Estate Planning Basics
Agenda
What Is An Estate Plan?
Finding Advisors
Wills and Trusts
Power of Attorney
Financial Snapshot
Special Assets & Taxes
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.
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
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
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.
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.
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
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.
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
Additional Resources
• Washington State Bar Association:
–
http://www.wsba.org/News-and-Events/Publications-Newsletters-Brochures/Consumer-Information
• Washington State Bar Association Lawyer Search:
– https://www.mywsba.org/LawyerDirectory
• Thomson Reuters:
– http://estate.findlaw.com/
