Estate Planning

Presented byDr. Jean M. Lown

Financial Planning for Women November 2013

Disclaimer: Education, NOT legal advice!

Taking care of business

• Sign up for drawing for financial consultation– Drawing will be held at the evening session

• Personal Finance Action Plan HO– Commit to taking action!

• Estate Planning HO

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Estate Planning

• “ the process of accumulation, management, conservation, and transfer of wealth considering legal, tax, and personal objectives.”

• Goal of estate planning is effective and efficient transfers.

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Overview: How Your Estate is Distributed

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Wills

Property distribution & Guardianship

Wills• Document in which a person tells how

assets should be given away after death

• Transfer the portion of your estate not covered by contract

• To ensure property goes to desired heirs

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Why Write a Will?• Absolutely necessary if you have children• Utah Legislature wrote a will for you• Without a will… Assets will go to spouse,

parents, siblings… • Not to your roommate or favorite charity• Without a will, your property may not go to

your desired heirs

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Personal Representative

• AKA Executor– Named in will

– Carries out provisions of will

– Manages assets until they are passed to heirs

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Will Names Guardian(s)• Person responsible for caring for child(ren)

– Name one person, not a couple

• May name different person to handle child’s finances– Can change!

– Not set in stone

– Do it today!

– Avoid family fight

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Without a Will…

• Estate transfers to various relatives according to state law – Property may not go to desired heirs

• Judge decides on guardianship– May not be the person you would choose to

raise your child(ren)

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Do you need an attorney?

• Not with a simple, uncomplicated estate

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You may not need an attorney• Simple situation?

– Attorney’s assistant will fill-in computer form– Buy computer program & fill in yourself

• Nolo Press website: www.nolo.com

• Complicated family situation? – Remarriage w/ kids from previous union?– Multiple ex-spouses?

• Lots of assets? – Educate yourself & then contact attorney

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Wesley Bedrosian

Before it’s too late…

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Personal Representative?

• Who me? Yes, you!• The Executor’s Guide (Nolo Press)

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Probate Process

• Probate – court-supervised process – Ensures transfer of a decedent’s assets to

beneficiaries • According to will or state law

– Allows creditors to present claims against an estate

• Non-Probate Assets– avoid probate process– P.R transfers assets directly to heirs

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Why Avoid Probate?-time consuming- costly in some statesup to 5% of estate

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Transfer Your Estate (continued)

• Will (goes through probate process)• Non-Probate Property –

– does not go through probate – includes assets transferred to survivors by contract &

beneficiary designation• Life insurance proceeds• Financial accounts (retirement accounts, POD acc’ts)• Joint ownership assets • Assets in Trusts

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Transfer Your Estate by Naming Beneficiaries

• Beneficiary: person or organization designated to receive a benefit

• Beneficiary designation – legal form signed by asset owner

– Specifies who gets property when owner dies

• Primary Beneficiary– Secondary (Contingent)

– in case the first-named beneficiary has died

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Avoid Probate: Transfer Your Estate by Ownership

• Joint Ownership (JTWROS)– Married couples

– Joint owner automatically inherits the property

– Most couples own house JTWROS

• Community property– NOT Utah

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Avoid Probate Summary

• POD bank accounts– Fill out bank's form

• Transfer on death– Vehicles; securities

• TOD real estate deed– Not UT, ID or WY

• Retirement accounts– name beneficiary

• Joint ownership• Community Property

– Not UT; yes ID

• Small estates may avoid probate– w/ affidavit– Simplified probate

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Questions?

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Use of Trusts to Transfer Assets

Trust• Legal arrangement between

– grantor (creator) of trust & trustee, person designated to control & manage trust assets

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Why Establish A Trust?

• Avoid probate (w/ living trust)• Control distribution of assets• Protect assets from creditors• Provide privacy for heirs• Avoid battle over will• Provide for special needs person• If you own property in > one state

– Avoids having to probate in > 1 state• Reduce/avoid estate taxes

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Trust Vocabulary• Grantor: person who establishes a trust

– Also called: settler, donor, or trustor• Beneficiary: person for whose benefit a

trust is created• Trustee: the person or corporation to

whom the property is entrusted to manage for the use & benefit of beneficiaries

• Corpus: assets in trust

- Also called: trust estate or fund

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A trust is an empty cookie jar

• Grantor MUST legally transfer assets into the trust!– Trust is an empty legal

document…

until funded

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Two Categories of Trusts• Living (inter vivos) Trust

– takes effect while the grantor is still alive

• Revocable (to avoid probate)

• Irrevocable (transfer property to reduce taxes)

• Testamentary Trust (in conjunction w/ will)– Takes effect upon grantor’s death

– Do NOT avoid probate

– Often to create a trust for minors• Property must be managed by adult

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Irrevocable Living Trusts

• Assets bypass probate• Grantor gives up 3 rights

– to control property– to change beneficiaries– to change trustees

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Revocable Living Trust

• Avoid probate• Protect & manage assets • Deal with incapacity/incompetence• Grantor can change trust’s terms or cancel

it while alive• Sets up a testamentary trust at death• Like a will; but more difficult to contest

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Testamentary Trusts

• Take effect at death of grantor• To manage $ after death

– Income for spouse & children• Underage children ($ guardian)• Disabled adult children

– Maintain eligibility for government benefits

• Pass $$$ to adult children at older ages

– To give assets to grandchildren while the income supports spouse & children

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Living Trust vs. Willhttp://www.nolo.com/legal-encyclopedia/living-trust-v-will.html

• Name beneficiaries• Leave property to kids• Avoid probate• Privacy• Requires property

transfer• Protection from court

challenges• Requires Notary

• Name beneficiaries• Name guardians• Name manager for

children’s property• Name executor (PR)• Instruct how to pay

taxes & debts• Simple to make• Requires witnesses

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Consult a Lawyer if…• Close relative—someone who would

inherit might challenge your decisions • Children from previous marriage don't get

along with your current spouse• You are in a relationship your closest

relatives don't approve of.• You have a history of mental illness • You don't plan to leave much to your

closest relatives, & they fear you are being unduly influenced by someone

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Questions?

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Letter of Last InstructionsNon-legal instrument with

suggestions & recommendations for survivors

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Letter of Last Instructions

Not a legal documentNot a will or substitute for willInformation that is needed

immediatelyto help family decide & reduce stress

to ensure wishes are carried out

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Letter of Last Instructions

Individuals to be notified of your death Contact info: name, address, phone, email

Funeral, burial; cremation, memorial service wishes

Location of will, trust Financial advisor & attorney contact info Insurance policies

Safe deposit box location & #, key, contents list

Location of personal papers (not in safe deposit box)

Personal property distribution

Father’s full name; mother’s maiden name for death certificate

Obituary information

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Letter of Last Instructions

Where to keep it? Who to tell? Survivors must be able to locate

quicklyTape to bedroom mirror?Copies to parents, siblings, etc.

Start today http://extension.usu.edu/files/publications/factsheet/FL_FF-19.pdf

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Organ Donation WishesEach day

77 people get a life saving organ transplant

19 others die waiting for donated organ http://organdonor.gov/

Driver license designation NOT enough

Utah Donor Registry http://www.yesutah.org/http://www.yesutah.org/registerTell family & your doctor of your wishes

US: opt-in; European countries: opt out

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Pre-plan Your Farewell

“Always go to other people’s funerals; otherwise they won’t come to yours.” Yogi Berra

Preplanning a funeral/wake/memorial service/going away party/sky burialhttp://extension.usu.edu/files/publications/factsheet/FL_FF-09.pdf

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Advance Directive Documents in case of incapacitation

Advance Directive – Document names who will make

financial, medical, other decisions… If mentally incompetent and/or unable

to communicate your wishesOnly 1 in 5 Americans has Advance

Directive documentsAsk your parents and grandparents

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Advance Directive DocumentsLiving Will

Wishes for end of life careKeep alive at all costs vs. do not want to live

in permanent vegetative state… & points in between

Medical Power of AttorneyAuthorize person to make health care

decisions on your behalf…if you are unable to make decisions

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Prepare Advance Directive Documents (continued)

Durable Power of Attorneyappoints a person to handle financial affairs if

you cannot Limited Power of Attorney –

narrow in scope could be restricted to a certain time period or certain tasks

Robert Kirby’s parents going on a church mission

Springing Power of Attorney – takes effect if a specified event occurs, usually

mental incapacitation

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Advance Directive (Living Will)

Purposes: to make your wishes knownTo relieve your loved ones of making

difficult, painful decisions when they may not agree

Utah Advance Health Care Directive New law & forms effective January 1,

2008Repealed old law and forms!

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UT Advance Directive for Health Care

1. Name person to make health care decisions for you when you cannot

2. Specify your health care wishes3. Tells how to revoke or change

directive4. Makes your directive legal5. Discuss with family & your doctor

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Utah Advance Directive/Living Will

http://aging.utah.edu/utah_coa/directives/index.html

Simple form Can be edited & personalizedMust be witnessed by one person who is

notrelatedheir or beneficiaryfinancially responsible for declaranthealth care providerhealth care agent

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Update Documents as needed: 5 Ds

1. Decade birthday

2. Diagnosis

3. Deterioration

4. Divorce

5. Death of someone close to you

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Who will inherit your digital assets?

• Email, Facebook, & blog?• Password protected financial accounts?• Family photos in the cloud?• License agreement for digital assets not

transferable– Put digital assets in trust– List in will who can inherit (but no passwords)– Details in letter of last instruction

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Summary• Talk with loved ones• Make decisions for yourself & children• Put your choices in writing• Just do it! • Single best resource: http://www.nolo.com• Commit to a specific date (Thanksgiving?)• Start: Letter of Last Instructions & Advance

Health Care Directive• Questions?

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Questions?

53FPW Blog: http://fpwusu.blogspot.com/

2014 Upcoming FPW

• No December program• Dr. Craig Israelsen: 7Twelve asset

allocation• Teresa Hunsaker: Which house

investments make sense?• Financial Planner Lon Jeffries• ACA- Health insurance in Utah

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