PROF. WILLIAM P. STRENG
INTRO TO ESTATE PLANNING COURSE
Estate Planning course subject matter includes:
1) Tax – federal estate, gift & generation skipping tax & income tax;
2) State property/trust/estate laws
Conflict of laws
Insurance, annuities, IRAs, JTWROS
5) The advisor’s ethical considerations.
Choices in Structuring an Estate Planning Course
1) Fundamental (a) property & (b) tax (& business) law considerations/structuring analysis.
2) Psychological elements/intra-family welfare/family wealth transfer counseling.
3) Document preparation (e.g., wills, trusts, etc.), i.e., mechanics.
Current Status of the Estate/Gift Tax Laws
2009 - $3.5 million estate tax exclusion
2010 – estate tax and GST expired – but then retroactive enactment (late 2010) ($5 million exclusion); possible to opt out of estate tax.
2011 & 2012 – $5 million exclusion (indexed?) amount for estates and for gifts.
2013 – to return to $1 million exclusion & high tax rate structure (pre-Bush tax cuts).
But (2013): PERMANENT FIX – American Taxpayer Relief Act of 2012 (ATRA) –
40% rate and $5 mil. exclusion (indexed).
STRUCTURE OF ESTATE PLANNING MATERIALS
See Table of Contents for the Estate Planning Materials. Segments include:
1) The basics in property transfer structures.
2) Gifts – sharing wealth before death; shifting appreciation potential and management to younger generation(s).
3) Death-time wealth transfers – planning.
4) Other property transfer techniques – alternatives to probate and gift transfers.
Chapter One – Focus on Estate Planning Basics
What is the focus of “Estate Planning”?
What skills are necessary for an “estate
planner” to be successful?
Who does estate planning? Attorneys?
Others? See p. 12 in materials.
What are the ethical and professional
responsibilities of the advisor? Estate planning
attorneys are governed by State Bar rules.
Finding the Essential Factual Information p.11
1) Family information.
2) Financial information - information concerning assets & liabilities, i.e.,
3) Information concerning the client’s objectives for disposing of assets and expectations – i.e., client’s asset disposition strategies.
Estate Probate p.13 Administration Mechanics
Locate the Last Will.
File the Last Will in the Probate Court.
File inventory - What is an “Independent Administration”?
Satisfy estate liabilities owing to creditors.
Satisfy transfer tax and income tax obligations.
Distribute the assets to the beneficiaries.
Final accounting in the Probate Court.
Mechanics are subject to provisions of the Texas Estates Code (effective 2014)
Properties which are transferred beyond jurisdiction of the local probate court:
1) Revocable trust assets
2) JTWROS assets
3) Life insurance proceeds – beneficiary designations
Retirement plan distributions – beneficiary designations
5) Payment on death (POD) accounts, including transfer on death deed.
Professional Responsibilities of the Estate Planner
Rules of Professional Conduct: p.14
- Avoid conflicts of interest (including between spouses) – How deal with these conflicts? Waiver? Agreement? (& next slide)
Possible Situations of Conflicts of Interest
Possible conflicts of interest:
Spousal – possible disputes – community vs. separate property;
children from a prior marriage
Representing the failing parent of the client.
Representing (a) the estate or (b) the trust vs. the beneficiaries.
Representing the family business (i.e., multiple family member partners).
Asset Management for the Client? P.20
What should the advisor do to help the client concerning the client’s financial affairs?
Life insurance and casualty insurance review?
Social security/retirement benefits analysis?
Medicare/medicaid benefits assistance & extended care insurance arrangements?
Estate Planner’s Fee & Deductibility p.21
How determine the amount of the fee for estate
Who pays this fee? (Employee’s employer?)
What availability of a federal income tax
deduction for the cost of estate planning?
Note the Merians case. P.24
Why be concerned about the availability of this
federal income tax deduction?
Limits on Tax Deduction
§67 – miscellaneous itemized deduction?
Applicable to trusts – Rudkin decision
§68 – limitation at the top – expired, but revived in the year 2013? Permanent extension in ATRA-2013. Applicable above $300,000 for joint return.