The Other Side of the Estate Planning Fence: Working with Lawyers and Accountants Jeanne C. Blackmore, Esq.

Introduction Overview of basic estate planning Review of current federal and state estate tax laws Review of new income tax rules on charitable giving Review of common charitable giving structures

Basics of Estate Planning End of life care documents Guardian designation Structuring the estate plan to avoid probate and to mitigate estate taxes Deciding how to dispose of assets after death

Why Charitable Giving? Minimize estate taxes Children are adequately provided for Sufficient assets to provide for children and engage in philanthropy Want to leave a philanthropic legacy Philanthropy is important to family culture

Components of Basic Estate Plan General Power of Attorney Advanced Directive for Health Care Pour-over Will Revocable Trust (or two, if taxable estate in Vermont) Other stuff: Bill of Sale for personal property Deeds Assignments of business interests Beneficiary and transfer on death designations

Overview of a Non-Taxable Estate Will For Husband Will For Wife Wills pour stuff into trust if you forget to put it there during life, or you mess up a beneficiary designation Joint Trust Put stuff in trust during life to avoid probate on death To the kids in equal shares on the second death

Overview of Taxable Estate Will For Husband Will For Wife Will pours stuff into trust if you forget to put it there during life, or you mess up a beneficiary designation Put stuff in trust during life to avoid probate on death Trust With Trust B Trust With Trust B For benefit of surviving spouse on first death To the kids in equal shares on the second death No estate tax until second death

What the heck is probate?

Probate Applies to assets that do not pass automatically on death Process of transferring title from the decedent to the intended recipient under the will or laws of intestacy No probate: Assets with a beneficiary designation: retirement accounts, life insurance, bank accounts with a payable on death designation Jointly-held assets – real estate, bank accounts Assets titled in trust during the decedent’s life time Probate: Pretty much everything else

Introduction Overview of basic estate planning Review of current federal and state estate tax laws Review of new income tax rules on charitable giving Review of common charitable giving structures

Review of Current Estate Tax Laws Federal estate tax Exemption about $11.2 million per person Portable between spouses Sunsets in 2025 and returns to $5.5 million per person exemption Unified transfer tax regime covers gifts during life and bequests on death

Review of Current Estate Tax Laws, Continued Vermont estate tax Exemption is $2.75 million per person Not portable between spouses Flat rate of 16% No unified transfer tax regime. Gifts subject to tax only if made less than 2 years before death.

Vermont Taxable Estate Will For Husband Will For Wife Trust With Trust B Trust With Trust B For benefit of surviving spouse on first death To the kids in equal shares on the second death No estate tax until second death

The Pie in a Taxable Estate For the kids For the government For charity If one gets more the other gets less

The Pie in a Non-Taxable Estate For the kids For charity If one gets more the other gets less

Impact of Current Estate Tax Laws Estate tax no longer a motivating factor for charitable giving For folks with charitable intentions and large retirement assets, these remain the most tax efficient assets to donate

Introduction Overview of basic estate planning Review of current federal and state estate tax laws Review of new income tax rules on charitable giving Review of common charitable giving structures

Review of Current Income Tax Laws Tax Cuts and Jobs Act Reduced income tax rate brackets Personal exemption eliminated Standard deduction increased Itemized deductions curtailed or eliminated

Review of Current Income Tax Laws, cont’d Miscellaneous deductions eliminated Deduction for qualified business income added Charitable deductions remain deductible Cash donations generally deductible up to 60% of adjusted gross income

Introduction Overview of basic estate planning Review of current federal and state estate tax laws Review of new income tax rules on charitable giving Review of common charitable giving structures

Popular Charitable Giving Structures Outright Gifts Charitable Remainder Trust Donor Advised Fund Private Foundation

Outright Gifts Bequest by will or trust? Subject to probate court oversight? Trust administration requirements adequate? Size of Bequest? Use percentage bequest to ensure portion of estate for children Make bequest by reference to a schedule Adequate to eliminate estate tax

Outright Gifts, continued Should the charity be notified of the bequest? Help with planning and budgeting Avoid pressure from charity Should the terms of the bequest be restricted? Revoked if administration of bequest noncompliant? Require the charity to commit to certain terms? Should the charitable recipient be subject to a contingency?

Charitable Remainder Trust Funded during life, on death, or both Create income stream for Donor(s) or other lifetime beneficiary Subject to strict statutory and regulatory scheme Scheme does allow some flexibility Can allow trustee, income beneficiary or even the Donor to change the charitable remainderman

Donor Advised Fund Benefit of working with philanthropic advisors Flexibility during life and, for family, on death Ease of Administration

Private Foundation Leave a philanthropic legacy Family must be interested in maintaining this legacy Create and fund during life, on death, or both Must apply to IRS for tax-exempt status Must comply with corporate governance requirements Administration presents significant complexities Complex statutory and regulatory scheme

Introduction Overview of basic estate planning Review of current federal and state estate tax laws Review of new income tax rules on charitable giving Review of common charitable giving structures

Conclusion: the Lawyers Point of View Charitable giving is a component of basic estate planning, but is not typically the primary focus Clients with philanthropic intent want flexibility and accountability in their structured giving Estate tax is no longer an incentive for charitable giving in most cases