1 ESTATE PLANNING BOOKLET (Information about Wills, Trusts, Estate Taxes, and more...) P P P SUSSMAN+PARKHURST ATTORNEYS AT LAW ROSS A. SUSSMAN (612) CAMERON M. PARKHURST (612) NORTH SECOND STREET, SUITE 300, MINNEAPOLIS, MINNESOTA
2 ESTATE PLANNING BOOKLET (Information about Wills, Trusts, and Taxes) Estate Planning. Lawyers use the words "Estate Planning" to describe the things we do to prepare your Wills, Trusts, Powers of Attorney, Health Care Directives ( Living Wills ), and related documents. Estate Planning also sometimes includes the transferring of assets to minimize or eliminate estate taxes. The Goal of Estate Planning is to arrange your affairs in the way you want and keep estate taxes to a minimum, if not eliminated altogether. Steps in Estate Planning. Estate Planning is basically a four step process: Step One Step Two Step Three Step Four Gathering Family and Financial Information. Listening to your concerns and how you would like your assets distributed. Discussion and recommendations of how to accomplish your goals. This step involves planning for income tax, gift tax, estate tax, and distribution of retirement plans. Preparation and signing of appropriate documents. Will. A Will is a document which names the persons to be your Personal Representative (Executor) who will administer your estate, Guardians for any minor Children, and Trustees (if appropriate). Your Will also names the persons to receive your property on your death. A Will only controls the distribution of property which is in your name alone. A Will must go through Probate. Property which is in joint tenancy or has a designated Beneficiary does not usually go through Probate. Trust. A Trust is an Agreement made with your Trustee. Like your Will, a Trust specifies how your property will be distributed. However, the Trust generally does not go through Probate, and you can defer distribution to your Children beyond age 18 (the age at which they are normally entitled to their property or inheritance). You can defer distribution to whatever ages you desire, and have full or partial distribution made at those ages. Some Trusts, which are irrevocable, can save Estate Taxes. Sometimes, Trusts are set up in a Will. Those Trusts are called Testamentary Trusts. A Trust may or may not be appropriate for your situation. Living Trust. A Living Trust avoids Probate and is a speedy way to transfer property on a person's death. It can even transfer property in another State, like a cabin in Wisconsin. It is a private document and does not have to be filed in Court (unless the Co-Trustee and beneficiaries get into a dispute and take their dispute to Court). It avoids the necessity of Guardianship or Conservatorship in case you become physically or mentally disabled. In that case, the Co- Trustee takes over for you and makes sure your bills are paid and you have a comfortable life. Living Trusts work very well in the appropriate situation. However, they are not the estate Page 1
3 planning solution for everyone. Sometimes greater tax-savings can be obtained through the Probate process. It depends on your personal situation, what assets you have, and how you want them transferred to the next generations. Bequests to Children. If you have children who are minors or young adults, we recommend that any significant inheritance be placed in a Trust until they reach a mature age. Please consider at what age you would want them to receive some or all of their inheritance. Until the Trust is terminated, the Trust pays for their health, education, or support. At some point, for example, at age 21, income would be paid to them each year. In addition, provisions can be made for payment of travel expenses, weddings, the purchase of a home, the purchase of a business or profession, or for any other expenditure the Trustee considers appropriate or necessary. Of course, you can stipulate what you consider appropriate or advisable. Income Taxes. Your heirs or beneficiaries do not have to pay income tax on the assets they inherit from you. However, income (interest, dividends, etc.) from the investment of an inheritance is subject to income taxation. Estate Taxes. Any amounts you give to your Spouse or to a charity are exempt from Estate Taxes provided you make the bequest according to the IRS rules. In addition, you can make bequests to others that will be not be taxed. It depends on the year in which you die. For example, For Deaths Occurring in FEDERAL Estate Tax Returns Must be filed if the Gross Estate* exceeds the Tax-Sheltered Amount of... MINNESOTA Estate Tax Returns Must be filed if the Gross Estate* exceeds the Tax-Sheltered Amount of $ 5,000,000 $ 1,000, $ 5,120,000 $ 1,000, $ 5,250,000 $ 1,000,000 * The Gross Estate includes the full value of Life Insurance (not the cash value), Real Estate (before deducting any unpaid mortgage balance), Bank Accounts, IRAs, and Other Assets in which the Deceased had an interest. Federal Gift Tax Exclusions. In 2013, you can give up to $14,000 to any number of people without incurring a Gift Tax or having to file a Gift Tax Return. This amount is increased to $28,000 if you are married at the time the gift is made. The person receiving the gift does not have to report the gift as income. In addition to the $14,000 Annual Exclusion, during 2013, you can use part or all of your $5,250,000 Lifetime Estate/Gift Exclusion to make additional gifts without incurring a Gift Tax. Again, the person receiving the gift does not have to report the gift as income. Currently, Minnesota does not have a Gift Tax. Page 2
4 IRS Required Disclosure under Circular 230. The IRS requires us to tell you that any Federal Tax advice in this booklet is not intended or written to be used, and cannot be used, (1) for the purpose of avoiding Federal Tax penalties or (2) promoting, marketing or recommending any transaction discussed in this document to another person unless I specifically authorize you to do so. Other Documents. When you make your Will, there are three other documents I recommend that you make. They are a Power of Attorney for Financial Matters, a Health Care Directive (which is the same as a Living Will ), and a HIPAA form. 1. Power of Attorney for Financial Matters. A Power of Attorney is a document authorizing another person to act on your behalf. This enables someone (called an "Attorney-in-Fact") to act for you. For example, your Attorney-in-Fact can sign checks for you and pay your bills. If you are out of the State and certain business must be attended to, or if you are ill and unable to sign your name, then your Attorney-in-Fact can act for you. Unless restricted (see Note at end of this Paragraph), your Attorney-in-Fact can act for you as soon as you sign the Power of Attorney document. That is why you must choose your Attorney-in-Fact carefully. A Power of Attorney that is "durable" is one that remains effective if you become disabled either physically or mentally. A Power of Attorney is terminated when a person dies. You should designate one person to act for you, and then name a backup person in case the first is unable or unwilling to act. [NOTE: If you wish, you can make a restriction on your Power of Attorney to make it a Springing Power of Attorney. The restriction would be that the Attorney-in-Fact would not be able to act until there was a letter from your doctor or some other named person stating that you were unable to manage your financial affairs. The downside of the Springing Power of Attorney is that it may take some time to get the letter when there is a situation that needs your immediate attention and you are unable to act promptly. This is something we should discuss when we meet.] 2. Health Care Directive. A Health Care Directive is a document which states your desires for medical treatment and names a person to make medical decisions for you when you are unable to make and communicate those decisions. I recommend that you also name a backup person in case the first is unable or unwilling to act. The Health Care Directive takes the place of the old Living Will and Power of Attorney for Health Care. 3. HIPAA form. This is a form which authorizes the disclosure of medical information to your Attorney-in-Fact and to your Health Care Agent. Without this document, doctors and hospitals are reluctant to disclose your medical information. This is a privacy provision under HIPAA which is the acronym for the Federal Health Insurance Portability and Accountability Act. Page 3
5 SOME THINGS TO THINK ABOUT It would be most helpful if you would think about the following and make some tentative decisions before our meeting: Guardians. If you have minor children, Guardians are the people who will take care of them until they reach age 18. The Guardians are given money from your Estate or Trust to help pay for your children's clothing, food, medical expenses, etc. If you have children under age 18, consider who you would like to appoint as their Guardians. Also, consider who should be alternate Guardians in case your first choice is unavailable. If your death occurs while you still have minor children, those children would probably be eligible for Social Security benefits. Personal Representative. Consider who you would like to serve as Personal Representative (Executor) and an alternate Personal Representative for your Estate. This is the person or Bank who will settle your estate. The Personal Representative (or PR ) works closely with your attorney. The PR's job is basically three-fold: #1 Collect and inventory your assets. #2 Pay your bills and last expenses. #3 Distribute your assets according to your Will. The job of a PR ends when the Estate is closed, generally 9 to 18 months after a person dies. Trustee. If you plan to create a Trust, consider the people you would like to name as Trustee and as a backup, or Successor Trustee. A Trustee is the person or persons or Bank who invests and distributes the Trust money for your Children or other Trust beneficiaries. If you have minor children, the Trustee would make payments to their Guardians. The Trustee can also make direct payments of your Children's bills. The job of Trustee ends when the Trust ends, usually when your youngest Child reaches a certain age, or at any date you specify. Trust Protector. This is an optional provision that you can use. A Trust Protector is a person who oversees the operation of your Trust. This must be someone who is not a Trustee. If the Trust Protector does not believe the Trustees are acting the way you would want them to, the Trust Protector can change the Trustees. The Trust Protector may, or may not, whichever you choose, appoint himself or herself as Successor Trustee. Alternative Distribution. Consider how you would like your estate to be distributed if your Spouse, Children, and Grandchildren do not survive you. Personal Property. Personal property, such as family heirlooms, artworks, jewelry, special collections, etc. can be given to people you designate on a special List, and this List must be referred to in your Will. Gifts of money cannot be written on the List. Page 4
6 Special Bequests. If you intend to make special bequests to Children, Grandchildren, Special Friends, or Charities, please bring a list with their exact names and addresses and the amount you wish to give. Other Questions. Are there any people you would not want to receive anything on your death? Do any children or grandchildren have any special needs? We can discuss these and any other concerns when we meet. Completion of Forms. You can start Step One of the Estate Planning process by completing the forms in the Estate Planning Worksheets Booklet. If you don't have all the information currently available, just do the best you can. Skip the parts that do not apply to you. You don't have to give us the exact dollar amounts, just round them off to the nearest $1,000, $5,000, or $10,000. These numbers are for planning purposes and do not have to be exact. We just need to know the approximate value and kinds of assets you own so we can recommend the best estate plan for you. Meanwhile, if you have any questions, don't hesitate to call us. Ross and Cameron Page 5
7 ESTATE PLANNING WORKSHEETS (Please bring these Worksheets to our Meeting.) P P P SUSSMAN+PARKHURST ATTORNEYS AT LAW ROSS A. SUSSMAN (612) CAMERON M. PARKHURST (612) NORTH SECOND STREET, SUITE 300, MINNEAPOLIS, MINNESOTA
8 FAMILY INFORMATION YOU SPOUSE Print your full name What other names are you known by? Print your name as you want it to appear in your Will What is your date of birth? Where were you born? Are you a US Citizen? Social Security Number Home Address Home Telephone Home Fax Number Cell Phone Number Address Employed by Business Telephone Business Fax Number Who were you referred by? Do you make gifts of more than $10,000 each year? Do you have any disabled or incapacitated Children or Grandchildren? Marital Number of CHILDREN'S NAMES & ADDRESSES Birthdates Status Children Ages
9 FINANCIAL INFORMATION DESCRIPTION Owned by YOU Owned by SPOUSE Owned JOINTLY ASSETS Homestead Mortgage Vacation Property Mortgage Other Real Estate Mortgage Bank Accounts/Cash/CDs U.S. Government Securities Stocks Bonds Mutual Funds Annuities Business Interests Partnerships Autos Household Goods, Personal Effects, and Furnishings Special Collections Money owed to you Expected Inheritances Other Assets (describe) Loans and Debts (describe) LIFE INSURANCE Death Benefits RETIREMENT PLANS IRA Accounts Qualified Plans 401(k) & Keogh Plans NET WORTH $ $ $
10 LIFE INSURANCE INFORMATION Death Benefit Amount Company and Policy Number Cash Value Insured Owner Beneficiaries #1 #2 #1 #2 #1 #2 #1 #2 INTERNET AND COMPUTER INFORMATION If you use the internet, do you have a list of the sites, usernames, and passwords, and where is that list located? Do you have any of the following: Website? ( ) Yes, ( ) No; Social networking sites such as Facebook or Twitter? ( ) Yes, ( ) No; Blogs? ( ) Yes, ( ) No; Listservs? ( ) Yes, ( ) No. RETIREMENT PLAN INFORMATION Approximate Institution & Amount of Primary Secondary Owner Account No. Investment Beneficiary Beneficiary Since our recommendations will be made on the basis of the financial information you give us, please date and sign this page to certify that the information you give us is true and correct to the best of your knowledge. Dated:, 2013
11 WILL WORKSHEET Personal Representative This is the person who will carry out the terms of your Will. 1st Choice: Spouse if living, OR 2nd Choice: 3rd Choice: Guardians This is the person who will raise your Children who are under age 18 if neither parent is living: 1st Choice: 2nd Choice: 3rd Choice: Special Bequests Personal property such as jewelry, special collections, etc., can be given away by making a special List which is referred to in your Will. In addition, you may give money or property to others, like Grandchildren, Special Friends, Charities, etc.. $ to $ to Distribution (Please modify if not appropriate.) of Estate 1st To my Spouse, if living OR to 2nd To my Children in equal shares, and the share of a deceased Child will be distributed to his or her descendants (my Grandchildren). Alternative 3rd If neither my Spouse, Children, nor Grandchildren survive Distribution me, then my Estate shall be distributed:! 50% to my Heirs-at-Law (parents, brothers and sisters, nieces and nephews, aunts and uncles, etc.) and! 50% to my Spouse's Heirs-at-Law.
12 TRUST WORKSHEET If you would like your Estate held in Trust until certain events happen, or until certain ages are reached, please complete this form. If you are undecided, we can discuss this at our meeting. Trustee This is the person or Bank who will invest and distribute the money for your Spouse or Children. 1st Choice: 2nd Choice: 3rd Choice: Trust Protector If you wish, you can name a watchdog person who can change Trustees for your family. This person must be someone other than a Trustee. 1st Choice: 2nd Choice: 3rd Choice: Trust Distribution (Please modify if not appropriate.) Special Bequests First, the Trust money shall be held for the benefit of my Spouse, and shall be used for my Spouse's support, maintenance, education, and health according to our accustomed standard of living, taking into account the Trust money available. Second, on the death of my Spouse, the Trust shall be divided into equal shares, one share for each of my Children (and one share for the Children of a deceased Child of mine), and each Share shall be used for their support, education, maintenance, and health. Third, when a Child reaches age, the Trustee shall distribute the Child s remaining Trust Assets to him or her. Until the Child reaches that age, my Trustee may use principal for the Child as the Trustee deems appropriate for wedding expenses, travel, purchasing a home or business, etc.
13 POWER OF ATTORNEY AND HEALTH CARE DIRECTIVE WORKSHEET Your Name For your POWER OF ATTORNEY for FINANCIAL MATTERS 1st Choice Backup #1 Backup #2 For your HEALTH CARE DIRECTIVE ( LIVING WILL ) 1st Choice Backup #1 Backup #2 Please circle your choices... Do you want your body to be cremated? Buried? Or are you undecided? Do you want to donate your organs for transplant or medical research? Yes No Undecided
14 POWER OF ATTORNEY AND HEALTH CARE DIRECTIVE WORKSHEET Your Name For your POWER OF ATTORNEY for FINANCIAL MATTERS 1st Choice Backup #1 Backup #2 For your HEALTH CARE DIRECTIVE ( LIVING WILL ) 1st Choice Backup #1 Backup #2 Please circle your choices... Do you want your body to be cremated? Buried? Or are you undecided? Do you want to donate your organs for transplant or medical research? Yes No Undecided