Estate Planning Workshop. Sacramento County Employees Retirement System

Transcription

1 Estate Planning Workshop Sacramento County Employees Retirement System 9381 E. Stockton Blvd. Suite 200 Elk Grove, CA tel online consult request

2 Welcome to our Workshop The Law Office of Michael Pearce is committed to assisting individuals and families in planning for themselves and the next generation with comprehensive, highly personalized estate planning services. Our attorneys are devoted exclusively to estate planning and estate administration services, including drafting of Revocable and Irrevocable Trusts, Special Needs Trusts, and the handling of estate administrations, probate and conservatorships. We strive to provide the most up-to-date estate planning strategies and cutting-edge planning techniques for our clients.

3 Workshop Purpose 1. Fundamental Estate Planning Tools Durable Powers of Attorney Advance Health Care Directive Wills Living Trusts 2. Planning for Life Along the Four Degrees of Transition 3. How to Avoiding Common Planning Mistakes 3. Questions & Answers

4 We All Know that Estate Planning is Important, but... We are so busy with work, school, taking care of the children, financial obligations, all the stuff that needs to be done at home, and sometimes, a vacation We are always meaning to get around to it.

5 We All Know that Estate Planning is Important, but... Most of us end up leaving our loved ones without any plan or guidance

6 What Happens When You Haven t Done Estate Planning? Unnecessary Court Proceedings & Legal Costs Delays and Distress for Loved Ones Inheritances Wasted Your Family can lose most of what it took you a lifetime to build

7 How Can You Avoid Bad Consequences? It s Not Magic!

8 What Do you Need? A PLAN Your estate plan may be written in a Will, or you may create your plan in a Trust, but more than that is required

9 Definition of Estate Planning Good Estate Planning will: Give what you have, To whom you want, When you want, In the way you want, At the least possible cost.

10 The Four Degrees of Transition In Everyone s Life Age 1-17 Transition #1 You are a Child Your Parents are in Complete Control Age 18 Transition #2 Adulthood You are in Complete Control Age Transition #3 Life Unfolds Job, Family, Assets and Property, Retirement, Aging You assume responsibility for Other People Other People may have to take care of You The First 60 Years Transition # 4 Into the Ocean The Last 28 Years

11 How to Prepare for each Stage of the Four Degrees of Transition It s a Long Voyage, so you need preparations: Planning Tools Planning Team Permanent Plans Life Transition Gear

12 Guiding Principles of your Plan: Opt Out of the Court System Opt Out of Government Decision-making Self-Sufficient Avoid Crises

13 Planning Gear for Transition #1 Age 1-17 Nothing Needed Here As a Child, you have no rights to make decisions for yourself. Your Parents are your Legal Guardians with complete control over all decisions regarding your custody, care, education, health care Your Parents must also provide for your well-being (A Legal Guardian has these same rights and responsibilities)

14 The Four Degrees of Transition In Everyone s Life Age 1-17 Transition #1 You are a Child Your Parents are in Complete Control Age 18 Transition #2 Adulthood You are in Complete Control Age Transition #3 Life Unfolds Job, Family, Assets and Property, Retirement, Aging You assume responsibility for Other People Other People may have to take care of You The First 60 Years Transition # 4 Into the Ocean The Last 28 Years

15 Common Planning Mistake: Not Planning for Yourself First Estate Planning is not only about Wills and Trusts and Dying

16 Planning Gear for Transition #2 Age 18 Adulthood At age 18, you became an independent legal Adult You have all rights to make decisions for yourself regarding where you live, your social and sexual contacts, your financial affairs, and your health care Your Parents do not have access to your confidential records

17 Planning Gear for Transition #2 Age 18 Adulthood At age 18, you became an independent legal Adult You need to authorize someone to make decisions regarding your Financial & Legal Affairs on your behalf if you cannot handle those matters

18 General Durable Power of Attorney for Financial and Legal Affairs Who will handle your financial and legal affairs if you are not able to do so? Incapacity or Unavailability A Power of Attorney can designate your Agent to handle your financial affairs on your behalf banking, mail, utilities, real estate, insurance forms, income tax returns, and much more. Everyone 18 or older should have a General Durable Power of Attorney for Financial and Legal Affairs

19 Planning Gear for Transition #2 Age 18 Adulthood At age 18, you became an independent legal Adult You need to authorize someone to make decisions regarding Health Care & Medical Decisions on your behalf if you cannot handle those matters

20 Advance Health Care Directive Who will make medical decision for you if you cannot communicate with your physician? An Advance Health Care Directive is a single legal document that serves two purposes: 1. Designate your Health Care Agent to make medical decisions on your behalf for ongoing medical care 2. You can also make your desires known regarding end-of-life decisions and life support. You make the decision; your Agent follows your instructions. Everyone 18 or older should have an Advance Health Care Directive

21 Advance Health Care Directive

22 Planning Gear for Transition #2 Age 18 Adulthood What happens if you become incapacitated without appointing an Agent to make financial and legal decisions on your behalf? Conservatorship proceeding in Court What happens if you become incapacitated without appointing and Agent to make medical decisions on your behalf? Conservatorship proceeding in Court If you are married or domestic partner, then your spouse or partner can make medical decisions for you, EXCEPT NOT Life Support

23 Guiding Principles of your Plan: Opt Out of the Court System Opt Out of Government Decision-making Self-Sufficient Avoid Crises Having a Durable Power of Attorney and an Advance Health Care Directive will help you accomplish these goals!

24 The Four Degrees of Transition In Everyone s Life Age 1-17 Transition #1 You are a Child Your Parents are in Complete Control Age 18 Transition #2 Adulthood Life Transition Gear: Durable Power of Attorney Advance Health Care Directive Age Transition #3 Life Unfolds Job, Family, Retirement, Aging You assume responsibility for Other People Other People may have to take care of You The First 60 Years Transition # 4 Into the Ocean The Last 28 Years

25 Life Transition Gear for Transition #3 Age Life Unfolds Somewhere between 18 and 45, Life Happens Job Spouse or Partner Family Home, Possessions, Assets Obligations - Personal and Financial

26 Life Transition Gear Wills and Trusts To understand Living Trusts, you need to know about Wills

27 Life Transition Gear Wills Living Trust Replaces the need for a Will To understand Trusts, you need to know about Wills

28 Wills A Traditional planning Tool Written instructions for distribution of your estate Effective on death Wills Guarantee Probate

29 Probate The Court-Supervised transfer of assets from the deceased to the living The Process: File original Will File Petition for Probate Appoint personal representatives Understand the Will Ascertain heirs Locate and value the property

30 How A Will Works To Distribute Your Property After Your Death House Deed: Harry Baxter $ Bank Accounts $ owner: Harry Baxter $ Mutual Funds $ owner: Harry Baxter $ Other Assets $ owner: Harry Baxter Court Jurisdiction Court authorizes sale of assets and payment of debts. At end of probate, property distributed by court order: 1/3 = Julie 1/3 = Tom 1/3 = Jane Will Filed in Probate Court

31 The Cost Of Probate Generate executor and attorney fees Taken off the top Average probate fees from 4-8% Probate can take 1-2 years to complete

32 A Will is a Basic Estate Planning Tool Everyone should have a Will - at a minimum Leave instructions - a matter of respect Some people want to do more than the basics

33 Fundamental Planning Gear: Your Revocable Living Trust A Planning Tool to Replace the Will The Living Trust Sets Forth Your Distribution Plans Age Transition #3 Life Unfolds Job, Family, Retirement, Aging You assume responsibility for Other People Other People may have to take care of You

34 Revocable Living Trust A Revocable and Changeable Contract Created during you Life A Single or Joint Trust The Trust owns Property and Assets All Trusts have 3 Parties: Trustmaker Trustee Beneficiary

35 3 Parties To A Revocable Living Trust Trustmaker: Trustee: The person who creates the Trust (You). The person who manages the Trust property (You). Beneficiary: The person who uses and receives the benefit of the trust property (You). While you are alive, and not incapacitated, you retain complete control in the role of all three parties.

36 How A Living Trust Works During Your Life House Deed: Baxter Trust $ Bank Accounts $ Owner: Baxter Trust $ Mutual Funds $ Owner: Baxter Trust Complete Control by Harry & Catherine As Co-Trustees. The Baxter Living Trust Trustees: Harry & Catherine $ Other Assets $ Owner: Baxter Trust Beneficiaries: Harry & Catherine

37 How A Living Trust Works $ Bank Accounts $ $ Mutual Funds $ $ Insurance $ All assets sold by Trustee. Insurance paid to Trustee. Proceeds held in Trust. Trustee distributes proceeds to children: 1/3 = Julie 1/3 = Tom 1/3 = Jane To Distribute Your Property After Your Death The Trustee has complete control of all assets. No court proceeding required. The Baxter Living Trust Trustees: #1: Jane Baxter (daughter) Beneficiaries: 3 Baxter Children in equal shares.

38 How A Living Trust Works To Provide for Your Children What happens when you are gone? The Living Trust Contains a Plan for: 1. Your Child s Inheritance 2. Your Child s Future

39 How A Living Trust Works to Protect Your Children $ Bank Accounts $ $ Mutual Funds $ $ Insurance $ All assets sold by Trustee. Insurance paid to Trustee. Proceeds held in Trust. After Your Death Complete Control by Trustee. No court proceeding. The Baxter Living Trust Each child s share held in Trust. Money used for child s health, school, rent, college, care and support. The Trustee has parental discretion to distribute funds. Children s Trust Distributions: 1/4 at age 25; 1/2 at age 30; all at age 35. Trustees: Ryan Smith (the Kid s Uncle) Beneficiaries: 3 Baxter Children in equal shares.

40 How Your Living Trust Plan Works to Opt Out of the Court System Your Trust keeps your Family out of Court Your Family will not have to hire lawyers Your Trust plan eliminates all potential problems Your Trust plan is clear and easy to understand There will be nothing to fight about

41 Review: Your Living Trust as Fundamental Life Transition Gear Establish a Living Trust as your foundation plan Your Trust will keep your family out of Court Your Trust plan will protect your Children after you are gone Your Trust plan will eliminate problems and keep your family happy and lawyer-free

42 Guardian Designations for Minor Children For any child under age 18, designate a Guardian of the Person who will raise and care for the child. A Guardian can be designated in a Will, or in a separate Guardian Designation document. Establish a Trust and name a Trustee to manage the child s financial assets.

43 CAUTION: POTENTIAL MISTAKES Navigating along the Four Degrees of Transition Age 1-17 Transition #1 You are a Child Your Parents are in Complete Control Age 18 Transition #2 Adulthood You are in Complete Control Age Transition #3 Life Unfolds Job, Family, Assets and Property, Retirement, Aging You assume responsibility for Other People Other People may have to take care of You The First 60 Years Transition # 4 Into the Ocean The Last 28 Years

44 #1 Common Planning Mistake: Beneficiary Designations Life Insurance Policy Annuity IRA 401k Plan & other Qualified Retirement Plans These assets have a pay on death beneficiary.

45 Problems with Beneficiary Designations The wrong people can get the money Outdated beneficiary selections No Control over the money

46 Who are Your Beneficiaries? IRA k Life Insurance When was the last time you updated your beneficiaries? Who will get the money: Your parents? Your ex-spouse? Your brother or sister? Your young children? No-one? (your estate ) WHERE WILL THE MONEY GO?

47 Naming Children as Beneficiaries BOB & MARIE SAMPLE $500,000 Life Insurance on Each Beneficiary = Spouse Contingent Beneficiary = Julie (8) and Jim (4) TRAGEDY STRIKES: BOB & MARIE ARE GONE What happens now?

48 What Happens to the Insurance Money when Bob and Marie are Gone? The Sample Family Estate Plan: (sorry kids, we didn t get around to it, but we intended to.)

49 What Happens to Money when Bob and Marie are Gone? The Sample Insurance Funds and Estate Money: After the accident that killed their parents, Julie (8) and Jim (4) will: establish banks accounts; save for college; start a Retirement Plan; invest in a Diversified Portfolio How Will this Really Work?

50 What Happens to the Money When Bob and Marie Die Without a Plan? The Automatic Plan: Estate Distributed ½ each to children Guardianship Proceeding Court Jurisdiction over Estate Money can be used for basic needs Court Order to distribute all money when Child is an Adult

51 At what Age will Your Child Be an Adult? Without a plan, when will your son or daughter be legally entitled to have all of the Money?

52 What Happens to the Money AT AGE 18!

53 Naming Your Child as Beneficiary Seems like the Right Thing To Do

54 But, Remember, Children Grow Up

55 Beneficiary Designations Alone are Not Enough Your Life Insurance, IRA s, Annuities and other TOD accounts need to be coordinated with your Living Trust Plan

56 CAUTION: Common Planning Mistake for Parents with young adult children: PARENT POWER FAIL! What happens when your Son or Daughter turns age 18?

57 Advance Health Care Directive Everyone over 18 needs a Health Care Directive

58 CAUTION: Common Planning Mistake Not Planning for a Child who has a Disability What Planning Gear do you need for your Child with Special Needs? Should you have a Special Needs Trust?

59 The Special Needs Trust At age 18, Your Child May Qualify for Governmental Assistance SSI & Medi-Cal and Other Public Benefits Most Public Benefits are Needs Based Your Child s Financial Resources are considered before government support is obtained An Inheritance may cause your Child to lose support and services

60 How Can an Inheritance be Protected? Parents make provisions in Will or Trust to distribute child s inheritance to a Special Needs Trust. The Baxter Revocable Living Trust: At second death, 1/2 to son Jack 1/2 to stand alone Special Needs Trust for daughter Julie The Julie Baxter Special Needs Trust Trustee: James Baxter Trust assets available for any use that will not disqualify Julie from receiving Government benefits.

61 How can the Special Needs Trust Funds be Used?

62 Review: Fundamental Life Transition Gear Living Trust General Durable Power of Attorney Advance Health Care Directive Guardian Designations for Minor Children

63 Planning Gear for Transition #2 & #3: Living Trust Powers of Attorney Advance Health Care Directive You will need an Attorney to assist you in obtaining this Life Transition Gear

64 Planning Gear for Transition #2, & #3: Attorneys are Tools You will remain Self-Sufficient Informed, prepared, and in control

65 Guiding Principles of your Plan: Opt Out of the Court System Opt Out of Government Decision-making Self-Sufficient Avoid Crises Having good Life Transition Gear will help you accomplish these goals!

66 The Four Degrees of Transition In Everyone s Life Age 1-17 Transition #1 You are a Child Your Parents are in Complete Control Age 18 Transition #2 Adulthood Life Transition Gear: Durable Power of Attorney Advance Health Care Directive Age Transition #3 Life Unfolds Life Transition Gear: Living Trust Plan The First 60 Years Transition # 4 Into the Ocean The Last 28 Years

67 Navigating along the Four Degrees of Transition The Hardest Part: Getting started! Before you go Into the Ocean

68 WHEN IS THE RIGHT TIME TO DO ESTATE PLANNING? What are your Priorities?

69 Planning your Next Vacation?

70 Doing the Yardwork?

71 Taking Care of Sparky?

72 What About Taking Care of Your Family and Loved Ones?

73 Good Estate Planning Will Give what you have to whom you want, when you want, in the way you want. And do it all at the lowest possible cost.

74 Good Estate Planning Good Estate Planning will protect your loved ones and keep all of your assets with your family.

75 Thank You!

76 Questions and Answers Consultation are encouraged. (no charge) Online Consult Request: Law Office of Michael Pearce (916)