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Estate Planning and Trusts Estate Planning A In terms of minimizing tax liability, how would estate planning differ from a partnership to a corporation? Professor review- You have touched on this topic; however, the content is somewhat confusing and hard to follow. You will want to revise this section of the paper. B For estate planning purposes, what are the advantages of setting your business up as a corporation versus a partnership? Defend your response. Professor review- The information here is very limited. You will want to dig deeper into this topic and make sure you present easy to follow and well defended content related to this topic C Describe your company's succession plan and whether or not it aligns with your company's vision. Professor review- The information here is good. What is the succession plan as it relates to what they would do if the newly appointed CEO was not able to carry on the duties? IV. Trusts A Draw a conclusion about the purpose for the company's trust based on the research of your company. Professor review- You have discussed a trust for the employees. What about a trust to protect the assets of the owners/shareholders? Make sure you discuss this from all aspects of protecting assets of the company, not just the employees B Why would a small business owner want to set up a trust and how could it be used for estate planning purposes? Professor Review-Good information here. More details and defense would bring you to the next level. C Evaluate the similarities and differences between trusts and corporations. In an attempt to protect income, which would be most suitable for a company Professor Review-You will want to make sure you not only include the information, but also explain what you are presenting. You will also want to defend your content with sources. This is my respond to the questions Estate Planning and Trusts In terms of minimizing tax liability, how would estate planning differ from a partnership to a corporation? In estate planning the gap between what a person's business is worthwhile they plan their estate and what it will be worth when they pass away is managed by having a well-structured irrevocable life insurance trust. This plan would ensure that all benefits paid from the insurance policy are not passed through probate, and cash is paid immediately. It also allows a person to transfer their assets to their children through a trust fund. Assets that appreciate in trust are exempted from estate taxes thus one can pass on a rapidly growing business. Potential tax liability that may arise when one dies before the trust expires can be offset by having a wellstructured irrevocable life insurance trust. The estate taxes, especially the federal estate taxes are way too high and these taxes must be paid annually whether one has earned income from the estate or not. Estate planning involves coming up with alternative choices that can minimize tax liability. One can avoid them using a living trust, if one is married they can use estate tax exemptions, one can remove assets from their estate before they die, or they can buy insurance to replace assets given to charity. This therefore means that the tax liability of your estate is too high and one way is to change the estate into a partnership, whereby one sets up a partnership with his spouse for instance, a LLP that is. One can also opt to set the assets into a corporation which would have the most minimum tax liability and still have ownership of their estate. For estate planning purposes, what are the advantages of setting your business up as a corporation versus a partnership? Defend your response An individual can decide to convert their estates' assets into partnership capital contribution. This would allow them to earn interest. A partner's capital account will be credited Estate Planning and Trusts with the amount of cash and the fair market value of the property they contributed debited. This is used in determining a partner's basis in the partnership. If the partnership is being liquidated, the fair market value shall be used to determine the value of assets they can claim from the partnership. With a corporation, all the income of the corporation is taxed to the beneficiary's trust. This avoids the punitive compressed tax rates applicable to trusts. Corporation's income is taxed at trust level unlike the partnership Describe your company's succession plan and whether or not it aligns with your company's vision Kroger Company's succession plan was to have a successor who was fully groomed for the CEO position. This means they had to identify a person who has worked in most of the departments and was aware how they all worked and how to solve problems and attract more customers by satisfactorily meeting their needs. W. Rodney McMullen was appointed because of his skills and experience that he has gained through working as President and Chief Operating Officer, director, and a part-time basis on a stock crew. He has held several positions in senior management such as Vice-Chairman; Chief Financial Officer and Executive Vice President of Strategy, Planning, and Finance. Now that Kroger was planning to implement its growth initiatives they needed a person like Rodney, who has played leadership roles in every crucial decision Kroger made for the past 25 years. Rodney was involved in making decisions for the development and implementation of Kroger's Customer first approach as well as Kroger's current growth strategy. Kroger's succession plan is in perfect alignment with the company's vision since their vision is to be the leading distributor and merchandising company. And by appointing Rodney as the new CEO, they are sure that he will lead their efforts to build on Kroger's market position and improve its competitive advantages. This would drive value for their shareholders Estate Planning and Trusts and strengthen their deep connection with all their great associates, customers and the communities they serve. Draw a conclusion about the purpose for the company's trust based on the research of your company. Kroger's company trust is to ensure that all their employees have a secured pension plan. Kroger moved the liabilities of its employees and retirees from the Washington Meat Industry Pension Trust to the UFWC consolidated pension fund. Kroger put its assets worth billions in trust to these schemes so that their employees and retirees could get payments when the time is due. The purpose for this is to reduce the burden of the company in incurring costs to pay for its employee's retirement benefits. This is why the company decided to set aside assets and gave trustee companies to be in charge of it and be responsible for paying Kroger's employees and retirees. Why would a small business owner want to set up a trust and how could it be used for estate planning purposes? A trust is set up so that to help them manage their assets. In estate planning, a grantor trust is set up for income tax purposes. Some advantages of grantor trusts are; one can sell the assets without recognizing gain on the sale, can loan money to the trust, and the interest income is not taxable to you. A trust is used in minimizing estate taxes and can offer a well-structured business with other benefits. A small business owner would like to set up a trust because trusts avoid probate and beneficiaries often easily access these assets much faster than through a will. If it's an irrevocable trust, it won't be taxed thus fewer taxes would be paid upon the death of the owner. Trusts protect the legacy of a business owner and allow them to be in control of their Estate Planning and Trusts wealth. Assets in a trust pass outside probate, save time, court fees, and thus reduce estate taxes as well. Evaluate the similarities and differences between trusts and corporations. In an attempt to protect income, which would be most suitable for a company One similarity is that they bear almost the same characteristics in the case whereby some trusts are as qualified S Corporation shareholders. In a corporation, one is allowed to have ownership in form of trusts. There are trusts as qualified S Corporation which include the grantor trust, voting trust, and testamentary trust. The beneficiary owners of the trust are treated as owners of their portion of the trust. One difference is that required to report their trust separately for taxation purposes. As for the case of corporation, taxation is at corporate level. One major difference is that taxation rates for the trusts are usually higher for the tax bracket as a corporation. While gain in the case of trust is not recognized, corporations must report the gains (losses). Depending with the type of trust, there are those that are much more superior. In corporations also, one would not have much control as they do with a trust. Generally, a trust is more suitable and if a corporation doesn't qualify at some point, it would be treated as a trust. Estate Planning and Trusts