ES: THE ESTATE PLAN ANALYZER

GOALS

Good decision making is based upon knowledge. The only way to obtain an education and the knowlege necessary to make decisions in Estate Planning is to know the effect of utilizing various types of estate plans to the surviving spouse and the net estate that is going to the heirs. ES: The Estate Plan Analyzer has been created with these goals in mind.
In the past, and sometimes today, the Attorney acquires from the client the client's financial information and manually determines the net worth and/or gross estate of the client. Then for each type of estate plan that the Attorney wants to present to the client, the Attorney has to manually calculate and analyze the taxes, costs and expenses related to each type of estate plan.
With the decrease in cost for computers and appropriate software, the Attorney may be able to present the client with a number of different estate plans, based upon various assumptions with relative ease and speed, depending upon the capabilities of the software being utilized. Using ES: The Estate Plan Analyzer the time involved to enter, calculate and print the necessary reports for presentation to the client is minimal, and allows the Attorney to offer their clients a very detailed analysis at a substantially reduced cost.
The manual calculations and preparation of reports for presentation of five different estate plans, based upon the use of four different variable assumptions (or a total of twenty different presentations) could take twenty to thirty hours. With the computer and ES: The Estate Plan Analyzer, those same twenty presentations would take twenty to thirty minutes!

How does it Work?

ES: The Estate Plan Analyzer works in three (3) easy steps:

INFORMATION INPUT

In the past, if the client did not give the Attorney a complete or accurate listing of their assets and liabilities, the Attorney would be forced to completely revise the calculations and presentations. Using a computer and ES: The Estate Plan Analyzer, data can be quickly and easily added and/or adjusted and new presentations printed out with the push of a button.
Note: When the client is meeting with you to review their estate plan and the assets making up the gross estate, and the client insists that the assets are overstated and their estate is "not that large," using ES: The Estate Plan Analyzer you can have your secretary alter the data input, and reprint the estate plans being presented, while you continue your meeting, instead of having to terminate the meeting and waiting until you have a chance to manually revise your calculations and estate plan presentations. All of your client's estate plans can be saved on disk in very small files (allowing you to save many, many plans). With a push of a button, you can load any of those saved plans and edit the file easily and quickly, and print new reports.
When you choose estate planning software, you should look for a program that is easy to learn, easy to use, and a program with the ability to produce an end product (presentation/report) that is both complete and easy to understand. ES: The Estate Plan Analyzer utilizes a simple three step process for the entry, calculation and presentation of estate plans: Data Input, Customization, and Calculation.

Client Financial Information - Worksheet

Purchasers of ES: The Estate Plan Analyzer are provided with a sample Client Financial Information Worksheet to aid them in the gathering of information on the client's assets and liabilities. This Form follows the categories for the Federal Estate Tax Return and is the same as the Data Input Screen utilized in the program. [Data Input Form].

Purpose:

To accumulate the values and manner of holding title of the client's various assets and liabilities, resulting in a determination of the client's net worth.

How To Use:

Using the Worksheet, the attorney can list the total values of the assets and/or liabilities based upon the type of asset and the manner in which title is held. If you with to specifically itemize types of assets, you may utilize the Itemization worksheet on the back of the Client Information Worksheet. The Itemization Worksheet allows you to describe individual assets, their value, and the manner in which title is held. When using ES: The Estate Plan Analyzer it is not necessary to manually total these assets, because the program will automatically adjust the total on the Data Input Summary each time a new itemized entry is made for that type of asset. Using ES: The Estate Plan Analyzer the Attorney enters the client's financial information under the appropriate category and manner in which title is held, in either total amounts or by itemizing. (Note: ES: The Estate Plan Analyzer features unlimited itemization capability.) ES: The Estate Plan Analyzer allows the Attorney to provide their client with a complete print out of the assets and liabilities upon which their estate plan is based and the Attorney will have the total gross estate for the client.
Summary Data Sheet: One of the reports available for printing is the Summary Data sheet. This shows the Summary of Title to Assets for an estate plan based upon the information entered for that particular client.
Itemization: If there were assets or liabilities entered as itemizated amounts, then when the Summary of Data sheet is printed, all the Itemization Reports are printed out. In this way, all of the detail is available for your presentation to clients and to enable full discussions about value and estate planning and taxation.

CUSTOMIZE THE ASSUMPTIONS

Each client's personal situation and needs are unique, therefore, it is necessary to customize the estate plan analysis to the client's individual needs.
ES: The Estate Plan Analyzer's Customized Assumption Screen, allows you to create your basic set of assumptions that you like to use as a "default." Then when using the program, you can always alter those assumptions to obtain estate plan analysis of alternative plans, other than with your default assumptions.
For example, one of the customized assumptions is who dies first, husband or wife. If either or both of the spouses have separate property, the liquidity required upon a death could change radically depending upon which spouse dies first. In such a case, the Attorney should always determine the effect, by doing an analysis where one spouse is assumed to die first, and then redoing the analysis with the assumption that the other spouse is the first to die.
Another assumption is the number of years between the deaths of husband and wife. In preparing the analyses, the Attorney should prepare a presentation with the assumption that there are no years occurring between the death of Husband and Wife (the assumption that the deaths are simultaneous), and then, analyses where a reasonable number of years (i.e. five, ten, fifteen, twenty years --- as may seem reasonable depending upon the circumstances) occur between the death of the spouses. In conjunction with this assumption, the Attorney can also specify the Growth Rate, which is an estimated percentage of annual increase in the value of the estate assets for the years between the first and second death. In some estate plans, a portion of the growth will not be subject to future estate tax.
ES: The Estate Plan Analyzer's Customized Assumptions gives the Attorney the option of preparing an estate plan wherein it is assumed that an Irrevocable Life Insurance Trust is utilized. If that option is chosen, all life insurance entered under the Data Input will be treated as follows: (1) the amount of the life insurance will be deducted from the gross estate; and (2) the amount of the life insurance will be assumed to have been placed in an Irrevocable Trust, outside of the gross estate, but part of the client's total net worth. Also, since the life insurance is not part of the estate, there would be no administrative expense incident to its disposition upon death.
If an Irrevocable Life Insurance Trust is properly drafted with appropriate "CRUMMEY" powers and the Trust is operated properly, the life insurance cash value and/or proceeds will not be subject to any estate tax.

CALCULATIONS

The third step under ES: The Estate Plan Analyzer is "Calculations", which includes choosing the type of estate plan to be analyzed, as well as printing the presentation reports of the various estate plans as effected by the customized assumptions.
Under ES: The Estate Plan Analyzer, the Attorney has the ability to review and present the following types of estate plans:
Of course, utilizing the options available under ES: The Estate Plan Analyzer including the Customized Assumptions, Irrevocable Life Insurance Trust Option, and Generation Skipping Transfer Tax and Excess Accumulated Retirement Options, the Attorney the type of presentations and estate plans available are greatly expanded. Furthermore, with the push of one button, the Attorney can review and print out the five most common types of estate plans:
The result of performing the calculations is to review on the computer screen or to print out the various reports for the various plans and assumptions.

 

ES: The Estate Plan Analyzer allows you to flow with the basic principals of probate, taxation, liquidity, available income to the surviving spouse, and summarize the affect of the various alternative estate plans. The ES: The Estate Plan Analyzer manual gives you a line-by-line explanation of both the theory and the calculations for each line in each report. With your explanation to the client, your presentation and explanation of reports on the affect of various estate plans, you should be able to educate your client so that your client may make an informed choice as to the type of estate plan that will best meet your client's needs.

HIGHLIGHTS OF ES: REPORTS

Cover Sheet

The first page is a cover sheet which includes the name of the client, the name of the preparer, the date of preparation, and the most pertinent Customized Assumptions utilized in developing the subject estate plan analysis.

Summary of Title to Assets

Summary of Title to Assets showing the total of various assets and deductions by the manner in which title to the assets and deductions is held.

Report - 0 Years/Existing Plan

The computer has been programmed to calculate and present a one page report for each type of plan being analyzed. Each report gives you all of the death related costs, expenses, and taxes (whether probate or non-probate) for the customized estate plan which has been entered. Each report shows the client's name, the type of plan being analyzed, the number of years occurring between deaths, and which spouse is assumed to die first. Also, the various assets remaining following the first death are highlighted under the heading "Net Worth After First Death". Additionally, with those available assets following the first death, a calculation is made to determine the return on investment to show the annual income available to the Surviving Spouse.
At the bottom of each report, a summary of the effect of the estate plan is summarized as the "Net Worth Transmitted to Heirs". This summary shows the net dollar amount remaining from the original estate and what percentage of the original estate is transmitted to heirs following the second death.
Under the "Existing Plan" (a simple Will scenario), all of the assets are transferred to the Surviving Spouse. There is no utilization of the unified credit. The Liquidity Required on the first death is minimal as compared to the substantial Liquidity Required on the second death.

Summary of Title to Assets - No Joint Tenancy

When you analyze an estate plan other than the "Existing Plan", the client's assets and liabilities which were previously entered under "Joint Tenancy" are automatically re-classified as Community Property (or Tenants in Common). The assets are reclassified to accomplish the proper funding of the various trusts being analyzed.

Report - 0 Years/Testamentary Trust/Bypass

With the creation of a Testamentary Trust and the utilization of a Bypass Trust, the QTIP (Qualified Terminable Interest Property) Trust is created as a marital deduction to allow a taxable estate equal to the asset equivalent to the unified credit. The Liquidity Required is slightly greater on the first death, but substantially less on the second death. The result is less erosion to the estate by taxes. The Net Worth After First Death will show a Bypass Trust, a QTIP Trust (with an election to defer the tax). The annual income available to the Surviving Spouse will be slightly less due to the increase int he Liquidity Required on the first death. The Net Estate Transmitted to Heirs is greater in this report. The increase in the Net Estate Transmitted to Heirs is equal to the reduction in the Federal and State Estate taxes.

Report - 0 Years/Testamentary Trust/Bypass/Equalization

In the utilization of a Testamentary Trust with a Bypass Trust and equalizing the estates, the QTIP Trust is not used as a martial deduction. Therefore, there is tax paid in the first estate. If there is no separate property owed by one of the spouses, the Liquidity Required is exactly the same in both estates irrespective of which spouse is the first to die, and the affect of the equalization is to eliminate "bracket creep". The income available to the Surviving Spouse, as a result of the equalization of the Liquidity Required, is less. The Net Estate Transmitted to Heirs will show that the taxes and expenses are slightly less and there is a slightly greater amount being transmitted to heirs.

Report - 0 Years/RIVT/Bypass

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