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Lorman Foundations Of Estate Planning 07


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Lorman Foundations Of Estate Planning 07

  1. 1. The Greatest Estate Planning Techniques Earl H. Cohen and Jeffrey C. O’Brien Mansfield Tanick & Cohen, P.A. © 2007 Mansfield Tanick & Cohen, P.A.
  2. 2. What We’ll Discuss Today <ul><li>Foundations of Estate Planning-Top Estate Planning Mistakes </li></ul><ul><li>Estate and Gift Tax Basics </li></ul><ul><li>The Top Estate and Gift Tax Planning Techniques </li></ul><ul><li>Estate Planning and Succession Planning for Business Owners </li></ul><ul><li>Top Asset Protection Tips </li></ul><ul><li>Estate Plan Implementation and Post-Mortem Planning </li></ul><ul><li>Case Study Discussion </li></ul><ul><li>And a few other ideas along the way! </li></ul>
  3. 3. Foundations of Estate Planning Jeffrey C. O’Brien Mansfield Tanick & Cohen, P.A. © 2007 Mansfield Tanick & Cohen, P.A.
  4. 4. Part One: The Importance of an Estate Plan
  5. 5. Estate Plan by Default – The Intestacy Statutes <ul><li>Uniform Probate Code (adopted in Minnesota) provides for certain “default” rules as to administration of an estate in the absence of a will. </li></ul><ul><li>Intestacy statutes ASSUME how the decedent would have wanted his/her estate distributed. </li></ul><ul><li>Determination of heirs; equal distributions </li></ul><ul><li>Spousal share </li></ul><ul><li>Intestate succession can pose problems for surviving heirs, especially with combined families and family-owned businesses </li></ul>
  6. 6. Ten Things Estate Planning Can Do For You <ul><li>Provide for your immediate family (guardians for minor children) </li></ul><ul><li>Provide for other relatives who need help (elderly parents, disabled relatives </li></ul><ul><li>Get your property to beneficiaries quickly (revocable trusts) </li></ul><ul><li>Plan for incapacity (powers of attorney, health care directives </li></ul><ul><li>Minimize expenses (avoid probate) </li></ul><ul><li>Choose executors/trustees for your estate </li></ul><ul><li>Ease the strain on your family (funeral planning) </li></ul><ul><li>Help a favorite cause (charitable gifts) </li></ul><ul><li>Reduce taxes on your estate </li></ul><ul><li>Make sure your business goes on smoothly </li></ul>
  7. 7. Avoiding Probate <ul><li>Costs money </li></ul><ul><li>Takes time </li></ul><ul><li>Public </li></ul>
  8. 8. State and Federal Estate Taxes <ul><li>Federal Estate Tax Applies to Estates With Value of $ 2,000,000 and more </li></ul><ul><li>Minnesota Estate Tax: 1,000,000 </li></ul><ul><li>Note: valuation of estate for estate tax purposes includes life insurance proceeds </li></ul>
  9. 9. Appointments of Guardians for Minor Children <ul><li>Lack of an estate plan means decedent parent has no say in who serves as guardian for surviving minor children </li></ul><ul><li>Arguments ensue </li></ul><ul><li>State will appoint conservator to manage orphaned children’s assets; only lasts until age 18 </li></ul><ul><li>Solution: take care of these issues in your will </li></ul>
  10. 10. Health Care Instructions <ul><li>Worst case scenario: Terri Schiavo </li></ul><ul><li>Setting forth in writing your desires as to health care, particularly health care in the event of terminal or critical illness, provides clarity and eliminates arguments among sides </li></ul>
  11. 11. Business Succession Planning <ul><li>Most family business owners want the ownership of their business to be transferred to the children who are active in the business </li></ul><ul><li>More on this later today… </li></ul>
  12. 12. Part Two: The Basic Estate Plan
  13. 13. Basic Estate Plan Documents <ul><li>Last Will and Testament </li></ul><ul><li>Health Care Directive </li></ul><ul><li>Power of Attorney </li></ul><ul><li>Durable Power of Attorney </li></ul>
  14. 14. Last Will and Testament – Statutory Requirements <ul><li>Minnesota has codified the basic requirements of a will </li></ul><ul><li>Testator must be of the age of majority (18) </li></ul><ul><li>Testator must be “of sound mind and memory” – must understand what he/she is signing </li></ul><ul><li>Will must be (i) in writing; (ii) signed by Testator; and (iii) witnessed by at least two other people </li></ul>
  15. 15. The “Simple” Will <ul><li>Preamble </li></ul><ul><li>Article One: Payment of Expenses/Taxes </li></ul><ul><li>Article Two: Special Gifts </li></ul><ul><li>Article Three: Residue </li></ul><ul><li>Article Four: Fiduciary Selection </li></ul><ul><li>Article Five: Fiduciary Provisions </li></ul><ul><li>Article Six: General Governing Provisions </li></ul><ul><li>Article Seven: Guardians/Conservators </li></ul><ul><li>Self-Proving Affidavit </li></ul>
  16. 16. Simple Will: Preamble <ul><li>I, TESTATOR , of ___________ County, State of Minnesota , revoke any prior wills and codicils , and make this my will . </li></ul>
  17. 17. Article One: Payment of Expenses/Taxes <ul><li>Provide for payment of expenses of last illness and funeral </li></ul><ul><li>Provide for payment of debts and administration of estate </li></ul><ul><li>Provide for payment of estate taxes </li></ul>
  18. 18. Article Two: Special Gifts <ul><li>Provide for gifts of personal property </li></ul><ul><li>Written list permitted (524.2-513) </li></ul><ul><li>Specific gifts of cars, cash, jewelry, etc. should be specifically listed </li></ul>
  19. 19. Article Three: Residue <ul><li>Provides for distribution of all assets not distributed in Article Two as special gifts </li></ul><ul><li>If Testator is married with children, Testator will likely want to include trust provisions in the event spouse predeceases and children are still minors </li></ul>
  20. 20. Article Four: Fiduciary Selection <ul><li>Nomination of personal representative and successor(s) </li></ul><ul><li>Nomination of custodians under Uniform Transfers to Minors Act for gifts to beneficiaries under the age of 21 </li></ul>
  21. 21. Article Five: Fiduciary Provisions <ul><li>Administrative Powers: </li></ul><ul><ul><li>To sell property </li></ul></ul><ul><ul><li>To settle claims </li></ul></ul><ul><ul><li>To continue a business </li></ul></ul><ul><ul><li>To make distributions </li></ul></ul><ul><li>Administrative Provisions: </li></ul><ul><ul><li>Request for formal administration </li></ul></ul><ul><ul><li>Waiver of bond requirements </li></ul></ul>
  22. 22. Article Six: General Governing Provisions <ul><li>Definitions </li></ul><ul><li>Rules of Construction </li></ul><ul><ul><li>Governing Law </li></ul></ul><ul><ul><li>Written lists of tangible personal property control </li></ul></ul><ul><li>Intentional Omissions </li></ul><ul><ul><li>“I have intentionally limited gifts to my descendants to those provided in this will” </li></ul></ul>
  23. 23. Self-Proving Affidavit <ul><li>It is recommended that the witness signatures be separately notarized (in the event a witness cannot be located) </li></ul><ul><li>An affidavit is typically attached as the last page of the will, signed by testator and two witnesses and notarized </li></ul>
  24. 24. Health Care Directive <ul><li>Part I: Appointment of Health Care Agent </li></ul><ul><li>Part II: Health Care Instructions: </li></ul><ul><ul><li>General thoughts/desires on health care </li></ul></ul><ul><ul><li>Desires as to specific types of treatment </li></ul></ul><ul><li>Part III: Making It Legal: </li></ul><ul><ul><li>Signed </li></ul></ul><ul><ul><li>Two Options for acknowledgment – notarized or signed by two witnesses </li></ul></ul>
  25. 25. Statutory Short Form Power of Attorney <ul><li>Minnesota Statutes Section 523.24 </li></ul><ul><li>Statutory Form Power of Attorney allows for appointment of attorney(s)-in-fact to handle financial matters for the principal </li></ul><ul><li>Form also allows for election as to whether attorney-in-fact can transfer property and if an accounting is required </li></ul>
  26. 26. Durable Power of Attorney <ul><li>Durable Power of Attorney is effective from date of execution until death </li></ul><ul><li>Continues even if principal is disabled, incompetent or absent </li></ul><ul><li>Durable Power of Attorney goes beyond financial matters and also governs personal care </li></ul><ul><li>Practice tip: if executing a general durable power of attorney and a health care directive, attorney-in-fact and health care agent should be same (because agent must heed principal’s wishes in health care directive) </li></ul>
  27. 27. The Top Ten Estate Planning Mistakes! <ul><li>Not having a properly drawn will! </li></ul><ul><li>Relying on Joint Tenancy! </li></ul><ul><li>Leaving everything to a spouse! </li></ul><ul><li>Leaving everything to one child! </li></ul><ul><li>Failing to Plan for adequate liquidity! </li></ul>
  28. 28. The Top Ten Estate Planning Mistakes! <ul><li>Having insufficient life, health and long term care insurance! </li></ul><ul><li>Failure to make lifetime gifts! </li></ul><ul><li>Failure to keep life insurance out of your estate for tax purposes! </li></ul><ul><li>Failure to transfer assets to trusts! </li></ul><ul><li>Failure to make proper beneficiary designations for retirement plans! </li></ul>