Estate Planning Essentials By: John P. Dedon Odin, Feldman

Estate Planning Essentials By: John P. Dedon Odin, Feldman & Pittleman, P.C. 9302 Lee Highway, Suite 1100 Fairfax, Virginia 22031 (703) 218-2131 [email protected] 1

Personal Asset Accumulation Wages Investment Income Qualified Plans Inheritance 2

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Proper Planning Will Allow You to . . Give what you have, To whom you want, When you want, and In the way you want And Pay Less for: Court Costs Attorney’s fees Estate Taxes 4

We want to give our children enough . but we don’t want them to blow it! 5

Other Fundamental Planning Issues Children from a previous marriage and second spouse Children with special needs Children with creditor, financial, or marital problems Property in multi-states Competency issues in future (parents) Spouse who would need help managing and investing funds 6

Assets At Risk (4 Areas of Risk) Potential Creditors 35% Income Tax 3-6% Probate & Legal Expenses Estate Tax (?) IRS 7

Estate Tax : Yea r2010 2011 and 2012 2013 Exemption Amount No estate tax* 5 Million** 1 Million*** ? - What will Congress do? *Income Tax **35% Estate Tax Rate ***55% Estate Tax Rate 8

Current Lifetime Gifting Rates 13,000 Annual Exclusion 2011 and 2012 - 5 Million 2013 - 1 Million 9

Estate Beneficiaries Charity IRS GWU Family 10

IRS MONTH 9 11

Probate Cost Time Delays Publicity Property In Multiple States 12

Assets Passing Without a Will Go Through Probate Assets Passing With a Will Go Through Probate 13

Benefits of Revocable Living Trusts I. Revocable Trust Avoids Probate a. Cost b. Time Delays c. Publicity d. Problems with property in multiple states II. Incapacity Planning III. Estate Tax Planning a. Bypass and Marital Trusts b. GST Planning 14

BASIC PLANNING SHOULD INCLUDE Wills Revocable Living Trusts Advanced Medical Directives (Living Wills) Powers of Attorney 15

Assets Passing at Death 1) 2) 3) 4) Probate Revocable Living Trusts Beneficiary Designations Titling of Assets - Tenants In Common - Tenants By The Entirety (Assets Pass to Surviving Spouse) - Joint Tenants with Right of Survivorship (Assets Pass to Surviving Owner) 16

Case Study Dad Mom Grandma 2 Children 17

Profile Married 2 Million Equity in real estate, retirement plans, other liquid assets, life insurance 18

Assets 800,000 300,000 Retirement Liquid Insurance 450,000 100,000 2,000,000 250,000 Total 2,450,000 350,000 900,000 Grand Total 4.8 million 2,000,000 19

Objective s Provide for surviving spouse Eliminate or avoid estate tax Eliminate probate Provide for children at second death Provide for Mom Charity 20

Solutions Wills, Revocable Trusts with credit trust and marital trust for surviving spouse, Powers of Attorney and Medical Directives. At second death, trusts for children, with distributions at ages 25, 30, and 35. Special Needs Trust for Grandma. Charitable Distribution 21

Using Revocable Trust to Reduce Estate Tax and Probate Upon Husband’s Death 2,450,000 Wife’s Trust Husband’s Trust 2 Million Joint Property Marital Trust Tax Free Marital Share: Assets 5 Million 350,000 5 Million Inheritance (Tax-Free) Bypass/Credit Trust (Husband’s Exemption 5,000,000) Spouse Beneficiary But 2013 ? 1 Million 22

Second Death Special Needs Trust 25 (1/3) 30 (1/2) 35 Balance Need Executor, Trustee, Guardian 23

Problems Potential Titling Problems Wife dies first, only 350,000 Jointly held property 24

Other Estate Tax Problems 1 million exemption amount in 2013? Charitable Planning As A Solution Distributions Charitable Remainder and Lead Trusts Life Estates 25