ABCs of Estate Planning


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ABCs of Estate Planning

  2. 2. Don has over twenty years ofexperience in the area ofEstate Planning. Don hasworked with hundreds ofFinancial Advisors and assistedthem to help their clientsdevelop thousands of personalEstate Plans. Currently, he isthe National Estate PlanningTrainer for ITS Training.don@trust-its.comAUTHOR PAGE:Don Deasy, CLU, ChFC// Page 2 Copyright © 2012. All rights reserved.
  3. 3. ABCs of Estate Planning.………………..…4How Different Assets Transfer …………..6The Revocable Living Trust………..………9Other Conditions………………….……......13The Estate Plan Portfolio…..……….…….15What’s Next …………………………………..17TABLE OF CONTENTS:// Page 3DisclaimerAll the material contained in this book is provided foreducational and informational purposes only.No responsibilitycan be taken for any results or outcomes resulting from theuse of this material.While every attempt has been made to provide information that is both accurate and effective,the author does not assume any responsibility for the accuracy or use/misuse of this information.
  4. 4. We are going to focus on several basicestate planning concepts so you canbetter understand how this processworks. Let’s begin with you or theboth of you if you are married.Actually, all of us have an estatebecause many of us own:Real Property:Your home, rentalproperty or otherreal estatePersonal Property:Clothes, furniture, jewelryTV, automobiles, etcTitled Property:Bank & Brokerage accounts,Investments, Life Insurance,Retirement plans, etcCHAPTER 1:ABC’s Of Estate Planning// Page 4
  5. 5. These three property categories make up your assets. So, wewill call this the A component.We all have heirs or beneficiaries. Typically, these are yourchildren, those who you want to receive your assets after youpass. This could also be a charity like your church. So, we willcall this the B component.Simply put, the objective ofan Estate Plan, after yourpassing, is to makesure A gets to B.However, there are sometimes conditions. A condition can be afuture, uncertain, event. And, if the event happens somethingneeds to be done. As an example, if a beneficiary were onlytwelve years old, he would be unable to receive your assetsuntil he reached a certain age, usually 18 or above.Therefore, a provision would need to be made to allow for thisor the court would step in and take control. In thiscase, assets would be held for the benefit of this beneficiary.So, we will call this the C component.The objective then is to get A to B regardless of or thatincludes C!ABCs of Estate Planning// Page 5AB
  6. 6. I once heard an attorney say that it is estimated that marriedcouples owned as much as 90% of their assets in the form ofJoint Tenancy With Right of Survivorship – JTWRS. Let’s seehow this works and use the house as an example.It’s quit simple, when the first spouse dies the survivingspouse receives full title of the house.Therefore, if your car, bank accounts and investmentaccounts and other assets were titled JTWROS, the survivingspouse would get ALL these assets with essentially no hassleor any court proceedings!Now, the surviving spouse would hold the title of the house,and other assets that were JTWROS as sole ownership,unless he or she made arrangements to change the form ofownership.CHAPTER 2:How Different Assets Transfer// Page 6
  7. 7. The next form of ownership is Sole Ownership.Obviously, if you are single, most if not allyour assets would be owned in this format.And, the surviving spouse we justmentioned would own those assetsthat were in JTWROS now as sole ownership.So, what happens when a person passes with assets held inthis manner?These assets normally now transfer by Willthrough the Probate process. If you have notcreated a Will, the State has a “default” Willthat determines who will receive yourassets.A couple of other points – the typical cost of Probate can rangefrom 1% to 8% of the value of the assets being probated. Thiscould be several hundred to several thousand dollars.Additionally, it usually takes several months to complete theprobate process before the finale transfer of assets is madeto the beneficiaries.Most people would prefer to use a different method becauseof the costs and time of this process.// Page 7ABCs of Estate Planning
  8. 8. Another way an asset cantransfer is by BeneficiaryDesignation.Typically, life insuranceand qualified plans –IRA’s, 401k’s, etc. fall intothis category.Other assets can alsotransfer to a beneficiary.Bank accounts can bePayable-on-Death – PODand securities can beTransfer-on-Death - TODAnd, a number of Statesnow allow BeneficiaryDeeds to transfer yourhouse to a beneficiary.Having an asset godirectly to a beneficiary isvery popular as, normally,the beneficiary gets theasset without anyProbate proceedings.// Page 8ABCs of Estate Planning“57% of AdultsDon’t Have aWill”Source: Rocket Lawyer.comMarch, 20111
  9. 9. The next way an asset can transfer is by using a Revocable LivingTrust. For most people, this is usually the BEST way to transferassets to a beneficiary. Let’s see how the Trust works:When you create a Trust:You become the Grantor. This means you say who will getyour assets, when and how.You are the Trustee. This means you hold title to your assetsin the Trust. This is why you transfer all your assets into yourTrust.You are the Beneficiary. This means you continue to enjoy theuse of all your assets.CHAPTER 3:The Revocable Living TrustRevocable Living Trust// Page 9
  10. 10. Your Beneficiaryor beneficiaries arethose who will get your assets afteryou pass.Typically, these are your children . . .. . . they could also be a grandchild, etc.Finally, you select a Successor Trustee. This is one who willcarry out your instructions if you become incapacitated or whenyou die. Typically, adult children are chosen for this position.As you can see, the Trust becomes a “holding place” for allyour assets, making it real easy to transfer these whenappropriate.ABCs of Estate Planning// Page 10
  11. 11. When the first spouse dies, usually there is not a great dealthat needs to be done. In some cases, assets would need bere-titled into multiple Trusts.However, when the surviving spouse dies, the SuccessorTrustee takes over and follows the Trust instructions todistribute the assets to the beneficiaries:ABCs of Estate Planning// Page 11
  12. 12. If there is a condition, such as: a Beneficiary is still a minor,the Trustee will “hold” the assets in a Holding Trust and payout income from the Trust and principal for certain reasonssuch as a college education:This is a good example of how the Trust accomplishes theobjective of having A go to B while taking into consideration C!Perhaps, you can think of a condition in your personal situationthat a Trust would allow for and therefore meet your objectives.ABCs of Estate Planning// Page 12Holding Trust
  13. 13. Up to this point, we have referred to conditions as applying toassets and the beneficiary. We have seen that the RevocableLining Trust is an excellent vehicle because:1) ALL assets can transfer in one manner – to a beneficiary2) If there is a Beneficiary condition [a distribution issue]– the Trust can “hold” assets until it is appropriate todistribute directly to a beneficiaryIn this section we are going to lookat several conditions that could applyto you. Additionally, we will lookat those documents that, in general,are used to offset each condition.If you become incapacitated, your chosen agent can makefinancial decisions and / or medical decisions on your behalf.There are two sets of documents to accomplish these objectives.CHAPTER 4:Other ConditionsIncapacitation Durable Powers of Attorney// Page 13
  14. 14. If you should go into a comatose or vegetative sate with nosigns of recovery, your chosen agent, usually selected in theDurable Power of Attorney for Health Care makes the decisionto continue life support systems based on your wishes. There isalso an Advance Health Care Directive that is sometimesused for these types of decisions.If you forget to transfer an asset into your Trust, the Last Will,also called a Pour Over Will directs assets may own at yourdeath to go to your Trust. This allows for ALL of your assets tobe distributed to your beneficiaries the way you want. Assets thatflow from the Will to your Trust may be subject to Probate. Thisis why it is important to transfer ALL your assets into your Trust.ABCs of Estate Planning// Page 14Comatose State Living WillForget to Transfer Last Will (Pour Over)
  15. 15. As you can see, you really need more than onedocument if you are to meet the basic EstatePlanning objective of, after your passing, gettingA [Assets] to B [Beneficiaries] regardless of,or taking into consideration, C [Conditions].It is also would be helpful to have explanation material andother forms to make changes and be able to administer yourEstate Planning objectives over time.The Estate Plan Portfolio is designed to accomplish all theseobjectives. The Portfolio is made up of ten Sections with fourpurposes:1) Four Document Sections – Meet ALL Estate Planning goals2) Three Funding Sections – Transfer assets into your Trust3) Two Information Sections – Provide helpful information4) One Change Form Section – Forms for changes, etc.CHAPTER 5:The Estate Plan Portfolio// Page 15
  16. 16. // Page 16ABCs of Estate PlanningAllows someone to make financial andmedical decisions, if you can’tEstate Plan PortfolioAllows your assets to go to whowant, when and how you wantAllows you to state your choice aboutcontinuation of life support systemsAllows you to be sure ALL your assetsflow through your TrustSummary of your Trust so one willchange title of an asset to your TrustLists who and how your assets areowned that are placed in your TrustAllows you to change the title orbeneficiary designation of your assetsDescribes the different sections ofyour Estate Plan PortfolioProvides instructions for the Trustee toknow what to do for administrationForms to make changes and carry outTrust administration issuesRevocable Living TrustDurable Powers of AttorneyLiving Will & DirectivesLast Will (Pour Over)Certificate of TrustSchedules, Ledgers & DeedsTransmittal LettersPortfolio SummaryTrustee MemorandumAdministrative Documents
  17. 17. Contact the person that provided you this e-book.That person can assist you by answering any questions youmay have. He or she can also begin the process with you tocollect the initial information so that you can begin the processto have your own personal Estate Plan developed.They will be able to give you a price quote that will include,when appropriate, the fee for an attorney.They will also be able to assist you to complete the process.________________________CHAPTER 6:What’s Next// Page 17