Beat Estate Tax Forever: Planning for Future Generations

By Michael Gilfix

IF YOUR ESTATE IS WORTH MORE THAN $3 MILLION TODAY, you must plan to avoid the estate tax. In and after 2013, everything in your estate beyond $5.35 million will be taxed at 40% upon your passing. As your estate grows, you must be aware of this. The future is unclear, and this number could be lowered significantly in the future.

This timely, readable book explains how you can plan to avoid this outcome. It gives an overview of the estate planning process, and the steps you need to take to protect your family. It explains that we have remarkable opportunities to plan ahead, and shows you how to take these steps. You can plan to protect everything if your estate is under $5 million, or under $10 million if you are a couple, from this controversial tax. If your estate is even larger, this book explains how you can protect even more. These opportunities might not last.

In this book, nationally renowned expert, author, lecturer, and estate planning practitioner Michael Gilfix gives you guidance and action steps so you can avoid the estate tax rather than fall victim to it.

• Language: English
• Publisher: Michael Gilfix
• Release date: Oct 29, 2014
• ISBN: 9780615928586

Michael Gilfix

Michael Gilfix is a nationally known authority in the field of law, aging and estate planning. A 1973 graduate of Stanford Law School, he is a Fellow of the National Academy of Elder Law Attorneys (NAELA), a co-founder of NAELA, and a Certified Legal Specialist in Estate Planning, Trust and Probate Law. Mr. Gilfix regularly addresses professional audiences, including attorneys, physicians, certified public accountants, and financial planners, nationally as well as locally.An entrepreneur in the legal field, Mr. Gilfix created the first legal aid program for elders in 1973. He served as Executive Director of that program, Senior Adults Legal Assistance (SALA) of Santa Clara County, for ten years. In 1983 he created the law firm that is today known as Gilfix & La Poll Associates LLP.For over 30 years, Gilfix & La Poll Associates has innovated creative legal solutions to help you manage and plan the future of your estate. Together, we will decide which strategy will best serve your individual needs and those of your beneficiaries. Their future is in your hands and it’s a privilege for us to serve you in this regard.Mr. Gilfix has been a principal speaker for numerous trust and tax symposia at the national level, including the Center for Judicial Education, the American Institute of Certified Public Accountants (AICPA) the New York University Tax Institute, and the National Academy of Elder Law Attorneys (NAELA).Mr. Gilfix is a California legal advisor to Partnership For Caring, the national organization devoted to rights of individuals to make their own health care decisions.A highly respected practitioner and a prolific author, Mr. Gilfix is co-author of Tax, Estate & Financial Planning for the Elderly: Forms and Practice (Matthew Bender) and is the principal author of Medi-Cal and Asset Preservation, a book- length set of materials for practicing attorneys. He regularly contributes to a wide variety of legal journals such as Trusts and Estates Magazine, where his writings have discussed the role of personal values in estate planning, life care communities, and asset preservation planning.Mr. Gilfix holds an AV rating from Martindale-Hubbell, as judged by his peers in the legal profession. This rating, the highest given “... reflects an attorney who has reached the heights of professional excellence, ... has practiced law for many years, and is recognized for the highest levels of skill and integrity.”Mr. Gilfix is a member of the National Academy of Elder Law Attorneys’ Council of Advanced Practitioners. NAELA guidelines state that an attorney must be preeminent in the field of elder and special needs law to hold this title. Mr. Gilfix has a reputation as an experienced, outstanding, and exceptionally skilled elder and special needs law attorneys

Book preview

Second Edition

Beat Estate Tax Forever

Planning for Future Generations

Michael Gilfix, Esq.

Palo Alto, California

Nationally known author, speaker, practitioner, certified specialist

Copyright © 2013 by Michael Gilfix.

ISBN 978-0-615-92858-6

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the copyright owner.

This book was printed in the United States of America.

Gilfix & La Poll Associates, LLP

2300 Geng Road, Suite 200

Palo Alto, California 94303

Toll Free 1(800) 244-9424

1(650) 493-8070

www.Gilfix.com

Table of Contents

Dedication

Acknowledgements

Disclaimer

Preface: Why This Book is Vitally Important for You and Your Family

Chapter 1: 2012 and Beyond -- An Unprecedented Year of Opportunity

Chapter 2: What Is In Your Taxable Estate? What Will be Taxed at 40%?

A. What is Included

B. Estimating Your Estate

Chapter 3: The Estate Tax and Gift Tax -- How Do They Fit Together?

A. Estate Tax

B. Gift Tax

C. The Annual Exclusion

Chapter 4: The Important, but Limited, Role of Revocable Trusts in Estate Tax Planning

A. Single Person

B. Married Couple

C. Your Revocable Living Trust is Not One Size Fits All

Chapter 5: Portability -- If a Needed AB Trust Was Not In Place

Chapter 6: You Can Plan to Avoid the Estate Tax. Overcoming Inertia; Overcoming Objections.

A. Addressing Objections

B. Planning for Long-Term Care

Chapter 7: Estate Tax Planning -- The Fundamentals of Transferred Wealth

A. The Annual Exclusion

B. The Remarkable $5 Million Giving Opportunity. Should You Do It Now?

C. Pay Tuition for Relatives, Anyone

D. Pay Medical Bills for Relatives, Anyone

Chapter 8: Dynasty or Family Protection Trusts -- Dynamic Multi-Generational Planning

A. Divorce Protection: Pre-Nup or Post-Nup Planning for Your Kids and Grandkids

B. Litigation Protection

C. Estate Tax Protection for Your Children and Grandchildren

Chapter 9: Advanced Estate Planning -- What You Can Do to Protect Your Estate

A. The Irrevocable Life Insurance Trust -- Surcharging Inherited Wealth

B. Family Limited Partnership (FLP): Giving Away Much More than $5 Million -- Discounting

C. Limited Liability Corporation (LLC)

D. Fractional Shares of Real Property

E. Residence Trust

F. Intentionally Defective Irrevocable Trust (IDIT)

G. Charitable Trust & Charitable Giving

H. Family Foundation and Donor Advised Fund

I. Grantor Retained Annuity Trust (GRAT)

J. Individual Retirement Accounts (IRAs) and Other Retirement Accounts

K. Disclaiming Inherited Assets

L. Other Planning Opportunities Exist

Chapter 10: Values, Motivation, and the Impact of Inherited Wealth: The Trust Baby Syndrome"

A. Defining Wealth -- At What Point Do You Worry? At What Point Do You Address This Issue?

B. Protecting Wealth and Family Values

C. Should You Tell Your Child What You Have?

D. Can You Leave Them Too Much?

E. Community Involvement and Personal Values Development

F. Estate Planning Steps to Address Heir Dependency

Chapter 11: Take Action! Protect Your Estate

9 Step Estate Tax Avoidance Checklist

Chapter 12: How We Take Care of Our Client Community: The Gilfix & La Poll Peace of Mind Program

Acronyms & Abbreviations

Glossary of Legal Terms in this Book

About the Author

Dedication

I dedicate this book to Myra Gerson Gilfix, whose advice, support, and insights are a constant source of clarity and inspiration.

Acknowledgments

Particularly when a book is time sensitive, help from others is essential. Fortunately, I had the help I needed. Ashleigh Alcock took over publication and many other responsibilities. Her help was absolutely critical. Mark Gerson Gilfix contributed to my thinking about multi-generational planning.

I received excellent and timely substantive suggestions from tax attorney Francis A. La Poll and Myra Gerson Gilfix. They also provided assistance with editing, as did Jamie Arielle Gerson Gilfix.

My friend and Stanford Law School classmate Jeffrey Yablon annually publishes a wonderful book, As Certain as Death: Quotations about Taxes. I liberally borrowed quotes contained in his book. I also borrowed many words of Len Tillem, a remarkably insightful radio show host in California’s Northern Bay Area.

Insurance professional Jack Bellevue helped me with insurance illustrations. Don Maruska, my good friend and business coach, offered practical and important guidance about the best approach to maximize success at every level. Many of my friends and colleagues, too many to name here, helped craft an effective title for this book and added extremely useful advice about its circulation and impact. Sincere thanks to all of them.

I thank and acknowledge you, the reader, for sharing this book with others and ensuring its broad distribution.

Finally, I thank our excellent staff at Gilfix & La Poll Associates for ongoing patience and commitment to quality services for our client community.

Disclaimer

This book is presented solely for educational purposes. The author is not offering it as a legal or other professional services advice. Every individual is different and the advice and strategies contained herein may not be suitable for your situation. You should seek the services of a competent professional before implementing a plan to address estate or other tax exposure. Examples are fictional. Any likeness to actual persons, either living or dead, is strictly coincidental.

Preface: Why This Book is Vitally Important for You and Your Family

Most of us don’t like to think about the two great inevitabilities: death and taxes. Yet, that is what this book is about: the planning you can do to protect virtually all of your assets from the punishing estate tax.

The first edition of this book was written in and for 2012 because the level of estate tax protection was expected to drop to only $1 million on January 1, 2013. That didn’t happen. The surprise to all of us was the extension of the $5 million estate and gift tax protection. I am therefore compelled to update and substantially rewrite this book in light of this overriding development.

I worked very hard to make this book understandable. The use of some legalese, however, is inevitable. This is why I include a Glossary and a list of Acronyms that define many of the terms that are used in this book. Refer to it often.

Also for the sake of simplicity and understanding, I sometimes refer to the $5 million exemption or planning opportunity. This figure is used in the text and many examples because it is a simple, round figure. It makes some examples easier to understand.

In fact, the level of gift and estate tax protection is actually $5,250,000 in 2013. This amount will increase annually, as it is indexed for inflation.

This means that you can actually pass along – by gift or at death – a minimum of $5,250,000 this year. Even if you transferred $5 million by gift in 2011 or 2012 to lock in that protection, you now have another $250,000 that you can protect for your family – if you are