How to Maintain and Administer Your Estate Plan Practical follow through ideas for your estate and related planning By: Martin M. Shenkman CPA, MBA, PFS, JD
Estate Planning During Economic Turmoil To get your copy of this free, timely 50 page report: • Email firstname.lastname@example.org note “Turmoil Report” in subject line for an electronic version of the Report • Call 201-845-8400 and request a written copy of the Report
Action Steps for your Estate and Related Planning • Dealing with economic turmoil • Organize and update your records • Evaluate your plan • Review your documents • Update your plan and documents, if needed • Maintain your plan • Tie up loose ends • Etc.
Organize your records • Beneficiary designations for retirement plans • Beneficiary designations for life insurance • Title to investment accounts; Investment policy statements • Deeds for real estate • Estate planning documents • Business documents • Etc.
When and why to revise your estate planning documents - 1 • Change in circumstances • Change in asset values • Changes in relative value of different assets • Heirs have new/different needs • Divorce; new partner; heir divorce • Reduction in interest rates • Etc.
When and why to revise your estate planning documents - 2 • New laws $3.5M exclusion. • Many wills fund maximum Federal exclusion amount. If your will is old this may have been done when the exclusion was $600,000 or $1M. Who are the beneficiaries? Is this what you want? • Example: $6M estate. Bypass trust was to be $1M for children of prior marriage, balance of $5M to marital trust for new spouse and after her death to kids. Estate declined to $4M with market drop. Kids get $3.5M and new spouse $500,000. • $229,200 state tax if you fully fund. Do you really want to incur this much tax on first death?
When and why to revise your estate planning documents - 2 • New laws - $13,000 annual gift exclusion – some powers still limit to $10,000 • Revise powers of attorney • Modify gift planning
When and why to revise your estate planning documents - 2 • New laws - Continued • HIPAA • 2009 Minimum distribution requirements suspended (Trust required to distribute RMD) • Principal and income act – unitrust payments • FLP discount cases • Grantor trust status – substitution power • Kohler valuation • Etc.
When and why to revise your estate planning documents - 3 • New techniques • Authorizing attorneys/advisers to deal with agents and family in power of attorney • Double pecuniary bypass/marital trust in a will – adjusts for up/down markets • Prepay private school tuition (PLR only) • Guarantees and subordinated loans to support note sales to grantor trusts • Etc.
Annual update meeting – Other steps 1 • Property and Liability Insurance • Adequacy of maximum coverage • Listing of all properties/assets to be covered (e.g., boats) • Coverage of investment properties • Landlord/Tenants coverage versus homeowners (e.g., parent owns home in which child resides, parent may require landlord coverage and child tenant coverage
Annual update meeting – Other steps 2 • Investments • 100 year flood • Updated asset allocation • Asset location versus asset allocation • Investment policy statement for each trust/entity • Coordination with estate planning • GRAT asset allocation • GRAT immunization • Insurance as an asset class • Trust distribution standards and investments
Annual update meeting – Other steps 3 • Asset title (Ownership) • Balance: Asset protection, tax planning, and administrative difficulties • Home: tenants by the entirety asset protection versus tenants in common bypass funding • Loose ends – decedent still in title • Insurance in trust versus outright • Property in entity versus outright • Joint with child or other instead of power of attorney
Annual update meeting – Other steps 4 • Crummey powers • Properly issuing each year’s notices to assure qualification for annual gift status • Saving past notices • Compliance with terms of trust • Annual minutes for every entity/trust • Assure key changes documented • Address key issues, e.g. update stated value • Corroborate respect of entity for asset protection • Document working capital needs for estate tax deferral and proposed legislation eliminating discounts on passive assets
Revocable living trusts • Funding – have appropriate assets been transferred properly to the trust • Operation • Appropriate trustee/co-trustee and other fiduciaries signing in appropriate capacity • Accounts properly titled • Correct tax identification number • Income tax return – “skeleton” • Inheritance and other issues documented and maintained • E.g. revocable inheritor’s trust should pay its proportionate share of income tax directly to avoid argument of marital taint • Updating for any change that would affect a will
Children/Grandchildren trusts • Annual gifts • Gifts of cash • Gifts of family business interests • Gifts of stock to appreciate post gift • Gift tax returns • Automatic allocation rules • Adequate disclosure • GST allocation (e.g., multiple grandchildren beneficiaries of a single trust) • Late allocations (while values depressed) • Investment planning and IPS • Ownership of family entities • Updated governing documents • Discounts in jeopardy?
Insurance trusts (ILITs) • Compilation of trust document, trustee resignations/appointments, fiduciary actions, policies • Needs analysis • 3 year rule – marital savings clause or term coverage • Assuring the trust owns the insurance • Evaluating in light of changing family estate plan • Crummey powers • Divorce considerations • Insurance review – in force illustration; company status; etc.
Grantor Retained Annuity Trusts (GRATs) • Ideal time to GRAT is now • Low interest rates • High discounts • Low asset values • Legislative restrictions looming • Impact of the economic downturn • Immunization • Formalities • Timely payments and corroborating them • Supporting grantor trust status • Income tax returns
FLPs and LLCs • Documentation • Operating agreement • Minutes • Certificates • Operation • Compliance with terms of operating agreement • Entity formalities – who signs • Investment policy statement (IPS) if applicable • Relationship with other family entities and trusts • Proper income tax returns • Gift tax return reporting gifts and sales with “adequate disclosure” • Distributions • Income tax considerations • Estate tax considerations • Asset protection considerations
Family and closely held business matters • Minutes; shares issued; updated bylaws • Shareholder agreements • Gifts • Section 101(j) rules to avoid insurance being taxable • Buy sell agreements – what has economy done to buy/sell agreements • Succession planning
Notices and Disclaimers • This material may constitute attorney advertising. • This Webinar, including all aspects of the audio and visual presentations, are intended to stimulate thought and discussion, and to provide you with useful ideas and guidance in the areas addressed. They do not constitute, and should not be treated as, legal advice. They do not constitute recommendations of any particular planning technique, device or suggestion, or the tax or other consequences associated with them. The speaker does not assume responsibility for your reliance on the information presented. You should verify all statements; determine that they are current and correct, and that they pertain to you, before applying them to any particular situation. • IRS Circular 230 Legend: Any information in this Webinar is not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. Federal, State, or Local tax penalties. Any statement in this Webinar relating to any U.S. Federal, State, or Local tax matter was not written to support the promotion, marketing, or recommendation by any parties of the transactions or materials provided as part of this Webinar.
Thank you for joining us • We appreciate your comments and input on: • This Webinar • The Practical Planner newsletter • Seminars we’ve provided • www.laweasy.com webiste • How can we help you plan through economic turmoil? • Would another Webinar be helpful? What topics should be covered? • Email: email@example.com • Write: Martin M. Shenkman, P.O. Box 1300, Tenafly, New Jersey 07666.