Estate planning is simpler than many young couples think. It involves planning for death, disability, asset protection, and advanced tax planning. The definition of estate planning is helping solve problems clients don't know they have in a way they can understand. Even those who think they have everything planned with a simple will may benefit from revisiting their plan as family and tax circumstances change over time. Effective estate planning requires understanding how assets pass at death and how property is taxed.

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ESTATE PLANNING FOR
YOUNG COUPLES
IT IS SIMPLIER THAN YOU THINK
Or How Most Of The 99% Plan
“Always go to other’s funerals. Otherwise whey will not come to yours.”
Yogi Berra
A.A. Stephen McDanielStephen McDaniel
Wyatt Tarrant & Combs LLPWyatt Tarrant & Combs LLP

2. • Planning For Death
– Where Will The Money Come From To Replace
You
• Planning For Disability
– When You Can No Longer Be In Control
Because Of Illness Or Accident
• Asset Protection
– For You And The Kids
• Advanced Tax Planning (Not For Today)
– For The Top 1% 2
WHAT IS ESTATE
PLANNING?

3. 3
THE DEFINITION OFTHE DEFINITION OF
ESTATE PLANNINGESTATE PLANNING
Estate Planner: Someone Who Solves A
Problem You Did Not Know You Had In A
Way You Don’t Understand
OR
Estate Planner: Someone Who Shares Creative
Ideas Conveyed In A Way That You Can
Understand

4. • My Wife Made Me Come!
• But For The Rest Of You…if You Do Have A Will
• Family Circumstances Change
• Tax Law Changes
• You Did Not Do It Correctly The First Time
• But Let’s First See What We Do Not Know
4
“I ALREADY HAVE A WILL.”
So Why Am I Here?

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PLANNINGPLANNING
CONSIDERATIONSCONSIDERATIONS
• WHEN DO YOU PLAN TO DIE?
• WHAT WILL THE LAW BE THEN?
• WHAT WILL YOUR ASSETS BE
WORTH?
• PLAN NOW AND DIE LATER?
• PLAN LATER BUT DIE NOW?

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THINGS YOU MUST KNOWTHINGS YOU MUST KNOW
BEFORE WE FINISHBEFORE WE FINISH
• How Property Passes At Death
• How Is Property Taxed At Death
• What Do Wills Do And Not Do
• Powers Of Attorney
• Living Wills
• Insurance

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HOW ASSETS PASSHOW ASSETS PASS
AT DEATHAT DEATH
• JOINT OWNERSHIP - With Right
of Survivorship
• BENEFICIARY DESIGNATION
–Life Insurance, Retirement Plans
• TRUST - Revocable vs. Irrevocable
• PROBATE - Will vs. Intestacy

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PROPER OWNERSHIP
OF ASSETS
• Do You Understand Joint Ownership?
– Assets Jointly Held Pass To The Surviving Owner
– They Are NOT Directed By Your Will
• Joint Ownership With Wrong People!
– They “Borrow” It
– They Don’t Share It With The Siblings
– Joint Ownership With A Minor Child!

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PROPER BENEFICIARY
DESIGNATIONS
• You Assume The Beneficiary Will Share
With The Children Or Siblings
– They Generally Don’t!
• Who Did You Name? Do You Recall?
• The Beneficiary Is Deceased
• The Beneficiary Is A Minor
• The Beneficiary Isn’t A Beneficiary Anymore

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DO YOU KNOW WHAT ADO YOU KNOW WHAT A
TRUST IS?TRUST IS?

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KEY TRUST TERMSKEY TRUST TERMS
• Trust Document Considerations
– Distribution of Income
– Distribution of Principal
– Termination and Distribution to Beneficiaries
Grantor Trustee
Beneficiary

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TESTAMENTARY TRUSTTESTAMENTARY TRUST
WILL
TRUST

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LIVING TRUSTLIVING TRUST
ASSETS ARE PLACED INTO TRUST DURING LIFE TOASSETS ARE PLACED INTO TRUST DURING LIFE TO
BE ADMINISTERED BY YOUBE ADMINISTERED BY YOU

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WHY WE USE TRUSTS
• To Provide For Beneficiaries Where Outright
Distributions Of Assets Are Not Advisable
• To Shelter Assets From Beneficiaries Who Are Not
Capable Of Managing The Assets For Themselves
• To Protect The Assets From A Spouse Of A Beneficiary
In Divorce
• To Protect Assets From Creditors
• To Assure That The Next Generation Will Receive At
Least A Part Of The Inheritance

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DISTRIBUTION BY WILLDISTRIBUTION BY WILL
ProbateAssets Heirs

16. • It Is A Document Executed In Accordance With State Law That
Disposes Of Your Estate Assets
– That Are NOT Jointly Held With Right Of Survivorship
– That Are NOT Payable By Beneficiary Designation
• It Must Comply With State Law
– Attested Will
• Two Disinterested Witnesses
• Who Saw You Sign And Saw Each Other Sign
– Holographic Will
• Entirely Handwritten And Signed By You
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WHAT IS A WILL?

17. • You Must Be At Least 18
• You Must Be Competent
– Who Says?
• You Cannot Be Under Undue Influence Or
Duress
– When Influence Is “Undue” Is The Issue
• You Must Execute The Document As Required
By State Law
WHO CAN EXECUTE A WILL?

18. • If You Die Without A Will, Assets Pass Equally To
Spouse And Kids, But Spouse Gets At Least 1/3
• The Judge Decides Who Gets Custody Of Minor Kids
And Their Money
– A Guardian Is Named Who Hires An Attorney
– Guardian Posts A Bond
– Guardian Reports To Court Each Year To Account
– Prior To 18 Judge Determines What Money Is Spent
On The Child
• Minor Kid Gets Inheritance Outright At 18!
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THE FREE TENNESSE WILL
If You Don’t Have One

19. • Simple Will – No Trusts: Outright To Spouse If
Surviving Otherwise To Children
• Simple Will – Trust For Kids: Outright To
Spouse If Surviving, Otherwise Into Trust For
Children
• Tax Planning Will – Multiple Trusts To Save
Death Taxes For The Top 1% to 10%
• Revocable Living Trust – Avoids Probate
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BASIC TYPES OF DOCUMENTS

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ESTATE
SPOUSE
NoNo
TaxTax
CHILDREN
Taxed
THE TYPICAL PLANTHE TYPICAL PLAN

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• ALL ASSETS PASS TO SPOUSE
• IT IS SIMPLE
• NO ESTATE TAX AT FIRST DEATH
• NO PROTECTION FROM A FUTURE
SPOUSE OR CREDITORS
• MAXIMUM ESTATE TAX AT DEATH
OF SURVIVING SPOUSE
• SURVIVING SPOUSE IS FREE TO
CHANGE THE PLAN
THE TYPICAL PLANTHE TYPICAL PLAN
THE SIMPLE WILLTHE SIMPLE WILL

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PLANNINGPLANNING
CONSIDERATIONSCONSIDERATIONS
Probate
TIME MONEY

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How Assets AreHow Assets Are
Taxed At DeathTaxed At Death
Federal Estate TaxFederal Estate Tax
State Inheritance TaxState Inheritance Tax

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TYPES OF PROPERTYTYPES OF PROPERTY
SUBJECT TO DEATH TAXSUBJECT TO DEATH TAX
EVERYTHING YOU OWN

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UNLIMITED MARITALUNLIMITED MARITAL
DEDUCTION - 1982DEDUCTION - 1982
NO TAX
IF PAID TO SPOUSE
REGARDLESS OF AMOUNT

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FEDERAL ESTATE TAXFEDERAL ESTATE TAX
EXEMPTIONEXEMPTION
• Each Spouse Has a
$5.25 Million
Exemption
• It can be transferred
from one spouse to
the other
• Tax Rate: 40%

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FEDERAL ESTATE TAXFEDERAL ESTATE TAX
How Will it Change?How Will it Change?
We Don’t Know!We Don’t Know!
• Proposals Before Congress
– Total Repeal - Unlikely
– Modified Exemptions to:
• $1,000,000
• $ 3,500,000
• $15,000,000
– Tax Rates between 15% and 45%
• Nothing Will likely Happen

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TENNESSEETENNESSEE
INHERITANCE TAXINHERITANCE TAX
EXEMPTIONEXEMPTION
• 2013 - $1,250,000
• 2014 - $2,000,000
• 2015 - $5,000,000
• 2016 – REPEAL
Tax Rate 9 ½ %

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CONTINGENTCONTINGENT
TRUSTSTRUSTS
A.A. Stephen McDanielStephen McDaniel

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ESTATE
TO SPOUSE
No
Tax
TO TRUST FOR
CHILDREN
Taxed
CONTINGENT TRUSTCONTINGENT TRUST

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TESTAMENTARY TRUSTTESTAMENTARY TRUST
WILL
TRUST

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• ALL ASSETS PASS TO SPOUSE
• IT IS SIMPLE AT FIRST DEATH
• NO DEATH TAX AT FIRST DEATH
• TRUST FOR CHILDREN IS CREATED
IF BOTH PARENTS ARE DECEASED
• POSSIBLE DEATH TAX AT DEATH OF
SURVIVING SPOUSE
• YOU NAME A GUARDIAN FOR MINOR
CHILDREN
CONTINGENT TRUSTCONTINGENT TRUST

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ISSUES TO RESOLVEISSUES TO RESOLVE
• EXECUTOR (SPOUSE) & ALTERNATE
• TRUSTEE & ALTERNATE
• GUARDIAN & ALTERNATE
• SPECIAL PROVISIONS FOR CHILDREN
• TERMINATION OF TRUST - AGE?
• CONTINGENT DISTRIBUTION

34. • In Addition To Standard Language For “Health,
Education, And Support…”
• Consider Adding The Following:
– Drug And Alcohol Abuse Provisions
– Education Goals Provisions
– Will Contest Provisions
– Retirement Benefits Provisions
– Statement Of Philosophy
– Ability To Convert To Special Needs Trust
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TRUST PROVISIONS TO CONSDER

35. • It Is Common To Create Trusts For Young Children
• Mainly Protecting Them From Themselves
• These Trusts Also Protects From Lawsuits Against
The Kids, And Divorce And Creditors Of The Kids
35
ASSET PROTECTION FOR
YOUNG CHILDREN

36. • Instead Of Terminating Trust At Age 35, Allow
The Child To Become The Trustee At Age 35
• Run The Trust For The Life Of The Child
• The Child Will Have Access To Income And
Principal For Health Support And Care
• The Child Can Direct Assets To Grandchildren
• The Trust Is Protected From
– Creditors
– Spouses In Divorce
– Death Tax 36
ASSET PROTECTION FOR OLDER
CHILDREN

37. • A Special Needs Child May Be Eligible For
Government Benefits Like Medicaid & SSI
• Problem: Trust Or Other Assets Disqualify Them
From Benefits
• Solution: Special Needs Trusts Preserves Benefits
And Provides A Way To Maximize Gov’t
Benefits
37
CARE OF DISABLED CHILDREN

38. • Estate & Trust Litigation Has Increased
25% A Year Over The Last 5 Years
• Don’t Create A Document
That Leads To A Fight!
• Punish Those Who Do Fight
38
REMEMBER:
ESTATES MAKE PEOPLE CRAZY

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LIVING WILLLIVING WILL
REQUIREMENTS FOR USEREQUIREMENTS FOR USE
• Document Conforms to State Law
• Terminal Condition
• No Expectation of Recovery
• Death Will Result Regardless of Treatment

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LIVING WILLLIVING WILL
DIRECTIONS GIVENDIRECTIONS GIVEN
• Medical Care Shall Be Withheld or
Withdrawn
• Medication Given Only to Alleviate Pain
and Provide Comfort
• Artificial Feedings?
• Life Will Not Be Artificially Prolonged
• Donation of Organs

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DURABLE POWER OF ATTORNEYDURABLE POWER OF ATTORNEY
DECISIONS TO BE MADEDECISIONS TO BE MADE
• Who Should Be Named Attorney In Fact?
• When Is Document Effective? Immediately
Or When Your Doctor Says You Are No
Longer Competent
• What Powers Are Given? Limited Or
Unlimited

42. • Life Insurance (More Later)
• Home Health Care Insurance
• Liability Insurance: Get $2M Umbrella
Insurance.
– Make Sure All Properties Listed On Umbrella
Policy
• Earthquake Insurance - Memphis
42
INSURANCE
BE PROPERLY INSURED

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MY BIGGEST ESTATE ISSUE:
INSUFFICIENT ASSETS TO
MEET FAMILY NEEDS
• Support of a Spouse (In the
Standard of Living SHE Deserves)
• Support and Education of Children
• How Long Do You Plan to Be Dead?

44. • How Many Years Do You Plan To Be Dead?
• What Are The Family Financial Needs?
– Current
– Future
• How Long Will They Need The Money?
• Get More Than You Need But Not More Than
You Can Afford
44
LIFE INSURANCE
How Much Do you Need?

45. • Term Life
– Annual Renewal Term
– Specific Term (E.G. 20 Year Term)
• Whole Life
– Participating Vs. Non-participating
• Universal Life
– Buy Term & Invest The Difference In The Ins. Co.
• Variable Life
– Buy Term Invest The Difference In Stocks
Note: All of this is a gross oversimplification
45
LIFE INSURANCE
What Type?

46. • Buy It From The Internet! No
• Buy It From Your Plumber Who Sells It On The
Side! No
• Buy It From A Professional
– CLU
– CHFC
– CFP
• Buy It From A Strong Company
– That Will Still Be There When You Die
Note: All of this is a gross oversimplification
46
LIFE INSURANCE
Where to Get it?

47. • Problem: Medical Providers Are Reluctant To Give
Medical Information Once The Child Is 18
• Fines, Lawsuits, Divorced Parents, Etc.
• Solution: Adult Children Should Sign Medical Power
Of Attorney Naming Their Parents
• A Durable Power Of Attorney For Health Care Is A
Good Idea Too
47
ONE LAST COMMENT
Health Care of Adult Children

48. 48
ADVANTAGES OF AADVANTAGES OF A
PLANNED ESTATEPLANNED ESTATE
• Double the Amount That Can Pass Tax Free
(Sometimes Eliminate all Tax)
• You Select the People to Administer Your
Estate
• Reduce Administration Expenses
• Speed Up The Estate Administration
• Eliminate Probate

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ADVANTAGES OF AADVANTAGES OF A
PLANNED ESTATEPLANNED ESTATE
• Protect Assets from Claims of a Future Spouse
• Protect Assets From Claims of a Current Spouse
• Protect Assets from Claims of Creditors
• Plan for Contingent Distributions – What If a
Child Should Predecease you?
• Pay Lower Legal and Accounting Fees at Death

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WHICH WAY IS BEST?WHICH WAY IS BEST?
– Each family is unique
– Assets are different
– Ownership is different
– Children are different
– Mine, yours, ours
– Family goals vary
– Age is a factor
– Health concerns differ
– AVOID ONE SIZE
FITS ALL PLANS!
W I l l
Living Trust

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DON’TDON’T
DODO
NOTHINGNOTHING

52. A. STEPHEN MCDANIELA. STEPHEN MCDANIEL
 Senior Attorney – Wyatt Tarrant & Combs LLP
 200 Attorneys – 27 Estate Attorneys
 Memphis Attorneys:
• 5 Certified Estate Planning Specialists In Memphis Office (Only 7 In Memphis)
• 2 CPAs
• 2 LLMs in Tax
 Former Attorney With IRS Estate & Gift Tax Division
 UM Law School Adjunct Professor
 Estate Planning, Trust Law, Estate Tax, Insurance Law
 Named Twice by Worth Magazine as top 100 Estate Planning Attorney In U.S.
 Past President of National Association of Estate Planners
 200 Councils and 20,000 members
 Past President of Estate law Specialist Board
 Administers ABA approved Board Certification of Estate Planning Attorneys
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I’M OUT OF HERE