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Estate Planning for Financial Planners
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  1. Estate Planning forFinancial Planners Chapter 1: Introduction to Estate Planning

  2. Estate Planning Definitions • Estate planning: The process of accumulation, management, conservation, and transfer of wealth considering legal, tax, and personal objectives. • Decedent – A deceased person. • Heirs – People who inherit under state laws. • Legatees – People who inherit under the will. • Donor – Person who gives a gift. • Donee – Person who received the gift.

  3. Goal of Estate Planning • Effective Transfers • Decedent’s assets are transferred based on his wishes. • Efficient Transfers • Transfer costs are minimized. • Minimize transfer taxes. • Gift Tax • GST Tax • Estate Tax • State Inheritance Tax

  4. Common Goals and Objectives(2 of 3) • Minimize transfer costs. • Lawyers’ fees • Accountants’ fees • Cost of documents • Court fees • Maximize net assets to heirs. • Exhibit 2.4: Generally taxes and transfer costs will consume at least 30% of an estate

  5. Common Goals and Objectives(3 of 3) • Provide liquidity at death, which is needed for last medical, taxes, and burial costs. • Fulfill client’s health care wishes.

  6. Impediments to Reaching Goals • Unwillingness to face mortality. • Procrastination. • Current good health. • Cost. • Lack of knowledge. • Unaware of value of assets.

  7. Risks in Failing to Plan • Client’s property transfer wishes go unfulfilled. • Transfer taxes are excessive. • Transfer costs are excessive. • Client’s family is not properly provided for financially. • Insufficient liquidity to cover client’s debts, taxes, and costs at death.

  8. Who Needs Estate Planning? • Karen is married with 4 children. • Donna is married with no children. • Bill is single with 3 cats. • Kali is single with no pets or children.

  9. Why the Interest in Estate Planning? • Federal Transfer Tax – 40% in 2014 • People have an interest in directing their assets at their death.

  10. The Six Basic Steps in Estate Planning • Establish the Client/Planner Relationship. • Gather client information and establish objectives. • Determine the client’s financial status. • Develop a comprehensive plan. • Implement the plan. • Review and update plan when necessary.

  11. Establish the Client/Planner Relationship • Talk to your existing clients. • Estate planning is not required! Many clients won’t do it unless they are encouraged. • Detail your services. • Send an Engagement Letter. • Explain how you will be paid

  12. Collecting Client Information • Current financial statements • Family information • List of assets and liabilities • Copies of policies (i.e., medical, disability, & life) • Annuity contracts • Wills and trusts • Identification of POA and GPOA • Previously filed returns (i.e., income & gift tax) • Assets transferred to loved ones • Other pertinent information

  13. Determine the Client’s Transfer Objectives • Common Transfer Objectives • Transfer property to desired beneficiaries • Minimize taxes, maximize assets to heirs • Avoid probate process • Use lifetime transfers – gifts • Meet liquidity needs at death • Plan for children • Plan for incapacity of transferor • Provide for needs of surviving spouse • Fulfill charitable intentions of transferor

  14. The Estate Planning Team • Attorney • CPA • Insurance Professional • Financial Planner (Team Captain)

  15. The Unauthorized Practice of Law • Certain activities are clearly reserved for attorneys (drafting legal documents). • Must be licensed attorney in jurisdiction where practice is occurring. • Planner should refer client to licensed attorney for legal advice.