2013 VADA Family Convention SunTrust Presentation Greenbrier SunTrust Presentation March 29, 2016 By: John P. Dedon 1775 Wiehle Avenue, Suite 400 Reston, Virginia 20190 (703) 218-2131 John.Dedon@ofplaw.com

Financial Objectives Build family wealth during life Control and enjoy it during life Preserve it upon death

Obstacles Income taxes Estate Taxes Probate Costs Predators (Asset Protection)

Current Law Federal Estate Tax $5 Million Indexed for inflation $5,450,000 Portability 40% Federal Estate Tax Rate

President Obama’s Budget Proposal: Limit GRATs: 10 year minimum term and remainder have some value. Limit dynasty trusts to 90 years protection from GST tax. Eliminate stretch IRAs for non-spouse beneficiaries. Limit sales to grantor trusts (estate tax inclusion on assets sold to grantor trusts)

Interplay of Estate and Income Tax Planning Post-ATRA Decision between gifts and bequests more complex Income tax basis of property received by gift versus bequest: Gifts – “carry-over” basis Bequests – “step-up” in basis to fair market value at death Effect of large, inflation adjusted federal estate tax exemption Can shelter more property from federal estate taxes Heirs receive basis step-up Benefit magnified in states with income taxes but not estate taxes Must compare total income/capital gains taxes on later sale of gifted property vs. estate taxes on inherited property

Income Tax Planning Post-ATRA Individuals now face much higher income tax exposure: Maximum federal individual tax rates 39.6% income ($400,000 (single) / $450,000 (married)) 20% capital gain ($400,000 / $450,000) “Pease limitation” on itemized deductions for adjusted gross income (AGI) over $250,000 / $300,000 Effectively raises federal income tax rates by 1.2% State income and/or estate tax exposure can increase rate to 50% versus 40% estate and gift tax rate

Planning for the Couple with Assets under $10.9 Million Focus on asset management and income tax planning Trusts to protect and manage inheritance Income tax planning may be more important than transfer tax planning Portability v. Traditional Credit Shelter Trust

Planning for the Couple with Assets in Excess of $10.9 Million Continue to use transfer tax planning techniques Gifts to GST trusts Sales to grantor trusts GRATs Charitable lead trusts SLATs Watch basis of gifted assets

Probate Obstacles Cost Time Delays Publicity Property In Multiple States Hassle Avoid Probate With Revocable Trust

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

Non-Tax and Non-Administrative Objectives and Concerns Children from a previous marriage and second spouse Children with creditor, financial, or marital problems Children with special needs

ASSET PROTECTION Titling of Assets Retirement Plans Family Partnerships/LLCs