Page 37 - MetalForming August 2010

that pass to the children or grandchil- dren. Second-to-die life insurance usu- ally is purchased on Joe and Mary to cover the estate tax due when Mary dies. The premiums on second-to-die life insurance are significantly less than buying insurance on only Joe’s life. Also, the death benefit comes immedi- ately after the second of Joe and Mary dies...when that ornery estate tax is due.
The documents—the will and trusts— that contain the rest of the estate plan for Joe and Mary have the appropriate clauses and language to deal with each of the problems and issues listed above. Over the years, with the exception of curing health issues and settling family quarrels, the provisions in the various estate-planning documents (usually a trust) solve the items listed above.
Note: If you have a health issue, start your estate planning now. Time becomes critical. As a result, we service health-issue clients first and fast.
Also: How do we keep the kids equal, yet give control to the clear leader when transferring Joe’s business? We create vot- ing (say 100 shares) and nonvoting stock (say 10,000 shares). The clear leader gets enough extra voting shares to have voting control and is shorted an equal number of nonvoting shares.
2) Ready to Tie the Knot...Again
Before you say “I do,” the about-to- be bride and groom must sign a prenuptial agreement. Failure to do so makes a lot of unhappy campers, par- ticularly the spouse with the most wealth.
If the marriage becomes a winner, it’s easy to blow off the prenuptial and play the estate-planning game as described in category 1.
3) You Have a Significant Other
When I ask, “Will you marry down- the-road?” the answers vary from No, to Maybe, to Someday or some variation.
Whatever the answer, when the rela- tionship is solid and for the long-term, then Joe is committed to taking care of Mary (maintaining her lifestyle if she outlives Joe).
What’s the estate-tax problem? Because Joe and Mary are not married, there is no marital deduction—no QTIP. If Joe dies before Mary, the estate tax is due now. With a QTIP (we learned in category 1), the monster estate tax is not due until both Joe and Mary have gone to heaven.
So what is the plan? We create a QTIP-type trust. We fund the trust with the assets needed to maintain Mary’s lifestyle: typically the residence and income-producing assets. Mary has a life estate only, living in the residence and receiving the income from the assets. At her death the assets go to Joe’s
kids and grandkids.
The only fly in the ointment is that
the estate tax is due at Joe’s death. When Joe is insurable, insurance on his life is the simple answer. Of course, the poli- cy death benefit (D/B) must be set up usually an irrevocable life insurance trust) so none of the D/B is subject to estate tax.
One final comment: The many prob- lems and the even more solid tax-win- ning solutions to those problems of this article’s subject matter cannot be cov- ered in just one article. So be warned: Start your planning, and call and make an appointment today with an experi- enced professional. Done right, every- one—except the IRS—wins. Done wrong, only you and your loved ones lose. Have a question? Call Irv Blackman at 847/674-5295. MF
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