Who we are?

Practice AreasEstate Planning

Personal Injury, Auto & Work Accident

Employment & Labor

Estate PlanningBy

Ziad Rawashdeh, CPAAttorney at Law

Phone 909-393-0660Fax 909-393-0430

Email ziad@zrawa.com Website: www.zrawa.com

Presentation Objectives & Road Map

• Summary of California Estate Planning law• Estate Planning Common Tools Explanation• Comparison of these Tools • Why California Residence need Estate

planning• Example to understand the big picture• Open questions & answers

What is estate planning?The biggest misconception:

• Many people mistakenly think that estate planning only involves the writing of a will

• A will is part of the planning process, but you need other documents to fully address your estate planning needs. Such as:

Revocable Living Trust Durable Power of Attorney for assets(For each Spouse) Durable Power of Attorney health care (For each Spouse)

Pourover Will (For each Spouse)

Good Estate planning process involves• People: you, your family, other individuals and, sometimes,

charitable organizations of your choice. • Your assets: properties with all forms of ownership. • Your future needs: in case you ever become unable to

care for yourself.

Who needs estate planning?Everyone needs estate planning, whether your estate is large or small.

A small estate the plan may focus on:• How and who will managed your assets for your benefit during your

lifetime if you ever become unable to manage them yourself.• Under what circumstances it makes sense to distribute your assets during

your lifetime. • How and by whom your personal care and health care decisions will be

made during your lifetime if you become unable to care for yourself. • How and to whom your assets will be distributed after your death.• Who will be the guardian of your minor children when you are unavailableA large estate the plan must address, • Various ways of preserving the estate assets for the beneficiaries’ benefit• Tax Planning: Any strategy required to reducing or postponing estate tax

What are assets included in your estate?

• Includes all of your assets, held in your name alone or jointly with others at fair market Value

• Like:Bank accountsReal estateStocks and bondsFurnitureRetirement AccountsLife insurance cars and jewelry.

Common Statistics:The ironic thing is that most clients think their estate plans are

set up correctly. In fact: • One or two out of ten do NOT even have a simple will. • Nine or ten out of ten do NOT have Durable Powers of Attorney. • Five to Six out of ten do NOT have Trusts A & B for estate tax

planning. • Nine or ten out of ten do NOT have a Family Limited Liability

Company or Family Limited Partnership. • Seven or eight out of ten do NOT have an Irrevocable Life

Insurance Trust

What Happens if you Die (Intestate) Without A Will?

• California law applicable by default,

• Distribution according California law & may be inconsistent with your wishes

• The Estate will be distributed through probate

• Court will appoint guardian for minor children

What is Probate?It is a court-supervised process for transferring a

deceased person’s assets to his heirs.

• Involves Court: Absent of a will, the court would appoint an administrator to handle your estate.

• No Privacy: Your estate & its value will become a public record.

• Expensive: Lawyer’s fees & executor’s commissions are based on a statutory fee schedule, 6-8%

• Time consuming: must give a notice & wait

What a Will Does?• Your assets will be distributed according to you wish

not according State law• Choose individuals or charitable organizations who will

receive your assets after your death.• Nominates an executor who will be appointed by the

probate court to manage your estate, pay your debts and taxes; and distribute your estate according to the instructions.

• Nominates guardians for your minor children.

Living TrustA trust is a legal arrangement in which the grantor transfers

control of his or her property to a trust, which is managed by a trustee.

What does a Revocable Living Trust Do?

Assets are put into the trust and most people name themselves as the trustee in charge of managing their living trust’s assets. By naming yourself as trustee, you can remain in control of the assets during your lifetime.

A successor trustee administered for your benefit during

your lifetime and transferred to your beneficiaries when you die all without the need for court involvement

Avoid Probate While Maintaining Total Management & Control of Assets with a living trust

The difference between a Revocable Living Trust & a Will

DescriptionLiving Trust

Will

Avoid Probate YES NO

No Court involved YES NO

Eliminates the requirement of public notices YES NO

Your estate plan private and the records do not become public YES NO

Provides for assets management if you are unable to manage assets due to health problemsYES NO

Avoids proving incompetency in a court proceeding YES NO

Allows for optimum tax planning, yet requires NO extra tax returns or filingsYES YES

Management & control your own assets & NO management fees requiredYES YES

Nominates a guardian to supervise & care for your minor children YES YES

Children Trust: can be held and administered for the benefit of minor child until they are olderYES NO

Support Trust: can be held and administered for the benefit disabledYES NO

You can revoke or change any terms any time as long as you are still competentYES YES

What happens if you become unable to care for yourself?

Durable Power of Attorney Assets Management

• Trustee of a living trust, provides the necessary management of all assets held in trust.

• Agent or attorney-in-fact in a durable power of attorney for property management handles limited financial transactions and deals assets that may not have been transferred to your living

trust.

Directive/durable power of attorney for health

• Attorney-in-fact makes health care decisions for you if you ever become unable to make such decisions.

• This legal document should contain your wishes concerning matters such as:

• All health care issues• Organ donation• Funeral

You can choose those who will care for you, your estate and health if you ever become unable to do so for yourself by making your own arrangements in advance.

EXAMPLE

John & Mary are husband & wife., with 2 children Sara 2 yrs and Alex. 5 yrs They own;

Property Market Value Equity OwnedHome 950,000 300,000

Rental 800,000 100,000

Small Business 450,000 350,000

401K John 100,000 75,000

401K Mary 100,000 75,000

Life Insurance John 750,000 500,000

Life Insurance Mary 750,000 500,000

TOTAL 2,000,000

Let us assume that John & Mary had an accident in 2011 and John dies, Mary Dies one month later. The whole world (friends, neighbors, and Relatives) knows that John and Mary wanted to give everything they have to their children Sara and Alex.

Scenario 1: John & Mary did nothing, die (Intestate) without a will

Scenario 2: John & Mary have a Will only:

The result same as scenario 1 except:

1- Estate properties will be distributed according to John & Mary’s Will

2- Sara & Alex’s guardian will according to their Will

Scenario 3: John & Mary have an Estate Plan

During John & Mary life:

All assets funded to a Revocable living trust

* For the benefits of John & Mary

* Full management & control by John & Mary

Scenario 3: John & Mary have an Estate Plan

When John dies• Distribution of John’s share Bypass Trust to May &

the children benefits• Distribution of Mary’s own share to Marital trust to her

benefit• Management & control by Mary & adult children

Scenario 3: John & Mary have an Estate Plan

When Mary dies• Estate will be funded in trust to the benefit of Alex &

Sara’s benefits• Management & control by Alex & Sara if they are adults• If Alex & Sara minors; management & control by a trusted

person or Corporate Trustee• Alex & Sara’s guardian will be named by parents • Estate Passes to Children with NO ESTATE TAXES

Scenario 3: John & Mary have an Estate Plan

2,000,000

Estate’s Value

John dies on 4/1/2011

Mary dies on 12/1/2011

TRUST A: 1,000,000 John’s exemption passes to trust A & held for Mary’s use for life then to Sara & Alex

TRUST B: 1,000,000 Mary’s exemption passes to Sara & Alex on Mary’s death

Summary: at Joe’s death 1,000,000 poured in trust A to utilize his estate tax exemption, & at Mary’s death her 1,000,000 poured in trust B to utilize her estate tax exemption,

The result the entire estate pass with no taxes

What about the estate taxes?

If your Estate Value is more than 2,000,000

• Definitely; you need special planning, please call the office at 909-393-0660

Why trust avoid probate?• Because the property is re-titled to the trustee

before the death of the trustor• In case of a Will the title stay in the deceased

spouse name

Why Do You Need to have a Plan

• Protect your children by naming their guardian not allowing the court to appoint their guardian.

• Protect your assets & be sure they are not going to unwanted person

• You worked very hard to make your assets, let them go to your beloved ones

• Legally avoid Estate Taxes like any other wealthy American

• Name a trusted person to make your personal & health decisions if you are unable to make them yourself, & do not allow the court to do them for you

Contact information

5843 Pine Ave. Chino Hills Ca 91709

Phone: 909-393-0660Fax: 909-393-0430Email: ziad@zrawa.comInternet: www.zrawa.com