TAX665_3-2 Final Project Part I Milestone One The Basic Estate Plan

Running Head: ESTATE PLAN e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e 1

ESTATE PLAN e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e

to manage an asset base of an individual in the event of their death or incapacitation, including

the settlement of estate taxes and the bequest of assets to heirs. It has been found that the estate

can be taxed at a 40% high rate for not having proper estate planning, which can result in very

high taxes for individuals with high wealth (CDFA, 2023). In the present case, the client owns

a company with $1 billion of fair market value. Here, if the client is not planning their estate in

a proper way, then it could result in paying nearly $400 million of estate taxes by the estate

upon death. It has been identified that many estate planning strategies are there for high-

wealth individuals to avoid gift taxes and paying estate, including limited family partnerships,

life insurance policies, establishing charitable trusts, gifting assets during their lifetime, and a

revocable living trust (CDFA, 2023). Thus, it becomes important for the client to consult with

al., 2019). For instance, if the client is married to someone, then they can get double the

amount as up to $11.4 million can be received by an individual tax-free, which can lead to a

total of $22.8 million. Similarly, in case you may leave your estate to your two children and

give your business 10% to a third party, then the exemption equivalent would reach $68.4

million, which is the lower estate amount. In such a scenario, it is always a better decision to

specify the client's wishes through a will that can administer the estate.

ESTATE PLAN e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e

the same time, the client needs to select a beneficiary while setting the life insurance so that

the beneficiary amount will be paid to the person upon the client's death. Another great option

could be transferring the life insurance policy to your children, but if the individual is living

for more than three years after the process of transfer, then the value will not be added to the

estate (Miller & Maine, 2020). Here, the person needs to ensure that the insurance policy is

purchased by one child who can insure them. For example, if the client is making payments

under $30,000 per year and paying the insurance premiums, then it will be considered a non-

taxable gift payment. In case the client cannot transfer the policy or does not have the life

the client wants to give 10% of the business to a third party, then the process should be

conducted sooner as it can lower the fair market value of their estate and business.

Introduction to the utilization of limited family partnerships

When focusing on long-term estate planning, it would be wise to create a family

limited partnership. This FLP is a type of partnership that is specially designed to centralize

investment accounts or family businesses by pooling the family assets together into a single

partnership where all the family members have their shares (Vlahos, 2018). If a family limited

partnership is utilized, then it can offer a limited partnership interest in the company to

maintain its control. Here, the client's organization could invest in different commercial and

ESTATE PLAN e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e

the fair market value to the third party and the children. This way, the client can give $30,000

tax-free worth to their children as a family limited partnership interest.

References

CDFA, C. (2023). How Portability Can Be an Impactful Estate Planning Strategy. Journal of

Financial Planning, 36(2), 64-67.

CDFA, C. (2023). Prenuptial Agreements and How They Affect Estate Planning. Journal of

Financial Planning, 36(4), 48-51.

DuCharme, J., Rodgers, J., Teague, L. J., Weiant, L., Wigley, M., & Zhang, Y. (2019). Tax