HACE 3200 1nd Edition Lecture 31Outline of Last Lecture I. Practice ProblemsOutline of Current LectureI. Estate PlanningII.Current Lecture- Chapter 17o Estate Planning: Saving Your Heirs Money and Headaches- Funeral Planningo Funerals cost more than you thinko Average funeral is $10,000o Burial plots… where??o Cremation or embalmed?o Last words? Last song?o Taking that last walk? With who?o What to do with your estate?- Objectives of Estate Planningo Distribute your propertyo Provide for dependentso Select guardians for minorso Minimize estate and inheritance taxeso Minimize settlement costs, including legal and accounting feeso Appoint power of attorney in case of physical or mental impairment- The Estate Planning Processo Step 1: Determine what your estate is worth Estate net worth- value of estates assets- value of estate liabilitieso Step 2: Choose your heirs and decide what they will receive- The Estate Planning Process (cont’d)o Step 3: Determine the cash needs of the estate Liquid assets are needed to pay estates taxes- Funeral expenseso Step 4: Select and implement your estate planning techniquesThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.- Understanding and Avoiding Estate Taxeso Estate Taxeso Gift Taxeso Unlimited Marital deductiono The generation- skipping tax- Wills and What they doo Will- a legal document that transfers an estate after deatho Beneficiaries- the people who receive your propertyo Executory Or personal representative -the person who is responsible for carrying out the provisions of the willo Guardian - cares for minor children and manages their property - Wills and The Probate Processo Probate - the process of distributing an estate’s assetso Purposes of the probate process appoint an executor, if one is not named validate the will allow for challenges to the will oversee the distribution of assets file a report with the court and close the estate - Why do you need a will?o So state law will not dictate the Distribution of your assets Custody of children or care for those with special needso To avoid a court-appointed administer and associated costs- The Basics of Writing a Willo Wills can be handwritten, computer generated, or oralo The safest way is to have a will drawn up by a lawyero Wills must be signed, witnessed by 2 or more people, and notarized- The Basic Organization of a willo Introductory statemento Payment of debt and taxes clauseo Disposition of property clauseo Appointment clauseo Common Disaster Clauseo Attestation and witness clause- Introductory Statemento Identifies the owner of the will and revokes all previous copies of the will- Payment of Debt and Taxes Clauseo Directs the payment of debts, death, and funeral expenses, and taxes- Disposition of Property Clauseo Allows for the distribution of money and propertyo Names the beneficiarieso Contains a remainder clause stipulating the disposition of any assets not directly given- Appointment clauseo Names the executor of the willo Appoints guardians for all children under 18 years of age- Common disaster clauseo Identifies which spouse is assumed to have died first in the event of simultaneous death- Attestation and Witness Clauseo Dates and validates the will with a signature before2 or more witnesses, who also must sign the document- Requirements of a Valid Willo Mental competenceo Under no undue influence from another persono Will must conform to the state laws- Ways to avoid Probateo Joint ownership Tenancy by the entirety(married couples) Joint tenancy with the right of survivorship( not necessarily married) Tenancy in common- will controls distribution of deceased’s share( doesn’t automatically go to survivor) Community property- state law and will control distribution of the property o Gifts Up to $11,000 per year tax free- Charitieso Naming beneficiaries in contracts( pensions)o Trusts Living- take effect before death Testamentary- take effect upon death- The Benefits if Using Trusts for Estate Transfero Avoid probateo Are much more difficult to challenge in court than are willso Reduce estate taxeso Allow for professional management o Provide for confidentiality ( think Hollywood)- Other Estate- Planning Documentso Durable power of attorneyo Living willo Health care proxy- Durable Power of Attorneyo Provides for someone to act on your behalf in the event you should become mentally, or physically incapacitatedo This document is separate from the will and goes into effect before deatho This document should be very specific as to which legal powers it transfers- Living Will and Health Care Proxyo A living will states your wishes regarding medical treatment in the event of a terminal illness or injuryo A health care proxy designated someone to make health care decision should you be unable to do so for