ABCs of Estate Planning

ABC’s of

Estate Planning

DISCOVER H OW ESTATE PLANNNING WORKS

W HAT DOCUMENTS MAKE UP A PLAN

H OW TO SET UP YOUR OWN PLAN

Don has over twenty years of experience in the area of Estate Planning. Don has worked with hundreds of Financial Advisors and assisted them to help their clients develop thousands of personal Estate Plans. Currently, he is the National Estate Planning Trainer for ITS Training. [email protected]

AUTHOR PAGE:Don Deasy, CLU, ChFC

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ABCs of Estate Planning.………………..…4 How Different Assets Transfer …………..6 The Revocable Living Trust………..………9

Other Conditions………………….……......13 The Estate Plan Portfolio…..……….…….15

What’s Next …………………………………..17

TABLE OF CONTENTS:

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DisclaimerAll the material contained in this book is provided for educational and informational purposes only. No responsibility can be taken for any results or outcomes resulting from the use 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.

We are going to focus on several basic estate planning concepts so you can better understand how this process works. Let’s begin with you or the both of you if you are married.

Actually, all of us have an estate because many of us own:

Real Property:Your home, rental property or otherreal estate

Personal Property:Clothes, furniture, jewelryTV, automobiles, etc

Titled Property:Bank & Brokerage accounts, Investments, Life Insurance,Retirement plans, etc

CHAPTER 1:ABC’s Of Estate Planning

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These three property categories make up your assets. So, we will call this the A component.

We all have heirs or beneficiaries. Typically, these are your children, those who you want to receive your assets after you pass. This could also be a charity like your church. So, we will call this the B component.

Simply put, the objective of an Estate Plan, after yourpassing, is to make sure A gets to B.

However, there are sometimes conditions. A condition can be a future, uncertain, event. And, if the event happens something needs to be done. As an example, if a beneficiary were only twelve years old, he would be unable to receive your assets until he reached a certain age, usually 18 or above.

Therefore, a provision would need to be made to allow for this or the court would step in and take control. In this case, 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 that includes C!

ABCs of Estate Planning

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A

B

I once heard an attorney say that it is estimated that married couples owned as much as 90% of their assets in the form of Joint Tenancy With Right of Survivorship – JTWRS. Let’s see how this works and use the house as an example.

It’s quit simple, when the first spouse dies the surviving spouse receives full title of the house.

Therefore, if your car, bank accounts and investment accounts and other assets were titled JTWROS, the surviving spouse would get ALL these assets with essentially no hassle or 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 of ownership.

CHAPTER 2:How Different Assets Transfer

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The next form of ownership is Sole Ownership. Obviously, if you are single, most if not all your assets would be owned in this format. And, the surviving spouse we just mentioned would own those assets that were in JTWROS now as sole ownership.

So, what happens when a person passes with assets held in this manner?

These assets normally now transfer by Will through the Probate process. If you have not created a Will, the State has a “default” Will that determines who will receive your assets. A couple of other points – the typical cost of Probate can range from 1% to 8% of the value of the assets being probated. This could be several hundred to several thousand dollars.

Additionally, it usually takes several months to complete the probate process before the finale transfer of assets is madeto the beneficiaries.

Most people would prefer to use a different method because of the costs and time of this process.

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ABCs of Estate Planning

Another way an asset can transfer is by Beneficiary Designation.

Typically, life insurance and qualified plans – IRA’s, 401k’s, etc. fall into this category.

Other assets can also transfer to a beneficiary. Bank accounts can be Payable-on-Death – POD and securities can be Transfer-on-Death - TOD

And, a number of States now allow Beneficiary Deeds to transfer your house to a beneficiary.

Having an asset go directly to a beneficiary is very popular as, normally, the beneficiary gets the asset without any Probate proceedings.

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ABCs of Estate Planning

“57% of Adults Don’t Have a Will”Source: Rocket Lawyer.com March, 20111

The next way an asset can transfer is by using a Revocable Living Trust. For most people, this is usually the BEST way to transfer assets 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 assets in the Trust. This is why you transfer all your assets into your Trust.

You are the Beneficiary. This means you continue to enjoy the use of all your assets.

CHAPTER 3:The Revocable Living Trust

Revocable Living Trust

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Your Beneficiary or beneficiaries arethose who will get your assets after you pass.

Typically, these are your children . . .

. . . they could also be a grandchild, etc.

Finally, you select a Successor Trustee. This is one who will carry out your instructions if you become incapacitated or when you 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 when appropriate.

ABCs of Estate Planning

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When the first spouse dies, usually there is not a great deal that needs to be done. In some cases, assets would need be re-titled into multiple Trusts.

However, when the surviving spouse dies, the Successor Trustee takes over and follows the Trust instructions to distribute the assets to the beneficiaries:

ABCs of Estate Planning

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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 the objective of having A go to B while taking into consideration C!

Perhaps, you can think of a condition in your personal situation that a Trust would allow for and therefore meet your objectives.

ABCs of Estate Planning

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Holding Trust

Up to this point, we have referred to conditions as applying to assets and the beneficiary. We have seen that the Revocable Lining Trust is an excellent vehicle because:

1) ALL assets can transfer in one manner – to a beneficiary

2) If there is a Beneficiary condition [a distribution issue] – the Trust can “hold” assets until it is appropriate to distribute directly to a beneficiary

In this section we are going to look at 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 make

financial decisions and / or medical decisions on your behalf. There are two sets of documents to accomplish these objectives.

CHAPTER 4:Other Conditions

Incapacitation Durable Powers of Attorney

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If you should go into a comatose or vegetative sate with no signs of recovery, your chosen agent, usually selected in the Durable Power of Attorney for Health Care makes the decision to continue life support systems based on your wishes. There is also an Advance Health Care Directive that is sometimes used 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 your death to go to your Trust. This allows for ALL of your assets to be distributed to your beneficiaries the way you want. Assets that flow from the Will to your Trust may be subject to Probate. This is why it is important to transfer ALL your assets into your Trust.

ABCs of Estate Planning

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Comatose State Living Will

Forget to Transfer Last Will (Pour Over)

As you can see, you really need more than one document if you are to meet the basic Estate Planning objective of, after your passing, getting A [Assets] to B [Beneficiaries] regardless of, or taking into consideration, C [Conditions].

It is also would be helpful to have explanation material and other forms to make changes and be able to administer yourEstate Planning objectives over time.

The Estate Plan Portfolio is designed to accomplish all these objectives. The Portfolio is made up of ten Sections with fourpurposes:

1) Four Document Sections – Meet ALL Estate Planning goals

2) Three Funding Sections – Transfer assets into your Trust

3) Two Information Sections – Provide helpful information

4) One Change Form Section – Forms for changes, etc.

CHAPTER 5:The Estate Plan Portfolio

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ABCs of Estate Planning

Allows someone to make financial and medical decisions, if you can’t

Estate Plan Portfolio

Allows your assets to go to who want, when and how you want

Allows you to state your choice about continuation of life support systems

Allows you to be sure ALL your assets flow through your Trust

Summary of your Trust so one will change title of an asset to your Trust

Lists who and how your assets are owned that are placed in your Trust

Allows you to change the title or beneficiary designation of your assets

Describes the different sections of your Estate Plan Portfolio

Provides instructions for the Trustee to know what to do for administration

Forms to make changes and carry out Trust administration issues

Revocable Living Trust

Durable Powers of Attorney

Living Will & Directives

Last Will (Pour Over)

Certificate of Trust

Schedules, Ledgers & Deeds

Transmittal Letters

Portfolio Summary

Trustee Memorandum

Administrative Documents

Contact the person that provided you this e-book.

That person can assist you by answering any questions you may have. He or she can also begin the process with you to collect the initial information so that you can begin the process to 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.

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CHAPTER 6:What’s Next

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ABC’s of

Estate Planning

Thank You!