1. Estate Planning Agency Name
[Title slide displayed as attendees enter the room and get settled.
Use these speakers’ notes as a guideline for your presentation. You are encouraged to use life stories and other experience to embellish, keeping in mind that this presentation has been reviewed for industry compliance. Evaluate your audience’s level of comfort to determine if you need to walk through each slide point-by-point.]
Estate Planning
Agency Name
Presenter’s Name
Agency Phone number
Contact
Agency Street Address
City, State, Zip Code
ALR828 (2/17)

2. Estate Planning
[Title slide displayed as attendees enter the room and get settled.
Use these speakers’ notes as a guideline for your presentation. You are encouraged to use life stories and other experience to embellish, keeping in mind that this presentation has been reviewed for industry compliance. Evaluate your audience’s level of comfort to determine if you need to walk through each slide point-by-point.]
ALR832

3. Introduction to Estate Planning
What is estate planning?
Why should you be interested in estate planning?
How much money should you have before you consider estate planning?
Estate planning is fundamentally about transferring your assets, along with your core values and priorities, to the people and organizations of your choosing at the time and the manner you desire. It’s about building a plan that leaves your family in harmony and about creating a legacy that may span generations. Your particular estate planning needs depend on your age, wealth, health goals, lifestyle and many other factors, all of which usually change over time. Therefore, it is important to have your estate plan periodically reviewed. As you will see, for some of you, there is only a need for some basic planning. However, there are some in the audience who have larger estates, which may have potential estate tax liabilities. Also, there are those of you in the audience who have specific goals and concerns about how the estate should pass to your loved ones, organizations and family, which can make your planning more complex. If you fall in either of these last two categories, you may need to create a more sophisticated plan that is tailored to fit those needs.
(Review agenda) Here is our agenda for the next hour.
As we work our way through the agenda, you need to determine the level of planning applicable to you. This means quantifying the full value of your estate, as well as determining the goals you wish to accomplish for the benefit of your family.

4. Estate Planning Goals – While Living
Provide for management of assets in the event of disability or incapacity
Provide instructions for healthcare decisions
Protect assets from long term care costs
Estate planning is an ongoing process. A well conceived estate plan can help ensure that you create a lasting legacy for future generations.
An estate plan should address issues that are important to you -- for example, making sure you’ve made the right decisions concerning the welfare of the people you care about. For you, elder care may not be an issue, but providing for your children may be. Health care directives are an issue for everyone.
So what’s the first thing you want to do when you’re beginning the estate planning process? …You need to decide what your purpose is -- what you want to accomplish.
While living, a proper estate plan generally addresses “living” issues by:
Providing instructions for the management of your financial affairs in the event of your incapacity.
Providing instructions for healthcare decisions in accordance with your personal wishes.
Protecting assets from long term care costs.

5. Estate Planning Goals – At Death
Determine who gets what, how and when after death
Maximize estate by reducing expenses and avoid delays
Minimize estate taxes
Provide liquidity
A proper estate plan generally addresses issues-- at death:
Determining who will get what, how they will get it and when they will get it. If trusts are used, they may provide some protection from creditors for the beneficiary(ies).
Maximizing the estate that will pass to your intended beneficiaries by reducing expenses and avoiding delays.
Minimizing estate taxes and administrative expenses required to settle your estate.
Providing the required liquidity to pay any remaining taxes and expenses.
In other words, a proper estate plan generally allows you to control your future:
It assists you in maintaining maximum control over your wealth.
It allows you to decide who will take over in the event of your disability.
It assists you in passing the maximum inheritance to your heirs with the most protection possible.

6. Who Should Plan? EVERYBODY! Why? Children
Assets (farm, business, etc.)
Incapacity
Healthcare
Elder Care
Expenses/Taxes
You may be wondering if you really need to be worried about estate planning. Is it only for the rich people in the world? ...Who really needs to plan?
Here’s the quick and easy answer -- everybody needs to do some planning -- everybody in the audience needs to plan…Here’s why.
Children: If you don’t make a decision regarding the guardianship of your minor children, the state court will step in and make this decision on your behalf. Do you feel comfortable that the judge making decisions regarding the guardianship of your children will make the same decision that you would have made?
Assets (farm, business, etc.): We are not addressing asset amount, but asset type. Many of us have assets, such as a business, that we would like to pass to specific beneficiaries. Many of us also have assets with a high amount of personal value, such as jewelry, autos, etc., that we would like to pass to specific beneficiaries. If we fail to plan, the state law will dictate to whom our assets will pass.
Incapacity: If you become incapacitated – either physically or mentally – who will take care of the basic everyday chores that we take for granted such as paying bills, getting money from the bank, renewing CDs, filing tax returns? Do you want the Court to have to decide how to manage your assets?
Health Care: If you can’t make decisions regarding your health care, who should make that decision? Should it be your partner or would you rather leave that decision to be decided by a family member who may not know your wishes?
Elder Care: As we live longer, determining what type of care and how to pay for it become critical issues. For many, it is not only making plans for yourself but also for your elderly parents. Most want to stay in their homes and don’t want to be a burden to children – with proper planning it may be possible to achieve both of these goals.
Expenses/Taxes: Some of you will have estates that are large enough to pay federal and state estate taxes. For those of you, there are a variety of planning techniques that are designed to minimize these taxes. For nearly all of us, there will be some expenses when you die, such as attorney’s fees, tax preparation fees and property transfer fees. One of the goals of estate planning is to minimize these fees by using the techniques we will discuss.

7. Planning All of Us Should Consider
Long term care planning
Provides a greater level of independence and dignity when long term care is needed
Affords assistance to maintain an accustomed standard of living
Promotes estate preservation
Clearly, estate planning is important for everyone -- but the types of planning needed can differ based on your particular needs and your financial situation.
Let’s start by looking at the kind of planning we all need to consider -- no matter what your goals are or how much money and assets you have.
There are four categories:
First, we should clarify our wishes concerning how we want to be cared for while we are still alive.
Then we should consider how to protect our assets in the event of chronic illness or disease.
We should consider how financial decisions and health care decisions should be made if we are incapacitated.
And, then, we should consider a will. We need to make our wishes known concerning how to provide for the people we care about after we die.
Let’s look at the general information you need to consider in each of these areas…
According to the U.S. Department of Health & Human Services’ website:
About 70% of people turning 65 will need long-term care at some point in their lives. Some average costs for Long-term care in the United States (in 2010) were:
$205 per day or $6,235 per month for a semi-private room in a nursing home;
$229 per day or $6,965 per month for a private room in a nursing home;
$3,293 per month for care in an assisted living facility (for a one-bedroom unit);
$21 per hour for a home health aide;
$19 per hour for homemaker services;
$67 per day for services in an adult day health care center
The cost of long-term care depends on the type and duration of care you need, the provider you use, and where you live.
Long term care planning is not just about nursing homes. This is the last stage of care that started many years before. Most people want to stay in their homes for as long as possible, so the majority of the planning is about preserving options for care. It may include considering various types of adult living facilities or changing living arrangements if friends or family members are going to provide care.
Long term care insurance may be an option to help pay for the costs associated with the provision of care. Policies typically provide home health care benefits as well as nursing home coverage.
In general, Medicare will not pay for nursing home coverage. Medicaid, which is a program for indigent persons, will only pay for coverage if the person’s assets have been spent down to a minimal level.

8. Planning All of Us Should Consider
Financial Decisions
Financial Durable Power of Attorney
Health Care Decisions
Power of Attorney for Healthcare
Living Will
There are three primary documents dealing with incapacity.
Durable power of attorney is a document that gives one individual the power to act on behalf of another in the event that person is unable to make decisions on his/her own. There are generally two types of durable powers of attorney: one that does not require proof of incapacity and one that requires proof of incapacity, called a “Springing” Power of Attorney.
The living will is a document that addresses your instructions on the use of extraordinary means to keep you alive, and it outlines the circumstances under which you would permit, or not permit the termination of those extraordinary life-support measures.
The health care proxy - which is also known as a durable power of attorney for health care or health care directive - is another important document addressing incapacity. The health care proxy addresses who you want to make medical decisions for you, for instance, while you are in a hospital, unconscious. Some attorneys combine the living will and the health care proxy into one document.

9. Planning All of Us Should Consider
Will
Legal Document
Takes effect at death
State requirements vary
Benefits
Transfer of assets
Names guardians
Can establish trusts for beneficiaries
A will is a legal document that instructs how you want your probate assets distributed upon your death. It’s important to have your will drawn up by a knowledgeable attorney, familiar with the laws in your state. If your will doesn’t meet the guidelines of the laws in your state, it could be declared invalid. In which case state laws (called intestacy statutes) determine how your assets will be distributed.
As part of your will, you name an executor or personal representative who generally makes sure that the estate taxes and other liabilities are paid and that the remaining assets are distributed according to the provisions of the will. Assets are distributed to your beneficiaries in accordance with your wishes.
Generally, you also name a guardian in your will who will care for your minor children should you die before they reach adulthood.
It is possible to establish trusts for your beneficiaries through your will. Trusts, which will be discussed later, permit you to retain control over the assets. They can be used to provide income and principal for children or any other beneficiary on almost any terms that are provided in the trust.

10. Distributing Your Assets
Probate
Court-supervised distribution of assets
Advantages
Distributes assets according to will
Limits time to challenge will
Limits time creditors can make claims
Probate is the legal process of distributing your property to your survivors after your death.
The function of probate is to execute the instructions of your will, or, if you don’t have a will, to ensure that your assets are distributed in accordance with the state’s intestacy laws, which may be contrary to your wishes.
Probate has advantages and disadvantages. In order to properly plan your estate, you need to be aware of these.
Some of the advantages of probate can include:
The supervision of your executor’s activities by the court.
Limiting the amount of time in which someone can challenge your will.
Limiting the amount of time creditors can make claims on your estate.

11. Distributing Your Assets
Probate
Disadvantages
Time
Cost*
Publicity
*About.com, Money, Article “How much does probate costs and how long does it take?” by Julie Garber, Wills & Estate Planning Expert. 2015
Some of the disadvantages of probate can include:
Time: Survivors may not have access to the probate assets during the probate period. The probate process may delay the distribution of probate assets for several months or even years before they can be distributed to the beneficiaries. (This allows creditors of the estate to have their claims paid prior to distribution to the beneficiaries.)
Cost: The cost of probate may be set by state law or by practice and custom in your community, so it will differ from place to place. When all the costs are tallied, probate can easily cost from 3–7% of the total estate value, and more. The costs may include appraisal costs, personal representative fees, court costs, costs for a type of insurance policy known as a surety bond plus legal and accounting fees. Some of these costs are set by law and there’s nothing you can do about them, but you may be able to negotiate a lower fee for services like accounting, legal advice, real estate sales, and so on*.
* About.com, Money, Article “How much does probate cost and how long does it take?” by Julie Garber, Wills & Estate Planning Expert. 2015
Publicity: Probate documents filed with the court are public records. This means that the public can gain access to the will filed in a probate proceeding. In some probate proceedings an inventory and accounting have to be filed. These documents contain detailed information about the assets in the estate.

12. Distributing Your Assets
Assets That Pass Outside of Probate
Joint tenancy with right of survivorship
Assets subject to a beneficiary designation
Assets owned by a Living Trust
The following are some ways your assets can be passed on to your loved ones outside of probate.
Assets that pass outside of probate are generally assets that pass either by way of joint tenancy with right of survivorship (JTROS) or beneficiary designations. Assets subject to joint tenancy with right of survivorship or assets with beneficiary designations will pass directly to the survivors outside of the probate process.
Assets with a beneficiary designation include life insurance policies owned by the insured, IRA’s, and 401(k) plans. These assets pass automatically to the designated beneficiary upon the owner’s death.
Many people mistakenly believe ownership either by way of joint tenancy or beneficiary designation is a sure way to completely avoid probate, however, let me offer an example that illustrates a weakness to this line of thinking.
Example: Both parents are in an accident. The husband is killed instantly and the wife dies 10 days later. All assets are either owned jointly or subject to a beneficiary designation. Upon the husband’s death, this property passes to the wife and avoids probate. However, what happens upon her death? Do the assets held in her estate avoid probate? The answer is “No”. However, the answer is “Yes” with respect to assets which pass by beneficiary designation if contingent beneficiaries are named. (Title only passes to the surviving joint tenant if there is a right of survivorship. Absent a specific right of survivorship, a joint tenancy will be treated as a tenancy in common in most states.)

13. Distributing Your Assets
Trusts
Parties to a Trust
Grantor – Creates Trust
Trustee – Manages Trust
Beneficiary – Benefits from Trust
Types of Trusts
Living vs. Testamentary
Revocable vs. Irrevocable
A trust is an agreement between the grantor and trustee for the trustee to hold, manage and distribute the assets in the trust for the benefit of the named beneficiary. Trusts generally last for a number of years and over time the identity of the trustee and the beneficiary may change. Although the law recognizes the separate role of the trustee and beneficiary, it is possible to set up a trust so that the grantor, trustee and beneficiary are the same person. This is a typical “living” or “revocable” trust where I create the trust, I am trustee and I am the beneficiary. Over time, other people will become the trustee and the beneficiary. The reasons for this type of trust are discussed in the next slide. Due to the complexities of trusts, as with other matters we are discussing, we recommend you consult with a competent attorney specializing in trusts.
Trusts are also categorized according to when they are set up and whether or not the terms of the trust can be changed.
A “living” trust is created during the life of the grantor. A “testamentary” trust is created at the death of the grantor, for example in the will of the grantor.
A revocable trust is a trust that can be changed at any time by the grantor of the trust. An irrevocable trust is a trust that cannot be changed by the grantor. Living trusts are usually revocable. Testamentary trusts are always irrevocable. It is possible to set up irrevocable trusts during life and the most common type of trusts in this category are the irrevocable life insurance trust and certain trusts for minor children.

14. Distributing Your Assets
Living Trusts
Preferred primary estate planning document
Avoid probate
Time
Costs
Publicity
Financial guardianship
Provide protection and management of trust assets if the grantor becomes incompetent
A revocable living trust has become the preferred primary estate planning document in most states. This is because it is possible to avoid probate if assets are transferred to the trust prior to death. By avoiding probate, assets may be distributed to beneficiaries more quickly, the transfer costs may be minimized and, perhaps most importantly for some customers, a trust is not a public document.
Even if an individual has a living trust, he may still have what is known as a “pour-over” will. This is a short will that simply states that any assets not in the name of the trust at the time of death will be transferred to the living trust. This does not make the trust a public document and even if a probate proceeding is necessary, the trust terms are not disclosed to the court.
Besides avoiding probate, the other significant advantage of a living trust is that it can provide for financial management of assets in the trust in the event of the incapacity of the grantor, without the need to rely on powers of attorney and without the need for a guardianship or custodianship proceeding. The trust will provide that the trustee can only act if he or she is able to manage his or her financial affairs. If unable to do so, then the successor trustee will step in and assume the management of the trust. If the trustee is removed because of incapacity, one or more doctor’s certification is usually required. In some trusts the trustee will decide to resign before that time and the successor trustee will start to act at that time. For single people, the living trust may provide important protections and the certainty that their assets will be managed by the person or persons that they want to manage the assets with little or no involvement of third parties.

15. Estate Taxes and Your Estate…
All Tangible Assets
All Intangible Assets
At Fair Market Value!
Now that we have discussed how assets may be distributed,
let’s discuss what an estate generally consists of
All tangible assets, including:
House
Real estate
Auto
Personal possessions, including jewelry, coins, etc.
All intangible assets, including:
Bank accounts
Annuities and retirement plan proceeds
Stocks, bonds, mutual funds
Life insurance that you own (Note: Many people don’t realize that life insurance is considered part of the estate and, therefore, is taxable at death. If you own a $200,000 policy, that amount is added to the total value of your estate for purposes of determining your potential estate tax liability)
AT FAIR MARKET VALUE

16. The estate tax rate is currently 40% and taxes are due 9 months
Your Estate at Death
How is an estate valued at death? What part of it does Uncle Sam look at?
At death, everything you own, including insurance, is taxable at its fair market value. This can cause considerable problems for people with farms or small businesses.
Give example appropriate to audience: A farm or business may have a current market value of $3 million, which means the family must come up with approximately $1.2 million in taxes (this assumes all of estate tax exclusion has been used and the $3 million is taxed at 40%) -- which they may not have. Hence…they are forced to liquidate the business or farm -- often at bargain basement rates -- just to pay the estate taxes.
Generally, estate taxes are due and payable in cash within nine months after death. These taxes are based on the value of your estate at the time of death. What does this mean…?
Consider all your assets… your home, your cars, your cash and savings, investments, insurance, valuables, and even your accumulated retirement funds.
Now deduct from that your final expenses, accounting fees, debts, probate, attorney’s fees and any tax deductions -- such as the charitable deduction and the marital deduction, which allows you to pass your estate to your spouse tax free. (Note: Non U.S. citizens are not eligible for the marital tax deduction).
What’s left is your taxable estate. This is the amount that Uncle Sam levies taxes on.
The estate tax rate is currently 40% and taxes are due 9 months
from the date of death.

17. Estate Taxes 2017 State estate taxes
$5,490,000 estate tax exclusion (indexed for inflation)
40% estate tax rate
Portability of estate tax exclusion
No Sunset – Permanent
On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act (2012 Tax Act) which among other things made permanent the $5,000,000 (indexed for inflation) federal estate and gift tax exclusion and raised the top estate tax rate to 40%.
Additionally, the concept of ‘Portability’ was made permanent. Portability allows the surviving spouse to use the unused federal exemption of his/her predeceased spouse. That means with a simple will, a husband and wife may be able to pass up to $10.98 million (2017) in assets tax free at death. Under prior law, the couple might have divided assets 50/50 and had each will include a bypass trust to benefit the surviving spouse, while still avoiding inclusion of those assets in the surviving spouse’s estate. We will talk about by-pass trusts in a little bit.
Portability is not simple, nor does it assure the intended result. The executor of the decedent’s estate must elect portability of the unused amount, and if that election is made, the surviving spouse can apply the deceased spouse’s unused exemption for use by the surviving spouse (as long as the election is made).
Over the years, some states have instituted their own state estate taxes with exemptions lower than the federal estate tax exemption, ($1,000,000 in New York). So planning for state estate taxes becomes important.
State estate taxes

18. Deductions/Credits Unified credit equivalent ($5,490,000 in 2017)
Lifetime gift tax exemption of $5,490,000
Unlimited marital deduction
Unlimited charitable deduction
Annual gift tax exclusion ($14,000 in 2017)
With such a high exemption, the estate tax will effect very few estates in 2017.
If you do have a taxable estate there is good news. Everyone MAY BE ABLE to reduce or eliminate estate taxes. The tax code gives us some exemptions and exclusions to do this. The goal is to use them in a way that minimizes taxes, while still maintaining your estate planning goals.
We talked about the unified credit equivalent of $5,490, everyone who is a U.S. resident or citizen gets that.
There is a gift tax imposed on transfers during life. The American Taxpayer Relief Act of 2012 made permanent the reunification of gift and estate tax systems. The rates and exemptions are the same. Giving away assets during your lifetime allows you to also give away the appreciation of that asset. If you want to make a large gift however, you should speak to your tax advisor.
The marital deduction allows for all assets owned by a married couple to pass to the surviving spouse at the time of death with no taxes due. Assets can pass outright or in trust. Several types of trusts qualify; one of the most popular is a “QTIP” trust, which gives the surviving spouse income and principal during life, but does not allow the spouse to have control over the disposition of the trust after death. So, for example, in a second marriage situation, the first spouse to die can ensure that the assets will pass to his or her children and not the surviving spouse’s children. Though it is a marital deduction, it is really an estate tax deferral mechanism since estate taxes are due on assets passing to the surviving spouse upon his or her death. In order to qualify for the marital deduction, couples must be legally married (civil unions or equivalent do not qualify) and the surviving spouse must be a U.S. citizen.
There is an unlimited charitable deduction so that it is possible to give all one’s assets to charity and not have to pay any estate tax. Charitable deductions are also available for various partial charitable interests and we will discuss these in more detail as they present an opportunity to provide benefits for loved ones while still getting an estate tax deduction.
In addition to the lifetime exemption, each person may give away $14,000 each year to as many persons as they wish. This amount is indexed for inflation.

19. Tax Payment Alternatives
Cash
Liquidity?
Sell business/farm/property?
Borrow
Interest?
Use life insurance proceeds
What if the estate is valued at more than $5.49 million? A/B trusts can only shelter a certain amount of your estate from estate tax. Remember the tax bite we talked about is 40% and is due nine months from the date of death. Proper planning means addressing the liquidity planning issue no matter what the estate tax law is. Many of us need to understand what taxes, debts and expenses are due at death. The key question is whether you have the liquidity -- the cash -- to pay them.
Here are some possibilities and potential problems:
Cash from the estate: Many estates may not have enough cash to pay the taxes or settlement costs.
Sell assets: Families too often have to sell their assets at a discount or sell assets that the family doesn’t want to sell -- such as the family farm, business or residence.
Ask: How many here have gone to an estate sale? Why? Because you get stuff cheap, right?
Borrow: A bank may not lend to an estate unless the decedent had a very strong relationship with the bank - - even then, the bank may charge a substantial interest rate.
Pay IRS in installments: Not all estates qualify for an IRS loan and the ones that do will pay interest on the loan. The IRS will have a security interest (i.e., a lien) on all assets in the estate.
Use life insurance proceeds: With proper planning, proceeds from life insurance may provide an ideal solution for taking care of estate taxes -- as well as taking care of dependents.

20. Planning Some of Us Should Consider
One alternative is an irrevocable life insurance trust. The insured creates an irrevocable trust which will be the owner and beneficiary of the insured’s life insurance policies. By having the trust purchase and own the policies, helps keep the death benefit out of the insured’s estate and thus sheltered from estate taxes upon the insured’s death. Since the life insurance is owned by the trust and the trust is created by the insured, the insured can control how the death benefit will be distributed to the beneficiaries.
Some benefits of the life insurance trust include:
Generating liquid funds to meet estate expenses.
Minimizing estate taxes because the trust assets are excluded from the estate.
Keep in mind that the trust must be irrevocable to qualify for estate tax exclusion. And, because the trust is irrevocable, once it has been executed, the insured will not be in a position to either amend or revoke this trust.
Gifts of existing life insurance policies to an irrevocable life insurance trust will not exclude the death benefit from being subject to estate taxes until 3 years have passed from the date of transfer.

21. Charitable Remainder Trusts
Charitable Remainder Trusts (CRTs) are irrevocable trusts that provide:
An “income” stream during the lifetime of named beneficiaries
Remaining property passes to charity at the death of beneficiaries
Income stream can be a set annuity payment (charitable remainder annuity trust – CRAT) or stated as a percentage of the value of the trust each year (charitable remainder unitrust – CRUT)
Charitable remainder trusts can be used to provide some tax planning for single and unmarried couples, as well as married, in place of the marital deduction. It is a way of providing for a beneficiary during his or her lifetime and obtaining a federal estate tax deduction for the trust. Unlike the marital deduction, however, the property remaining in the trust will go to charity at death and is not available for family members. Thus, this technique is only suitable if you are interested in benefiting one or more charities.
A charitable remainder trust has to meet the requirements of the Internal Revenue Code. It is an irrevocable trust that provides an income stream to the named beneficiary or beneficiaries, usually for the balance of their lifetime. At the death of the last beneficiary to die, the remaining property in the trust passes to the charity or charities named in the document.
There are two basic types of charitable remainder trust – the charitable remainder annuity trust that provides that a set dollar amount will be paid to the beneficiary each year and the charitable remainder unitrust that provides that a percentage of the trust’s value will be paid each year. The unitrust typically results in a variable amount being paid – if the value of the trust increases, then the payout amount will increase because it is the same percentage of a larger amount. Conversely, if the value of the trust decreases, then the payout amount will decrease because it is the same percentage of a smaller amount. The payout rates are set when the trust is created and cannot be changed.

22. Charitable Remainder Trusts
Minimum value of income stream is 5% of the value of property transferred to trust
Trust can be set up for lifetime of beneficiary or beneficiaries or for a term of years
Term of years is limited to 20 years
Estate tax deduction limited to estimate of value of property passing to charity, not for value of property contributed to trust
The minimum value of the income stream is 5% of the value of the trust. For an annuity trust this means that the annuity will be set at 5% of the value of the trust when it is set up and will not change, regardless of the underlying value of the trust. For example, if I contribute $100,000 to a CRAT and the payout is set at 5%, the annuity payment will be $5,000 per year for the beneficiary’s life. If the trust is a unitrust, then 5% of the value of the trust will be paid each year. In the first year, the amount paid will be $5,000. In the second and subsequent years, the trust will be valued as of January 1 to determine the amount to be distributed.
A CRT can be set up for the life of named beneficiaries or for a term of years. Most trusts are set up for the lifetime of the beneficiaries.
If a term of years is selected it cannot exceed 20 years. There is no limit on the number of years that the trust can last if its term is determined by reference to the life of the beneficiaries.
There is an estate tax deduction available for the present value of the property passing to charity at the end of the term. This amount is discounted using interest rates set by the IRS on a monthly basis. In general, the older the beneficiary and/or the smaller the payout, the larger the deduction. Conversely, the younger the beneficiary and/or the larger the payout, the smaller the deduction.
If a CRT is created during lifetime, there is an income tax deduction available, subject to the same calculation.

23. Charitable Remainder Trusts – Example
John’s estate is $6.0 million. John wants to provide an income stream for Mary during her lifetime. John’s trust sets up a CRUT for Mary with $1,500,000 and provides that Mary is to receive 7% of the value of the trust each year. At the time of John’s death in January 2017, Mary is 76 years old.
The charitable deduction is $774,360 based on IRS interest rate of 1.8% (December 2016)
Let’s look at an example to see how we can minimize
the taxes in an example.
John has a taxable estate, after expenses and other deductions, of $6.0 million. John is interested in providing for Mary during her lifetime and wants to avoid paying estate taxes if possible. John is also interested in benefiting his favorite charity but is willing to make the charity wait until after Mary’s death to get the gift. The balance of John’s estate will pass to other family members.
John creates a charitable remainder unitrust under the terms of his living trust. He provides that $1.5 million of his estate is to pass to the trust and that Mary is to receive 7% of the value of the trust each year. At the time of John’s death, Mary is 76 years old.
Using the interest rate of 1.8%, which is the effective rate for December 2016, the value of the charitable deduction is $774,360. This is the amount of the charitable deduction that John’s estate is entitled to.

24. Charitable Remainder Trusts – Example
For federal estate tax purposes, John’s estate is now $5,225,640 ($6,000,000 - $774,360).
He has provided for Mary and reduced his estate below the estate tax exemption so there are no federal estate taxes to pay.
He has also provided for his favorite charity (or charities) at Mary’s death.
As a result, John’s taxable estate is $5,225,640, just under the $5.49 million exemption amount. Consequently, there will be no estate taxes to pay.
As a result of using the charitable remainder trust, John has:
provided a lifetime benefit for Mary
reduced his estate so that no estate taxes are payable
provided a significant benefit to his favorite charity at Mary’s death.

25. So what should you do next?
What Next?
Start with baby steps and review your assets and the titling of the assets.
Use all available resources to help. Your financial advisor is invaluable in this process.
Don’t put off until tomorrow what you should do today.
We have talked about a lot of different material and techniques during our seminar.
So what should you do next?

26. Conclusion: Thank you for coming.
Please note that the offering insurance company or its agents and representatives cannot give legal or tax advice. The brief discussion of taxes on this page may not be complete or current. The laws and regulations are complex and subject to change. For complete details consult your attorney or tax advisor.
This information is provided for general consumer educational purposes and is not intended to provide legal, tax or investment advice. All guarantees are based on the claims-paying ability of the issuing insurance company.
Securities offered by Personal Financial Representatives through Allstate Financial Services, LLC (LSA Securities in LA and PA). Registered Broker-Dealer. Member FINRA, SIPC. Main Office: 2920 South 84th Street, Lincoln, NE (877)  Check the background of this firm on FINRA’s BrokerCheck website
Life insurance offered through Allstate Life Ins. Co. & Allstate Assurance Co., 3075 Sanders Rd, Northbrook IL 60062; Lincoln Benefit Life Co., 1221 N St. Ste 200, Lincoln NE 68508; American Heritage Life Ins. Co., 1776 American Heritage Life Dr., Jacksonville FL In New York, life insurance offered through Allstate Life Insurance Company of New York, Hauppauge NY.
Thank you for coming. I hope that you found this presentation useful.
ALR828 (2/17)