Estate Planning for Parents of Minor Children

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For most new parents, life is about functioning on a few hours of sleep a night, squeezing in a daily shower, and finding clothes that actually fit. Big "to-do's" are easily put on the backburner, and as a result, many new parents fail to create (or revise) Wills, Trusts or appropriate Guardianship documents. In this presentation, Jaime Kim shows us the consequences of not having these documents in place, and how parents can provide for their minor children through proper estate planning. Jaime is an attorney with King & Navins, P.C., in Wellesley, MA, the mother of a four year old daughter and one year old son and an avid Isis fan.

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Estate Planning for Parents of Minor Children

  1. 1. ESTATE PLANNING FOR PARENTS OF MINOR CHILDREN Isis Maternity Expert Speaker Series Jaime T. Kim Material presented here is intended for information purposes only. It should not be construed as legal advice or the formation of an attorney-client relationship. Please consult an attorney for individual advice regarding your own personal situation.
  2. 2. <ul><li>INTRODUCTION – A PROCESS </li></ul><ul><li>COMMON MISCONCEPTIONS </li></ul><ul><li>DOCUMENTS WHICH EFFECTUATE THE PLAN </li></ul><ul><ul><li>- WILLS </li></ul></ul><ul><ul><li>- TRUSTS </li></ul></ul><ul><ul><li>- DURABLE POWERS OF ATTORNEY </li></ul></ul><ul><ul><li>- HEALTH CARE PROXIES </li></ul></ul><ul><ul><li>- APPOINTMENTS OF GUARDIAN </li></ul></ul><ul><li>TAXATION </li></ul>OVERVIEW
  3. 3. <ul><li>Identifying your personal and financial goals , including: </li></ul><ul><ul><li>Planning for incapacity ; </li></ul></ul><ul><ul><li>Providing for spouses and children upon death; </li></ul></ul><ul><ul><li>Avoiding probate ; and </li></ul></ul><ul><ul><li>Minimizing taxes . </li></ul></ul><ul><li>Choosing the people w ho will: </li></ul><ul><ul><li>Manage your assets for your benefit if you are unable to; </li></ul></ul><ul><ul><li>Make health care decisions when you cannot; </li></ul></ul><ul><ul><li>Take responsibility for your minor children’s day-to-day care ; and </li></ul></ul><ul><ul><li>Manage your children’s inheritance . </li></ul></ul><ul><li>Establishing documents to effectuate your goals; and </li></ul><ul><li>Reviewing title to your assets in order to take full advantage of your estate planning documents, including: </li></ul><ul><ul><li>Updating beneficiary designations on retirement accounts and life insurance policies; and </li></ul></ul><ul><ul><li>Re-titling individually held property. </li></ul></ul>I. INTRODUCTION – A PROCESS ESTATE PLANNING IS A COMPREHENSIVE PROCESS WHICH INVOLVES:
  4. 4. <ul><li>Only the wealthy need an estate plan; </li></ul><ul><li>There are adequate substitutes to a well-conceived estate plan, e.g., joint ownership, designation of beneficiaries, etc.: </li></ul><ul><ul><li>Under current law, if you die without a will, your individually-held property will be split between your children and your spouse, which requires your spouse to obtain guardianship of his/her own minor children through the Probate Court; </li></ul></ul><ul><ul><li>Do-it-yourself estate planning may sound appealing from a cost perspective, but can backfire by failing to minimize estate taxes or take into consideration: state-specific probate laws, unique family dynamics, various options for managing each child’s inheritance, and how to properly title your specific assets. </li></ul></ul><ul><li>Taxability of joint property, life insurance and retirement plan assets: </li></ul><ul><ul><li>Avoiding probate does not save estate taxes. </li></ul></ul>II. COMMON MISCONCEPTIONS
  5. 5. <ul><li>WILL – a written instrument executed with certain formalities, which: </li></ul><ul><ul><li>Must be filed with the Probate Court for allowance upon death; </li></ul></ul><ul><ul><li>Disposes of property held in your individual name as you so desire; </li></ul></ul><ul><ul><li>Nominates a personal representative , i.e., executor who will be responsible for settling your estate; </li></ul></ul><ul><ul><li>Recites powers to be conferred upon a personal representative; </li></ul></ul><ul><ul><li>Directs payment of taxes ; </li></ul></ul><ul><ul><li>Nominates a guardian for minor children. </li></ul></ul>III. DOCUMENTS WHICH EFFECTUATE THE PLAN
  6. 6. <ul><li>TRUST – a written instrument which transfers property from one person to another to be held for a third party. A trust may function like a Will and comes in different forms: </li></ul><ul><ul><li>Testamentary (created under a Will); </li></ul></ul><ul><ul><li>Living (created during lifetime); </li></ul></ul><ul><ul><ul><li>Revocable (may be changed at any time); </li></ul></ul></ul><ul><ul><ul><li>Irrevocable (may not be changed). </li></ul></ul></ul>III. DOCUMENTS WHICH EFFECTUATE THE PLAN
  7. 7. <ul><li>TRUSTS, CONTINUED </li></ul><ul><ul><li>Purposes of revocable trusts: </li></ul></ul><ul><ul><ul><li>Provide for financial management in the event of incapacity; </li></ul></ul></ul><ul><ul><ul><li>Privacy of arrangements (probate avoidance); </li></ul></ul></ul><ul><ul><ul><li>Provide framework for management of assets for the benefit of spouse, children, other more remote issue; </li></ul></ul></ul><ul><ul><ul><li>Minimization of estate tax ; </li></ul></ul></ul><ul><ul><ul><li>Contemplate unique circumstances , e.g., family members who have special needs, blended families. </li></ul></ul></ul>III. DOCUMENTS WHICH EFFECTUATE THE PLAN
  8. 8. <ul><li>TRUSTS, CONTINUED </li></ul><ul><ul><li>Purposes of irrevocable trusts: </li></ul></ul><ul><ul><ul><li>Estate and gift tax minimization: </li></ul></ul></ul><ul><ul><ul><ul><li>Life insurance; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Charitable arrangements; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Gifting to younger generation beneficiaries. </li></ul></ul></ul></ul><ul><ul><ul><li>Asset protection: </li></ul></ul></ul><ul><ul><ul><ul><li>Creditors; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Preserve eligibility for public benefits. </li></ul></ul></ul></ul>III. DOCUMENTS WHICH EFFECTUATE THE PLAN
  9. 9. Pour Over Will Any individually-owned assets will be directed by the Will and “pour over” to 1 st Spouse’s Revocable Trust AFTER being subject to probate Assets titled in name of the Trust or that name the Trust as beneficiary will flow directly to the Trust upon death without being subject to probate Assets that name 2 nd Spouse as beneficiary Assets owned by 1 st Spouse and 2 nd Spouse jointly Pass directly to 2 nd Spouse Marital Fund Trust is managed for the benefit of 2 nd Spouse until his/her death 1 st SPOUSE’S REVOCABLE TRUST PROBATE COURT <ul><li>DOCUMENTS WHICH EFFECTUATE THE PLAN: </li></ul><ul><li>Example of Flow of Assets Upon 1st Spouse’s Death </li></ul>
  10. 10. Pour Over Will Any individually-owned assets will be directed by the Will and “pour over” to 2 nd Spouse’s Revocable Trust AFTER being subject to probate Assets titled in the name of the Trust or that name the Trust as beneficiary will flow directly to the Trust upon death without being subject to probate 2 nd SPOUSE’S REVOCABLE TRUST PROBATE COURT Marital Fund Trust is managed for the benefit of 2 nd Spouse until his/her death Family Fund Upon 2 nd Spouse’s death , trust is managed for the benefit of the children 1 st SPOUSE’S REVOCABLE TRUST MERGE Family Fund Trust is managed for the benefit of the children <ul><li>DOCUMENTS WHICH EFFECTUATE THE PLAN: </li></ul><ul><li>Example of Flow of Assets Upon 2 nd Spouse’s Death </li></ul>
  11. 11. <ul><li>DURABLE POWER OF ATTORNEY – a written instrument that appoints an agent to handle legal, business and financial affairs: </li></ul><ul><ul><li>General vs. Limited; </li></ul></ul><ul><ul><li>Designed principally for future incapacity; </li></ul></ul><ul><ul><li>Avoids time, expense and emotional burden of probate court involvement (i.e., conservatorship). </li></ul></ul>III. DOCUMENTS WHICH EFFECTUATE THE PLAN
  12. 12. <ul><li>HEALTH CARE PROXY – a written instrument that appoints an agent to make health care decisions when you can no longer communicate your decisions yourself: </li></ul><ul><ul><li>May include a Living Will, e.g., language that directs no heroic measures or artificial means are used which prolong life if living in intractable pain and not expected to regain cognitive faculties. </li></ul></ul>III. DOCUMENTS WHICH EFFECTUATE THE PLAN
  13. 13. <ul><li>LIFETIME APPOINTMENTS OF GUARDIAN – 2 TYPES: </li></ul><ul><ul><li>APPOINTMENT OF GUARDIAN OF A MINOR – a written instrument that appoints a guardian in the event of both parents’ death or incapacity : </li></ul></ul><ul><ul><ul><li>A Will only comes into effect upon death; </li></ul></ul></ul><ul><ul><ul><li>Guardian named must file acceptance with court before authority to act commences. </li></ul></ul></ul><ul><ul><li>APPOINTMENT OF TEMPORARY AGENT FOR CARE OF MINOR CHILDREN – a written instrument that appoints a short-term guardian when absence is planned: </li></ul></ul><ul><ul><ul><li>Guardian’s authority to act is immediate but can only last up to 60 days after document is signed. </li></ul></ul></ul>III. DOCUMENTS WHICH EFFECTUATE THE PLAN
  14. 14. IV. TAXATION <ul><li>Take Advantage Of Tax Minimization Tools: </li></ul><ul><ul><li>Federal and State Estate, Generation-Skipping, Gift And Income Tax Exemptions; </li></ul></ul><ul><ul><li>Annual Gift Tax Exclusion; </li></ul></ul><ul><ul><li>Unlimited Marital Deduction: </li></ul></ul><ul><ul><ul><li>Certain Limitations For Non-U.S. Citizen Spouses. </li></ul></ul></ul><ul><ul><li>Charitable Deduction: </li></ul></ul><ul><ul><ul><li>Outright Gifts; </li></ul></ul></ul><ul><ul><ul><li>Charitable Gift Annuities; </li></ul></ul></ul><ul><ul><ul><li>Charitable Remainder or Lead Trusts; </li></ul></ul></ul><ul><ul><ul><li>Donor Advised Funds; </li></ul></ul></ul><ul><ul><ul><li>Private Foundations; </li></ul></ul></ul><ul><ul><ul><li>Conservation Easements/Restrictions. </li></ul></ul></ul>
  15. 15. HOW DO I GET STARTED? Feel free to bee in touch with any questions or concerns you have regarding your personal situation (781) 237-0150 [email_address] Thank you! ~ Jaime T. Kim

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