1. 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)

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

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

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

5. 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)

6. 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

7. 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

8. 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

9. 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

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

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

12. 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

13. ASSET PROTECTION Titling of Assets Retirement Plans
Family Partnerships/LLCs