Estate Planning for Financial PlannersEstate Planning DefinitionsGoal of Estate PlanningCommon Goals and Objectives (2 of 3)Common Goals and Objectives (3 of 3)Impediments to Reaching GoalsRisks in Failing to PlanWho Needs Estate Planning?Why the Interest in Estate Planning?The Six Basic Steps in Estate PlanningEstablish the Client/Planner RelationshipCollecting Client InformationDetermine the Client’s Transfer ObjectivesThe Estate Planning TeamThe Unauthorized Practice of Law© 2007 ME™ (Your Money Education Resource™)Estate Planning forFinancial PlannersChapter 1:Introduction to Estate Planning2© 2007 ME™ (Your Money Education Resource™)Updated on 12/12/06Estate Planning DefinitionsEstate planning: The process of accumulation, management, conservation, and transfer of wealth considering legal, tax, and personal objectives.•Decedent – A deceased person.•Heirs – People who inherit under state laws.•Legatees – People who inherit under the will.•Donor – Person who gives a gift.•Donee – Person who received the gift.3© 2007 ME™ (Your Money Education Resource™)Updated on 12/12/06Goal of Estate PlanningEffective TransfersDecedent’s assets are transferred based on his wishes.Efficient TransfersTransfer costs are minimized.Minimize transfer taxes.Gift TaxGST TaxEstate TaxState Inheritance Tax4© 2007 ME™ (Your Money Education Resource™)Updated on 12/12/06Common Goals and Objectives (2 of 3)Minimize transfer costs.Lawyers’ feesAccountants’ feesCost of documentsCourt feesMaximize net assets to heirs.Exhibit 2.4: Generally taxes and transfer costs will consume at least 30% of an estate5© 2007 ME™ (Your Money Education Resource™)Updated on 12/12/06Common Goals and Objectives (3 of 3) Provide liquidity at death, which is needed for last medical, taxes, and burial costs.Fulfill client’s health care wishes.6© 2007 ME™ (Your Money Education Resource™)Updated on 12/12/06Impediments to Reaching GoalsUnwillingness to face mortality.Procrastination.Current good health.Cost.Lack of knowledge.Unaware of value of assets.7© 2007 ME™ (Your Money Education Resource™)Updated on 12/12/06Risks in Failing to PlanClient’s property transfer wishes go unfulfilled.Transfer taxes are excessive.Transfer costs are excessive.Client’s family is not properly provided for financially.Insufficient liquidity to cover client’s debts, taxes, and costs at death.8© 2007 ME™ (Your Money Education Resource™)Updated on 12/12/06Who Needs Estate Planning?Karen is married with 4 children.Donna is married with no children.Bill is single with 3 cats.Kali is single with no pets or children.9© 2007 ME™ (Your Money Education Resource™)Updated on 12/12/06Why the Interest in Estate Planning?Federal Transfer Tax – 40% in 2014People have an interest in directing their assets at their death.10© 2007 ME™ (Your Money Education Resource™)Updated on 12/12/06The Six Basic Steps in Estate Planning1. Establish the Client/Planner Relationship.2. Gather client information and establish objectives.3. Determine the client’s financial status.4. Develop a comprehensive plan.5. Implement the plan.6. Review and update plan when necessary.11© 2007 ME™ (Your Money Education Resource™)Updated on 12/12/06Establish the Client/Planner RelationshipTalk to your existing clients.Estate planning is not required! Many clients won’t do it unless they are encouraged.Detail your services.Send an Engagement Letter.Explain how you will be paid12© 2007 ME™ (Your Money Education Resource™)Updated on 12/12/06Collecting Client InformationCurrent financial statementsFamily informationList of assets and liabilitiesCopies of policies (i.e., medical, disability, & life)Annuity contractsWills and trustsIdentification of POA and GPOAPreviously filed returns (i.e., income & gift tax)Assets transferred to loved onesOther pertinent information13© 2007 ME™ (Your Money Education Resource™)Updated on 12/12/06Determine the Client’s Transfer ObjectivesCommon Transfer ObjectivesTransfer property to desired beneficiariesMinimize taxes, maximize assets to heirsAvoid probate processUse lifetime transfers – giftsMeet liquidity needs at deathPlan for childrenPlan for incapacity of transferorProvide for needs of surviving spouseFulfill charitable intentions of transferor14© 2007 ME™ (Your Money Education Resource™)Updated on 12/12/06The Estate Planning TeamAttorneyCPAInsurance ProfessionalFinancial Planner (Team Captain)15© 2007 ME™ (Your Money Education Resource™)Updated on 12/12/06The Unauthorized Practice of LawCertain activities are clearly reserved for attorneys (drafting legal documents).Must be licensed attorney in jurisdiction where practice is occurring.Planner should refer client to licensed attorney for legal