Creative Wealth Preservation Techniques

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

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

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Obstacles

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

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Current Law

• Federal Estate Tax 5 Million
• Indexed for inflation
• 5,450,000
• Portability
• 40 Federal Estate Tax Rate

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President Obamas 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)

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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

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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

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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

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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

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Probate Obstacles

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

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BASIC PLANNINGSHOULD INCLUDE

• Wills
• Revocable Living Trusts
• Advanced Medical Directives (Living Wills)
• Powers of Attorney

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Non-Tax and Non-AdministrativeObjectives and
Concerns

• Children from a previous marriage and second
  spouse
• Children with creditor, financial, or marital
  problems
• Children with special needs

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ASSET PROTECTION

1. Titling of Assets
2. Retirement Plans
3. Family Partnerships/LLCs