The five levels of planning is a systematic approach to explain the succession planning in order to follow easily. What must the five levels, based entirely on your goals and circumstances.
Level One: the basic plan
The situation for the Level One plan that will not be given or living trust, or your existing or living trust or insufficient. The objectives for this type of programming are:
or reduce orEliminate estate taxes;
or avoid the costs, delays and publicity of the court of succession in case of death or disability, which is managed
or protect the heirs of their inability, their disability, their creditors and their predators, including ex-spouses.
To achieve these objectives, either a single jet is more than a revocable living trust that a married person from holding a credit shelter trust and marital trust, general power of attorney for financial matters and confidential durablePowers of attorney for health care and living wills.
Level Two: The Irrevocable Life Insurance Trust (Ilit)
The situation for phase two is that the planning of your company is designed to be superior to the estate tax exemption. Although there is a range in the estate gift and generation-skipping transfer tax, it is likely that the Congress and taxes (perhaps retroactively again) a few times this year. Otherwise, at first in January 2011, the exemption from estate taxes (the $ 3,500,000in 2009) is $ 1,000,000, and the top estate tax rate (was 45% in 2009) to 55%. In any case, for cash gifts Ilit with a $ 13,000 / $ 26,000 annual gift tax exclusion per beneficiary.
Level three: Family Limited Partnership
The situation for the third phase of planning is that a proposed real estate tax that exceeds the life insurance purchased in the second phase. If your gift tax exemption one million U.S. dollars ($ 2,000,000 for married couples) will be used toDonations, ownership of talent and any future appreciation and income for the property be removed from your assets.
More and more would be willing to give gifts to their children if they could continue to manage the property gifted. A family limited partnership (FLP) or family limited liability company (FLLC) can play a valuable role in this situation. They usually the general partner or manager and in that capacity, the FLP or FLLC continue to manage the assets. You caneven a reasonable fee for its services as general partner or manager. Moreover, the income used to pay premiums for a gift or FLP interests Ilit FLLC, the FLP or FLLC then release the $ 13,000 / $ 26,000 annual gift tax exclusion for other gifts.
Level Four: Qualified personal residence trusts owner to new trusts and annuities
The situation for Level Four is planning to reduce the additional need for your own good after one million U.S. dollars / $ 2million gift tax exemption has been used. While gift tax payment is less expensive than paying property taxes, that most people do not want to pay gift taxes. There are various techniques to make substantial gifts to children and grandchildren without paying gift tax substantially.
One technique is a qualified personal residence trust (QPRT). A QPRT allows you to transfer a residence or vacation home into a trust fund for the benefit of your children, while retaining the right to use the residencefor a period of years. filled by the continued right of residence, the value of the remaining interest will be reduced, along with the gift tax.
Another technique is considered an annuity contract (the Great). One is similar to a QPRT large. The typical is large with an income-producing property such as shares or Subchapter S or FLP interests FLLC encouraged. The GREAT you pay a fixed annuity for a number of years. Because of the fee deduction, the gift to remaindermen (children)significantly lower than the current value of the property.
Both conditions can grats QPRTs and sufficient to pass the value of the remaining interest to reduce your children to a nominal amount to zero or even be designed. If you do not survive, however, said that the term, the house is included in your property. It is therefore recommended that a Ilit funded as a "hedging" against your death before the deadline specified.
Level Five: The Zero Estate Tax Plan
Levelfive planning is a desire "to" disinherit the IRS. The strategy combines the gifts of life insurance with gifts for charitable purposes. Take, for example, a married couple, both 55, with $ 20,000,000 Estate. Assuming that there would be no growth or reduction of activity and that both spouses die in a year when the estate tax exemption is $ 3,500,000, and the top estate tax rate of 45%.
With credit shelter trust typically married, when the first spouse dies, is $ 3,500,000, awarded the creditShelter trust and $ 16,500,000 in the marital trust. No federal estate tax is due. However, the death of the surviving spouse is the property tax is due $ 5,850,000. The result is that children inherit only $ 14,150,000.
plans to use Null-estate tax, the Ilit (with a generation gap provisions) with $ 13,000,000 the second to die life insurance funded. These gifts reduce the estate value to $ 18,000,000. In addition, family members, the couple lives each leave $ 3,500,000 (theProperty tax exemption), their children to death of the surviving spouse. The balance of its assets ($ 11,000,000 is free) to a public charity or private foundation property tax. To summarize, which provides zero-estate-tax plan, $ 20,000,000 (ie $ 13,000,000 from $ 7,000,000 from Ilit and living trusts) to the children, instead of $ 14,150,000, and the charity receives $ 11,000 instead 0.000 nothing, and the IRS does not receive anything, instead of $ 5,850,000.
In summary,with some advanced planning, you can reduce property taxes, avoid probate court, then set your wishes, protect your heirs and creditors, former spouses, and property taxes.
As for us, this article provides revenue, is intended or should be used in writing and can not be a taxpayer to avoid penalties that may be imposed on the taxpayer to use, according to Circular 230
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