By: Paula Ferreira Montoya, Esq. Understanding Estate Planning By: Paula Ferreira Montoya, Esq.

WHAT IS ESTATE PLANNING? Planning for transfer of assets at death Creating plan for lifetime care and financial management Reducing or eliminating costs of Probate Guardianship Estate taxes

WHY DO ESTATE PLANS After Death At Incapacity Control Who Receives Assets Pay Minimum Legal Fees, Taxes At Incapacity Control Assets, Medical Decisions

INDIVIDUAL ESTATE TAX EXCLUSION 2016 U.S. Citizens and Green Card Holders $ 5,450,000 Non U.S. Citizens and Non-Residents $ 60,000 UNLIMITED MARITAL DEDUCTION U.S. Citizens Only Excludes Green Card Holders and Non-Residents Unlimited Amount to Spouses

COMMON ESTATE PLANS Will Do Nothing Joint Ownership Give Assets Away Beneficiary Transfers Revocable Living Trust Advance Directives

1. WILL Expresses Your Wishes Only Controls Assets Titled In Your Name Enforced By Probate Court Last Will & Testament

WHAT IS PROBATE Legal Process Only Legal Way to Change Title Will Validated Debts Paid Assets Distributed According To Will Only Legal Way to Change Title Probate Court

PROBATE ILLUSTRATION Assets Titled In Just Your Name Go Through Probate

PROBATE PROCESS CONTROLS How Your Will Is Interpreted Takes time – Several Months – Years Costly No Privacy Easy To Contest

2. DOING NOTHING At Death At Incapacity Minor Beneficiaries Probate No choice of PR Assets Distributed By State Law At Incapacity Court Controls Assets Minor Beneficiaries Guardian Controls Assets

3. JOINT OWNERSHIP Joint Tenancy With Right Of Survivorship Husband & Wife Other Transfer limitations Tenants In Common Death = Probate Interest to Heirs of Decedent Transferable Interest

DISADVANTAGES OF JOINT OWNERSHIP Only Postpones Probate to death of survivor Unintentional Disinheriting Incapacity = Court Interference Difficult To Remove Co-Owner Lawsuits Against a Co-Owner Debts/Tax Problems Improper Titling = Probate

4. GIVING AWAY ASSETS You Lose Control Could Cause Capital Gains Taxes No Basis step up Gifts Within 3 Years Of Death May be Included in Estate by IRS

5. BENEFICIARY TRANSFERS Direct To Beneficiary Court Interference Guardianship Incapacitated Minor Probate Beneficiary Dies First Or At Same Time = Probate “To My Estate” = Probate

6. Revocable Living Trust (Versus Will) Avoids Probate – not owned individually You maintain control during life - Buy / Sell Assets As Before - Change / Cancel Anytime - Trust Contains Your Instructions Incapacity – No Guardianship

YOU CONTROL INHERITANCE Distribute All At Once Distribute Installments Distribute Income Only Hold for Minors Or Incapacitated Heirs Preserve Beneficiaries’ Government Benefits Protected from Beneficiaries’ Creditors Reduces or eliminates estate taxes

QUALIFIED DOMESTIC TRUST (QDOT) A provision included in the Revocable Trust Allows for the Unlimited Marital Deduction between spouses, including green card holders and non-residents Delays the estate tax until the death of the surviving spouse

7. ADVANCE DIRECTIVES Lifetime directives appointing someone to Handle financial and contractual matters Make decisions related to your health Make decisions related to life support Obtain your medical information (HIPAA)

What Is A Living Will? LEGAL DOCUMENT GOES INTO EFFECT express in advance wishes concerning the use of artificial life support GOES INTO EFFECT two physicians certify that a patient is unable to make medical decisions and as specified by the living-will law DIRECT LOVED ONES AND DOCTORS to discontinue life-sustaining measures WITHOUT A LIVING WILL life support may be continued indefinitely

What Is A Designation of Health Care Surrogate? Appoints and authorizes someone to make health care decisions Authorizes someone to access medical records Copies of Living Will given to health care surrogate

What Is a Durable Power of Attorney? Appoints Agent - Attorney In Fact -with power to act for another Manage finances and property Sign financial or legal documents Authority of agent spelled out; legally binding Survives Incapacity

PLANNING FOR FOREIGN NATIONALS Goal is to reduce and/or eliminate PROBATE and ESTATE TAX Options: 1. Revocable Trust 2. Joint Ownership 3. LLC or Corporation owned by Foreign Entity 4. Life Insurance and Life Insurance Trust (ILIT)