Wills Trusts APT s Stuff Who me worry

Wills, Trusts, APT’s & Stuff “Who me, worry? ” By Rick Kahler, MS, CFP™ Kahler Financial Group

Another Estate Planning Seminar • • • How ‘bout them Bears? What’s happened to the Vikings? Is the stock market near a high? When will the real estate bubble burst? Will it be Hillary or Rudy in 2008?

Let’s Talk About Anything… …except about death.

“OK, Kahler. . . I’ll Get Around To It…” …he never did

Why Do So Many Not Have Wills? • Four people I interviewed in four months – All had net worth’s of $1 million to $4 million – Most had a spouse and children None had a will

Why Don’t We Plan For Death? • • • Too much pain around death Money scripts…. . I don’t have enough to be worried about I’ll let those living figure it out Planning is too complicated or expensive

“OK, I’ll Plan. ” Planning • • Will Living Trust Executor/Trustee Guardianship Durable Power Distribution to Heirs Living Will • • Taxes/Liability A/B Trusts ILIT Self-Settled Trust FLP LLC Corp Land Trusts

Understand the Terminology • Decedent – the guy who died • Executor – the person in charge of ‘executing’ the instructions of the will • Trustee – the person in charge of carrying out the instructions of a trust • Grantor, Settlor, Creator – the person who establishes a trust

Understand the Terminology • Testamentary Trust – a trust created by a will at death • Probate – a public proceeding before a judge that governs the distribution of an estate passed by a will • Joint Tenancy – an interest in property where title automatically passes to the other owners • Tenants in common – an interest in property where title is passed only by a will

“OK, OK…What Should I Do? Get started, today.

Everyone Needs A Will • • • Guardianship Executor/Trustee Durable Power Distribution to Heirs Even If You Use A Living Trust

Who Needs A Living Trust? • • • To Avoid Probate Your Final Distribution To Remains Private Faster Disposition Of Assets Don’t Mind Retitling All You Own real estate, a large estate, business

Living Trust • NO liability protection • Some Privacy – Don’t use your name in the title or be trustee – Beneficiary deemed to own equitable title • NO additional tax return • NO annual fees or paperwork • Tax Neutral

Do I Need To Worry About Taxes? • Will there be a chance your estate will be over $2, 000 when you die? • Don’t forget – Inheritances – life insurance policies

A Simple Strategy • Create a ‘Family Trust’ aka ‘credit shelter trust’ or the ‘A’ trust • The first $2 million goes to this trust • Spouse (usually) gets only the income • Balance goes to kids/charity and is not taxed in the estate of the spouse • Cannot be changed after death

A Simple Strategy • Create a ‘Marital Trust’ aka ‘Q-Tip trust’ or the ‘B’ trust • The balance of the estate goes to this trust • Spouse gets whatever he/she wants • Balance goes to whoever he/she wants • Can be changed after death

Irrevocable Life Insurance Trust • Avoids creditors • Possible every insurance policy should be owned by a trust • Is never taxed • Spouse could receive income for life • Can buy illiquid assets from the estate • Passes to children or charity outside of spouses estate

Self-Settled Trust • Asset Protection • Best used in conjunction with a irrevocabel trust • Statutorily allowed in five states – – – Nevada Missouri Delaware Alaska SOUTH DAKOTA

SD Asset Protection Trust • Four year look back on fraudulent transfer • Ten year look back on bankruptcy • Grantor can retain power to: – Replace trustee – Veto distributions – Change beneficiaries • Must have a SD trustee

Family Limited Partnership (FLP) • • • Liability protection for limited partners No liability protection for general partners General partner usually a corporation Additional tax return Annual fees but no meeting Tax neutral

Family Limited Partnership (FLP) • General Partner is corporation – Receives a 1 to 10% interest – Shares of corp owned by parents • Limited Partners get 45 to 49% each – Typically owned by parents • Limited shares are gifted to kids by parents • General Partner controls FLP • Upon death, shares are valued at market which is typically 25 to 75% under asset value

Family Limited Liability Company (FLLC) • Liability protection for all • Some privacy – Officers are public record • Additional tax return • Annual fees but no meeting • Tax neutral

Family Limited Liability Company (FLLC) • Only one entity needed • Members get 50% each – Typically owned by M & D • Membership units are gifted by M & D • Managers control – voting and non-voting units • Upon death, units are valued at market which is typically 25 to 75% under asset value

In Summary • • Form a FLP or FLLC Put all your assets into the FLP/FLLC You hold the voting shares Contribute the units of the FLP/FLLC to your living trust or APT • Created an entry level asset protection strategy with optimal estate tax protection

Asset Protection Fundamentals • Own nothing in your own name • Use a variety of entities – Trusts, LLCs, Corps, FLPs • In a variety of states

Assets Registered Agent Wyoming Resident FLLC Wyoming Trustee Alaska Resident Alaska Asset Protection Trustee You LIVING TRUST South Dakota Beneficiary

This Is Just The Beginning • • • Don’t try this at home The devil is in the details Educate yourself Use an attorney Use an accountant

Our 30 Years of Experience Runs Deep • • • Operate multiple businesses With over 40 employees Instruct nationally and internationally Columnist for 10 years Several financial and real estate degrees – CFP™, Ch. FC, CCIM, GAA – Masters in Wealth Management

Our Broad Experience Means: • • We give you tried applications, not theory You learn from our experiences We see the bigger picture We know the answers to the questions you don’t ask • You get better, more balanced advice.