Estate Planning  <ul><li>Objective of estate planning is to distribute your wealth according to your wishes after your dea...
Consequences of Improper  Planning  <ul><li>Estate planning is essential because estate taxes could take most of your esta...
Components of An Estate Plan <ul><li>A  will  is the most important part of your estate plan. A will is a legal document t...
Living Will & Power of Attorney   <ul><li>A  living will  allows you to specify what kind of medical care you would like t...
Trusts  <ul><li>A trust is a legal entity that holds and manages assets on behalf of someone else.  </li></ul><ul><li>Trus...
Types & Formats of Wills   <ul><li>A will enables a testator, person who drafts their will, to devise property to benefici...
Will Format <ul><li>Introduction of the testator  </li></ul><ul><li>Payment of debts and taxes  – this clause directs the ...
Codicils  <ul><li>You can change or revoke your will at any time, as long as you still have the mental capacity to execute...
Passing Property Outside a Will   <ul><li>Any wealth transferred by will must go through probate.  However, some property ...
Forms of Ownership <ul><li>In some states a special form of ownership, known as  tenancy by the entirety  applies to husba...
Estate & gift Taxes  <ul><li>Currently under federal law, you can give a person $12,000 tax free.  Anything more must be r...
Estate Tax Rates <ul><li>INSERT Figure 15-2 </li></ul>15-13
Calculating Estate Tax  <ul><li>In order to calculate the amount of your estate that could be subject to estate tax upon y...
Trusts & Gifts  <ul><li>Two ways to reduce your taxable estate are to move the money into a trust and give away your asset...
Types of Trusts  <ul><li>If your primary purpose in establishing a trust is to reduce taxes then you must establish an  ir...
Living vs. Testamentary  <ul><li>A  living trust, or inter vivos  is established while you are alive.  In contrast a  test...
Copyright Notice <ul><li>© 2008 John Wiley & Sons, Inc.   </li></ul><ul><li>All rights reserved. Reproduction or translati...
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  • Copyright by John Wiley and Sons, 2006
  • Copyright by John Wiley and Sons, 2006
  • Copyright by John Wiley and Sons, 2006
  • Copyright by John Wiley and Sons, 2006
  • Copyright by John Wiley and Sons, 2006
  • Copyright by John Wiley and Sons, 2006
  • Copyright by John Wiley and Sons, 2006
  • Copyright by John Wiley and Sons, 2006
  • Copyright by John Wiley and Sons, 2006
  • Copyright by John Wiley and Sons, 2006
  • Copyright by John Wiley and Sons, 2006
  • Copyright by John Wiley and Sons, 2006
  • Copyright by John Wiley and Sons, 2006
  • Copyright by John Wiley and Sons, 2006
  • Copyright by John Wiley and Sons, 2006
  • Copyright by John Wiley and Sons, 2006
  • Copyright by John Wiley and Sons, 2006
  • Estate Planning Objective of estate planning is to distribute ...

    1. 1. Estate Planning <ul><li>Objective of estate planning is to distribute your wealth according to your wishes after your death. </li></ul><ul><li>Estate is your net worth at death. </li></ul><ul><li>The purpose of estate planning is to avoid as much of your estate passing through probate as possible. </li></ul><ul><li>More than half of the people in the United States do not have wills. </li></ul><ul><li>If you die without a will, federal estate taxes, top margin is 47% in 2005 and state taxes around 0-10%. </li></ul>15-2
    2. 2. Consequences of Improper Planning <ul><li>Estate planning is essential because estate taxes could take most of your estate. In addition, improper planning could cause the following: </li></ul><ul><li>Delays in settlement of the estate </li></ul><ul><li>Distress over the distribution of your assets </li></ul><ul><li>Potential financial hardship for your dependents. </li></ul>15-3
    3. 3. Components of An Estate Plan <ul><li>A will is the most important part of your estate plan. A will is a legal document that specifies how you would like your property to be distributed upon your death. </li></ul><ul><li>A person designated to receive something in your will is known as an heir. </li></ul><ul><li>If you die intestate , without a valid will, your property is distributed according to the rules of the state in which you live or your property is situated. </li></ul>15-4
    4. 4. Living Will & Power of Attorney <ul><li>A living will allows you to specify what kind of medical care you would like to receive. This document is useful if you become incapacitated. </li></ul><ul><li>Durable power of attorney allows you to designate a person to make decisions on your behalf in case you are temporarily or permanently unable to do so. </li></ul><ul><li>A letter of last instruction provides information about funeral arrangements and important information about your bank accounts. </li></ul>15-5
    5. 5. Trusts <ul><li>A trust is a legal entity that holds and manages assets on behalf of someone else. </li></ul><ul><li>Trusts are commonly used in estate planning. </li></ul>15-6
    6. 6. Types & Formats of Wills <ul><li>A will enables a testator, person who drafts their will, to devise property to beneficiaries. </li></ul><ul><li>Wills must satisfy seven requirements to be valid </li></ul><ul><li>Most importantly, a testator must have capacity to complete a will. </li></ul>15-7
    7. 7. Will Format <ul><li>Introduction of the testator </li></ul><ul><li>Payment of debts and taxes – this clause directs the executor on how to direct these payments. </li></ul><ul><li>Distribution of Assets – this is the purpose of the will and outlines who receives which assets. </li></ul><ul><li>Appointment of an Executor – the person who will handle the administration of the estate. </li></ul><ul><li>Appointment of a guardian – if you have minor children you appoint a guardian for them. </li></ul><ul><li>Execution – the signing of the will by the testator and witnesses. </li></ul>15-8
    8. 8. Codicils <ul><li>You can change or revoke your will at any time, as long as you still have the mental capacity to execute a new will. </li></ul><ul><li>A codicil can be used to change a named guardian or trustee, and to make changes to the will. A codicil is a legal document and should be executed with the same formalities as a will. </li></ul>15-9
    9. 9. Passing Property Outside a Will <ul><li>Any wealth transferred by will must go through probate. However, some property may stay outside of probate depending on the ownership status. </li></ul><ul><li>When two people own property in a joint tenancy with right of survivorship , the ownership of the property automatically passes to the surviving owner. </li></ul>15-10
    10. 10. Forms of Ownership <ul><li>In some states a special form of ownership, known as tenancy by the entirety applies to husband and wife, but operates the same way as a joint tenancy with right of survivorship. </li></ul><ul><li>Another option is tenancy in common . Here, each tenant retains the right to transfer his or her ownership interest independently. Your portion of the property is included in your estate. </li></ul>15-11
    11. 11. Estate & gift Taxes <ul><li>Currently under federal law, you can give a person $12,000 tax free. Anything more must be reported. Exception is that there is no limit as to how much you can give your spouse. </li></ul><ul><li>Like federal income taxes, estate and gift taxes have increasing marginal tax rates. </li></ul>15-12
    12. 12. Estate Tax Rates <ul><li>INSERT Figure 15-2 </li></ul>15-13
    13. 13. Calculating Estate Tax <ul><li>In order to calculate the amount of your estate that could be subject to estate tax upon your death use the following steps: </li></ul><ul><li>Calculate your gross estate – first estimated your net worth. </li></ul><ul><li>Calculate adjusted gross estate – your gross estate is reduced by funeral costs and settlement expenses. </li></ul><ul><li>Calculate taxable estate – start with your adjusted gross estate, subtract marital and charitable bequests, and add any taxable gifts. </li></ul>15-14
    14. 14. Trusts & Gifts <ul><li>Two ways to reduce your taxable estate are to move the money into a trust and give away your assets in charitable bequests. </li></ul><ul><li>A grantor, the person creating the trust, transfers assets to a trust which is managed by the trustee. </li></ul><ul><li>This is done to avoid probate, to minimize taxes and ensure the grantor’s intent is followed. </li></ul>15-15
    15. 15. Types of Trusts <ul><li>If your primary purpose in establishing a trust is to reduce taxes then you must establish an irrevocable trust . With this type of trust, the terms of the trust cannot be changed once it is established. These trusts bypass probate and are not subject to taxes. </li></ul><ul><li>A revocable trust allows the grantor the right to change the trust and terminate the trust if he or she chooses. </li></ul>15-16
    16. 16. Living vs. Testamentary <ul><li>A living trust, or inter vivos is established while you are alive. In contrast a testamentary trust is one established through the terms of your will. </li></ul><ul><li>A fairly common practice is to set up a revocable trust that become irrevocable upon your death. </li></ul><ul><li>A pourover will is a legal document stating that any of your assets which have not been transferred by the time of your death are “poured over” into one or more of the trusts established. </li></ul><ul><li>Two types of testamentary trusts are: </li></ul><ul><li>Standard family trust </li></ul><ul><li>Qualified terminable interest property </li></ul><ul><li>Each type of trust should be discussed in creating an estate plan. </li></ul>15-17
    17. 17. Copyright Notice <ul><li>© 2008 John Wiley & Sons, Inc. </li></ul><ul><li>All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein. </li></ul><ul><li>All clipart and photos courtesy of Microsoft.com, unless otherwise noted. </li></ul>15-18

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