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Understanding Estate Planning: Secure Your Future Assets

Explore the concept of estate planning, encompassing decisions on property transfer during life and after death. Essential for all, beyond financial concerns, to avoid relying solely on state-provided plans.

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Understanding Estate Planning: Secure Your Future Assets

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  1. What is Estate Planning?

    The overall process of making decisions as to how property is to pass to others, during one’s lifetime, at death, or after death.
  2. Who Should do Estate Planning? Everyone…….It is not just about money Unless you are happy with the plan your state has provided
  3. We are not giving Legal Advice Just Providing Non Bias Educational Information Seek out your own legal council
  4. Coordinate Your Planning Retirement Estate Transfer Income Tax Planning Planning Planning Planning
  5. Who is the Estate Plan for? Is it to pass a business to the next generation? Is it to plan for retirement? Is it to jump start the kids ambitions? Is it to avoid taxes?
  6. What are your most important goals? Individual Family Retirement Business Spiritual Other
  7. Key is to Articulate Goals The parents together The parents individually The on-farm heirs The off-farm heirs
  8. Develop Goals under various circumstances What to do if spouse dies Receive Income? Sell interest? Participate in management? What to do if both die What to do if entire family dies
  9. Common Estate Planning Goals Minimize taxes at death Minimize probate costs and delays Conserve property during life and after death in accordance with estate planning goals Provide financial security Parents in retirement Family member with a disability
  10. Key Areas of Concern Guardian for minor children or adult children with special needs. Providing income for a surviving spouse or children. Management of estate property, assets and investments. Minimization of probate and settlement expenses. Minimization of estate and inheritance taxes. Flexibility. Liquidity for necessary and unavoidable expenses. Gift planning. Continuation and/or transfer of the business.
  11. Putting together a team of Advisors Accountant Banker Insurance agent Investment advisor Lawyer Others Take referrals, put through interviews
  12. Who should be involved? PARENTS ASSET OWNERS IF YOU OWN A BUSINESS - BUSINESS PARTNERS HEIRS WORKING IN THE BUSINESS HEIRS NOT WORKING IN THE BUSINESS NON FAMILY BUSINESS PARTNERS DAUGHTERS-IN-LAW & SONS-IN-LAW ATTORNEY KNOWLEDGEABLE IN ESTATE PLANNING FINANCIAL ADVISORS INSURANCE ADVISORS MANAGEMENT CONSULTANTS LENDERS MEDIATOR
  13. Scheduling a Family Meeting SCHEDULING THE MEETING How often meetings will be scheduled Set specific beginning and ending times Establish a standing agenda How are items added to the agenda How are emergency meetings scheduled How is notice of meetings given What constitutes a quorum What happens if someone cannot attend
  14. A Process of Decision Making What criteria will be used; Financial, values, production, time, family, etc. Who will make the decision; Owner/Parents, children, employees, advisors. How will decisions be made; Autocratic, democratic, consensus, collaboration. How will conflicts be resolved.
  15. MEETING GROUND RULES Agree upon the role and authority of the facilitator. Critique the message, not the messenger. Everyone must listen to learn. Do not interrupt. Practice good manners and model good behavior. Discuss your emotions. Our emotions often drive our decisions. Expect honest comments from others by being honest in your comments. Enthusiastically support decisions made at the meetings. Trust the process to generate an estate plan that all will agree upon.
  16. Important Considerations TIMING Choose the right time for making the decision. Delaying a decision may be the same as not making a decision, however do not be rushed into making a decision. INFORMATION - Remember that there is never the right amount of information for making a decision. One always wishes that more information were available or one feels overwhelmed by the amount of information available.
  17. Getting Started Determine what you own and how much it is worth. Who do you want to receive your bounty? Review any past estate planning
  18. Vocabulary Activity Take 10 minutes to complete vocabulary activity
  19. Estate Planning Steps Examination of how property is owned or held Review of family insurance program Advisability of lifetime gifting Alternatives for disposing of property during life
  20. Property Classifying what you own Real Personal
  21. Fair market value of real estate You may be pleased! May be one of your greatest stores of wealth
  22. Ownership a). Fee simple, life estate, life tenants, leaseholds, remainder interest b). Tenants in common c). Joint tenants with right of survivorship (car, bank account, simplified estate settlement) Note: different states may have different forms of ownership
  23. Forms of Co-ownership Tenancy in common Each tenant holds an undivided interest in the property Upon a tenant’s death, the interest passes in accordance with the tenant’s will (or state law if no will) The decedent’s estate includes only the decedent’s interest
  24. Forms of Co-ownership Joint tenancy Passes by survivorship designation Precludes use of life estate/remainder arrangement as to non-marital portion of the estate Magic words of conveyance Takes precedence over the will
  25. Forms of Co-ownership Tenancy by the entirety (Ex: not allowed in Iowa) Husband and wife can together convey a fee simple but neither can unilaterally sever the tenancy
  26. Estate Planning Implications of Property Ownership Forms Non-spousal joint tenancies Property is taxed in the estate of the first to die except to the extent the surviving owner proves contribution for its acquisition “Consideration furnished” rule Property included in decedent’s estate receives a new basis at death
  27. Estate Planning Implications of Property Ownership Forms Spousal joint tenancies The property is treated at the first death as belonging 50% to each spouse for federal estate tax purposes “Fractional share” rule
  28. Important Considerations Type of Asset Inventory Depreciable Machinery & Equipment Permanent Improvements Real Estate Land Personal Residence Tax Basis
  29. Financial Statement(Net Worth Statement)(Balance Sheet) Now that you have inventoried all of your assets, you might just as well make a financial statement. It gives you your financial position as of a certain date.
  30. Assets: House $50,000 1993 Lumina $1500 Personal property $10,000 CD’s $20,000 Total assets $81,500 Liabilities: None Assets $81,500 Debts 0 Net worth $81,500 John and Mary
  31. Financial Statement Might want to get more detailed: Assets Short, Intermediate, Long or Short term, long term Same with liabilities
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