INTRODUCTION TO ESTATE PLANNING

Bill TaylorNortheast Area Community

Development Educator

?• What is estate planning?

• How many people are legally prepared for death?

• What keeps people from doing estate planning?

• At what age should you start planning for transfer of your estate?

REFERENCES

• PLANNING AHEAD; DIFFICULT DECISIONS University of Wyoming Extension bulletin series; September 2013; Aaron Lyttle, Cole Ehmke, Mary Martin, Bill Taylor; available at http://www.wyomingextension.org/publications and enter Lyttle as author

• Aaron Lyttle, attorney-at-law with Long, Reimer, Winegar, Beppler

SIX MAJOR QUESTIONS

• Who will make my financial decisions when I can’t make them?

• Who will make my health-care decisions when I can’t make them?

• What will happen to my property after I die?

• What will happen to my remains?• What is the legal procedure for transferring

my estate to my heirs?• Who will care for my minor children?

THREE OTHER IMPORTANT QUESTIONS

• What are the Wyoming requirements for valid wills?

• How do you revoke a will?• What other tools are available?

FINANCIAL DECISIONS

• Delegated with a Durable Power of Attorney• Allows agent to make financial decisions on

your behalf• Can delegate anything you could do yourself– From narrow (close an account) to broad (make

all decisions on your behalf– Typical:

• Opening & closing accounts• Borrowing & lending• Giving gifts• Settling lawsuits

DURABLE POWER OF ATTORNEY

• Two types:– Immediate – goes into effect immediately

• For those:– Presently having difficulty managing affairs– Couple who own property jointly

– Springing – goes into effect when you are legally determined incompetent• Often specifies conditions necessary for

incompetency– E.g., 1 or 2 doctors make determination

(Traditional POA becomes invalid when you become incompetent)

HEALTH-CARE DECISIONS

• Delegated via an Advance Health Care Directive–Modern combination of Health Care POA

and Advance Directive or Living Will– Binding decisions regarding end-of-life

options– Health Care POA portion like Durable

POA, but limited to health decisions• Goes into effect when primary health-care

provider determines you can’t make decisions

HEALTH-CARE DECISIONS (cont.)

• Decisions you can make in an Advance Health Care Directive– Name a guardian for yourself– Direct to what degree you want your life

prolonged– Direct whether you want CPR– Indicate whether you want to donate

organs or your body– Name a primary physician(s) to

determine your capacity to make decisions

HEALTH-CARE DECISIONS (cont.)

• Advance Health Care Directive–Must be written, signed, dated– Notarized or signed by two witnesses– Can be revoked or changed at any time

– Only gives power to terminate life-support, never to assist with suicide or euthanize

PROPERTY

• Intestate – without a will– According to a formula set in state

statue– Spouse & children• Spouse – 50%• Children (or their heirs) split remaining 50%

– Spouse only – 100%

PROPERTY (cont.)

• Intestate – without a will (cont.)

– No Spouse1. Children & their heirs2. Parents, siblings and their heirs3. Grandparent, uncles, aunts, and their heirs

– No heirs• State of WY – 100%

– Court will appoint personal representative• Old term – “administrator”

PROPERTY (cont.)

• Testate – a valid will is present– “Surviving spouse’s elective share”:• Spouse & children

– Spouse – may take up to 50% if any of the children are his/hers even if the will sets a lesser amount

– Spouse – may take up to 25% if none of the children are his/hers

• Spouse only – may take up to 50% even if will sets a lesser amount

PROPERTY (cont.)

• Testate – a valid will is present (cont.)

– Benefits:• Name a personal representative (executor,

administrator)• Written list of who receives specific property• Name someone as guardian of children• Name someone to take care of pets• Require beneficiaries inheritance held in

trust until a specified age• Other decisions regarding administration &

taxation of estate

VALID WILL

• Wyoming requirements:– In writing or typed, signed, dated– Two competent, disinterested witnesses– Notarization not required, but

significantly eases the process

VALID WILL (cont.)

• Wyoming requirements (cont.):– Proved• “Self-proving” – witnesses sign notarized

affidavit stating will was executed by person signing it– Unnecessary for witnesses to later testify to

validity– Probated without further proof

• Non “self-proving” – validity must be proven by written or oral testimony of one of the witnesses– If witnesses are unavailable, must be proved by

testimony of 2 disinterested witnesses

VALID WILL (cont.)

• Holographic will– Entirely in testator’s handwriting– Signed by testator– Not recommended except in emergency–Must be proven before probate

REVOCABLE?

• Will or any part revoked by:– New will that revokes the prior will or part of it– By inconsistency between new will and past will– Being “burned, torn, cancelled, obliterated or

destroyed” by testator w/ intent and purpose of revoking it

• Divorce revokes any disposition or appointment of property, any conferring of general or special powers, and any nomination to executor, trustee, conservator or guardian of former spouse, unless specifically stated otherwise in latest will.

REMAINS

• No instructions made:– Disposition decided by:• Spouse; adult children; parents; siblings;

grandparents; stepchildren; guardians – in that order

• Written instructions regarding “entombment, burial or cremation” or authorizing another person to make those decisions:– Funeral director or undertake must

follow

REMAINS (cont.)

• Helpful to prepay funeral or burial– Provides certainty & relieves family of

burden

• Can prepare written document with funeral wishes– Not legally binding, but helpful to others

• Should discuss wishes w/ family & heirs before death– Estate planning documents often not found

or reviewed until after funeral

PROBATE

• Process of transferring property from dead person to living person(s)

• Can take several months• Personal representative & attorney

entitled to feel based on % of probate estate value–May collect additional fees for extraordinary

services or costs

• Public and subject to mandatory court supervision

SUMMARY PROBATE

• Process for estates of $200,000 or less

• Persons claiming to be distributees may file application to district court after 30 days from death

• Typically less difficult, time-consuming, costly then formal probate

MINOR CHILDREN

• Nominate guardian(s) or conservator(s)– Guardian – appointed by court to

manage a person– Conservator – appointed by court to

manage a person’s property– Nominees in will given preference by

court– Nominees will be examined by court and

court will make decision based on determination of what is in best interest of child

TRUSTS

• Often used to avoid probate• Establishes relationship between

settlor, a trustee, & beneficiaries– Settlor transfers property to trustee– Trustee manages property– Beneficiaries benefit

• Trust never dies – probate required to pass property from dead to living

TRUSTS (cont.)

• Typically, settlor transfers as much property as possible during his/her life and uses pour-over will to catch anything not yet transferred at death

• Advantages:– More expensive then wills up front, but save

probate costs– Privacy– Increased property control– Minimizing transfer taxes (if estate is over

$5M/person or $10M/couple)

REVOCABLE TRUSTS

“A trust that the trustor may terminate at any point prior to his/her death. A trust relationship in which one party, known as the trustor, gives to a person or organization, known as the trustee, the right to hold and invest assets or property on behalf of a third party, known as the beneficiary. Most trusts exist to provide for the financial future of a minor child or mentally incompetent person, or may benefit charitable organizations. Many trusts are exempt from taxation on money given to the beneficiary, but because revocable trusts may be terminated, they are considered part of the trustor's estate and are thus subject to estate taxes.”

Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

IRREVOCABLE TRUSTS

“A trust into which a grantor deposits assets for use by a beneficiary where the terms of the trust cannot be modified or abrogated without permission of the beneficiary. That is, when a grantor sets up an irrevocable trust, he/she completely relinquishes ownership of the assets placed in the trust. As a result, an irrevocable trust is not usually considered part of the grantor's estate for estate tax purposes.”

Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

OTHER TOOLS

• Living Trust (Revocable Trust)– Created during life to manage property

& provide ongoing management & distribution of property after death w/o probate

– Funded via transfers during life and pour-over will at death

• Pour-Over Will– Transfers property at death to previously

established trust

OTHER TOOLS (cont.)

• Joint Ownership W/ Rights of Survivorship (Joint Tenancy)–Whichever person survives the other

receives full ownership of property– Used to avoid probate

• Beneficiary Designations– Transfer benefits of life insurance,

pension, IRA, annuity, other pay-on-death proceeds

OTHER TOOLS (cont.)

• Testamentary Trust– Takes effect at death– Trustee manages property for minor or

incapacitated heir

• Bypass Trust (Credit Shelter Trust)– Allows spouse to take advantage of

lifetime applicable exclusion– Limit (January 1, 2013) - $5M/person,

$10M/couple

OTHER TOOLS (cont.)

• Irrevocable Life Insurance Trust (ILIT)– Trust to hold life insurance policies– Creator pays amount to trust equal to annual

gift tax exclusion to pay policy premiums– Prevents life insurance proceeds from being

subjected to estate taxes

• Family Business Arrangements– Documented business succession plan

between owners– Type of business structure will affect what plan

is used

OTHER TOOLS (cont.)

• Charitable Gift Designations– Intent to transfer assets to charity as

designated by will or trust

• Minor’s Trust– Irrevocable trust which moves property from

estate to benefit minor children or grandchildren

• TOD/POD– Transfer-on-Death (TOD) and Payable-on-Death

(POD) designations on accounts and investments

FINAL THOUGHTS

• Discuss estate and surrounding issues w/ loved ones and trusted advisors– Find out their interests and preferences–Make decisions about what actions to take,

what to avoid

• See an attorney to help you through all the alternatives and to prepare the final documents

• Whenever circumstances or your intentions change, change the necessary documents

Questions? Comments?