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Estate Planning

Securing Your Legacy for Future Generations
In today's complex estate planning environment, it's critical that affluent individuals have the benefit of best-in-class advice tailored to their needs.

Shoreline Wealth & Investment Management works with professionals to provide expert advice on tax-efficient wealth transfers, consistent with your personal values and goals. We can help you to:

Integrate your estate plans with tax, investment, business, and insurance planning
Develop plans to manage problems associated with a sizable inheritance
Determine how to provide for future generations
Utilize tax-efficient strategies to transfer your wealth

Working together, we can help you create a legacy that provides for your family and projects your values and vision across future generations.
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Estate Planning Basics
Estate planning offers an opportunity to ensure that your family and future generations are financially secure according to terms that you decide. Your careful decisions today can guarantee that your will is executed and your assets distributed according to your intentions. You can plan in such a way that your descendants avoid probate administration of your estate and your estate pays the minimum amount legally possible in estate taxes.

Proper planning can protect your estate, which is the total of all your assets and liabilities, including real estate, business interests, stocks, and personal property, from defaulting to the distribution scheme set forth by the laws of the state in which you live, and can smooth the distress surrounding your death or incapacitation. Although you may prefer not to think about a time when you will not be there for your family, estate planning can and should be rewarding and satisfying. Once you have completed your estate plan, you will know that you have provided for the people and causes you care about.

Estate planning is crucial in order to avoid probate, the legal process by which a court supervises the administration of the decedent's estate, validates the will, if there is one, and ensures that debts are paid and assets are distributed to the appropriate beneficiaries. The probate process varies by state and by the size and complexity of an estate's assets and liabilities. Although a simple estate may complete probate in only two to six months, a more complicated estate could take years. This can be an expensive process, and one that allows public access to the family's financial information through court documents. Through proper estate planning, you can avoid probate.

Estate Tax Exemptions and Rates
Estate planning can reduce or eliminate the amount of taxes that your estate must pay after your death. The amount protected from taxation, known as the lifetime exemption, is $1 million.

Prior to making any distributions to your beneficiaries, your estate will have to pay taxes on the amount that exceeds your lifetime exemption. The estate tax rate is currently flat at 45% with the current plan set to expire in 2010. However, in 2011 it will restart at  lowest estate tax rate at 41% and the highest at 55%. The basic evaluation of your estate includes determining the fair market value of your current assets. Over time, your assets are likely to appreciate, which means that your estate tax liability will also increase.

Without proper estate planning, there can be a dramatic reduction of the value of the estate that your beneficiaries will actually receive after estate taxes are paid. Adequate planning is essential so that your assets are protected from taxation and are distributed according to your intentions.

Terms and Definitions
There are many strategies you can use to plan your estate, depending largely on your total net worth and your relationship with the beneficiaries of your thoughtfulness. Here are some terms and concepts that will help you understand your estate planning options.

Annual gift tax exclusion: The federal government allows you to give any individual a present interest gift of up to $13,000 per year, without paying gift taxes. You must pay a gift tax or use your applicable exclusion amount on any gift that exceeds $13,000 to a single recipient or does not qualify for this exemption. To qualify, the recipient must have a "present interest" in the gift, which means that the recipient must legally be able to use the gift immediately. If you and your spouse make a gift together, you can each give $13,000 to each individual recipient, for a total tax-free gift of up to $26,000. Gifts that exceed $13,000 (or $26,000 from married couples) will count toward your lifetime exemption (see above).

Applicable exclusion amount, or unified credit equivalent, or lifetime exemption:During your lifetime or following your death, you can transfer this amount to others (in the aggregate) without paying taxes. In 2006, this was 1 million but increases to 1.1 million under the new 2011 terms.

Generation-skipping transfer tax: The federal government assesses a transfer tax on aggregate transfers that exceed $1,060,000 million (indexed for inflation) to grandchildren, great-grandchildren, and other individuals who are two or more generations removed from the donor. This is effectively a double tax that is intended to dissuade people from leaving assets to grandchildren in an effort to avoid estate taxes that would otherwise be paid by the son or daughter's estate. Each person is granted a GST exemption of $1,060,000, which can be allocated to transfers that would otherwise cause a generation-skipping transfer tax to be paid.

Gift tax return: An annual gift tax return (Form 709) must be filed by April 15th of the year following the year in which a person makes any gift that is not fully sheltered by the gift tax annual exclusion. If a return is required, all gifts (including those falling within the $13,000 annual exclusion) must be reported, but an exclusion will be allowed (up to $13,000 per donee) for any gift that qualifies as a present interest gift. The total amount of taxable gifts in excess of the allowable annual exclusions will use up an equivalent amount of the donor's lifetime exemption (currently $1,060,000), and if the lifetime exemption has already been fully used, the donor must pay a gift tax. A gift tax return is sometimes also filed to allocate the donor's GST exemption to a gift to avoid a generation-skipping tax on the gift.

Trust: A trust is a legal entity that holds property on behalf of an individual, group, or other legal entity. The person who sets up the trust is the grantor, the person or group of people who manage the trust is the trustee, and those who benefit from the trust are the beneficiaries. Sometimes trusts are used as vehicles to avoid federal and state inheritance taxes. Other times, trusts are designed to ensure that the assets held in trust are used in a manner specified by the grantor.

Unlimited marital deduction: When a spouse dies, all of the couple's assets can go to the surviving spouse without estate taxes. Unfortunately, this seemingly simple kind of transfer fails to take advantage of the lifetime exemption of the first spouse to die and can be a tax trap for the beneficiaries of the remaining spouse.

Shoreline's Competitive Edge
Whatever your estate planning need, Shoreline Wealth and Investment Management can assist you in obtaining the best in tax planning advice.

For more information:
If you'd like more information about how diversified investment advisors can help you achieve your financial objectives through personalized wealth or retirement and risk management strategies, please contact us. We welcome the opportunity to discuss your unique needs and how we may best meet them.

This page (formatted for versions 10.0 and higher of Internet Explorer) is updated regularly so check in from time-to-time to see new articles and updates. You can click on any underlined words on each page to see a specific wealth management topic in the left margin of each page.

Charles M. Bloom, Registered Principal offers securities and advisory services through Centaurus Financial, Inc. - Member FINRA and SIPC - 775 Avenida Pequena, CA, 93111 (mailing address: 3905 State Street Suite 7173, Santa Barbara, CA, 93105) - CA Life Insurance License No. 0A52786 - Centaurus Financial, Inc. and Shoreline Wealth & Investment Management are not affiliated companies.

The information contained in this web site is neither an offer nor solicitation of any security or service.


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