Retirement: The Big Three for Your Consideration

1. Retirement:The Big Three for Your Consideration Thursday, September 20, 2007

2. Disclaimers! • Under requirements imposed by the IRS, we inform you that, if any advice concerning one or more U.S. federal tax issues is contained in this communication (including any attachments), such advice was not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any transaction or tax-related matter addressed herein. • And, the information discussed in this seminar today should not be construed or taken as legal advice, nor should it be construed, taken, or used as legal advice or counsel. As each person’s need for legal advice or counsel must be based on his or her unique set of circumstances, you are urged to consult the attorney, CPA, CFP, or other professional advisor of your choice to render such legal or other professional financial and tax advice based on your unique circumstances. • Any opinions expressed are the speaker’s, not those of ETSU or affiliated organizations.

3. An OverviewofTHE BIG THREE1. Last Will and Testament/Revocable Living Trust2. Powers of Attorney3. The Advance Directive (“Living Will”)

4. Estate Distribution Only Three Places Family Charity Government

5. Two Concepts to Know1. The Probate Estate2. The Federal Gross Estate

6. Asset Ownership1. Individually2. Tenants in Common3. Tenants with Rights of Survivorship4. Tenants by the Entirities5. Community Property6. Transfer on Death (T.O.D.)

7. A Probate Estate is… • The Estate for distribution purposes, and • Property passed by will or intestacy laws.

8. Why Probate? • To settle the Decedent’s debts and to resolve claims against the estate • To establish title to the assets owned at death

9. May I title property to avoid probate? • Property owned by joint tenants with right of survivorship • Property owned by tenants by the entirety • Life insurance proceeds payable at death to a named beneficiary • Does avoidance of probate equal avoidance of taxes? No!

10. So, what’s in the Federal Gross Estate? • Property (real and personal) owned by the Decedent at death • Incidents of ownership • Life insurance death benefits • Certain gifts • Business-related interests

11. Do I really, really need a Will? • Maybe not---if you like the state’s “one-size fits all” plan for you (and everyone else) under the intestacy laws • I don’t have any heirs at law, so I’m comfortable with the state of Tennessee receiving my estate (escheats) • I’m OK with the judicial system choosing the guardians for my minor children • Well, I’ve titled my assets to avoid probate, haven’t I? • Yes, if I want to remember charitable organizations

12. Advantages of a Will • You may generally control the disposition of your assets at death to heirs (spouse, children, grandchildren, charities, friends) • You may choose your Executor • You may choose a Guardian for minor children • Pass along your legacy, your values • Effective stewardship, effective tax planning • Peace of Mind

13. Requirements for a Valid Will • Yes, in Tennessee, you can handwrite you own Will (a holographic Will) • If typed, then two witnesses or Attestation Clause (self-proving) • Disposing memory/capacity • Was not made under duress or undue influence • Signed by the Testator (if typewritten, in the presence of witnesses and notary if Attestation Clause utilized)

14. FAQs regarding Wills • Can I use a form at the Stationery store? • Where should I keep my executed Will? What if my Executor cannot find my Will? • What if I want to change or update my Will? • Can’t I just verbally tell a trusted person prior to my death how I want my property to be disbursed? • Does the lawyer really invite the beneficiaries to gather to read the Will? • Should I do a separate letter to my executor or others (location of my Will, burial instructions, e.g.) • How may I disinherit my spouse and my children? Can I really leave a bequest to my dog?

15. Why We Don’t Make Wills • Busy with Life? • Too Little Property? • Too Expensive? • Don’t Like Legal Documents? • Unable to Know Future? • Don’t Plan to Die?

16. The Revocable Living Trust: Who needs a Will? • The advantages of the RLT include privacy as you don’t have to probate the RLT • You may serve as your own Trustee • Disadvantages to consider include “re-titling assets,” higher initial costs, and may/probably still need a Will for property not included in the Living Trust

18. Tax Patriot “I'm proud to be paying taxes in the United States. The only thing is -- I could be just as proud for half the money.” - Arthur Godfrey

19. Taxes At Bedtime “And now I lay me down to sleep. I pray the Lord my soul to take. If the tax-collector hasn't got it before I wake.” - Ogden Nash

21. Rule #1: Remember, look at the Federal Gross Estate, not the Probate Estate. Rule #2: Effective planning can maximize the use of the Marital Deduction with Credit Shelter/Bypass Trust arrangements Rule #3 Consider using IRAs/Retirement accounts for charitable bequests Rule #4 Don’t forget the Tennessee inheritance tax! Rule #5 Life Insurance can increase the value of your estate if owned by the Decedent Rule #6 Consider giving assets away to children, grandchildren, others with the $12,000 yearly exclusion from gift tax Who me? Why should I worry about taxes?

22. Before we leave Wills/Living Trusts… • QTIP Trusts---Second spouse, children from first marriage • Be careful of the “I Love You—All to Spouse Will” as you may forfeit your federal exemption and create a taxable estate when the surviving spouse dies • Charitable Remainder Trusts/Wealth Replacement CRTs • Charitable Gift Annuities

23. Powers of Attorney—Financial • Durable General Financial Power of Attorney • Enables the holder of the power to act in your stead for financial matters • “Durable” means the power is not affected by the principal’s subsequent incapacity • If the principal so chooses, the power can be effective upon disability or incapacity • Can nominate a Conservator

24. Powers of Attorney-Healthcare • Tennessee law provides for Durable Powers of Attorney for Healthcare • Recent changes in Tennessee law allows execution of the HC Power of Attorney attested only by a notary public or observed by two witnesses (at least one witness not related to the principal, or not a beneficiary to principal’s future estate)

25. The Advanced Directive • The “Tennessee Health Care Decisions Act” encompasses: *Appointment of Health Care Agent *Advance Care Plan *Physician Order for Scope of Treatment *Appointment of Surrogate

26. For more information, please contact: • ETSU University Advancement PO Box 70721 Johnson City, TN 37614 423.439.5352 andersjw@etsu.edu THANK YOU! Happy Planning!