5 STAGES OF ESTATE PLANNING

5 STAGES OF ESTATE PLANNING

CORE ESTATE PLANNING

REVOCABLE LIVING TRUST (RLT)
The RLT comes into effect during settlor and settlor’s spouse and children. Upon the settlor’s death, all money and property in a living trust pass to the beneficiaries via the RLT, and not the settlor’s will. Therefore, any money or property in RLT avoids probate.

POUR-OVER WILL
The essential companion to any RLT. It is a very simple document which at death, transfers any individually owned probate property to the RLT for proper distribution heirs/beneficiary and allows the individual to name guardians for his/her minor children and appoint executors for their estate.

DURABLE POWER OF ATTORNEY
A durable Power Of Attorney is an important supplement to any well-planned estate since it can provide for an individual’s welfare in the event he/she is incapacitate. The responsive preservation of one’s health, wealth or business while alive but incapacitated is perhaps more crucial than determining proper disposition at death.

LIVING WILL/HEALTH CARE DIRECTIVE
The Health Care of Attorney allows an individual to appoint an agent who shall have all powers to consent to health decisions.

DISCOUNT ESTATE

FAMILY LIMITED PARTNERSHIP (FLP)
The purpose of the FLLC and FLP is to consolidate management investment and disposition of asset in a single business entity and transfer economic in the assets to younger generations without providing recipients with direct control over asset. One or more family members may contribute assets to the FLLC or FLP. The FLLC and FLP have two classes of owners: general partners (GPs) and limited partners (LPs). Any discount properly reducing the value of LP units reduce the gift or estate tax exemption used, or gift or estate tax paid, in transferring those units. Assets contributed to the FLLc or FLP will recieve certain discounts which may be appropriate in the valuation of LP units.

RECAPITALIZE S CORPORATIONS
Create voting and non-voting stock. Obtain asset valuation discounts and creditor and liability protection. FRACTIONALIZE
Self LP interest to intentionally Defective Irrevocable Trust in exchange for promissory notes.

MOVE ASSETS AND PROVIDE LIQUIDITY

ANNUAL EXCLUSION
Maximum Annual Gift Tax Exclusion.
USE OF APPLICABLE ESTATE TAX AND GENERATION SKIPPING TRANSFER (GST) TAX EXEMPTION Maximize the estate tax exclusion and amounts and GST exemption.

INTENTIONALLY DEFFECTIVE IRREVOCABLE TRUST (IDIT)
An IDIT is drafted so that the grantor will be treated as the owner for income tax purposes. A proper estate planning freeze technique involves a sale of limited partnership or member interests, usually for an installment note, to an IDIT. The value of the assets is “frozen” at the value of the note received in the sale so that the future appreciation in the value of the assets sold to the IDIT transferred to the beneficiaries of the IDIT without gift or estate tax.

GRANTOR RETAINED ANNUITY TRUST (GRAT)
A GRAT is a gift trust which essentially enables you to place assets into trust, retain an interest in the property (i.e, income stream) for a stated period of years of the years and at the end of the period transfer the asset to the remainder beneficiaries(typically your children). Since you retain an interest in the property, the value of the gifts is reduced.

QUALIFIED PERSONAL RESIDENCE TRUST (QPRT)
The QPRT provides a mechanism which you could irrevocably transfer your residence and/or vacation home to a trust, retarining a term interest, with your children as the ultimate beneficiaries. During the term period, the house would remain in your name and under your control; thereafter, it would be given to the beneficiaries pursuant to their term to the term of the QPRT.

IRREVOCABLE LIFE INSURANCE TRUST (ILIT)
AN ILIT is a specific type of irrevocable trust. Typically, an ILIT provides for distribution of trust income and/or trust assets to or for the benefit of the grantor’s spouse or children. The trust can also be an indirect source of liquid funds for the benefit of the grantor’s estate. Ownership of a life insurance policy (usually on the grantor’s life) is vested in the trust.

CHARITABLE PLANNING

CHARITABLE REMAINDER TRUST
The Charitable Remainder Trust is an revocable trust which is a split interest trust because you designate separate beneficiaries for its income interest and for its remainder interests. In general, with this type of trust you would retain an income interest in the trust for life (e.g., five percent annual income stream). The remainder interest after death will belong to the charity.

CHARITABLE LEAD ANNUITY TRUST
Charitable Lead Annuity Trusts permit you to leave a charitable beneficiary a private foundation established by you and controlled by your descendants or a donor advised fund of your descendants could be the advisor and avoid significant estate taxes.

PRIVATE FOUNDATIONS
Private Foundations permit your family in charitable decisions, control charitable assets and donations, obtain significant income tax deductions and remove from your taxable estate.

ASSET PROTECTION

QUALIFIED RETIREMENT PLANS
Qualified plans are a vehicle for the successful business owner and professional to save for retirement. Qualified retirement plans provide for substantial tax deductions today and tax advantaged income in the future. A properly designed qualified plan will help you keep more of what you earn.

INTERNATIONAL ASSET PROTECTION TRUST (IAPT)
One of the most important pieces to any sophisticated asset protection plan is the IAPT. An IAPT can offer the highest level of asset protection available under current law and enables an individual to establish a “start-over” fund in the event of unforeseen misfortune. This level of asset protection is achieved through a variety of components found in certain foreign jurisdictions which permit the creation of a “self-settled spendthrift Trust” which is exempt from the settlor’s claims. The IAPT can be effectively funded with almost any type of asset. These structures can hold assets in any jurisdiction, even the U.S. attorneys from the date of the transfer. IAPT allows flight provisions which permit the trustee and the “Trust Protector” to monitor the trust assets and immediately move them to a similar protective foreign jurisdiction in the event it appears the assets are threatened in any way.

INTERNATIONAL PRIVATE PLACEMENT VARIABLE LIFE INSURANCE
In addition to the traditional benefits afforded by life insurance (tax-free accumulation of assets, tax free policy loans and tax-free death proceeds),foreign insurance companies have developed investment-oriented contracts which provide reduced fee structures when impaired to domestic insurance contracts. Such life insurance policies provide you with the opportunity to achieve tax- free accumulation in your investment portfolio.

CAPTIVE INDURANCE COMPANIES
A captive is an insurance organized primarily for the purpose of insuring or reinsuring the liabilities of the business owners. The structures provide federal, state and international tax advantages. They can be established either domestically or internationally.

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