JH Solutions QuickEstate Presentation - Concept Navigator

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QUICK ESTATE TAX PRESENTATION Estate Tax Basics For many people, federal estate taxes will take a large chunk of their assets before their heirs receive any part of the estate. Therefore, minimizing estate taxes and other transfer costs at death should be important estate planning objectives. Although there is a one-year repeal of the federal estate tax starting on January 1, 2010, the estate tax is scheduled to return on January 1, 2011 and may return sooner, depending on legislative changes. What assets get counted for estate tax purposes? Typically, your gross estate includes every asset you own at death, including: cash, bank accounts, CDs; stocks, bonds, mutual funds; notes receivable, real estate, business interests; retirement plan assets; annuities, life insurance; automobiles, jewelry, artwork and other personal property. Prepared for Sam Valente & Vivian Valente Presented by Sample Agent Current Plan Projected Values for the Valente Estate Focus Year 15² Current Estate Value Today : $7,500,000 Projected Estate @5%: $15,591,961 Estate Taxes Due: $8,150,177 Net To The Heirs: $7,441,785 How can you reduce your potential estate tax liability? Unlimited Marital Deduction. You can transfer unlimited assets to your spouse, during your lifetime or at death, without incurring any federal estate or gift tax liability. You can take advantage of the marital deduction by making an outright gift to your spouse or by using a marital trust. 1 Estate Taxes 52% Net To Heirs 48% Credit Shelter Trust. An individual can transfer an “applicable exclusion amount” to any beneficiary (or beneficiaries) without paying federal estate tax. Charitable Deduction. Gifts made to a qualifying charity during life or at death can reduce the amount of the taxable estate or the amount of federal estate tax that will be due. Lifetime Gifts. You can reduce your taxable estate by making qualifying tax-free gifts during lifetime, using the $1,000,000 lifetime gift exemption. Annual Exclusion Gifts. You can take advantage of the annual exclusion from gift tax by giving up to $13,000 (in 2010) in cash or other assets each year to as many individuals as you wish without paying any federal gift tax or using your lifetime gift exemption. Notes The data shown is taken from a hypothetical calculation. It assumes a hypothetical rate of return and may not be used to project or predict investment results. The above analysis assumes that current estate tax law is in effect. This analysis does not include the impact of gift taxes. To understand the gift tax implications, ask your advisor about <strong>JH</strong> <strong>Solutions</strong> Gifting Analysis. Both insureds are assumed to die in the same year. Page 2 of 9 May 10, 2011
QUICK ESTATE TAX PRESENTATION Estate Tax Basics How can you reduce your potential estate tax liability? (cont'd) Irrevocable Life Insurance Trusts (ILITs). An ILIT is an irrevocable trust created to own one or more life insurance policies. If the trust is drafted and administered properly, the death benefit proceeds are received by the trust income and estate tax free. 3 Irrevocable Life Insurance Trusts (ILITs) An ILIT can help you: Provide cash for your beneficiaries to fund estate taxes and other transfer costs. Prepared for Sam Valente & Vivian Valente Presented by Sample Agent Proposed Plan Projected Values for the Valente Estate in Year 15 Projected Estate: $15,591,961 ILIT Proceeds: $5,000,000 Leverage existing trust assets to increase what your beneficiaries receive. Reduce potential estate tax liability by making gifts to the trust. Protect the trust assets from your beneficiaries’ creditors. Provide for the effective management of insurance proceeds after your death. Equalize your assets among family members. Provide the trustee with a source of funds from the policy’s cash values to make trust distributions. Estate Taxes Due: $8,150,177 Net to The Heirs: $12,441,785 The following pages illustrate a comparison of your estate taxes due (and type of assets available) based on your current situation, with and without the use of a life insurance in an irrevocable trust (ILIT). This is a supplemental illustration authorized for distribution only when preceded or accompanied by a basic illustration from the issuer. Benefits and values may not be guaranteed; the assumptions on which they are based are subject to change by the insurer. Actual results may be more or less favorable. Refer to the basic illustration for guaranteed elements and other important information. Page 3 of 9 May 10, 2011
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