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Estate Planning for the Financial Services Professional

Estate Planning for the Financial Services Professional. A Three Part Series of Interactive Lectures Designed to Provide Financial Professionals with the Skills Needed to put the Estate Planning Conversation into their Toolbox of Solutions to Meet a Clients’ Goals and Objectives.

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Estate Planning for the Financial Services Professional

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  1. Estate Planning for the Financial Services Professional A Three Part Series of Interactive Lectures Designed to Provide Financial Professionals with the Skills Needed to put the Estate Planning Conversation into their Toolbox of Solutions to Meet a Clients’ Goals and Objectives

  2. Why Estate Planning? • Improve knowledge as a financial advisor • Easier to get appointments and gain client confidence • Combine financial planning concepts • Significant increase in financial planning fees, product sales and assets under management

  3. What is Estate Planning? • Commonly understood definition • Last Will and Testament • Health Care Proxy • Power of Attorney • Traditional Definition • Add inter vivos (living) revocable trust • Financial Advisors’ definition

  4. The Estate Planning Learning Timeline • Introductory concepts of property, probate and intestacy • Health Care Proxy, Living Will, Power of Attorney • Revocable and Irrevocable Trusts • Federal and State Estate and Gift Tax System • Review Form 706 and the Gross Estate • Deductions from the gross estate • Marital Trusts; Bypass Trusts; QTIP and QDOT Trusts • Life Insurance, Annuities, Qualified and Nonqualified plans in the gross estate • Powers of Appointment

  5. Advanced Concepts • Estate Freezing Strategies • Chapter 14 & IRC Section 2702; IRC 7520 • Grantor Retained Income Trusts (GRIT) • Family Limited Partnerships/LLC’s • Qualified Personal Residence Trusts • Private Annuities/Self-Cancelling Installment Sales • Asset Protection Trusts • Business Succession Models • Advanced Financial and Estate Planning Strategies using Life Insurance and Annuities

  6. “Do You Guys Have a Will? How About a Health Care Proxy and a Power of Attorney” Well I’m not an attorney, and I can’t draft your Wills for you, but like a budget and life insurance and homeowner’s insurance and a retirement plan, there are fundamental tools which all responsible adults should have in place. Now you seem to me like responsible people, so maybe you’re not fully aware of the consequences of not having basic estate planning documents in place. For example, if you die without a will, this is known as ‘dying intestate,’ and the laws of the state of New York define what happens to your property at your death. Now you’re both young, and god forbid one of you should die prematurely, but these things do happen. Are you aware of the rules of intestacy? God forbid both of you should die in a common accident; it’s an almost impossible scenario but it does happen. Are you willing to let the courts decide who will have guardianship of your children and the property you leave behind?

  7. How Property Passes at Death • BY OPERATION OF LAW • By contract (beneficiary designations; transfer on death accounts; joint tenancies w/Rights of Survivorship) • Under Property Law (Joint Tenancies with Rights of Survivorship; Tenants by the Entirety) • PROBATE • INTESTACY

  8. What is a Will? • NY Estates, Powers and Trusts Law § 1-2.19 • (a) A will is an oral declaration or written instrument, made as prescribed by 3-2.1 or 3-2.2 to take effect upon death, whereby a person disposes of property or directs how it shall not be disposed of, disposes of his body or any part thereof, exercises a power, appoints a fiduciary or makes any other provision for the administration o his estate, and which is revocable during his lifetime. • (b) The term “Will” includes a “codicil.”

  9. What is Probate? • From the latin root “probare” (to prove) • The action or process of proving before a court of competent jurisdiction (Surrogate’s Court) that a document offered for official registration and recognition is the genuine last will and testament of a decedent • The judicial determination of the validity of a will • Probate does have advantages! Not always as bad as Suze makes it seem. But it can be horrendous! Age and family structure are critical factors.

  10. Probate versus Non-Probate • The laws of Intestacy, and property which may be passed via a Last Will and Testament, apply only to “Probate Property.” • At death, title to property can pass from the decedent to another person in three ways: • By Intestacy • Through a Last Will and Testament • By Operation of Law

  11. How Does Ownership Pass at Death? • How does ownership pass while you’re alive? • Form of ownership may be determinative • Beneficiary and Transfer on Death or Payable on Death Designations • Probate: the Last Will and Testament • Intestacy

  12. “By Operation of Law” • Must first understand how property can be owned • The word ‘property’ is often used synonymously and exclusively by the public to refer only to ‘real property,’ either vacant land or residential real estate, or commercial or investment real estate. • But ‘property’ also refers to tangible personal property; intangible personal property

  13. Forms of Ownership • An important concept for data gathering • Financial Planning • Estate Planning • Sole owner • Jointly, with rights of survivorship • Jointly, as tenants in common • Multiple persons may own as tenants in common • As “tenants by the entirety” [H & W only]

  14. Individual Titling“SEVARALTY” • Single owner

  15. Joint Tenants with Rights of Survivorship • Each party owns an undivided one-half interest in the entire property • At death, the survivor becomes the sole owner • This is what “rights of survivorship” means • Almost all married couples own their homes as “JTWROS” • Investment accounts can also be titled as JTWROS

  16. Tenants by the Entirety • The “default” rule when married people take title to property and no form of ownership is indicated

  17. Tenants in Common • Two or more persons own a percentage of the property • Ownership percentage often 50/50, but does not have to be • At death, an owner’s interest passes via intestacy or by will, but not to the co-owners via ‘operation of law’

  18. “By Operation of Law” • Life insurance and annuity beneficiary designations • Individual Retirement Accounts • 401(k)/403(b)/457 defined contributions plans • Defined Benefit Plans • Investment Accounts with “Transfer on Death” designations • Bank accounts with “in trust for”[ITF] or “Payable on Death” [POD] designations

  19. Young Families • Generally good prospects for new financial advisors to discuss “simple wills.” Complex ‘estate planning’ usually not needed. • Guardian for minor children: somewhat over played, but • Depending on titling of assets, lack of basic will may be devastating! [Intestasy]

  20. Intestacy • Estates, Probate and Trusts Law (EPTL) 4-1.1 • If unmarried: all to children • If unmarried and no children, to parents, then siblings; then nieces and nephews; then grandparents (half to each side); then first cousins. Then NY! • If married and no children: all to spouse • If married with children, $50,000 to spouse, then remainder 50/50!

  21. Intestacy = “Administration” • The legal process of appointing a fiduciary (one or more persons with legal authority to transfer property of a decedent) is known as Probate when the decedent dies with a valid Last Will and Testament • The virtually identical process is known as Administration when someone dies intestate. • Quite often, the Probate process can actually be more cumbersome and time consuming than Administration, depending on a variety of factors (e.g., charitable beneficiaries require involvement of Charities Bureau of the Attorney General’s office); people tend to leave numerous very small bequests to a dozen people.

  22. Do Not Confuse Probate Property and Property Subject to Estate Tax • Although related, estate tax and probate property and often confused • Reducing Estate Taxes is usually an important objective of estate planning (but not Level I)

  23. What’s Worse Than Dying? • “Many people assume that spouses are automatically entitled to make medical decisions for each other should one spouse become incapacitated and need a medical procedure. While there are provisions in the law which allow for emergency medical procedures

  24. The Health Care Proxy • Appoint a surrogate decision-maker to authorize medical treatment or refuse medical treatment • Pre-dates the “living will” used in most states; often confused

  25. Other Presentations • How to Network with Attorneys • Where to find lawyers • What to say and what not to say • Managing expectation • Income and Estate Tax Planning for Real Estate Investors

  26. Special Topics • Transferring insurance into a trust • The Transfer for Value Rule • 1035 Exchanges • Split-Dollar arrangements, including multi-generational split dollar • Converting joint and survivor contracts into individual contracts

  27. The Importance of Estate Planning • If a person does not set forth their wishes, the State of New York will do so for them • Usually very disturbing prospects

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