Post on 08-May-2015
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ESTATE PLANNING FORPARENTS OF MINOR CHILDREN
Isis Maternity
Expert Speaker Series
Jaime T. Kim
Material presented here is intended for information purposes only. It should not be construed as legal advice or the formation of an attorney-client Material presented here is intended for information purposes only. It should not be construed as legal advice or the formation of an attorney-client relationship. Please consult an attorney for individual advice regarding your own personal situation. relationship. Please consult an attorney for individual advice regarding your own personal situation.
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I. INTRODUCTION – A PROCESS
II. COMMON MISCONCEPTIONS
III. DOCUMENTS WHICH EFFECTUATE THE PLAN
- WILLS
- TRUSTS
- DURABLE POWERS OF ATTORNEY
- HEALTH CARE PROXIES
- APPOINTMENTS OF GUARDIAN
IV. TAXATION
OVERVIEW
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• Identifying your personal and financial goals, including:
• Planning for incapacity;
• Providing for spouses and children upon death;
• Avoiding probate; and
• Minimizing taxes.
• Choosing the people who will:
• Manage your assets for your benefit if you are unable to;
• Make health care decisions when you cannot;
• Take responsibility for your minor children’s day-to-day care; and
• Manage your children’s inheritance.
• Establishing documents to effectuate your goals; and
• Reviewing title to your assets in order to take full advantage of your estate planning documents, including:
• Updating beneficiary designations on retirement accounts and life insurance policies; and
• Re-titling individually held property.
I. INTRODUCTION – A PROCESS
ESTATE PLANNING IS A COMPREHENSIVE PROCESS WHICH INVOLVES:
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• Only the wealthy need an estate plan;
• There are adequate substitutes to a well-conceived estate plan, e.g., joint
ownership, designation of beneficiaries, etc.:
• Under current law, if you die without a will, your individually-held
property will be split between your children and your spouse, which
requires your spouse to obtain guardianship of his/her own minor children
through the Probate Court;
• Do-it-yourself estate planning may sound appealing from a cost
perspective, but can backfire by failing to minimize estate taxes or take into
consideration: state-specific probate laws, unique family dynamics, various
options for managing each child’s inheritance, and how to properly title
your specific assets.
• Taxability of joint property, life insurance and retirement plan assets:
• Avoiding probate does not save estate taxes.
II. COMMON MISCONCEPTIONS
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WILL – a written instrument executed with certain formalities, which:
• Must be filed with the Probate Court for allowance upon
death;
• Disposes of property held in your individual name as you so
desire;
• Nominates a personal representative, i.e., executor who will
be responsible for settling your estate;
• Recites powers to be conferred upon a personal
representative;
• Directs payment of taxes;
• Nominates a guardian for minor children.
III. DOCUMENTS WHICH EFFECTUATE THE PLAN
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TRUST – a written instrument which transfers property from one person to
another to be held for a third party. A trust may function like a Will
and comes in different forms:
• Testamentary (created under a Will);
• Living (created during lifetime);
• Revocable (may be changed at any time);
• Irrevocable (may not be changed).
III. DOCUMENTS WHICH EFFECTUATE THE PLAN
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TRUSTS, CONTINUED
• Purposes of revocable trusts:
• Provide for financial management in the event of
incapacity;
• Privacy of arrangements (probate avoidance);
• Provide framework for management of assets for the
benefit of spouse, children, other more remote issue;
• Minimization of estate tax;
• Contemplate unique circumstances, e.g., family
members who have special needs, blended families.
III. DOCUMENTS WHICH EFFECTUATE THE PLAN
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TRUSTS, CONTINUED
• Purposes of irrevocable trusts:
• Estate and gift tax minimization:
• Life insurance;
• Charitable arrangements;
• Gifting to younger generation beneficiaries.
• Asset protection:
• Creditors;
• Preserve eligibility for public benefits.
III. DOCUMENTS WHICH EFFECTUATE THE PLAN
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Pour Over WillAny individually-
owned assets will be directed by the Will
and “pour over” to 1st Spouse’s Revocable Trust AFTER being subject to probate
Assets titled in name of the Trust or that name the Trust as
beneficiary will flow directly to the Trust upon death without
being subject to probate
Assets that name 2nd Spouse as
beneficiary
Assets owned by 1st Spouse and 2nd Spouse
jointly
Pass directly to 2nd Spouse
Marital Fund
Trust is managed for the benefit of 2nd Spouse until his/her death
1st SPOUSE’S
REVOCABLE TRUST
PROBATE COURT
III. DOCUMENTS WHICH EFFECTUATE THE PLAN:
Example of Flow of Assets Upon 1st Spouse’s Death
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Pour Over WillAny individually-
owned assets will be directed by the Will
and “pour over” to 2nd Spouse’s Revocable Trust AFTER being subject to probate
Assets titled in the name of the Trust or that name the Trust as beneficiary will flow directly to
the Trust upon death without being subject to probate
2nd SPOUSE’S
REVOCABLE TRUST
PROBATE COURT
Marital Fund
Trust is managed for the benefit of 2nd Spouse until his/her death
Family Fund
Upon 2nd Spouse’s death, trust is managed for the benefit of the
children
1st SPOUSE’S
REVOCABLE TRUST
MERGE
Family Fund
Trust is managed for the benefit of the children
III. DOCUMENTS WHICH EFFECTUATE THE PLAN:
Example of Flow of Assets Upon 2nd Spouse’s Death
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DURABLE POWER OF ATTORNEY – a written instrument that
appoints an agent to handle legal, business and financial affairs:
• General vs. Limited;
• Designed principally for future incapacity;
• Avoids time, expense and emotional burden of probate court
involvement (i.e., conservatorship).
III. DOCUMENTS WHICH EFFECTUATE THE PLAN
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HEALTH CARE PROXY – a written instrument that appoints an agent
to make health care decisions when you can no longer
communicate your decisions yourself:
• May include a Living Will, e.g., language that directs no
heroic measures or artificial means are used which prolong
life if living in intractable pain and not expected to regain
cognitive faculties.
III. DOCUMENTS WHICH EFFECTUATE THE PLAN
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LIFETIME APPOINTMENTS OF GUARDIAN – 2 TYPES:
• APPOINTMENT OF GUARDIAN OF A MINOR – a
written instrument that appoints a guardian in the event of
both parents’ death or incapacity:
• A Will only comes into effect upon death;
• Guardian named must file acceptance with court before
authority to act commences.
• APPOINTMENT OF TEMPORARY AGENT FOR
CARE OF MINOR CHILDREN – a written instrument that
appoints a short-term guardian when absence is planned:
• Guardian’s authority to act is immediate but can only
last up to 60 days after document is signed.
III. DOCUMENTS WHICH EFFECTUATE THE PLAN
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IV. TAXATION
Take Advantage Of Tax Minimization Tools:
• Federal and State Estate, Generation-Skipping, Gift And Income Tax Exemptions;
• Annual Gift Tax Exclusion;
• Unlimited Marital Deduction:
• Certain Limitations For Non-U.S. Citizen Spouses.
• Charitable Deduction:
• Outright Gifts;
• Charitable Gift Annuities;
• Charitable Remainder or Lead Trusts;
• Donor Advised Funds;
• Private Foundations;
• Conservation Easements/Restrictions.
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HOW DO I GET STARTED?HOW DO I GET STARTED?
Feel free to bee in touch with any questions or concerns you have regarding your
personal situation
(781) 237-0150(781) 237-0150
jkim@kingandnavins.comjkim@kingandnavins.com
Thank you!Thank you!
~ Jaime T. Kim~ Jaime T. Kim