What Should You Know About Estate Planning & Asset Protection

What Should
You KnowAbout

Author: Shawn Rabban

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Presented by

Shawn Rabban

(310) 714 5616

Telephone : 310-714-5616

Shawn Rabban, Author of Investment- Money- Loan, 1031 tax deferred exchange,

SBA Policy and Underwriting Guidelines, Carwash and Gas Station, Equipment Financing,
Land Acquisition Development, Owner Occupied Property, Automobile Financing an d
Commercial Real Estate Conduit Loan, Hard Money Loan, What should know about estate
planning.

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Please consult with your personal tax professional or legal advisor for further guidance on tax or legal
matters

City Capital Realty
Shawn Rabban
310-714-5616
[email protected]
citycapitalrealty.com
CALDRE.00667328 | NMLS. 298861/ 729817 |
Notary Public. 2247857
Insurance. 01613659

Federal Estate and Gift Taxes

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For most U.S. citizens the federal estate tax is meaningless because most
citizens don't have a net worth of more than $6 million. But that situation can
change quickly if Congress fails to take action on estate taxes during 2019.
This web page explains the estate tax and how it may affect your estate.

THE FEDERAL ESTATE TAX is a tax on any transfer of assets from a deceased
person's estate to his or her heirs, except for transfers to US citizen spouses.

ALL OF THE ASSETS owned by the deceased person are subject to the estate
tax, including property in tenancy in common, living trusts, IRAs, and life
insurance (if the insurance was owned or controlled by the decedent).

TAX RATE: Assets that are subject to the estate tax (in other words, an estate
greater than $5,450,00 for a single person and $10,980,000 for a married couple

THE MARITAL DEDUCTION: Assets that are transferred from one spouse to
the other spouse at death are not taxed. This is called the " unlimited marital
deduction," and there is no limit on how much can be transferred.

PORTABILITY: If a spouse does not use his or her exclusion amount by
funding an exemption trust or making bequests to anyone other than his or
her spouse, the surviving spouse can use the unused exclusion amount of the
first spouse to die. Portability doubles the amount available to the surviving

spouse in many cases, and up to $12,000,000 of assets can be excluded
from the estate tax. Also, see the portability page.

Here are the requirements for portability:

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1. The decedent and the survivor must have been married.
2. Death must have occurred JAN, 1, 2015.
3. An election to use portability must be made on the estate tax
return of the decedent.
4. Portability applies only to the surviving spouse, not to other family

members.
4. Portability applies for both estate and gift tax purposes.
5. Portability does not apply to the generation skipping tax.

THE FEDERAL GIFT TAX is intended to limit the amount that can be
transferred to persons other than a spouse without incurring a tax. Starting
Jan. 1, 2015, annual gifts of up to $15,000 can be made to an individual without
incurring a gift tax. If the gift is made by a married couple from their jointly
owned assets, it can be as much as $30,000 per year without being taxed.
There is a lifetime gift exemption of $6,000,000 per donor, but the gift will be
deducted from the donor's exclusion amount.

WHAT IS A DISCLAIMER? A disclaimer is a refusal to inherit all or part of an asset or
of an entire estate. The reason for doing this is that the person who is entitled to
receive a bequest either doesn't need or doesn't want the bequest. In most cases
the bequest would only make a sizable estate larger and increase the amount of
federal estate taxes that will eventually be collected from that estate. The
disclaimer operates as though the disclaimant died before the decedent, and the
decedent's estate plan specifies a contingent beneficiary, who is often the
disclaimant's children. If that is the case, the effect is that the bequest goes to the
disclaimant's children, and is never taxed in the disclaimant's estate.



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 Each individual will be entitled to a



$6,000,000

exemption from the federal estate, gift and generation-skipping transfer (“GST”) taxes

($12,000,000) per married couple).

For individuals who die in 2019, the federal estate tax and the generation skipping tax will be
35% of the amount of the estate in excess of $6,000,000 per individual ($12,000,000 for
married couples). Also, heirs will get a step-up to fair market value in the basis of most assets
inherited.

The law also unifies the estate tax and gift tax exemption to the $6,000,000 amount for 2019.
This means individuals can make lifetime gifts in excess of the $15,000 per year annual

exclusion gifts totalling $6,000,000 during life for ($12,000,000 for a married

couple). What a huge planning opportunity.

 More ideas will be explained and illustrated throughout 2019 to take advantage of this
opportunity.

 Finally, the law added a provision making the $6,000,000 exemption portable among spouses. If
someone’s spouse dies and does not use the full $12,000,000 exemption, the surviving spouse
will be able to add the unused portion to their exemption.


.
 Lots of fun and exciting planning will be happening over the next two years in the estate

planning area.

Protect what you have.

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Plan for what you want.
Do you have plans for the future?

What kind of life insurance
Is right for you?

Shawn Rabban 310-714-5616 Insurance Lic: 0613659

Seven ways to Protect Your Assets From Creditors:

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When planning your estate, your primary objective is to pass on as much wealth to your heirs
as possible. If you’re like most people, you want to reduce or eliminate estate taxes as well.

But litigation, divorce, malpractice and other potential claims may damage your net worth
more than taxes. So protecting assets from potential claims has become an additional
planning objective. Fortunately, many of the same techniques you can use to reduce estate
taxes also can provide creditor protection.

You can use many techniques to reduce your estate for tax purposes while also protecting
your assets from creditors. Yet these measures won’t protect against existing creditors if a
transfer constitutes a “fraudulent conveyance” under the Uniform Fraudulent Transfer Act. A
fraudulent conveyance occurs if you had actual intent to hinder, delay or defraud a creditor
when you made the transfer.

Here are seven ways to safely protect transferred assets from creditors:

1. Outright gifts. An outright gift protects a transferred asset from creditors. But you’ll

lose all economic interest in and control over the asset

2. Family limited partnerships (FLPs). An FLP is an excellent asset-protection

device because it limits a limited partner’s creditor’s ability to attach partnership assets to
satisfy a debt. Creditors generally can obtain a charging order only against a limited partner’s
interest in a partnership. A charging order would permit a creditor to receive distributions
only when they’re made from the partnership, and the general partner could choose not to
make distributions. The creditor could even end up with taxable income without any cash
distributions.

3. Irrevocable life insurance trusts (ILITs). From the standpoint of protecting your

assets, an ILIT removes insurance proceeds from your estate for federal estate tax purposes.
And the trust protects from creditors the cash value of the policies during your lifetime and
the policy proceeds when you die.

4. Qualified personal residence trusts (QPRTs). A QPRT lets you transfer a

primary or vacation residence to a trust while you reserve the right to live in the home for a
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term of years. The value of the interest you retain (that is, the right to live in the house for a
term of years) is calculated using IRS tables. The value of the property transferred into trust,
minus your term interest’s value, is a gift known as the “remainder interest.” This gift can be
sheltered from gift tax by your $5 million gift tax exemption in 2011 and 2012. If you survive
the term of years, the trust is not included in your estate for federal estate tax purposes.
(QPRTs provide creditor protection by insulating the residence from your creditors’ claims.
In a creditor protection situation, the nondebtor spouse should create the QPRT and retain the
term interest.)

5. Inter vivos qualified terminable interest property (QTIP) trusts. You create

this trust during your lifetime for your spouse. It qualifies for the gift tax marital deduction.
The federal estate tax benefit to this technique is that when your spouse dies, the QTIP trust is
included in his or her estate for federal estate tax purposes. If your spouse lacks sufficient
assets in his or her own name to use his or her federal estate tax exemption, the QTIP assets
will achieve this.

If you survive your spouse, an amount of assets equal to the estate tax exemption (currently
$5 million) will first go to fund a family trust created under the QTIP trust for your benefit.
The balance of the QTIP trust assets will be allocated to the marital trust for your benefit and
will qualify for the marital deduction, resulting in no federal estate tax at your spouse’s death.

By structuring the QTIP trust this way, the assets allocated to the family trust when your
spouse dies will escape estate tax. That is, the assets allocated to the family trust don’t qualify
for the estate tax marital deduction, but your spouse’s estate tax exemption “shelters” them
from estate tax. They also won’t be subject to federal estate tax when you die, because assets
allocated to a family trust — including their appreciation — for a surviving spouse’s benefit
aren’t part of the surviving spouse’s estate for federal estate tax purposes.

The inter vivos QTIP trust is extremely popular as a creditor protection device because the
QTIP assets are completely insulated from claims of your creditors and your spouse’s
creditors during your spouse’s lifetime.

6. Charitable remainder trusts (CRTs). A CRT usually provides for distribution of a

percentage of the trust principal, at least annually, to a person, usually the grantor, for his or
her lifetime. The CRT can provide that when the grantor dies, the grantor’s spouse shall
become the CRT annuitant for his or her lifetime. When this period ends, the charity receives
the remaining CRT assets (the “remainder interest”).

Creating a CRT provides several income tax benefits. For example, the grantor can deduct the
remainder interest’s value (the interest passing to the charity) as determined at the CRT’s
inception by consulting IRS tables.

An additional benefit is that the CRT is exempt from all income tax. So a grantor owning
assets subject to a large capital gain can transfer these assets to the trust, and it can sell them
without the grantor or the trust having to pay any tax on the gain. Or a grantor holding highly
appreciated assets that aren’t producing much income can contribute them to the CRT and
create an income stream and owe tax only as annuity payments are received. It sells them and
reinvests the proceeds to service the annuity.

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A nondebtor-spouse-created CRT protects assets from a debtor spouse’s creditors. A creditor
can’t attach the principal because of the charitable interest. And a debtor spouse’s creditors
can’t attach the nondebtor spouse’s annuity payments. If the nondebtor spouse dies first —
and the CRT provides that the debtor spouse becomes the annuitant — the debtor spouse’s
creditors could attach the annuity when distributed to him or her.

7. Grantor retained annuity trusts (GRATs). A GRAT is a gift of a remainder

interest in an irrevocable trust, under which the grantor has retained an annuity interest for a
term of years. For example, if $500,000 is transferred to a GRAT and the grantor has retained
a 6% annuity, $30,000 per year will be distributed to the grantor. The remainder interest in
the GRAT can be a trust for the grantor’s spouse, with trusts being created for children when
both spouses die.

The value of the gift to a GRAT for gift tax purposes is the value of the property transferred
to it, less the value of the grantor’s retained annuity interest. The value of the annuity is
calculated according to IRS tables.

If the grantor survives the GRAT’s term, its assets will be excluded from the grantor’s estate
for federal estate tax purposes. If the grantor dies during the term, some of the assets will be
included in the grantor’s estate for federal estate-tax purposes.

If a nondebtor spouse is the grantor of a GRAT, the debtor spouse’s creditors can’t attach the
annuity distributions to the nondebtor spouse. These creditors also can’t attach the GRAT
principal. If a debtor spouse becomes a GRAT beneficiary when the nondebtor spouse dies,
his or her creditors could attach any distributions to the debtor spouse.

Many options

These are just a few of the ways proper estate planning can also safeguard your assets from
creditors. And in a society rife with litigation, you simply can’t underestimate the importance
of protecting yourself. Learn all you can about these measures and others that may benefit
you.

Should You Add a Child's Name to the Deed?

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Many parents, in planning their estates, add an adult child's name to the title of their home,
bank account or other assets.

"Joint tenant" approach

The most common way to do this is to make the child a “joint tenant with full rights of
survivorship”. This mean that when one joint owner dies, the other joint owner automatically
acquires sole ownership of the property.

Theoretically, adding your child's name to the deed to your home or to bank accounts is a
good move because it's a way to avoid probate. But doing so could create problems for you
for a number of reasons.

Gift tax problem

If you make your child the joint owner of your home, for instance, the IRS could treat this
transfer as a gift. IRS guidelines permit you to make a gift of $13,000 a year to one person
(note that this is the amount you can gift in 2010 and 2011). If the half interest in the home is
worth more than $13,000, which in 99.9% of cases it is, the gift tax provisions of the IRS
code will be triggered and your child will be required to pay gift taxes.

Attacks by creditors

If your child has financial problems or develops financial problems at any time after you add
his name to the title, his creditors may be able to levy on (take) the house to satisfy the debt.
Because you are joint owners, your child's creditors could only get at his half interest in the
equity. However, if one of your child's creditor's levies on the house, it will be sold at
auction, you'll be paid one half of the net proceeds, and the balance will go to pay down or
payoff the debt.

Bankruptcy

If your child files bankruptcy, there's a chance that you could lose the house. If the home has
a substantial amount of equity, the bankruptcy trustee can seize the house and sell it. You and
your child would receive the cash equivalent of whatever exemption you're entitled to under
the laws in your state, any mortgages on the property would be paid off, and the balance
would be distributed to your unsecured creditors on a pro rata basis.

Divorce

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If your child is married and you transfer an interest in your home or bank accounts to her, it's
quite possible that her spouse will have a marital interest in the property. If your daughter
gets divorced, you may be required to buy her spouse out of his interest in order to maintain
ownership of the house. He might even be able to force the sale of the house.

Accident

If your child is involved in an accident and is uninsured or under-insured and gets sued, the
plaintiff in the lawsuit may be able to get a lien against your house. If this happens, you'd be
unable to sell or refinance the property without paying off the lien. If the lien is sizable, it
could potentially eat up all of your equity. If your house is free and clear, the judgment
creditor could have the sheriff levy on the house. If this happens, the house will be sold and
the net proceeds distributed to the judgment creditor.

Loss of control

If you add your child to the deed or financial accounts, you lose control of your property and
your money. If you want to sell or refinance your home, your child will have to consent.
Moreover, if you decide you want to remove your child from the deed, he will have to sign a
quitclaim deed. If he refuses to sign it, you may find yourself embroiled in a legal battle that
could cost you thousands of dollars.

When it comes to bank accounts, remember that joint account holders have equal access to
the account. This means that your child could withdraw money from the account without
your permission. We'd all like to believe that our children would never do this, but I've seen it
happen and it can wreak havoc on the parent's finances and on the parent-child relationship.

On the opposite end of the spectrum is the child who is so concerned about the parent's
finances, that she begins policing the parent's spending. Whether or not your child's concern
is justified, it's your money and you're entitled to spend it in any way you see fit.

A revocable living trust can help avoid probate

If one of your goals is to avoid probate, the best way to do it is to establish a revocable living
trust. A revocable living trust is an agreement or contract between the settlor (the person who
establishes the trust) and the trustee (the person who manages the trust). The trustee has a
fiduciary duty to manage the trust according to the terms of the trust document and must not
act in a way that would harm the trust or the beneficiaries of the trust. If you name yourself as
the trustee, you will maintain control of your property during your lifetime and will also be
able to provide for the distribution of your property after your death. You will also name a
successor trustee who will take over management of the trust upon your death. You will have
the ability to change the terms of the revocable trust or to revoke it in its entirety at anytime
during your lifetime.

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Consider the worst that can happen

As you can see, the choice you make could truly impact your home and bank accounts. In
deciding whether to add your child's name to the deed to your house or to your bank
accounts, it's important to consider the worst thing that happen – losing your house or your
money because of your child's bad credit, negligence, or divorce, fighting with your child
over your desire to refinance or sell the property, or having your child “borrow” money from
your account without your consent. A little consideration and advanced planning will save
you a lot of stress and heartache. Remember estate planning requires prudence and
practicality, rather than short-sightedness and sentimentality.

Getting an expert in your corner

Before making any estate planning decisions, it's important that you consult with an
experienced estate planning attorney. Because there may also be tax consequences associated
with your estate planning decisions, you should also consult with an experienced CPA..

A buy-sell agreement helps sustain your business as it changes hands from one generation to

the next. One of the keys to an effective buy-sell agreement is a solid provision for valuing interests
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in the company. Whether shares are valued by an independent appraisal, formula, or agreement of
the shareholders, if the amount doesn’t accurately reflect the business’s value, your heirs will pay
the price.

If you own a company, you know that business affairs and family affairs are closely
intertwined. The company is likely the principal source of your wealth, so your family’s
financial future depends on its success. One of the most important factors in a business’s
long-term survival is a smooth transition from one generation to the next. A buy-sell
agreement can facilitate this transition.

What is it?

A buy-sell agreement is a contract that provides for the disposition of your business interests
when you die, become disabled, or leave the company for some other reason. By permitting
or requiring the company or other shareholders to acquire your interest, a buy-sell agreement
creates a market for your ownership shares, which thereby reduces or eliminates the estate
liquidity problems that a block of closely held stock may cause your heirs at death. In
addition, a buy-sell agreement may assist in resolving disputes among shareholders. Often,
companies use life insurance on each shareholder to fund the agreement so that a deceased
shareholder’s family can receive faster payouts.

Factors such as the structure of your business and the degree to which you and others remain
involved in it will dictate the buy-sell agreement’s terms. But perhaps the two most important
elements of any buy-sell agreement are the triggering events (what will cause your business
interests to become available for sale) and how your company will be valued.

Triggering events may include 1) divorce, disability, retirement or death; 2) employment
termination of a minority owner; or 3) bankruptcy or loss of a professional license.
Ultimately, because buy-sell agreements plan for future uncertainties, yours needs to be
flexible in the triggering events it names and how it interprets them.

What’s the business worth?

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It’s critical for a buy-sell agreement to establish reliable procedures for determining the value
of your business interest. Most agreements set the price in one of these ways:

Independent appraisal. Owners often use fair market value to set the purchase price,

typically selecting one or more outside professional valuators to determine this value. If you
choose this method, address how you’ll select the valuator or valuators. If you’re using more
than one and they disagree, how will you reconcile the difference?

Valuation formula. Some buy-sell agreements include an objective valuation formula,

such as a multiple of earnings, sales or book value. Although valuation formulas are
straightforward and easy to apply, they fail to reflect the many subjective factors involved in
arriving at a value — such as upcoming new products or services, or the power of your good
reputation.

Agreement by shareholders. Another effective approach is for you and the other

shareholders to meet periodically to review the company’s value and update the buy-sell
agreement accordingly. You can use either a formula or outside appraisal to determine the
price.

How costly are valuation errors?

Designing a buy-sell agreement that accounts for every factor that affects your company’s
value is next to impossible. But if the IRS determines that an estate tax return improperly
reflects business value, your heirs may pay the price.

Suppose, for example, that your estate tax return reports your company’s value as $10
million. If the IRS later finds that your business was actually worth $15 million at your death,
your estate will face the tax burden on the $5 million difference. At the 2004 top estate tax
rate, 48%, your heirs would face $2.4 million in additional tax liability. They might get hit
with interest and penalties, too.

The IRS is suspicious of buy-sell agreements it believes are devices to pass your shares to
family members for less than adequate and full consideration. Regardless of the valuation
method, you can’t use a buy-sell agreement to intentionally lower the value of your business
interests to reduce estate taxes. So, as a last step of due diligence, make sure your buy-sell
agreement is safe from IRS scrutiny before implementing it — particularly if a related party
is a potential buyer.

Buy-sell provides many benefits

A buy-sell agreement helps sustain your business as it changes hands from one generation to
the next. It can also provide other benefits, such as improving company morale by reassuring
employees of your company’s stability. And, perhaps most important, it protects your heirs
from a potentially devastating future estate tax bill. As discussed above, thorough planning
and solid valuation provisions are keys to achieving these objectives.

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Do you have
enough life
insurance
coverage
to
protect
your family?

Shawn Rabban 310-714-5616 Insurance Lic: 0613659

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Estate Tax Study Terms and Concepts

Insurance, face value

This asset category includes the face value of includible life insurance on the decedent's life.
Includible insurance is any insurance on the decedent's life that is payable to the estate at the
decedent's death, or is payable to another beneficiary if the decedent retained some ownership
of the policy.
Source: Form 706, Schedules D, E, G, H (2007 revision)

Insurance, policy loans

This item represents borrowing or other indebtedness against life insurance policies
includible as part of the gross estate. This value can be deducted from the face value of
insurance to compute the net value of includible life insurance.
Source: Form 706, Schedules D, E, G, H (2007 revision)

Other transfers within three years of death (section 2035(a)).

These transfers include only the following:

 Any transfer by the decedent with respect to a life insurance policy within 3 years
of death; or

 Any transfer within 3 years of death of a retained section 2036 life estate, section
2037 reversionary interest, or section 2038 power to revoke, etc., if the property
subject to the life estate, interest, or power would have been included in the gross
estate had the decedent continued to possess the life estate, interest, or power until
death.

These transfers are reported on Schedule G, regardless of whether a gift tax return was
required to be filed for them when they were made. However, the amount includible and the
information required to be shown for the transfers are determined:

 For insurance on the life of the decedent using the instructions to Schedule D
(attach Forms 712);

 For insurance on the life of another using the instructions to Schedule F (attach
Forms 712); and

 For sections 2036, 2037, and 2038 transfers, using paragraphs (3), (4), and (5) of
these instructions.

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T rust

What Does Irrevocable Trust Mean?

A trust that can't be modified or terminated without the permission of the beneficiary.
The grantor, having transferred assets into the trust, effectively removes all of his or
her rights of ownership to the assets and the trust. This is the opposite of a
"revocable trust", which allows the grantor to modify the trust.

Investopedia explains Irrevocable Trust

The main reason for setting up an irrevocable trust is for estate and tax
considerations. The benefit of this type of trust for estate assets is that it removes all
incidents of ownership, effectively removing the trust's assets from the grantor's
taxable estate. The grantor is also relieved of the tax liability on the income
generated by the assets. While the tax rules will vary between jurisdictions, in most
cases, the grantor can't receive these benefits if he or she is the trustee of the trust.

The assets held in the trust can include, but are not limited to, a business,
investment assets, cash and life insurance policies

Beneficiary
What Does Beneficiary Mean?

A person or entity named in a will or a financial contract as the inheritor of property
when the property owner dies.

Investopedia explains Beneficiary

A beneficiary can be a spouse, child, charity or any entity or person to whom the
property owner would like to leave his or her possessions and assets.

What Does Estate Mean?

All of the valuable things an individual owns, such as real estate, art collections,
collectibles, antiques, jewelry, investments and life insurance.

Investopedia explains Estate

The value of a personal estate usually becomes very important upon the death of the
person in question. Those in line for inheritance often have to pay an inheritance tax
on the estate. This tax can be very large, forcing the beneficiary to sell some of the
inherited assets in order to pay the tax bill.

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Estate Planning
What Does Estate Planning Mean?

The collection of preparation tasks that serve to manage an individual's asset base in
the event of their incapacitation or death, including the bequest of assets to heirs and
the settlement of estate taxes. Most estate plans are set up with the help of an
attorney experienced in estate law.

Some of the major estate planning tasks include:

- Creating a will
- Limiting estate taxes by setting up trust accounts in the name of beneficiaries
- Establishing a guardian for living dependents
- Naming an executor of the estate to oversee the terms of the will
- Creating/updating beneficiaries on plans such as life insurance, IRAs and 401(k)s
- Setting up funeral arrangements
- Establishing annual gifting to reduce the taxable estate
- Setting up durable power of attorney (POA) to direct other assets and investments

Investopedia explains Estate Planning

Estate planning is an ongoing process and should be started as soon as one has
any measurable asset base. As life progresses and goals shift, the estate plan
should move to be in line with new goals. Lack of adequate estate planning can
cause undue financial burdens to loved ones (estate taxes can run higher than 40%),
so at the very least a will should be set up even if the taxable estate is not large.

Beneficiary Clause
What Does Beneficiary Clause Mean?

A beneficiary clause is a provision in a life insurance policy or other investment
vehicle such as an annuity or IRA that permits the policy owner to name individuals
as primary and secondary beneficiaries. The policy owner typically may change the
named beneficiaries at any time by following the specifications defined in the policy.

Investopedia explains Beneficiary Clause

The term beneficiary refers to the specification of the recipient of funds or other
benefits as specified in a policy or trust. The beneficiary clause defines who this is; in
other words, what individual(s) will benefit from the funds or other benefits from the
policy holder or benefactor.

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Estate Tax
What Does Estate Tax Mean?

A tax levied on an heir's inherited portion of an estate if the value of the
estate exceeds an exclusion limit set by law. The estate tax is mostly imposed on
assets left to heirs, but it does not apply to the transfer of assets to a
surviving spouse. The right of spouses to leave any amount to one another is known
as the "unlimited marital deduction".

Investopedia explains Estate Tax

When the surviving spouse who inherited an estate dies, the beneficiaries may then
owe estate taxes if the estate exceeds the exclusion limit. Because the estate tax
can be quite high, careful estate planning is advisable.

In 1997, a change in U.S. laws increased the value of assets that a beneficiary may
exclude from federal estate taxes - though many states have their own estate taxes.
With this change of laws, small business owners became able to pass on farms and
other qualifying businesses to their heirs.

Probate

What Does Probate Mean?

The legal process in which a will is reviewed to determine whether it is valid and
authentic. Probate also refers to the general administering of a deceased person's
will or the estate of a deceased person without a will. The court appoints either an
executor named in the will (or an administrator if there is no will) to administer the
process of collecting the assets of the deceased person, paying any liabilities
remaining on the person's estate and finally distributing the assets of the estate to
beneficiaries named in the will or determined as such by the executor.

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Investopedia explains Probate

Because of the costs of court involvement in the probate process and the
potential for involvement of lawyers who collect fees from the estate of the
deceased, many people try to minimize costs associated with the probate process.
There are tremendous legal and tax complexities in the probate process, so it
is advisable to have a will and speak with a lawyer and financial professional in order
to insure that your loved ones are not left with the complicated and often messy task
of distributing the assets of your estate upon your passing.

Family Limited Partnership - FLP

What Does Family Limited Partnership - FLP Mean?
A type of partnership designed to centralize family business or investment accounts.
FLPs pool together a family's assets into one single family-owned business
partnership that family members own shares of. FLPs are frequently used as an
estate tax minimization strategy, as shares in the FLP can be transferred between
generations, at lower taxation rates than would be applied to the partnership's
holdings.

Investopedia explains Family Limited Partnership - FLP

An FLP is different from a conventional trust, as family members actually own a
share in a business. Shares can be gifted to family members over years, thus taking
advantage of gift tax exemptions on an annual basis. The assets held in an FLP impact the

level of estate tax savings that can be realized by using an FLP. In general, the more illiquid and
complex the asset mix, the more difficult the FLP is to evaluate, and the larger the potential for estate
tax savings.

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SCHEDULE OF ATTORNEY AND EXECUTOR FEES FOR CALIFORNIA
PROBATES

California's fee schedule for attorneys is found at Probate Code Section 10810 and for
executors is found at Probate Code Section 10800 and is a somewhat complicated formula.
For ease of approximation, a simplified formula can be used. It works for probate estates with

a value between $100,000 and $1 million. It is 2% of the probate estate value + $3000. That
sum would be the statutory fee for the attorney and the executor would receive an identical
sum.

PROBATE ESTATE TOTAL ATTORNEY AND EXECUTOR
VALUES FEES*

$100,000 $8,000
200,000 14,000
300,000 18,000
400,000 22,000

500,000 26,000
600,000 30,000
700,000 34,000

800,000 38,000
900,000 42,000
1,000,000 46,000

2,000,000 66,000
3,000,000 86,000

4,000,000 106,000
5,000,000 126,000

*The Attorney receives one-half of this sum and the executor receives the other half.
However, often extraordinary fees are allowed which could make this total even higher!

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THE RULES AND THE EXEMPTIONS
The Basic Rules of Estate Tax

The goal with estate taxes is to try to pay the minimum tax by the use of deductions,
exemptions, and credits. The first rule is that an unlimited amount can be passed to a
surviving spouse without one dime of death tax being paid.

There will probably be a whopper of a death tax paid upon the second death but there
typically is no tax upon the death of the first spouse. The second rule is that one can pass
assets to those who are not the spouse of the decedent, without a tax, an amount equal to the
exemption equivalent.

This does not mean that one can pass the exemption equivalent to each of the non-spouse
beneficiaries rather, in the aggregate, this is the amount that can be passed without a tax. The
exemption equivalent went up in stages between year 2001 and year 2009 until it reached
$3,500,000. It was scheduled to lapse in 2010 and return to $1,000,000 in 2011.

At the end of calendar year 2010, Congress acted to set the exemption amount at $5,000,000
for two more years. The exemption equivalent for each year is listed below.

In advanced planning cases, estate tax reduction usually revolves around three major
approaches: gifting through the use of discounting, life insurance, or charitable devices. Any
of these methods are highly technical and beyond the scope of this article.

Year Estate Tax Exemption Equivalent (see below for definition)
1997 $600,000
1998 625,000
1999 650,000
2000 675,000
2001 675,000
2002 1,000,000
2004 1,500,000
2006 2,000,000
2009 3,500,000
2010 Repeal
2011 5,000,000
2012 5,000,000
2013 Tax Returns at 1,000,000 exemption

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Taxation of Life Insurance Death Benefits

One of the benefits of owning life insurance is the ability to generate a large sum
of money payable to your heirs in the event of your death. An even greater
advantage is the federal income-tax free benefit that life insurance proceeds
receive when they are paid to your beneficiary. However, although the proceeds
are income-tax free, they may still be included as part of your taxable estate for
estate tax purposes.

Section 2042 of the Internal Revenue Code states that the value of life insurance
proceeds insuring your life are included in your gross estate if the proceeds are
payable: (1) to your estate, either directly or indirectly; or (2) to named
beneficiaries, if you possessed any incidents of ownership .

In 2011, Congress and the president extended the Economic Growth and Tax
Relief Reconciliation Act of 2001 through 2015. Whereas the federal tax exclusion
amount was increased to $5,430,000 per person with an estate tax rate of 35% .
On January 1, 2015,.)

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Ownership Transfer

For those estates that will owe taxes, whether life insurance proceeds are
included as part of the taxable estate depends on the ownership of the policy at
the time of the insured's death. If you want your life insurance proceeds to avoid
federal taxation, you'll need to transfer ownership of your policy to another person
or entity. Here are a few guidelines to remember when considering an ownership
transfer:

1. Choose a competent adult/entity to be the new owner (it may be the policy
beneficiary), then call your insurance company for the proper assignment,
or transfer of ownership, forms.

2. New owners must pay the premiums on the policy. However, you can gift
up to $14,000 per person in 2017, so the recipient could use some of this
gift to pay premiums.

3. You will give up all rights to make changes to this policy in the future.
However, if a child, family member or friend is named the new owner,
changes can be made by the new owner at your request.

4. Because ownership transfer is an irrevocable event, beware of divorce
situations when planning to name the new owner.

5. Obtain a written confirmation from your insurance company as proof of the
ownership change.

6.

Life Insurance Trusts

A second way to remove life insurance proceeds from your taxable estate is to
create an irrevocable life insurance trust (ILIT). In order to complete an ownership
transfer, you cannot be the trustee of the trust and you may not retain any rights to
revoke the trust. In this case, the policy is held in trust and you will no longer be
considered the owner. Therefore, the proceeds are not included as part of your
estate. (For more insight, read When is it a good idea to use an irrevocable life
insurance trust?)

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Why choose trust ownership rather than transferring ownership to another
person? One reason might be that you still wish to maintain some legal control
over the policy. Or perhaps you are afraid that an individual owner may fail to pay
premiums, whereas in the trust you can ensure that all premiums are paid in a
timely manner. If the beneficiaries of the proceeds are minor children from a
previous marriage, an ILIT will allow you to name a trusted family member as
trustee to handle the money for the children under the terms of the trust
document.

IRS Regulations

The IRS has developed rules that help to determine who owns a life insurance
policy when an insured person dies. The primary regulation overseeing proper
ownership is known in the financial world as the three-year rule, which states that
any gifts of life insurance policies made within three years of death are still subject
to federal estate tax. This applies to both a transfer of ownership to another
individual and the establishment of an ILIT. So, if you die within three years of the
transfer, the full amount of the proceeds are included in your estate as though
you still owned the policy.

Another IRS regulation will look for any incidents of ownership by the person who
transfers the policy. In transferring the policy, the original owner must forfeit any
legal rights to change beneficiaries, borrow against the policy, surrender or cancel
the policy or select beneficiary payment options.

Furthermore, he or she must not pay the premiums to keep the policy in force.
These actions are considered to be a part of ownership of the assets and if any of
them are carried out, they can negate the tax advantage of transferring them.
However, even if a policy transfer meets all of the requirements, some of the
transferred assets may still be subject to taxation.

If the current cash value of the policy exceeds the $14,000 gift tax exclusion, gift
taxes will be assessed and will be due at the time of the original policyholder's
death.

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Understanding Term verses Whole Life Insurance

term insurance verses whole life insurance

Many people are debating on various insurance markets on the best of the term
vs. whole life insurance; they express their respective views of what they choose.
But I think both have advantages among different views on many factors,
especially you have to a good reason on your own choice. I’ll try a little to explain
the principle difference between these two types of insurance.
The first difference between term vs. whole life insurance Term insurance is
generally much cheaper than whole insurance, but the premiums they receive are
lower, because the profits of insurance companies are also not too big. For those
of you who have income that is not too big but has great future plans I think this is
the right choice.
Furthermore, another difference is seen from the period of time, term insurance
usually has a specific period as agreed when you first bought it. While the whole
insurance has an indefinite period, meaning that as long as the policyholder
continues to pay premiums, they will continue to be a customer until they died.
You should consider is the high cost to pay premiums of whole life insurance, so many

people who can not afford to pay.

Shawn Rabban 310-714-5616
Insurance Lic: 0613659

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 Understanding Living trust
 How to avoid probate
 More Benefit of a Living trust

 Avoids probate at death, including multiple probates if you own property in
other states

 Prevents court control of assets at incapacity
 Brings all your assets together under one plan
 Provides maximum privacy
 Quicker distribution of assets to beneficiaries
 Assets can remain in trust until you want beneficiaries to inherit
 Can reduce or eliminate estate taxes
 Inexpensive, easy to set up and maintain
 Can be changed or cancelled at any time
 Difficult to contest
 Prevents court control of minors’ inheritance
 Can protect dependents with special needs
 Prevents unintentional disinheriting and other problems of joint ownership
 Professional management with corporate trustee
 Peace of mind

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Protect Your Home Ownership Through Life Insurance

You have put a lot of time and money into your home. From monthly utility bills to
those home improvements you started and never finished. Why? Because it’s your
home, and your home is important to you.
With all the time, effort and money you have put into your home, what have you
done to protect it?

Sure, you have homeowners insurance; you may even have flood
insurance.

But what about life insurance?

With life insurance, you can insure your life so in the event of your untimely death,
your family could continue to live in the home you’ve worked so hard for.
You may also have the potential to accumulate cash value within the policy,
depending on the type of life insurance you have.

Life Insurance.

We all hope that we have enough life insurance, but the reality is that many of us
are underinsured. Without enough life insurance coverage, your family may not be
able to keep your home. We offer a variety of life insurance products that may be
just the solution that you are looking for. Are you adequately insured?
A life insurance needs analysis can help you determine the amount of life
Insurance you may need. If you haven’t recently reviewed your need for Life
insurance, a needs analysis is a good place to start. Don’t wait until the worst has
happened.

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Proper Protection

A key to building your financial strategy is to ensure you have proper
protection to replace your income and protect your assets.

The Principle of Building Equity

The Principle of Building Equity illustrates the need to protect you and your family in
the event you die too soon or live too long. When you are young, you want to make
certain your family’s source of income is protected in the event of death or disability.
When you are older, you need to protect the retirement assets you have
accumulated so you can provide for yourself and your loved ones as you age
.

How much life insurance protection is enough?

Many factors must be taken into consideration when identifying how much insurance
you need, including your age, your medical condition, how many dependents you
have, and your income or current financial status. Based on these considerations, a
basic rule of thumb is to have enough life insurance to provide approximately 10
times your annual family income. Please be aware that there are limitations to the
protection that life insurance can offer. Please discuss these limitations with our
associates.

Example: $100,000 Annual Income
x 10
$1,000,000 Protection Needed

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How do I structure a life
insurance policy?
How does it work?
Annual premiums.
Death benefit proceeds.
Insured/policyowner.
The heirs.

The choice is yours

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Life Insurance Glossary

Accumulated Value

The total of an amount of money invested plus the interest earned by that money.

Amortized Cost

An asset's historical cost, less any adjustment, such as depreciation or
amortization, to the asset's book value.

Asset Allocation

The process of investing money in predetermined proportions in different types of
assets to create a collection of assets with the desired expected return and the
desired expected risk characteristics.

Assignment

The legal transfer of one person's interest in an insurance policy to another person.

Agent - A licensed person or organization authorized to sell insurance by

or on behalf of an insurance company.

Age nearest Birthday

An age calculation based on a person's nearest birth date for premium rate determinations. If
the person's birth date is within six months, they are considered the next age.

Authorization

Permission from the policy owner or proposed insured which allows release of information to
a named party.

Beneficiary

The person or persons designated by the policyholder to receive the proceeds of an
insurance policy upon the death of the insured. The policyholder can name both a
primary and secondary beneficiary

Certificate of insurance: This certificate serves as proof of insurance and outlines

benefits and provisions.

Collateral Assignment

A temporary transfer of some, but not all, policy rights to a lender to provide security for a
loan

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Cost Basis

An amount attributed to an asset for income tax purposes; used to determine gain or
loss on a life insurance contract to determine the value of a gift.

Death benefit: The amount payable after the death of the person whose life is insured.

Estate-Planning

Planning for the orderly handling and administration of an estate upon the death of
the owner. This usually involves drawing up a will and setting up trusts and
insurance, with the intention of minimizing loss to the estate value incurred by estate
taxes and administrative expenses.

Gift

A voluntary transfer of property to another person, made without receiving
consideration in return.

Irrevocable Beneficiary

A beneficiary that cannot be changed without their written consent.

Irrevocable Trust

A trust that cannot be revoked or amended by the party who establishes it. This
type of trust is often established when life insurance is purchased to protect an
estate.

Mortality Charge

The cost of the insurance protection on a whole life product. On an illustration,
mortality charges referred to as "current" are not guaranteed. Those stated as
"maximum" are the contract guarantees. The mortality charge is similar to a one-year
term rate and increases with the insured's attained age. For example, a typical
$100,000 whole life policy for a 40-year-old male carries a premium of about $2,000
a year. Of that, roughly $350 is the mortality charge, and the rest of the premium
goes toward the investment portion

Rating-Classes

Insurance companies used to have just three classes -- standard (the lowest), select
(middle) and preferred (the best rates). But some insurers have been slicing classes
into many more categories. That's why it pays to shop around because you may be
placed in the best rating class by one company's criteria and a notch below by
another.

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Revocable Beneficiary

A beneficiary whose rights are subject to the rights of the policy owner who may
revoke or change the beneficiary designation and exercise any ownership rights
under the policy without the risk Classification.
An underwriting process used to determine the appropriate price category or
Premium Rate Class of the proposed insured, according to risk factors associated
with that person's health condition, occupation, lifestyle, etc. beneficiary's consent.

Secondary Beneficiary

A person(s) designated by the policy owner to receive policy proceeds if the Primary
Beneficiary is deceased at the time benefits become payable. Also referred to as
secondary Beneficiary.

Second-To-Die

A type of life insurance policy that insures two lives. The death benefit is payable at
the second death. Generally, this product is used as a funding vehicle for estate
taxes payable at the second death when the unlimited marital deduction is utilized.
Also referred to as survivorship policies. Be sure to compare the cost of two separate
policies before signing on for one of these.
Single Premium Life Insurance
Requires one lump-sum, up-front premium and is often guaranteed to remain paid-
up throughout the insured's lifetime. Beware. These policies sometimes don't come
with a guarantee that future payments will never be required, a fact the agent may
gloss over.

Surrender

To terminate or cancel a life insurance policy before the maturity date. In the case of
a cash value policy, the policy holder may exercise one of the non-forfeiture options
at the time of surrender

Shawn Rabban 310-714-5616 Insurance Lic: 0613659

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Estate planning glossary

Bequest -- Two types: A specific bequest is a gift by will of an identified type of

property, for example, a car or home. A general bequest is a gift from the general
assets of the estate.

Community property -- Property acquired during marriage in a community-property
state, except for property obtained prior to marriage or through gift, inheritance and
court award.

Conservator -- A person appointed by the court to act on behalf of someone who

has become mentally or physically incapacitated, or is too young to act alone. Often
acts with respect to the ward’s property rather than with respect to the ward’s
personal matters.

Credit shelter trust -- A way for couples to reduce federal estate taxes when their

combined assets exceed the allowable exemptions. A credit shelter trust enables them to
take full advantage of the federal estate tax applicable exemption amount.

Decedent -- The person who has died

Estate -- All the property one owns and has an interest in at death, including real
estate, chattel and investments.

Estate plan -- A strategy for leaving property to loved ones and minimizing the

impact of federal and state estate taxes.

Executor -- A person chosen by the decedent and named in the will to manage the

decedent's affairs and settle the estate

Fiduciary -- A person entrusted and legally and ethically obligated to act in the best

interests of someone else. A trustee, executor or guardian is a fiduciary.

Grantor -- Creator of a trust, also known as the settler or trustor.

Heir -- Either a person legally entitled to receive property from a family member who

died without a will, or in the modern usage of the word, anyone who inherits
something from a decedent’s estate

Inheritance tax -- An assessment on the portion of an estate received by an

individual. It differs from an estate tax, which is levied on an entire estate before it is
distributed to individuals. The inheritance tax is usually progressive and generally
determined by the amount of property received by the beneficiary, as well as by the
heir's relationship to the deceased. The U.S. government levies only an estate tax.
Some state governments levy inheritance and estate taxes.

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Intestate -- Dying without a will.

Inter vivos trust -- Inter vivos is another way of saying living, so this refers to a

living trust. A trust set up during the trust creator's lifetime. When the creator, also
called the grantor, dies, it becomes irrevocable.

Irrevocable trust -- A trust that cannot be changed or altered. Taxable income

from the trust goes to the beneficiaries or to the trust itself.

Joint tenants with rights of survivorship -- A form of property or account

ownership. When one of the joint tenants dies, his or her share of the ownership
passes automatically to the other owner.

Probate -- A state court proceeding that verifies the validity of a will or appoints an

administrator to settle a decedent’s estate and distribute property to heirs if there is
no will.

Qualified domestic trust (QDOT) -- A trust arrangement where a noncitizen

spouse can take advantage of the unlimited marital deduction. The assets placed in
a QDOT are taxed when the surviving spouse dies or receives a no hardship
distribution of trust assets during his lifetime.

Revocable trust -- A trust that can be modified and altered by the grantor at any

time during life. The grantor can also terminate the trust during his lifetime, with all
property reverting to him. A revocable living trust is a trust into which a grantor
places his property with instructions for its distribution and management.

Taxable estate -- All property and property interests owned at death that are

subject to estate taxation.

Tenants in common -- A type of joint ownership without rights of survivorship. If

an owner dies, his or her portion of ownership is included in the estate and passes
by will or laws of intestacy rather than automatically passing to the other owner(s), or
tenants. Ownership interests may be unequal.

Trustee -- A person or entity named in the trust to manage the assets of a trust and

distribute them according to the terms of the trust.

Will -- A legal instrument used to direct the disposition of the will maker's property

upon death. Also names an executor and a guardian for dependents

Probate -- A state court preceding that verifies the validity of a will or appoints an

administrator to settle a decedent’s estate and distribute property to heirs if there is
no will.

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NOTE

_________________________________________________________________

___________________________________________________________________

Shawn Rabban 310-714-5616 Insurance License: 0613659

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Too many people lack adequate life insurance

Fewer American have life insurance

Life expectancy in the United States is age 78

Every year 56,000,000 people leaving us

Around 5.5 million deaths a year are caused by tobacco

Only 10 million American have life insurance

Have you planned for your future?

Buy enough life insurance to protect your family

Make everyday safe and secure

Live comfortably and independently

Getting value for your money

Live within your means, even if that means changing the way you
live
Ask your financial advisor about ways to guarantee that you don’t
outlive your income

Shawn Rabban, Author of Investment-Money-Loan, is a financial consultant with twenty
years experience in commercial real estate finance and financial planning. Offer the highest
level of service to select number of high net worth individuals, families and corporations.
One of his greatest assets is his knowledge in both real estate finance and insurance a renas.
Mr Rabban is a highly acclaimed speaker who holds informative workshops and seminars
throughout Southern California. His articles have been published in trade magazines and his
expertise can be heard on his live radio program on channel KRSI and Channel One. He is
also The Learning Annex Instructor of Commercial Real Estate Investment Analysis and 1031
Exchange seminars.

“With Shawn Rabban’s Formula, Your Money Will Grow!”

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