“Dirty Dozen” Estate Planning Mistakes … and how to avoid them

1. “Dirty Dozen” Estate Planning Mistakes… and how to avoid them Jane L. Williams, LLC 816-249-2122 jane@jlwlawfirm.com www.jlwlawfirm.com

2. The “I’ll Be Dead, Who Cares?” Plan • James Dean: • Died at age 29 without planning (no will) • Entire estate, including licensing fees, passed to his father, who had abandoned him as a child. • Licensing fees generate $1 - $3M annually.

3. The “Wish and Hope Plan” • Marilyn Monroe: • Died at age 36 • Will left 75% to Marilyn’s acting coach, Lee Strasberg, with “wishes” to donate to charity. • Strasberg later married, and at death in 1982, his estate plus all Monroe’s licensing and royalty fees went to his widow – a complete stranger to Marilyn – and not to charity! • Licensing fees generate over $1 annually.

4. The “They’re Good Kids” Plan • The Woolworth Misfortune: Barbara Hutton & F.W. Woolworth • Granddaughter of Woolworth’s founder • At age 10, inherited $25M in trust, which ended when Barbara turned 21, in 1933. • 46 Years and 7 husbands later, died at age 66 with $3,000. • Years of relentless exploitation, divorces, drug addiction and uncontrolled spending.

5. The “I’ll Work on That Later” Plan • John Denver • Died in a plane crash in 1997 with no estate plan. • Failed to name beneficiaries for his retirement accounts! • $19M Estate probate and IRS disputes took over 6 years and resulted in loss of tens of millions in taxes and tax-free compounding to his children.

6. #1 Mistake Failing to Name Someone to Make Health Care Decisions

7. Today’s World of Modern Medicine • You are likely to become incapacitated before you die. • 85% of deaths occur in hospitals and long term care facilities.

8. Wait . . . What? SHE/HE will be making my Medical Decisions? Result: Longer periods where you lack decision making capacity and someone else will be making medical decisions for you.

9. What if I do not name anyone to make my medical decisions? Won’t they just ask my spouse? • Conflict – Terri Shiavo • Guilt • Not your wishes Problems Created:

10. Solution: Healthcare Power of Attorney and Advance Directive ► Identify Decision-Makers ► End of Life Directives ► Clear statements of intent to loved ones A GIFT YOU GIVE YOUR LOVED ONES!

11. #2 Mistake No plan to control financial & property matters during incapacity

12. A Court Will Decide Who Manages Your Assets If You Don’t Without appropriate legal documents to manage your assets during incapacity, you may end up with a court deciding who will manage your financial affairs.

13. Avoid Conservatorships with Trusts Establishing a Trust : One option is to create a Revocable Living Trust and appoint a trustee to manage your financial affairs when you cannot.

14. Avoid Conservatorships withDurable Powers of Attorney Durable power of attorney: Another option is to create a durable power of attorney to name a “Financial Agent” who has the power to make financial decisions and transactions on your behalf.

15. #3 MistakeNo Estate Planning

16. Why Do I Need a Plan? • Tailored to the assets you own • Accounts for your unique family situation • Designed to streamline transfer • Quick and cost effective

17. Solution: Revocable Living Trust – My Top Five Reasons • Protecting Property for Your Beneficiaries (minors, lack of maturity, addiction) 2. Managing Property upon Incapacity 3. Avoiding Probate (time, money, angst) 4. Avoiding a Will Contest 5. Privacy (from heirs, unscrupulous folks, nosy neighbors, etc.)

18. #4 Mistake Failure to Plan For Death Taxes

19. Estate Tax Landscape Neither Kansas nor Missouri currently assesses an estate tax. The Federal Government tax exemption is $5.49 million (EACH – if you are a married couple). If you get even close to that amount, you should consider estate tax planning.

20. How Big Is Your Estate? (You may be surprised!) • Home • Retirement Plans • Life Insurance • Real Estate • Investment Accounts • Autos, boats, RVs • Furnishings, collections, personal effects

21. Married Couple’s Death in 2017 $10.98 Million Estate Without Tax Planning With Tax Planning Federal estate taxes on $5.49 million = $2-3 million Federal Estate Taxes = $0

22. #5 Mistake: Thinking Your Children Don’t Need Inheritance Protection

23. What if your child … • Becomes instantly “rich” at 18 • Suffers a divorce • Experiences creditor problems • Gets sued

24. Children’s Trusts Are Not Permanent Restraints • Adult child can be named co-trustee or eventually trustee of his or her own trust • Has access to trust assets for: • Health, Education, Maintenance, Support • Can ultimately consume it all – few strings attached

25. Children’s Trust - Benefits • Protects inheritance from children’s divorces • Protects inheritance from lawsuits, bankruptcy, personal injury claims, IRS, etc. • Protects child against excessive spending (spendthrift, addiction, spousal pressure)

26. #6 Mistake Failing to Involve Your Family

27. Traditional Estate Plans Focus On: Keeping Secrets Transferring Assets Reducing Taxes Administration Costs

28. Today’s Estate Plans May Include: • Open Communication • Incentive Trusts • Ethical and Thoughtful End-of-Life Planning

29. #7 Mistake: Not Preserving Tax Benefits of Retirement Plans

30. Prolong IRA Ownership! The longer your beneficiaries can keep funds in an IRA after death, the more wealth they can create!

31. Prolong IRA Ownership! • Can my IRA be Stretched? • What’s a Stretch? • Name a beneficiary now – primary & contingent • Make sure IRA custodian allows the stretch.  Some bank and other financial institutions are ignorant of the stretch IRA • If advisable, roll your current plan (401K, 403B or 457 plans) to an IRA to ensure the ability to stretch

32. HUGE LOSS When Your IRA is Cashed-out and Spent!Assume child is 40 years old when he inherits an IRA worth $100,000. A difference of over $ 400,000 on a $100,000 IRA!

33. Still a BIG LOSS When Your IRA is Cashed-out Early and Invested!Assume $100,000 IRA inherited at age 40 earning 6% tax-deferred.Child withdraws and invests at 6% A difference of over $ 300,000 on a $100,000 IRA!

34. You Can Require the “Stretch” • Standalone Retirement Trust (aka “IRA Trust”) • Established now by IRA Owner • Beneficiary of IRA at Owner’s Death • Separate from your Living Trust

35. How Does It Work? IRA • IRA pours into the Standalone Retirement Trust at Death • RMD “withdrawn” from IRA each year • Trust Principal is Asset Protected! RMDs TRUST = PROTECTION BENEFICIARY

36. Mistake #8 Failing to Organize and Consolidate

37. Biggest factors causing estate administration delays & increased costs • “No one ever really talked about it.” • “Where is everything? Have we found it all? Why didn’t they make a list?” • “Why are there accounts (or CD’s) in 7 different banks?”

38. Solution: Create a Comprehensive and Organized Estate Plan • Talk About It • Estate Planning Portfolio • Consolidate Accounts • Emergency document access

39. #9 Mistake In blended families, failing to protect your spouse and your kids

40. Typical Problems • Surviving spouse leaves your money to her/his children • Surviving spouse is spendthrift, effectively disinheriting your children • Surviving spouse remarries and his/her new spouse ends up with your estate.

41. SOLUTION: QTIP “TRUST” YOUR SPOUSE! • Passes inheritance to your spouse (and your children) instead of your spouse’s new spouse or your son-in-law or daughter-in-law • Provides income and principal to your spouse for life in accordance with his/her needs • Your remaining assets go to your children per your choice

42. #10 Mistake Failing to Plan for Your Tangible Personal Property

43. Most common issues between beneficiaries: your “stuff” • Sentimental items • Photos • Jewelry • Artwork • Collectibles

44. Tangible Personal Property -- Solutions • PLEASE do not assume your kids will “work it out” • Personal Property Memorandum • Communication before you die • Clearly articulated process for handling disputes

45. #11 Mistake Failing to give someone access to Medical Records

46. HIPAA – Don’t ‘cha just love it? • Medical personnel face stiff penalties • Reluctant to permit family members access • Special HIPAA Authorization ensures access to medical information • Especially important for college kids/young adults

47. #12 Mistake Believing Estate Planning is a One-Time Event

48. It’s not a “one-and-done” • Estate planning is a lifetime process • Life changes quickly and unexpectedly • Laws change • A lasting relationship with an estate planning attorney are key

49. We Want to Help! • Free consultation • 25% discount to Local 42 members • Continuing presence through yearly check-ins and through Local 42 and its retirees

50. Jane L. Williams, LLC 1441 E. 104th Street, Suite 100 Kansas City, MO 64131 816-249-2122 (office) 816-817-1578 (fax) jane@jlwlawfirm.com www.jlwlawfirm.com