After The Fiscal Cliff

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Fiscal CliffWhat has Changed in the Estate and Gift Tax Laws? By Geri McHam

Congress passed the American Taxpayer Relief Act of 2012’’ (“ATRA”) that made the federal estate tax exemption permanent on January 1, 2013.  In a last minute move before we went over the “fiscal cliff”, in an 11th hour tax law passed by the Senate on New Year’s Eve, and by the House of Representatives one day later, mostly what Congress did was to make permanent the system that has been in effect for the past two years.  I am just thankful that we now have permanence that has been missing for the last 12 years.

What’s most important to us as planners is how the “fiscal cliff” deal changes will affect our clients’ existing estate plans and whether any changes are necessary.

Most estate planning documents deal with non-tax issues, including the very valuable benefit of structuring assets to avoid the probate process at death and to provide creditor protection for beneficiaries.  The Power of Attorney, Conservator, and healthcare documents are all extremely important and necessary.  These documents are critical to avoid unnecessary court oversight and expense, delay, and intrusion.

What are the provisions of the ATRA that will affect my estate planning practice or clients?

Top gift, estate and GST tax rates are set at 40%. ATRA 2012 establishes the top gift, estate, and GST tax rates at 40% for gifts made and decedents dying in 2013 and thereafter. This top rate is higher than the 2012 rate of 35%, but lower than the 55% rate that would have come into effect on January 1 in the absence of legislation. This top rate will apply to transfers exceeding the exemption amounts.

Exemption amount:  Permanently set at $5,000,000 per client, indexed for an inflation adjustment beginning 2012 ($5.12 million in 2012).   The estate tax exclusion amount for deaths in 2013 will be $5.25 million.

Gift Tax Rate:  The estate and gift taxes will remain unified, so the $5 million exemption also applies for gift tax purposes, and will follow the estate tax rate.  The rate was permanently set to 40% of the amount over the exemption.  In addition, the annual gift exclusion amount was raised to $14,000 per person this year.

Generation Skipping Tax Rate:  The generation skipping tax exemption follows the estate tax rate.  The rate was permanently set to 40% of the amount over the exemption.

Portability made permanent:  Further, the deal continues the estate tax portability provisions that allow a surviving spouse to take advantage of his or her deceased spouse’s unused exemption amount. This provision allows a surviving spouse to avoid complicated estate planning by recognizing that gifts between spouses are typically tax free and allowing the exemption to be portable between both spouses.  In order to utilize this, a 706 tax return MUST be filed within 9 months, so in my opinion, portability is less than optimal in many cases.

Use of the A/B/Bypass Trust:  Some of the discussion since passing this legislation has focused on the use of A/B trust structure, and whether planning is better without the credit shelter trust.  I still am in favor of estate planning with an A/B/C trust, especially to preserve a decedent’s share in case of a remarriage of the survivor spouse, and also to allow the flexibility of state estate tax planning.  As long as the trust is flexible enough to allow the options of funding the various sub-trusts to the survivor spouse, which ours does, you still have the benefit of planning that gives the most flexibility to the survivor.  We will review the provisions in our trust as a precaution

Upside to IRA Planning in ATRA

Hidden in the law — along with the typical year-end riders attached to a last minute piece of legislation, including tax breaks for NASCAR and the alternative fuel industry — were a couple of tangible impacts to the retirement world, though one may offer just short-term benefits. First, it looks as though folks hoping to roll over their regular 401(k)s to Roth 401(k)s may get an opportunity for a long-term tax break — lord knows you’re going to need one, as your taxes really are going to go up.  A new provision in the package will allow 401(k), 403(b) and 457(b) participants to make the leap to a Roth 401(k) without waiting for the traditional qualifying events (retirement, reaching age 59 1/2 or changing jobs).  Why? Because doing so immediately sends that tax deferral — which you’ll have to pay up front — to Washington, rather than waiting until your far-off retirement day, and Washington wants your taxes. It’s a huge opportunity for regular folks to make that Roth conversion – provided they have the financial wherewithal to pay those taxes much sooner than later.

Potential future legislation. It is important to note that there may be a push for additional revenue-raising legislation as political debates continue. The current administration has expressed its desire to limit the advantages of GRATs, grantor trusts, GST-exempt dynasty trusts, and transfers in family entities that qualify for valuation discounts. Clients who might consider employing those techniques may wish to do so sooner rather than later.

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As an attorney in our Licensed Attorney Network, you will be able to provide the finest estate planning document packages to your clients, matured through more than 1,000 network attorneys, and utilize our excellent support services as your back office. Our system allows you to build the estate planning portion of your business by receiving referrals from our network of Independent Advisors, save valuable time on research of federal law changes, and reduce the cost of generating new clients.  View more

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As an attorney in our Licensed Attorney Network, you will be able to provide the finest estate planning document packages to your clients, matured through nearly 30 years and a 1,000 network attorneys, and utilize our excellent support services as your back office. Our system allows you to build the estate planning portion of your business by receiving referrals from our network of Independent Advisors, save valuable time on research of federal law changes, document processing and reduce the cost of generating new clients. View more


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As an Independent Advisor in our professional network, you will be able to support your client from start-to-finish by assisting in the non-legal aspects of the estate planning process.  This includes educating your clients on estate planning concepts, gathering information, working in conjunction with an attorney in our network, to create important planning documents, a living trust, aiding in the execution and funding of the trust, and assisting with the settlement process.  View more


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As an Independent Advisor in our professional network, you will be able to support your client from start-to-finish by assisting in the non-legal aspects of the estate planning process.  This includes educating your clients on estate planning concepts, gathering information, working in conjunction with an attorney in our network, to create important planning documents, a living trust, aiding in the execution and funding of the trust, and assisting with the settlement process. 

1.  Once your application has been approved,  you will receive a sample trust (full binder) customized to your home state, a training manual, a sample client workbook, and The Living Trust book by Henry Abts III.

2.  When you have a client you will  input their information into our client workbook (provided online); then you will provide the workbook to an attorney in our network to create the trust.

3.  The attorney will send us the client/trust information electronically; we will then prepare the documents and ship them by FedEx to you or the attorney’s door within 2 weeks.  (A mini-summary is printed in addition to printing the trust and provided in the shipment for the attorney to forward to you.)

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A training course is included in your set-up fee, The Basic Institute for the Estate Preservation is offered several times a year.  It is necessary to complete this course within your first year of affiliation.  We require this course because we have found it to be extremely valuable in your performance and success.  We've gathered nearly 30 years of proven results.  For information on The Basic Institute for the Estate Preservation please click here.

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We offer free referrals to our trusted network professionals that are generated through The Living Trust book and through our website.

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1. Request your Information & Application Packet, please fill it out and submit it by faxing to 775-828-4444 or emailing it to alliances@tepsource.com 

2. Once we receive the application, we will review and approve it.  We will contact you upon approval and payment. (Any application that is not accepted will receive a full refund or not be processed.)

3. We will send, by FedEx ground, a sample trust (full binder) for your state, a sample client workbook, and The Living Trust book by Henry Abts III.  Included in your set-up fee is our educational training course; The Basic Institute for Estate Preservation, it is recommended you attend this course at your earliest convenience, and modules are now available online if you prefer to get a quick start.  The training manual you will receive is for this training course.

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Comprehensive Estate Planning Documents - Revocable Living Trusts - Will Package - Ancillary Documents

What Gives Our Documents the Leading Edge?

Detailed and comprehensive, these documents have been developed through nearly 30 years of hands-on improvement by hundreds of attorneys throughout the US resulting in thousands of satisfied clients. They are drafted to ensure accuracy with current state and federal laws, and are updated as changes occur.

The Revocable Living Trust contains over 222 carefully worded provisions so that the trust can accommodate a client’s changing circumstances and to cover additional contingent situations without needing to be legally modified.  The trust is also universal; that is applicable in all 50 states, for a client may eventually own property in or even move to another state.

I Would Like an Advisor to Contact Me to Discuss My Estate Planning Needs

Here is a list of what our package includes:

  • 1 set of Ancillary Documents per person (DPOA for assets, DPOA for healthcare or Advanced Directive, Living Will, Nomination of Conservator, Appointment of Guardian, and Anatomical Gift)
  • Abstract of Trust
  • Trust Certification
  • Pour-Over Will
  • Assignment of Furnishings and Personal Effects
  • 1 three-ring professional quality binder with tabs and inserts
  • 1 set of quality documents with Plain English summaries
  • Funding Manual

We offer a wide variety of estate planning solutions and documents customized at your direction.

Nationally Transportable Living Trusts

Single A Trust
Married A Trust
Married/Unmarried AB Trust
Married ABC Trust
A Q-TIP Trust (for married person)
Partner AA Trust
Partner AB Secure Trust (for Domestic Partners)
Complete Amendment
Partial Amendment

Vital Ancillary Documents

There are a number of other legal documents that are not legally required parts of the Living Trust but which should be included in or with the Trust to provide for future contingencies. Our ancillary documents offer you additional control over your person or assets. These documents are so vital; they are included, at no additional charge as part of your comprehensive document package.

Pour-Over Will
Living Will
Durable Power Of Attorney For Health Care
Durable Power Of Attorney For Assets
Nomination Of Conservator/Guardian
Appointment Of Guardian
Anatomical Gift

Advanced Planning Vehicles

Because many individuals have needs that go beyond basic estate planning, we offer numerous Advanced Estate Planning Solutions that can be incorporated into your overall estate plan. These documents should be considered as a supplement to your Living Trust to shelter your hard-earned estate from unnecessary estate taxes.

■Asset Management Trust (Spendthrift Trust)
■Beneficiary Trust (Dynasty)
■Buy/Sell Agreement
■Catastrophic Illness Trust (Medicaid Planning Trust)
■Charitable Remainder Trust
■Family Catastrophic Illness Trust
■Gift Trust
■Insurance Preservation Trust- Spousal Support (ILIT)
■Insurance Preservation Trust (ILIT)
■IRA/Qualified Plan Trust
■Land Trust
■Special Needs

“A POORLY WRITTEN TRUST IS WORSE THAN NO TRUST AT ALL.” Henry Abts, III

A poorly drawn trust can become a restrictive nightmare for the surviving spouse or successor trustee and beneficiaries. As long as the clients are living, it does not matter what a Living Trust says, because it can always be revoked. However, upon the death of the client, these poorly written Trusts are going to end up in probate court, with petitions being presented to revise or clarify the Trust wording. (Even though the main advantage of a Living Trust is to avoid probate, a Trust falls under the legal jurisdiction of the probate code; any need for clarification of a Trust therefore must be handled in the probate courts.)

One size does not fit all – no two people or families are alike! Your family’s needs, dynamics, personalities, and values are unique. If you use a form kit, you are asking for problems. Even LegalZoom.com reveals that 80% of people who fill in blank forms to create legal documents do so incorrectly. Plus, if your Will or Living Trust is not executed properly, it becomes invalid. If you overlook the opportunity to write specific instructions about how you want to provide for your spouse and children, your family will receive whatever the “cookie cutter” document provides, and you may not know of other options. The only estate plan you rely on is the one that is custom prepared by a qualified estate planning professional attorney.

A well-written comprehensive trust document comes about only through extensive experience. The Estate Planning Source’s trust documents are the result of more than 28 years of working together with legal counsel to cover every imaginable contingency.

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Who We Help

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JOIN OUR INDEPENDENT NATIONWIDE NETWORK

 

ATTORNEY

As an attorney in our Licensed Attorney Network, you will be able to provide the finest estate planning document packages to your clients, matured through more than 1,000 network attorneys, and utilize our excellent support services as your back office. Our system allows you to build the estate planning portion of your business by receiving referrals from our network of Independent Advisors, save valuable time on research of federal law changes, and reduce the cost of generating new clients.  View more

ADVISOR or Financial Planners

As an Independent Advisor you will be able to support your client from start-to-finish by assisting in the non-legal aspects of the estate planning process.  This includes educating your clients on estate planning concepts, gathering information, working in conjunction with an attorney who is affiliated with our network, to create a living trust, aiding in the execution and funding of the trust, and assisting with the settlement process.  View more