Estate Planning Basics

Transcription

1 Estate Planning Basics December 2, 2015

2 Agenda What Is An Estate Plan? Finding Advisors Wills and Trusts Power of Attorney Financial Snapshot Special Assets & Taxes

3 What IS an Estate, Why Plan? A. Your estate is everything you own at death, such as bank accounts, investments, real estate, insurance, personal property (vehicles, furniture, jewelry, art, etc). B. An estate plan speaks for you. It should: A. Specify any life-prolonging medical care you wish to receive and the person to make decisions on your behalf. B. Specify a person to make financial decisions on your behalf. C. Specify any funeral and burial arrangement you want. D. Specify a guardian for any minor children. E. Identify who receives your property. F. Directs how your heirs receive your property. C. Why should you plan your estate now?

4 Why Plan? A. Planning now allows you to choose how you will be cared for and who will receive your property. B. Without a plan in place, state law and a judge will decide what happens to you and your property. C. Once you have a plan, you should review it: A. Every 5 years B. Marriage C. Divorce D. Death of a spouse/partner E. Birth of child F. Death of child or primary beneficiary

5 Finding Advisors A. Professional advisors should be utilized to provide you with the best advice for your plans and aspirations. B. Advisors will help you navigate questions about: A. Community property - Washington B. Evaluating and drafting wills and trusts C. Power of attorney D. Health care directives E. Dispositive options F. Possible taxes G. Selecting a personal representative/executor and/or trustee

6 Wills and Trusts A will is a legal document governing the disposition of your property subject to probate. Probate assets are subject to state law, subject to public inspection. Probate laws provide for court filings and creditor deadlines. Court venue for disputes. A trust (revocable living trust) is a legal entity that controls your assets during life and distributes the assets at death. Assets held by a revocable living trust are excluded from probate. Private transfer of assets. May avoid requirements and expense of probate. Also, POD, TOD, Insurance, and Retirement Accounts

7 Power of Attorney Durable Financial Power of Attorney Appoint a person to manage your finances in certain situations. Your attorney-in-fact can have broad powers to manage all of your finances. Becomes active when your doctor determines your lack of capacity. Durable Health Care Power of Attorney, Living Will, and Advanced Medical Directive Appoint a person to serve as your agent for health care decisions. Define, broadly or specifically, the type and manner of care you wish to receive if you no longer have the capacity to make decisions. Becomes active when your doctor determines your lack of capacity.

8 Financial Snapshot Estimate your (or your family s) balance sheet Collect your financial records. January through March are good times annual statements and tax forms are typically mailed. Organize into assets (property) and liabilities (debt) Review the beneficiary designations of your property Pre-tax retirement accounts, such as IRAs, 403(b)s, 401(k)s After-tax retirement accounts, such as Roth IRAs Investment and bank accounts Life insurance and annuities

9 Special-Attention Assets Pre-tax retirement accounts 401(k); 403(b); traditional, rollover, and SEP IRAs; 457 plans. Retirement accounts funded with pre-tax earnings are subject to income tax. Does not apply to Roth structures. Income tax due when withdrawals are made. Income tax due when inherited by a non-spouse (IRD). Deferred annuities Any increase in value of annuity is taxable as income when received. Survivor benefits (surrender value) will be partially taxable as income. Discuss options with your insurance/annuity company. Use these assets for charitable bequests!

10 Possible Taxes Income Tax Income in Respect of a Decedent (IRD) Pre-tax assets will be taxed at some time Review your 401(k), 403(b), IRAs, and deferred annuities Estate and Gift Tax Washington are Oregon have estate tax WA: $2,000,000 OR: $1,000,000 Federal estate and gift tax starts at $5,430,000 Capital Gains Tax Reduction Cost basis step-up upon death

11 Additional Resources Washington State Bar Association: Brochures/Consumer-Information Washington State Bar Association Lawyer Search: Thomson Reuters: Contact Me: Ext or