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Chapter 1

Chapter 1. Estate Planning An Overview. Definitions. KNOW THESE TERMS -- not word for word defini-tions but how they work. Estate Planning Life Interest versus Estate in Fee Simple Absolute Escheat (to the state) Intestate Will (Last Will and Testament) Codicil

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Chapter 1

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  1. Chapter 1 Estate Planning An Overview

  2. Definitions KNOW THESE TERMS -- not word for word defini-tions but how they work • Estate Planning • Life Interest versus • Estate in Fee Simple Absolute • Escheat (to the state) • Intestate • Will (Last Will and Testament) • Codicil • Equitable Apportionment • Residue (Residual) (in a LW&T) • Predecease (like if I “predecease” my wife) • Donor • Donee • Grantor

  3. Types of Income Taxes Federal Taxes • Income Tax • Payroll Taxes • Estate Taxes • Gift Taxes • Excise Taxes State Taxes • Income Tax • Property Tax • Sales Tax • Inheritance Tax • Excise Taxes

  4. Income Tax vs. Estate / Gift Tax • What is different between the two?? • When we say “transfer tax”, what are we referring to?? • How do the tax rates compare?

  5. Gift Tax versus Estate Tax • What is the differences between the two? • What are the lifetime exclusions of each? • How do the tax rates compare? • Why is it necessary to apply transfer tax to lifetime gifts instead of just applying the tax at death??

  6. What is the objective of Estate Planning??

  7. What is the objective of Estate Planning?? • Accumulation (of wealth) • Conservation (of wealth) • Distribution (of wealth) What is this man’s Estate Plan??

  8. “Give your kids enough money so they can do anything, but not enough so that they can do nothing” “It’s hard to teach a new dog old tricks” Warren Buffet

  9. How do we own property?? • Fee Simple Absolute ….. outright ownership • Life Estate …… ownership for a period of time …….. temporary ownership Under what circumstances might we use a life estate??

  10. What if we die intestate in SC?? • Spouse and Children Spouse gets everything ….. unless there are children. Then Spouse gets half / children get half. ŸWhat about the age of the children? ŸIf children predecease but have children (grandchildren), the grandchildren step into the shoes of their parents. • No spouse or children ……. Goes to your parents. • No parents ……. Goes to brothers and sisters (or children or brothers and sisters (nieces and nephews)) • Other relatives • State of SC Note: Anti-Lapse Providsion …….. Name a charity if no “relatives” Besides wealth transfer and financial assets, what other BIG question is dealt with in a LW&T?? hint: children??

  11. Roles of Advisors in Estate Planning • Attorney • Bank (Trust) Officer • Investment Advisor / Financial Planner • CPA / Accountant • Insurance Agent What role does each play??

  12. The following table shows how the gift-tax rate will decrease over the next several years and how it reverts to pre-tax law levels in 2011 with the expiration of the new tax law:

  13. 2007 Estate and Gift Tax Rates

  14. 2005 Tax Revenue ($2.2 Trillion) – US Government

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