtag Family Planning Ideas Implement a current annual gifting program • Make annual family gifts • Utilize annual gift exclusion ($14,000/donee for 2013) • Make direct payments to medical and educational providers Make lifetime transfers during 2013 • Take advantage of $5.25 million lifetime exemption in 2013 • Shift post-gift appreciation and income to donee • Avoid imposition of gift or estate tax on appreciation if transfer delayed. 42
  43. 43. #twitter-hashtag Family Planning Ideas Utilize lifetime exemptions properly • Review wills periodically • Review listing of assets including ownership • Consider temporary portability Consider a credit shelter trust. • Not as critical since portability is permanent • Take advantage of the first-to-die’s lifetime exemption • Assets of trust: - Benefit surviving spouse - Excluded from surviving spouse’s estate 43
  44. 44. #twitter-hashtag Family Planning Ideas Intra-family loans. • AFR interest rate is so low. • June 2013 annual long-term rate = 2.47% 44
  45. 45. #twitter-hashtag Business Planning Ideas Buy-sell agreement Family limited partnership 45
  46. 46. #twitter-hashtag Buy-Sell Agreement Legal contract. Prearranges the sale. Allows control until triggering event. Types of Arrangements: • Redemption - Company has right to purchase stock. • Cross purchase - Other shareholders have right to purchase stock. • Combination - First rights given to company or other shareholders then offered to the other party before shares can be offered to outside party. - Protects sale of company to outsiders. 46
  47. 47. #twitter-hashtag Buy-Sell Agreement Price and sales terms prearranged. Valuation critical to set the share price. • Determine discounts available. • Operational considerations. • Perform while major owner is actively engaged in business. • Other factors: - Competition. - Economic conditions. - Prices of commodities and materials. 47
  48. 48. #twitter-hashtag Family Limited Partnership Parents contribute business and investment assets to a partnership in exchange for a 1% general interest and 99% limited interest Parents gift limited interest to children and/or grandchildren at one time or over an extended period using their annual gift exclusions and lifetime unified credits Accomplishes: • Asset protection • Estate freezing • Income splitting 48
  49. 49. #twitter-hashtag Family Limited Partnership Cont. Gift of partnership interest rather than direct interests in underlying assets Gifts qualify for minority and lack of marketability discounts FLP must have a business purpose IRS is pushing for legislation to eliminate discounts. • Planning opportunity: - Make substantial gifts to fully utilize gift lifetime exclusions. 49
  50. 50. #twitter-hashtag Family Limited Partnership Advantages • Creates valuation discounts for gifts (not as significant with the increased lifetime exemptions) - Minority interest discount - Lack of marketability discount • Donor retains control over transferred assets • LP interests provide liability protection against creditors Disadvantages • IRS may challenge valuation resulting in transfer taxes • Legal entity • Must be operated as “true” business • Administrative costs such as appraisal when making transfers of interests, recordkeeping costs, tax return preparation costs 50
  51. 51. #twitter-hashtag Planning Ideas for the Charitable Minded IRA required minimum distributions Noncash gifts 51
  52. 52. #twitter-hashtag Planning Ideas for the Charitable Minded IRA required minimum distributions • Available for 2013 only • Permits a tax-free distribution from an IRA to a charitable organization up to $100,000 Noncash gifts • Capital gain property-asset held over 1 year • Gifting of stock-limited to 30% of your AGI • Gifts of capital gain property-deductible at FMV on date of contribution 52
  53. 53. #twitter-hashtag Life Insurance Uses Life insurance trust Beneficiary designations Policy reviews 53
  54. 54. #twitter-hashtag Life Insurance Uses • Liquidity to pay debts, expenses, taxes • Support for family • Equalize inheritances • Funding for buy/sell agreements Life insurance trust • Trust receives life insurance proceeds income tax free • Life insurance proceeds are not included in estate • Irrevocable 54
  55. 55. #twitter-hashtag Life Insurance Review beneficiaries of life insurance, retirement accounts, etc. • Crucial if there has been a change in the family such as a death, divorce, marriage, birth, etc. • Beneficiary should not be the estate • Beneficiary designation overrides the will • Use of “per stirpes” language versus default “pro rata” language Policy reviews • Policy illustrations for sustainability • Purpose of life insurance 55
  56. 56. #twitter-hashtag Objectives of Today’s Presentation Overview of estate and gift tax systems • Current law • Compliance Planning ideas • Family • Business • Charity • Life insurance 56
  57. 57. #twitter-hashtag Conclusion Complex area Estate and gift area is constant target when law changes mentioned-current law may or may not be “permanent” 2013 and forward are ideal for estate planning: • Low interest rates • Depressed values • Available discounts • Generous estate and gift exemptions • Low tax rates 57
  58. 58. #twitter-hashtag Conclusion Each person/family is unique There is a no “one size fits all” plan Planning can range from simple steps to more complex strategies Planning during the administration of the estate or trust can defer taxes or shift tax burden Doing nothing is a plan – may not be the best one! 58
  59. 59. #twitter-hashtag Today’s Presenter Anita Hamilton, Partner, HORNE LLP – Tax Anita.Hamilton@horne-llp.com 731.668.7070 59

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