J.K. Lasser's New Rules for Estate, Retirement, and Tax Planning, 6th Edition

Acknowledgments xi

Introduction xv

1. American Taxpayer Relief Act of 2012 1

Marginal Ordinary Income Tax Rates 2

Capital Gains Tax Rates and Qualified Dividends 2

Educational Provisions 2

Business and Corporate Tax Relief 5

Estate, Gift, and Generation-Skipping Transfers 5

The 3.8 Percent Tax on Net Investment Income 10

2. Estate Planning 13

What Is Estate Planning? 13

The Benefits of Estate Planning 14

The Nightmares of Poor Planning 16

The Myths of Estate Planning 17

Guidelines for Successful Estate Planning 18

3. The Estate Tax System 21

Determining Your Estate Net Worth 21

Understanding the Estate Tax System 21

Your Estate Tax Picture 26

Your Future Estate 30

Overview of Estate-Planning Strategies 30

4. Investment Strategies for Maximizing Estate Growth 33

Growth Strategy with a Safety Net 34

Prioritizing Your Investment Dollars 38

Retirement Planning: Choosing the Best Investment Environments 39

Some Final Thoughts on Investing 48

5. Retirement Planning: Living Your Dream 49

Your Retirement Requirements 49

Best Retirement Strategies 58

Reverse Mortgages 65

Social Security Strategies 68

Customizing Your Health Care Plan 73

6. You Don’t Have a Will? Big Trouble! 77

Property Transfers at Death 78

Transfers via Probate 78

Direct Transfers by Title 81

Other Methods of Property Ownership 85

Choosing the Best Methods of Ownership 86

Setting Estate-Planning Goals 87

7. Where There’s a Will, There’s Your Way! 89

What Is a Will? 89

Types of Wills 89

Advantages and Disadvantages of Wills 91

Intelligent Decisions Concerning Your Will’s Basic Provisions 93

Executing Your Will 105

Where to Store Your Will 105

Other Important Documents 106

Working with Your Attorney 111

When to Review Your Estate Plan 114

8. Using Trusts in Your Estate Plan 117

The Credit Shelter Trust Will 118

Disclaimers 122

Marital Trusts 123

Spendthrift Trust 127

Standby Trust 128

Other Trusts 128

9. Understanding the Living Trust 129

Advantages of Living Trusts 129

Disadvantages of Living Trusts 131

How a Living Trust Operates 132

Transferring Property into Your Living Trust 134

Types of Property Likely to Be Transferred 137

Living Trust Myths 139

Transacting Business with Your Trust 140

10. Using Insurance in Your Estate Plan 143

Life Insurance 143

Using Life Insurance to Replace Income 146

How Much Life Insurance Do You Need? 147

What Type of Life Insurance Is Best for You? 149

Insurance on a Homemaker 149

Insurance on Adult Children 150

How to Get the Best Deal on Term Life Insurance 150

Insurance Warnings! 150

Using Life Insurance for Estate Liquidity 151

How Much Is Enough? 152

What Type of Life Insurance Is Best for Estate Liquidity? 152

The Irrevocable Life Insurance Trust 154

Getting Your Life Insurance into Your Trust 155

Using Life Insurance to Leverage Your Estate 157

About Your Cash Values 159

Long-Term Care Insurance 161

11. Smart Strategies for Gifting Assets to Family Members 165

The Annual Gift Tax Exclusion 165

Unintended Gifts 166

Filing a Gift Tax Return 167

The Lifetime Applicable Exclusion Amount 168

Outright Gifts 168

When the Donee Is a Minor 170

Other Tax-Free Gifts 178

Family Gifts Utilizing Trusts 178

Grantor Retained Annuity Trust 178

Grantor Retained Unitrust 180

Qualified Personal Residence Trust 180

Taking Advantage of Generation-Skipping Transfers 184

Sales to Family Members 186

Loans to Family Members 188

Sales to Intentionally Defective Grantor Trusts 189

The Legacy Trust 190

12. Strategic Planning with Charities 199

Outright Gifts to Charities 200

Testamentary Gifts to Charities 202

Gifts Using Charitable Trusts 202

Using Your Charitable Trust for Retirement Planning 205

The Private Foundation 208

13. Family Limited Partnerships 213

General Structure of the Family Limited Partnership 213

Family Limited Partnership Rules 218

14. Succession Planning for the Family Business or Farm 225

Special Estate Tax Benefits for Farmers and Closely Held

Business Owners 227

Valuing Your Business or Farm 228

Succession or Sale? 229

Succession Planning: Keeping the Family Business in the Family 229

Maximizing Your Business’s Value through a Sale 230

Structuring Your Buy-Sell Agreement 232

Types of Buy-Sell Agreements 232

Funding the Buy-Sell Agreement 233

One Final Strategy—The Employee Stock Ownership Plan 234

15. Asset Protection Strategies 237

The Concept of Fraudulent Transfers 238

A Word about Jointly Held Property 241

Retirement Plans 241

Life Insurance 242

Using Trusts to Protect Assets 243

Using Limited Liability Entities to Protect Assets 245

Use of Multiple Limited Liability Entities 247

Foreign Asset Protection Trusts 248

Domestic Asset Protection Trusts 250

16. Personal Business Planning Issues 253

Choosing the Right Entity for Your Business 253

Closing Thoughts 263

Importance of a Business Plan 265

Epilogue—Dealing with Parents and Their Money 269

Appendix A—Professional Advisers 271

Appendix B—Estate Planning Terms 275

Appendix C—IRS Life Expectancy Table 281

Index 285

STEWART H. WELCH III, AEP, CFP^®, is a nationally recognized financial advisor who has served as Chair of the Disciplinary and Ethics Commission and as a member of the Board of Directors of the Certified Financial Planner Board of Standards, Inc.

HAROLD I. APOLINSKY, ESQ., EPLS, is a board-certified estate-planning attorney with the law firm Sirote & Permutt, PC in Birmingham, Alabama. He previously taught estate planning at the Cumberland School of Law and the University of Alabama Law School.

J. WINSTON BUSBY, ESQ, LLM, is an attorney at Sirote & Permutt, PC, focusing on tax and estate planning, income taxation of trusts and estates, succession planning, charitable giving techniques, and tax-exempt entities.

J.K. Lasser—Practical Guides for All Your Financial Needs