Advisor Opportunities Using Trusts Sandy Cardy Mackenzie Financial

Advisor Opportunities Using Trusts Sandy Cardy Mackenzie Financial Corporation

) Strategic use of trusts 4 Initiate tax and estate planning discussions 4 Customize basic strategies RESULT: 4 Increased satisfaction with your value 4 Opportunities for business building

Topics to cover today: 4 Why trusts? § Basics of taxation 4 Case studies: § Asset protection § Handicapped beneficiaries § Business Succession § Income-splitting testamentary trusts § Insurance Trusts

Trusts – Who is a prospect? 4 Minor children 4 Charitable giving 4 Special-needs dependents 4 Inheritances 4 Family members who are not “financially astute” 4 Marriage 4 Divorce 4 Confidentiality 4 Income-splitting 4 Probate 4 Retirement planning 4 Family law property claims

Trusts Inter-vivos Trusts Testamentary Trusts § Top tax rates § Taxed at graduated rates § Calendar year end § Flexible year end § Attribution § No attribution

Case Studies

Trusts - inheritance planning. The Evans family Robert (85) + Emma Evans John’s Parents John (56) Kate (55) Sam (22) Son Heather (20) Daughter Robert’s ins. policy: $500, 000 Robert’s will: $1, 000 to John

Case #1 -Testamentary trusts 4 Delay distribution of asset Testamentary Trusts (created after death) 4 Control over assets 4 Save on income tax

John’s inheritance of $1, 000 Direct Inheritance Testamentary Trust @ MTR of 45% @ graduated rates Mackenzie Sentinel Corporate Bond Fund $1, 000 6% interest income $60, 000 Taxes payable $27, 000 Income retained $33, 000 $1, 000 $60, 000 Net annual savings through a testamentary trust $16, 000 $44, 000 $11, 000

John’s inheritance Evans Family Trust $60, 000 Income $24, 000 paid to beneficiaries $36, 000 John - ? Kate - $8, 000 Sam - $8, 000 Heather - $8, 000 Total Taxes = $8, 000

The Power of Testamentary Trusts Direct Joan’s $1, 000 inheritance from his parents is generating $60, 000 interest income annually. Testamentar ry Trust (including (Joan as spouse and beneficiary) children as beneficiaries) Taxes $27, 00 $16, 000 $8, 000 payable 0 Net annual N/A $11, 000 $19, 000 savings

Testamentary trusts - planning opportunities 4 Income splitting for high income beneficiaries 4 Income sprinkling for beneficiaries with dependant children 4 Designated income

Case #2 – Insurance trust 4 Vivian (68) § Widowed but well off § 4 children § 3 successfully independent § 1 dependent on Vivian at age 36

Vivian dies? Issue Possible solution 4 Unequal sharing 4 Will planning 4 Legal wrangling 4 Gifting 4 Family discord 4 Alter Ego trust 4 Insurance trust

Insurance trusts 4 Funded with the proceeds of life insurance policy 4 Established outside estate as separate trust 4 Beneficiary designation pays proceeds of policy to individual - receives proceeds as trustee 4 Documentation to establish an insurance trust: § Last Will and Testament § Trust Declaration or Trust Agreement

Insurance trusts – advantages 4 Taxed as testamentary trust 4 Probate avoidance 4 Creditor proof 4 Confidentiality

Case # 3 - Handicapped beneficiaries 4 Amanda, age 6 4 Father § Life insurance proceeds $250, 000 § Designated beneficiary 4 Options available § In trust for account § Annuity § Formal trust

“Henson” trust Trustee • Fully discretionary • Control of assets • Prescribed beneficiary election $250, 000

Case #4 - Jackson Tool & Die Bill Jackson Owner/Manager 4 Age 56 4 Wife Joan (55) 4 Children $5 million § Eric (27) § Cody (22) Jackson Tool & Die § Joanne (17)

Estate freeze - trust Bill Family Common shares Debt and preferred Trust Operating Company

Estate freeze - strategies to consider 4 Use the capital gains exemption now 4 Recommend multiple wills

Estate Freeze - The real nitty gritty 4 When to freeze – will owner have enough value to live on in the future? 4 How do you protect children’s shares from matrimonial claims?

Case #5 – Asset protection 4 Lou (70) § Divorced – married Anna Nicole 2 years ago § 3 children § 2 grandchildren 4 Anna Nicole (32) § Divorced § 1 son

Lou dies first? Issue Possible solution 4 Family law issues 4 Will planning 4 Estate depletion 4 Gifting 4 Lou’s children disinherited 4 Alter-ego trust 4 Legal wrangling 4 Spousal trust 4 Family discord

Alter Ego trust Lou and/or Anna Nicole 4 Protection of assets Assets 4 Control of capital 4 Confidentiality Lou and/or Anna Nicole Children 4 Jurisdiction shopping 4 Probate avoidance

Mackenzie is here to help 4 Client Service Group 4 Sales Reps 4 Private Client Group 4 Tax and Estate Planning 4 Mackenzie University