Golden Opportunities for 2012 Estate Planning Ideas That Will Impact The Bottom Line! June 14, 2012 By: John P. Dedon Odin, Feldman & Pittleman, P.C. 9302 Lee Highway, Suite 1100 Fairfax, Virginia 22031 (703) 218-2131 John.Dedon@ofplaw.com

Personal Asset Accumulation Wages Qualified Plans Investment Income Closely Held Business Inheritance

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

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

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

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

Probate 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

Estate Tax : Year Exemption Amount No estate tax* 2010 $5 Million** 2011 and 2012 2013 ? - What will Congress do? *Income Tax **35% Estate Tax Rate ***55% Estate Tax Rate

Taxes are Due Nine Months After Your Death IRS MONTH 9

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

Two Case Studies Dad Mom 2 Children

Profile Married $10 Million + Equity in closely held business, real estate, retirement plans, other liquid assets, life insurance

Assets $ 1,500,000 $ 800,000 Retirement $ 450,000 $100,000 Liquid $ 800,000 Retirement $ 450,000 $100,000 Liquid $10,000,000 Insurance $ 2,000,000 $250,000 Closely Held Business $12,000,000 Total $14.450,000 $350,000 $12,300,000 Grand Total = $10 million +

Objectives Provide for surviving spouse Provide for children at second death Eliminate probate Eliminate or avoid estate tax Eliminate or avoid estate tax in perpetuity Asset protection to protect children from divorce, creditors

Solutions – Case Study I Step I Wills, Revocable Trusts with credit trust and marital trust for surviving spouse, Powers of Attorney and Medical Directives.

Solutions Step II Focus on $10 million of marketable securities Spousal access Trusts Each spouse transfers his and her own assets to the other’s Trust Use exemption amount and file gift tax return

Bank Trustee Grantor Beneficiaries = Wife and Children Wife’s Trust $5 Million Beneficiaries = Wife and Children

Bank Trustee Grantor Beneficiaries = Husband and Children Husband’s Trust $5 Million Beneficiaries = Husband and Children

Why Estate and GST Exemption Applied - $10 Million + Appreciation Estate Tax Free Asset Protection Each Other Children Access

Problems (and Solutions) Divorce Death Legal Issues Support Reciprocal Trust

Solutions – Case Study II Step I Wills, Revocable Trusts with credit trust and marital trust for surviving spouse, Powers of Attorney and Medical Directives.

Solutions Step II Focus on $12 million closely held business Husband transfers discounted non-voting stock to Trust, per appraisal Use $10 million exemption amount even though his name (gift splitting)

$1.2 Million 10% Equity 100% Voting = 100% Control Bank Trustee Trust $10,800,000 Before Discount Grantor 100% of Non-voting stock (90% of Equity) Beneficiaries = Wife and Children

Why Estate and GST Exemption Applied - $10 Million + Appreciation Estate Tax Free Asset Protection Each Other Children Access Husband has control through voting stock and access Trust during marriage Wife is Trust beneficiary

Problems (and Solutions) Divorce Death