ESTATE & GIFT TAX –TAX 665-X4484 FINAL PT. II –POWERPOINT
PRESENTATION
Sidney, Newt, Holmes & Ubel Tax Partners LLP “your tax law partners, your keys to success”
123 E Main Street Suite 456 Manchester, NH 03103-9999 p: 123.456.7890 /f: 098.765.4321 info@snhu.llp.com
Chairman R. Mahathey
Estate & Gift Tax Stratagem
A complete estate plan with focus on minimizing TAX consequence
JR Associate - J.L. Culpepper
Important Plan Differentials for this Estate:
•This plan’s primary focus is to reduce the large estate tax associated with the
Mahathey Estate currently valued at $1.1B.
•Consequentially, the following estate planning areas will be omitted:
•POWER OF ATTORNEY
•HEALTH CARE POWER OF ATTORNEY, ADVANCED HEALTH CARE
DIRECTIVE, AND OTHER HEALTH CARE DOCUMENTS
•WILL
•Key plan focus on various implementations of possible FLPs, Trusts, and Insurance
Policies.
•CEO, Chairman and founder of the Rylan Mahathey Real Estate (RMRE)
Group, Inc.
•Estimated Estate Valuations of $1,108,750,000.00:
•34% Owners stake of RMRE Group - $805,800,000.00.
•30.6% - To be left for Louis & Marline (direct descendants).
•3.4% - (10%) –To be left for general sale to help future tax consequence.
•$265,000,000.00 –Several Private Commercial Real Estate holdings.*
•$25,000,000.00 –Charitable Donation –American Bulldog Association.
•$12,950,000.00 –Portfolio –Various Investments and Securities.*
•As per the Chairman’s instructions all estate assets are to be divided
between his two children with certain assets(*) available for sale to
further help reduce tax liabilities.
Understanding the Client:
Intentionally Defecting Grantor
Trusts & Family Limited
Partnerships
•IDGT allows the grantor and owner of the trust to
have certain powers such as the power to withdraw
or use income from trust; power to substitute asset;
power to revoke; power to add charities as
beneficiary
•IDGT can also be funded via the sell of property.
•FLP makes it possible for ownership to be passed
down from one generation to the next without
sacrificing control over the underlying property, it
offers the chance to lower or avoid income and
transfer taxes, ensures the permanency of family
ownership in a business, and shields the partners
from liability.
Minimizing Income
Tax Liability
•Utilizing both FLPs and IDGTs we can minimize
the estate tax consequence of over $440M,
down to a little under $25M
•Minimize income tax liability on the sale of
partial interest in a business to an unrelated
third party
•Minimize taxation of income potentially
received by a business’ operation over the next
24 month span
Life
Time
Value
Grantor
$3,000,000,000
Estate
Value
$1,
108,750,000
Federal
Tax
%
37.0%
State
Tax
%
5.75%
Trust
Value
$1,108,750,000
Federal
Tax
%
0.0%
$2.000,000,000
State
Tax
%
0.0%
Annual
Rate
of
Return
1.7%
ee
Tax
%
Upon
Death
40.0%
Non-Grantor
Estate
Value
$1,108,
750,000
Federal
Tax
%
37.0%
$500,000.00
State
Tax
%
0.0%
Trust
Value
S$
725,220,000
;
Federal
Tax
%
37.0%
.
State
Tax
%
0.0%
,
,
“
"
‘ ‘
;
Annual
Rate
of
Return
5.658
Ee
ee
irit
Tax
%
Upon
Death
40.0%
Year
0
Yearl
Year
2
Year
3
Year
Year
S
Year 6
Year
7
Years
Year
9
Year
10
Estate
$1,108,750,000
$1,127,598,750
$1,146,767,929
$
1,166,262,984
$1,186,089,454
$
1,206,252,975
$1.226,759,276
$1,247,614,183
$
1,268,823,624
$1,290,393,626
$
1,312,330,318
Federal
Tax
$
417,211,538
$
424,304,134
§
431,517,304
$
438,853,098
§
446,313,601
$
453,900.932
$
461,617,248
§
469,464,741
§
477,445,642
$
485,562,218
State
Tax
$
1,083,803
$
1,102,228
$
1,120,966
5
1,140,022
$§
1,159,402
$
1,179,112
$
1,199,157
$
1,219,543
§
1,240,275
§
1,261,360
Tax
Upon
Death
5
-
§
-
§
-
§
=
5
-§
=
5
-§
-§
-
$3
=
Year
End
Value
$
709,303,409
$
721,361,567
§
733,624,714
§$
746,096,334
$
758,779,972
§
771,679,231
§
784,797,778
§
798,139,340
§
811,707,709
$
825,506,740
Trust
§
725,220,000
§
765,832,320
§
808,718,990
$
854,007,190
§ 901,831,593 $
952.334.162
$
1,005,664,875
$1,061,982,108
$1,121,453,106
$1,184,254,480
$
1,250,572,731
Federal
Tax
$
-
§
-
§
-
§
-
$4
” - -
§
5
$
”
State
Tax
$
-
§
$ $ $
-
§
-
§
=
§
-
§
-
§
-
Tax
Upon
Death
$
=
§
-
§$
-
§
-
§
- - -
: :
-
Year
End
Value
$
765,832,320
$
808,718,930
$
854,007,190
$ 901,831,593
$
952,334,162
$1,005,664,875
$1,061,982,108
$1,121,453,106 $1,184,254,480
$1,250,572,731
Year
il
Year
iz
Year
13
Year
14
Year
15
Year
16.
Year
17
Year
18
Yer
19
Year
20.
Year
21
Year
22
‘Year
23
Year
24.
Wear
25
$1,334,639,933
$1357,378,812
$1,380,403,402
$1,403,870.260
$1,427,736054
$1,452,007,567
$1,476,691,695 $1,501,795,454
$1527.525,977
S1.553.790.519
S1579,696457
$1,606551,297
§$1,693,862,669
5
1,661,638,335
§
1,689,886,186
$
499,816,775
$
SO2211,660
$
510,749,259
$
519,431,996
$
528,262,340
$
537,242,800
$
546,375,927
$
555,664,318
$
565,110,611
$
574,717,492
$
584,487,689
$
594,473,980
$
GO4,579,188
$
614,806,184
$
625,257,889
S$
1,782,803
$
1304611
$
1,326,789
$
13493944
5
1,372,283
5
1.995612
5
Lai9a37
$
1443466
$
1469005
$
1492.961
S$
1518341
5
1,544,153
$
LS70404
S$
1597,101
$
1,624,251
5
-_5
-_
3
-
3
-$
-_5
-
$
-§
-_5
-
$5
-
§
-§
-
$
-_$
-
5
:
$
839,540,355
$
853,812,541
$
868,327,354
$
883,088,919
$
898,101,431
$
913,369,155
$
928,896,431
$
944,687,670
$
960,747,360
$
977,080,066
$
993,000,427
$1/010,583,164
$1,027,763,078 $1,045,235,050
$1,063,004,046
$1,320,604,804
$1,394,558,673
$1,472,653,958
$1,555,122,580
$1,642,209444
$1,794,173173
$1891,286,871
§1933,838,996
$2,042,139916
$2,156493,416
S2.277,257,047
$2404,
789441
$2,599,451,314 $2,681,660,588
§
2,831,833,581
$
=
§
=
§
-
§
=
\§ =
§ $
=
§
=
§
=
$
=
§
=
§
-
§
-
§
=
§
=
5
-
§
-
3
-
3
-
§
-
$
-
3
-
§
-
$3 -
$
-
§
-
$
-
3
-
§
-
§
5
-_$
-$
-
§
-
$
-_
3
-
-_$
-
$
-
§
-
$
-_$
-
-
$
-$
7
$1,320,604,804
$1,304,558,673
$1,472,653,958
$1,555,122,580 $1,642,209,444
$1,734,173,173 $1,831,286,871
$1,993,838,936 $2,042,133,916
$2,156,493,416
$2,277,257,047
$2,404,783,481
$2,539,451,314 $2,681,600,588
$2,831,833,581
FINAL SLIDE
C Donations
In a Charitable Remainder Trust (CRT) donor
receives an income stream from the trust for a
term of years or for life and a named
charity (including a donor created private
foundation) receives an immediate income
tax charitable deduction when the CRT is
funded based on the present value of the
property that will eventually go to the named
charity. Property gifted to a CRT is removed
from the donor's taxable estate. CRTs are
useful to hold and sell appreciated assets
because the trust is a tax-exempt organization
and will pay no income tax on the property
sale.
Insurance Policy
•An ILIT can be used to reduce inheritance taxes, eliminate gift taxes, safeguard
government benefits, safeguard assets, regulate distribution plan
•ILIT is irrevocable and policy premium is paid by the trustee
•Internal Revenue Code Section 2042(2), the value of a decedent's gross estate
must include all life insurance proceeds payable to beneficiaries
•In order to avoid life insurance proceeds being apart of gross estate then estate
planning of purchasing the life insurance policy or transferring the policy into
Irrevocable Life Insurance Trust (ILIT).
