Avoiding Accidental Disinheritance

Transcription

1 Avoiding Accidental Disinheritance Thomas C. West, CLU, ChFC Thomas West Financial Services Kimberly A. Fiske, Esq. Fiske & Harvey, PLLC

2 Quiz TRUE FALSE

3 TRUE or FALSE Probate is a private affair.

4 TRUE or FALSE You can avoid probate on an asset by owning the asset jointly with heirs.

5 TRUE or FALSE Life insurance proceeds are subject to federal estate tax.

6 TRUE or FALSE Assets passed through wills avoids probate.

7 TRUE or FALSE Jointly held property can pass to surviving owners through the will.

8 TRUE or FALSE Every estate must go through probate.

9 TRUE or FALSE Wills supersede beneficiary designations.

10 TRUE or FALSE Gifts to charity can minimize estate taxes.

11 Estate Planning Basics

12 State of Nature in Gift and Estate Taxes All transfers of wealth to somebody else are taxable.

13 Five Exceptions to Gift & Estate Tax 1. Gifts to your spouse Unlimited amount During lifetime At death

14 Five Exceptions to Gift & Estate Tax 2. At Death Exemption (up to $5 million) To any non-spouse

15 Five Exceptions to Gift & Estate Tax 3. Annual gifts up to $13,000 Can be made to anyone Couples can gift $26,000 to same individual annually

16 Five Exceptions to Gift & Estate Tax 4. Lifetime Gift Exemption (up to $1 million) In addition to $13,000 per person annual amount Counts against $5 million at death exemption Need to file a Gift Tax return

17 Five Exceptions to Gift & Estate Tax 5. Transfer to Charity No transfer tax (gift/estate) Income tax deduction - in year of gift

18 Common Mistakes That Can Trigger Accidental Disinheritance

19 Accidental Disinheritance Triggers 1. Multi-party bank accounts

20 The Jacob Family

21 The Jacob Family Parents Mary and John Daughter Susan Son David David has two children, Michael and Sarah

22 The Jacob Family John and Mary s intent is to have children inherit their brokerage account equally John dies Mary titles brokerage account jointly with son David and daughter Susan David dies Mary dies shortly after

23 The Jacob Family Problem: All money goes to Susan, none to David s children Michael and Sarah Solution: Align multi-party account ownership with estate plan s intent

24 Accidental Disinheritance Triggers 2. Beneficiary Designations/ Payable on death

25 Widower Sam Abbott Sam has two granddaughters, Linda and Michelle Wanted to treat them equally when they were young Linda and Michelle listed as equal beneficiaries of life insurance policies

26

27 Widower Sam Abbott Granddaughter Linda Teacher of special needs children, struggles to make ends meet, took care of Sam when ill Granddaughter Michelle Founded internet company, multi-millionaire, selfabsorbed, drifted from family Sam changed his estate plan to make Linda a sole heir, wrote letter to Michelle explaining his decision

28 Widower Sam Abbott Problem: Beneficiary forms for life insurance were never updated, documents conflict, life insurance proceeds inadvertently go to selfish granddaughter Michelle Solution: Update all beneficiary forms, Payable on Death designations when estate plans change

29 Michelle Linda

30 Real Property

31 Mr. and Mrs. Jones Married 30 years, but each has children from former marriages. Each name the children of first marriage as beneficiary of their home. Deed is titled jointly between Mr. and Mrs. Jones.

32 Mr. and Mrs. Jones Mrs. Jones dies. House passes to Mr. Jones by deed. Mrs. Jones children are left out.

33 Mr. and Mrs. Jones (cont d) Problem: Documents conflict Solution: Make sure all your documents work together

34 No Will The Commonwealth of Virginia has a Will for you with a plan on who will receive your assets Commonwealth selects your Executor

35 No Will (cont d) Married, no children all to surviving spouse Married with children of that spouse all to surviving spouse Married, with children of another person 2/3 to children, 1/3 to surviving spouse

36 No Will (cont d) Not married, with children all to children Not married, no children all to your parents. If not living, then to parents children (your siblings) & their descendants (your nieces and nephews)

37 No Will (cont d) Problem: No Will Solution: Prepare a will so you can select your heirs and your Executor

38 Not So Common Mistakes

39 Divorce What happens if you divorce after you sign your will and forget to update your will? Virginia provides a solution

40 Divorce (cont d) Will your former spouse will not inherit from you and will not remain your Executor If you want to leave money to your former spouse, you must sign a new will after the divorce

41 Mr. and Mrs. Smith Divorced in 1989

42 Mr. and Mrs. Smith Mr. Smith remarried in Mr. Smith dies in He never updated his life insurance beneficiary form. The first Mrs. Smith gets the money.

43 Divorce (cont d) Beneficiary Forms If former spouse is primary beneficiary, Virginia treats as if they died first. Secondary beneficiary takes. UNLESS you divorced before July 1, 1993

44 Per Stirpes Distribution What happens if your child divorces after you sign your will?

45 Per Stirpes Distribution (cont d) Problem: Keep your in-laws from becoming out-laws Solution: Use the words PER STIRPES Not per stripes Means only to my issue

46 Mrs. James moved from Florida to Virginia to be near her children She did not update her estate plan Invalid Will

47 Mrs. James dies Probate clerk did not accept Florida will Missing the words, of sound mind Find witnesses or assets pass per Virginia law Invalid Will

48 Invalid Will (cont d) Problem: Florida Will not easily accepted in Virginia Solution: Update your Will if you: Move to a new state Add a family member Lose a family member Inherit money or experience economic loss Learn there is a change in tax laws

49 Properly naming a charity Charitable bequest means charitable deduction for your estate Be sure the charitable entity is properly identified Gift to United Way Local Chapter? National Organization?

50 QUESTIONS?