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	Estate Planning Issues for the High Net Worth Client: A Private Banker's Approach Topic List The following outline lists the main topics covered in this two-day course. For general information about who should take this course, why, and what it will cost, visit the course description page. Introduction of the St Michael case study Andrew and Annette StMichael (you may recognize the couple from the Tax Return Analysis: Cash Flow & Beyond course) Documents Personal financial statement Individual income tax return (Form 1040) Financial information for selected business interests Shares valuation process used for the closely held business Closely held business interests in professional corporation, S corporation, limited liability company Investment portfolio: real estate, stocks, bonds, etc. Debt and its structure Asset allocation plan upon death – their ‘wish list’ Objectives in estate planning Disposition of property upon death Recognizing the potential estate tax, planning to avoid same Using the personal financial statement for the high net worth client within the estate planning process Assets Valuation issues Marketable securities Closely held business interests (see expanded topic below) Liquidity concerns: banker’s ability to provide needed liquidity Assets that create taxable income upon death Liabilities Inside, outside liabilities and the impact on the estate plan Estate/gift tax system overview How the federal estate/gift tax system works – its mechanics Estate tax consequence absent an effective estate plan Understanding where does most of the tax planning takes place Removing assets from the taxable estate prior to death Valuing the assets remaining in the estate Asset transfers to family members Gifting (see expanded topic below) Sale of assets – including “installment sale” Closely held business interests Buy-sell agreements Sale of interest to family member Recapitalization techniques Tax consequences – income and transfer tax Wills When they work, when they don’t, alternatives One-way ticket into the probate court system Probate system overview What it is, problems it creates, costs Taking action to avoid the probate courts – the “living trust” (see expanded topic below) Forms of ownership Fee simple Tenancy in common Joint tenancy with right of survivorship Estate planning concerns with respect to forms of ownership Gifting to reduce assets Gifting the charities Use of trusts within the gifting process Gifting income verses corpus – retaining same as a life interest Gifting to non-charities Annual exclusion, tax planning Fractionalized interests in property Installment sales and loans between ‘related parties’ Using trusts in estate planning Tax and non-tax advantages and disadvantages Understanding trusts Terminology Entity concept – person in law Testamentary trust – what it is and how it functions Living trust Often, the first step in the estate planning process; the sooner, the better How to create the living trust, and transfer assets, liabilities to it (funding the trust) Titling assets to the living trust – caution advised Internal structures used for the living trust Lender concerns when assets titled to the living trust – grantor wants to use same as collateral; suggested remedies Recognizing assets, liabilities titled to the living trust but not so designated on the client’s personal financial statement Understanding how the living trust morphs upon the death of the grantor and related lender concerns Irrevocable life insurance trust (ILIT) How the ILIT functions and what its objectives are within the estate plan Titling insurance policy in the name of the ILIT – existing and new policies Paying the annual premiums – structuring the “Crummey” power to create the present interest to secure the annual gift tax exclusion (GRATs, GRITs, GRUTs, LEADs) Definitions and mechanics Tax consequences - income and transfer taxes Personal Residence Trust (PRT) Trustees Institutional verses non-institutional Arguments pro and con Benefits of the institutional trustee Closely held businesses and the estate tax Valuing the closely held business, and IRS perspectives Appraisal for establishing estate tax value Client and IRS position not the same – a blending of approaches Current court supported valuation techniques Using industry based valuation standards Using debt to reduce the value of the estate Estate freezing techniques – a touchy subject with the IRS Family limited partnership (FLP), family limited liability company (FLLC) Objectives Secure discount for asset owned by the entity based on lack of control and minority ownership Type of asset owned by the entity is critical – best if it’s an interest in an operating company rather than purely investment type assets Structure History IRS attacks and recent court decisions Estate planners response Leveraging the assets within the FLP (FLLC) – lender’s concerns in light of possible tax consequences Generation skipping transfers Objectives Structure – how the system works Tax consequences - income and transfer taxes Deferred compensation plans A huge potential income tax consequence in addition to the estate tax – income with respect of a decedent (IRD) IRAs Other deferred compensation plans Remedies within the estate plan – credit shelter trust Section 529 plans within the estate plan Credit issues within the overall estate plan Using credit without triggering a tax consequence – leveraging assets titled to another entity Using credit to reduce estate’s net asset value – opportunity for the lender © 2008 BankSems LLC All Rights Reserved Unauthorized use of material on this website is strictly prohibited.







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