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ESTATE PLANNING

ESTATE PLANNING . Presenter Dr. AA Neidermeyer West Virginia University. ATTENTION-GETTING QUESTION. Please enter the estimated amount of your estate assuming your demise occurs right now: _$________________________. DEFINITION OF AN ESTATE.

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ESTATE PLANNING

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  1. ESTATE PLANNING Presenter Dr. AA Neidermeyer West Virginia University

  2. ATTENTION-GETTING QUESTION • Please enter the estimated amount of your estate assuming your demise occurs right now: • _$________________________

  3. DEFINITION OF AN ESTATE • ALL ITEMS A PERSON OWNS AT TIME OF HIS/HER DEATH

  4. Possible Definitions of “Estate” • Probate Estate • Federal Taxable Estate • State Death Tax Estate • Net Estate

  5. Motivation to Pre-Plan • Observation: • You’ve worked a lifetime to accumulate your “stuff”; do you want someone else to determine who receives the distributions of your “stuff”? • THE ANSWER TO THE ? IS “NO!”

  6. STATUS REPORT • Document location (s)? • Will? • POAs? • Funeral Arrangements? • Investment / Insurance Information?

  7. Excessive transfer costs Lack of estate liquidity Improper administrative steps Failure to consider needs of children Failure to consider needs of spouse Most Frequent Problems in Estate Administration

  8. Planning Perspectives • People Who Will Receive • Assets Which Will Be Re-titled

  9. Lifetime Planning Steps • Property Ownership • Beneficiary Designation(s) • Gifting

  10. Property Ownership Alternatives • Sole Ownership • Joint Tenants • Tenants in Common • Tenants by the Entirety • Community Property • Trustee

  11. Beneficiary Designation(s) on • Perquisite Benefits • Insurance Policies • IRAs and Keoghs • Trusts

  12. Lifetime Gifting • Annual • Additional: Lifetime Exclusion • Charitable

  13. COMPONENTS OF AN ESTATE PLAN • 1. THE WILL • 2. INVOLVED PARTIES • 3. YOUR PERSONAL GOALS • 4. YOUR RESOURCES

  14. INDIVIDUAL STEPS TO DEAL WITH THE ESTATE • PREPARE A WILL • ACQUIRE LIFE INSURANCE • BEGIN GIFTING • ESTABLISH TRUSTS • SPEND IT ALL • DO NOTHING

  15. Proper Will Execution • Have Mental Capacity • Be free of duress • Follow acceptable legal format

  16. LANGUAGE OF THE ESTATE • TESTATOR / TESTATRIX • DECEDENT • BENEFICIARY • EXECUTOR / EXECUTRIX • BEQUEST • PROBATE

  17. ESTATE PLAN OBJECTIVES • Control Who Receives What • Control When Receipt Occurs • Provide Interim Management and Liquidity for the Estate • Minimize Taxes and Administrative Expenses

  18. ESTATE PAPERS TO HAVE • Birth certificate • Marriage / divorce certificate • Legal name change record • Military service record • Death certificate

  19. DOCUMENTS TO RETAIN • Social security card • Insurance policies • Bank account information • Investment records • Perquisite information • Real estate ownership record(s) • Vehicle registration documents

  20. TYPES OF WILLS • SIMPLE / SWEETHEART • MARITAL SHARE • EXEMPTION TRUST • STATED DOLLAR AMOUNT

  21. FORMAT OF THE WILL • HOLOGRAPHIC • FORMAL • STATUTORY

  22. WRITING THE WILL • SELECTION OF EX ECUTOR • SELECTION OF GUARDIAN • SELECTION OF TRUSTEE

  23. Introduction Direction of Payments Dispositive provisions Appointment clause Tax clause Living will provision Durable power of attorney Details of the Will

  24. Duties of the Executor • Take Control of Deceased’s Assets • File Inventory with Probate Court • Pay Debts of the Deceased • Distribute “Stuff” According to Will • Make Final Accounting to Probate Court

  25. Duties of the Guardian • The designated guardian accepts responsibility for raising the children of the deceased. • Do not appoint a guardian until you have discussed the appointment with the individual(s).

  26. Selection of the Trustee • The Trustee is appointed to manage the funds of the family in support of the remaining family members. • The Trustee should be independent of daily living involvement with the family members.

  27. EXTENSIONS TO THE WILL Execution of Powers of Attorney Creation of a Letter of Last Instruction

  28. Necessity for a Medical Power of Attorney • An individual should designate another individual who will make the necessary medical decisions for them if he/she becomes incapacitated. • Choose someone in whom you have complete trust.

  29. Other Potential Powers of Attorney • Limited: Enables another individual to act for you in a specific transaction. (e.g. real estate purchase) • Durable: Enables another individual to act for you in all future situations. (e.g. closely restrict this)

  30. Possible Components of a Letter of Last Instruction • Funeral Arrangements • Location of Financial Information • Listing of Sources of Benefits for Dependents not specified in Will • Listing of Recurring Debt Payments • List of Credit Card Information • List of Individuals to be Notified

  31. PLANNING OBJECTIVES • PROVIDING FOR FAMILY • PRESERVING ASSET VALUES • CONTROLLING FAMILY FUTURE • REDUCING TAXES • SUPPORTING CHARITIES

  32. ELEMENTARY ACTIONS • ESTABLISH SPECIFIC OBJECTIVES • TAKE A PERSONAL INVENTORY • GIFT TO FAMILY MEMBERS • GIFT TO CHARITIES

  33. TAXES ON THE ESTATE • FEDERAL TRANSFER • STATE INHERITANCE • FEDERAL INCOME • STATE INCOME

  34. KEY TAX PROVISIONS • FEDERAL UNIFIED ESTATE & GIFT TAX CREDIT • THE UNLIMITED MARITAL DEDUCTION • THE GENERATION-SKIPPING TRANSFER TAX EXEMPTION

  35. REDUCING THE TAX BURDEN • UTILIZE THE EXCLUSION • GIFT • DONATE TO CHARITIES • ESTABLISH LIFE INS TRUST • ESTABLISH A RESIDENCE TRUST • FORM A FAMILY PARTNERSHIP

  36. FUNDING ESTATE TAXES • CASH • LOANS • LIQUIDATION OF ESTATE ITEMS • LIFE INSURANCE

  37. USE OF TRUSTS • TO MANAGE AND PROTECT • TO PROVIDE CONTINUITY • CONTROL ASSET DISTRIBUTION • AVOID THE COST OF PROBATE • AVOID DELAYS OF PROBATE • ENSURE PRIVACY

  38. BASIC TRUSTS • REVOCABLE LIVING TRUST • CREDIT SHELTER TRUST • IRREVOCABLE LIFE INSURANCE TRUST

  39. ESTATE PLANNING RED FLAGS • JOINTLY-HELD PROPERTY • PROPERTY OWNERSHIP IN MULTIPLE STATES • SUBSTANTIAL TAX-DEFERRED BENEFIT PLANS • OWNED LIFE INSURANCE • INCORRECT EXECUTOR AND/OR GUARDIAN CHOICE

  40. Spend it All! Difficulty in executing the timing of this alternative - you may live too long! Do Nothing! Difficulty here is that you may not like the transfers which will be made under state law. Last Two Possible Actions

  41. Review ownership / beneficiary designations Review POAs Identify Guardians/ fiduciaries Reviews will and trust agreements Measure estate liquidity needs Minimize transfer costs Consider early gifting Discussion Extensions: Your To-Do List

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