Text Box: Estate Planning Update Text Box: CONTINUED ROLE FOR LIFE INSURANCE Retain Life Insurance Now in Effect. With the long delay and ultimate uncertainty of complete estate tax repeal, I am advising clients not to drop or reduce existing life insurance coverage. The irrevocable life insurance trust (ILIT) will remain an important planning technique to exclude life insurance proceeds from the gross estate. Term Life Insurance for New Policies. For clients considering new life insurance, the use of term insurance (including decreasing term) should be considered in order to cover the period through 2009, or until it is clear whether estate tax repeal will ever become a reality. (The utility of this kind of policy will also depend on the age and health of the client.) CHARITABLE REMAINDER TRUSTS The charitable remainder trust (CRT) is primarily an income tax planning vehicle, permitting the client to transfer appreciated property to a tax-exempt trust, which in turn can sell the property and reinvest the proceeds, and pay an annuity or unitrust amount to the client for his or her lifetime or for a term of years. The estate tax deduction for the remainder interest passing to the charity when the trust ends is usually a secondary consideration. Thus, the CRT should continue to be a valuable estate planning tool. Text Box: CHARITABLE PRIVATE FOUNDATION The charitable private foundation is a vehicle that serves important income and gift tax purposes, so its use should continue under the new law. FAMILY LIMITED PARTNERSHIPS AND THE LLC Even with the increased exemption amounts and possibly estate tax repeal, there will be good reasons, particularly with an active family business or family investments that are closely managed, to shift existing assets and future appreciation to younger family members while allowing the senior family members to retain control. The Family Limited Partnership and Limited Liability Company are excellent vehicles for achieving these goals. To the extent valuation discounts can be created through making lifetime gifts of such business interests, clients should continue using this strategy in light of the possibility that the estate tax will not be repealed. Text Box: Page # Text Box: Estate planning opportunities under the new tax law (continued) Text Box: The following is a poem by Edgar Guest, which reminds us of the perils of serving as an executor. The Executor By Edgar A. Guest (1927) I had a friend who died and he On earth so loved and trusted me That ere he quit this worldly shore He made me his executor. Text Box: POETRY CORNER Text Box: He tasked me through my natural life To guard the interest of his wife To see that everything was done Both for his daughter and his son. I have his money to invest And though I try my level best To do that wisely—I’m advised My judgment oft is criticized.Text Box: His widow once so calm and meek Comes hot with rage—three times a week And rails at me because I must To keep my oath—appear unjust. His children hate the sight of me Altho’ their friend I’ve tried to be Text Box: Now when I die—I’ll never ask A friend to carry such a task. I’ll spare him all such anguish sore And have hired an executor.

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Martin J. Hagan is licensed to practice law in the Commonwealth of Pennsylvania. This website is intended solely for informational use and is not intended to solicit clients. Likewise, any information contained in or obtained from this web site is for informational purposes only and is not intended to be used as legal advice.

IRS CIRCULAR 230 DISCLAIMER:   Pursuant to Treasury guidelines, any tax advice contained in this website (or any link from it) does not constitute a formal opinion. Accordingly, any tax advice contained in this website (or any link from it) is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be asserted by the Internal Revenue Service. You should seek advice based on your particular circumstances from an independent tax advisor.

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Copyright © 2007 Martin J. Hagan, One Gateway Center - 8 South; Pittsburgh, PA 15222-1435
Last Updated: 06/29/07