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Estate planning matrix.

In the traditional sense, estate planning means preparing for the orderly and efficient transfer of assets at death. Within this definition, the basic objectives of estate planning are set forth in the discussion of the Estate Funnel on page 10.

However, estate planning has also come to involve planning for the accumulation and distribution of an estate during lifetime as well as at death. It must also be recognized that comprehensive estate planning will often involve the concepts and techniques contained in the business planning and employee benefits chapters of this guide. For example, although additional estate liquidity would be provided from the sale of a business interest, estate taxes will be increased through inclusion of the proceeds of the sale in the taxable estate. Likewise, an effective estate plan should maximize employee benefits, while at the same time taking into consideration their impact upon the estate.

The following matrix should provide a better understanding of how the concepts and techniques, represented in the charts, can be used to solve estate planning problems.
PROBLEM                SOLUTION(S)                                PAGE

Loss of Estate Value   EXEMPTION TRUST WILL provides the           28
Through Estate Tax     opportunity to reduce estate taxes (the
                       COMPARISON OF WILLS chart on page 33
                       illustrates the substantial savings).

                       QTIP TRUST provides opportunity to          40
                       reduce taxes while controlling
                       disposition of estate.

                       GIFTS & SPLIT-GIFTS remove property from    54
                       the estate.

                       GIVING--THE TAX ADVANTAGES                  58
                       demonstrates the benefits of using the
                       unified credit to make larger gifts and
                       contrasts the gift of life insurance
                       with gifts of other property.

                       LIFE INSURANCE AS PROPERTY shows            82
                       how life insurance can be excluded from
                       the gross estate for federal tax

                       LIFE INSURANCE TRUST can remove life        62
                       insurance death proceeds from the

                       CHARITABLE REMAINDER TRUST can              66
                       remove from estate taxable property that
                       can be replaced by life insurance in a
                       Wealth Replacement Trust.

                       GRANTOR RETAINED ANNUITY TRUST              70
                       allows a grantor to retain an annuity
                       interest while at the same time reducing
                       estate taxes.

                       GENERATION-SKIPPING TRANSFERS               44
                       shows use of exemption in 2009 to
                       transfer $3,500,000 to grandchildren.

Estimating the         FEDERAL ESTATE TAX explains the             18
Estate Tax             calculations.

Payment of Estate      LIFE INSURANCE PRODUCTS can be used         86
Costs                  to provide funds to pay these costs.
                       Chart compares alternative plans and
                       explains their basic characteristics and
                       essential differences.

Distribution of        SIMPLE WILL can provide for the             26
Estate                 distribution of estate assets, including
                       specific bequests.

                       EXEMPTION TRUST WILL offers added tax       28
                       savings and the post death management of

                       REVOCABLE LIVING TRUST (RLT) is a will      34
                       substitute offering many advantages
                       during lifetime and at death.

                       POUR-OVER WILL functions as a "fail         38
                       safe" device to transfer property at
                       death into the RLT.

Replacement of Income:

Upon Death             LIFE INSURANCE PRODUCTS can provide         86
                       funds to replace lost income in case of
                       death (one approach to determining the
                       necessary funds is contained in the
                       discussion of HUMAN LIFE VALUE on page

Upon Disability        DIABILITY--THE LIVING DEATH                254
                       demonstrates the need for proper
                       planning before disability occurs.

Upon Retirement        DEFERRED ANNUITY can be used to            298
                       accumulate funds on a tax-favored funds.

Insufficient Income    LONG-TERM CARE planning provides an        270
or Assets for          understanding of the risk and cost of
Custodial Care In      long-term care and how the risk can be
Retirement             managed.

Management of Assets   LIFE INSURANCE TRUST provides for           62
and Orderly Payment    both asset management and ongoing
of Income to Spouse    payments.
and Children
                       EXEMPTION TRUST WILL with provisions        28
                       for both asset management and payment of
                       continuing income to beneficiaries.

                       REVOCABLE LIVING TRUST can provide for      34
                       management of assets both before and
                       after death.

Guardianship of        SIMPLE WILL with provisions for             26
Children               appointment of guardian (EXEMPTION TRUST
                       WILL can also contain these same
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Article Details
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Title Annotation:ESTATE PLANNING
Author:Cady, Donald F.
Publication:Field Guide to Estate, Employee, & Business Planning
Date:Jan 1, 2010
Previous Article:Pointers.
Next Article:The estate funnel.

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