Slide 1What is Estate Planning?Slide 3Legal Aspects of Estate PlanningOpportunity Cost of RationalizingGather Necessary DocumentsWillsThe Four Types of WillsFormats of WillsIntestate and ProbateSelecting an ExecutorResponsibilities of an ExecutorSelecting a GuardianAltering or Rewriting Your WillPrenuptial AgreementA Living WillAn Ethical WillPower of AttorneyLetter of Last InstructionWhat is a Trust?TrustsTypes of TrustsMake an Inventory of Your EstateOther Estate ConsiderationsFederal and State Estate TaxesEstate Planning ActivityChapter 19Estate PlanningEstate PlanningMcGraw-Hill/IrwinCopyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved.What is Estate Planning?•Your estate consists of everything you own.•Estate planning is not just for wealthy and elderly people.•Build your estate through savings, investments, & insurance.•Transfer your estate as you wish at death.•If married, include spouse and children in estate planning process.•If unmarried, make sure beneficiaries have information about your estate that they will need.19-2What is Estate Planning?•Many people give little or no thought to putting their personal and financial affairs in order for their families that survive them.•Demands of daily living can keeppeople from thinking about death.•Plan while you are in good health.•Estate planning is especially important for nontraditional households.19-3(continued)Legal Aspects of Estate Planning •Review and update your will on a regular basis, especially if you have major life changes.•Name an executor for your estate.•Create and review trusts.•Prepare a letter of last instructions.•Organize current financial records and documents, and let family members know where they are. •See the estate planning checklist in your text.19-4Opportunity Cost of Rationalizing•Who wants to think about their death?•Intend to organize things but you don’t.•Bereaved family may have to deal with strangers.•Plan your estate while you are in good health.19-5Gather Necessary Documents•Birth and marriage certificates.•Social Security documents.•Military service records.•Insurance policies.•Transfer records of joint bank accounts.•Safe-deposit box records.•Registration of automobiles.•Title to stock and bond certificates.•Legal name changes.19-6Wills•A will is the legal declaration of a person’s mind as to the disposition of his or her property after death.•Transfers property according to your wishes at death.•State law determines distribution of assets if you die intestate.•Marriage and divorce affect your will.Review your will with an attorney.Marriage may revoke your will.•Legal costs of a will vary. A standard will costs between $200-$350.19-7The Four Types of WillsA simple will leaves everything to your spouse.A traditional marital share will leaves half to spouse, half to children or heirs. Avoid probate.An exemption trust will passes to your spouse except for an amount equal to the exemption, which passes into a trust. The trust can provide a lifelong income.A stated dollar amount will.Should use percentages, not actual dollar amounts.19-8Formats of Wills•Holographic willA will that you write, date and sign, entirely in your handwriting.May not be recognized in some states.•Formal will.Usually prepared with attorney’s assistance.You must sign & have two witnesses, neither of whom can be beneficiaries (people named to receive property.Statutory will: type of formal will on a pre-printed form. Has rigid provisions, may be not meet current laws, and may be invalid if you change provisions.19-9Intestate and Probate•Intestate.Means you die without a will.The state distributes your assets.May mean the state will decide ona guardian for your children.Very complicated if you also have a “blended” family.•Probate.Probate court generally validates wills and makes sure your debts are paid.It is expensive, lengthy, and public.19-10Selecting an Executor•This person follows your instructions.•Find out if the person is willing to accept this major responsibility.•Find out if he or she is capable of the complicated tasks involved.•Person could be a family member, friend, attorney, accountant, or a bank representative.•If you don’t name one the court will.•Executor’s fees are set by state law.19-11Responsibilities of an Executor•Take control of assets of the estate.•File an inventory of assets and liabilitieswith the court.•Liquidate assets if necessary to pay claims.•Distribute assets, based on the instructions in the will.•Make a final accounting to the court.19-12Selecting a Guardian•If you have children, you need a will to name their guardian and/or trustee.•A guardian assumes the responsibility for providing the children with personal care and managing the estate for them.•Trustee will manage property for benefit of children.•Be sure the person would be willing to raise them and that their values match yours.19-13Altering or Rewriting Your Will•Add a codicil.A document that explains, adds or deletes provisions in your existing will. Consider a new will if making major changes.•Review your will if there are major changes.If you have sold property mentioned in the will.If the size and composition of your estate have changed.If you have married, divorced or remarried.If new potential heirs have died or been born.19-14Prenuptial Agreement•Agreed upon prior to marriage.•Often waive a right to receive property under the other’s will of under state law.•You agree on a settlement if youshould divorce.•Consult an attorney.19-15A Living Will•Not a substitute for a traditional will.•Provides for your wishes to be followed if you become so physically or mentally disabled that you are unable to act on your own behalf.•Discuss your living will with those close to you, and your family doctor.•Sign and date it before two witnesses.•Give copies to those close to you.19-16An Ethical Will •New type of will that is a way to pass on emotional and spiritual wealth to your heirs. •It is not a legally binding document.•A way to pass on your values and beliefs.•Share lessons you’ve learned in life.•Address any regrets.•Requires self-examination.•Writer and recipients say the results are an invaluable legacy.19-17Power of Attorney•Power of attorney.Legal document authorizing