1 Farm Succession Planning
2 Marsha Goetting Ph.D., CFP, CFCS èProfessor & Extension Family Economics Specialist èDepartment of Agricultural Economics & Economics
3 Special Request from: Members of Planning Committee
4 Make your estate planning presentation!!!!!! n Lively n Interesting n Exciting
5 Don’t want to think about Death Dying
6 Experiment Succession/Estate Planning Team Contest u Valuable prizes !!!
7 n people Divide into Groups
8 First Decision n Select Team Name u 30 Seconds
9 Second Decision – Select Team Runner n Each time your team responds to a question ò Write team name & answer on sticky note RavalliRaiders 50%
10 n Rewards u “Winning Team” F gets to select prizes at the end of the session
11 “Who” Gets Your Property When You Die????
12 State Law Determines
13 Titled Real Property includes: n Land n Home
14 Titled Personal Property includes: n Savings & Checking Accounts n Certificates of Deposits n Motor Vehicles n Stocks & Bonds
15 Property passes by: n Contract Law n Written Will n Law of Decent & Distribution n Trust Agreement
16 Contract Law n Beneficiary Designations u Life insurance u Annuities u IRAs u Keogh
17 Life Insurance n Bill n Vere
18 Beneficiary n Bill has $100,000 life insurance policy n Designates Vere as his primary beneficiary
19 Bill’s Will n “I bequest all my life insurance proceeds to my son, Chris Shelton.”
20 Who gets $100,000? n Vere, wife? n Chris, son?
21 $100,000 Life Insurance Proceeds n Vere n Contractual arrangement u Designated Beneficiary
22 Estate Planning Task n Determine who are the beneficiaries of your life insurance policy/policies
23 Payable on Death Designation (POD) n Accounts at financial institutions n At death ownership passes to POD beneficiaries
24 Transfers on Death (TOD) Registration n Stocks n Bonds n Mutual funds
25 Dying Without a Will: Who Receives Your Property?
26 PERSONAL PROPERTY No matter where located, distributed according to laws of state in which decedent had domicile at time of death.
27 REAL PROPERTY Located outside state of residence distributed according to that state’s intestacy laws.
28 Estate Planning Task n What & Where u Determine in whose name is on title of real & personal property u Location
29 Business Arrangements Census, Washington Sole proprietorship/family 85% Partnership 6% Corporation 8% Estates/trusts, other 1% 40,033 farms
30 Single Person Property in one person’s name only. Part of owner’s estate upon death.
31 Single Person Mother 1/2 Dad 1/2 Single Guy/Gal
32 What fraction (if any) will brother receive? No Written Will
33 Team Question n What share if any does Bother receive?
34 What fraction (if any) will brother receive? No Written Will
35 ? Right of Representation
36 Married Couple n John & Mary property titled John’s name only (sole proprietorship) No childrenNo children
37 Auto Accident n John dies first n Mary dies 3 days later
38 Team Question n Who receives the property?
39 Who Receives? n John dies first n Mary dies 3 days later
40 Who receives????? n John dies first n Mary dies 3rd Day n Mary’s relatives receive property
41 Need for will n John & Mary need a written will F if they want to control who receives their property
42 JOINT TENANCY Real Property
43 JOINT TENANCY n On death of either, survivor takes all
44 JOINT TENANCY
45 Husband dies: Survivors, wife surviving joint tenant; his children
46 Husband dies: Survivors, wife surviving joint tenant; his children
47 Wife dies with all property
48 Wife dies with all property
49 Remarriage with husband as joint tenant husband
50 Husband dies: Survivors, wife surviving joint tenant; his children
51 Life Estate Remaindermen
52 Estate Planning Task n Review titles on real property
53 Family Tree
54 Question: What fraction, if any does grandchild receive? ?
55 Survivors : 3 children
56 Survivors : two children & grandchildren Right of Representation
57 Survivors : one child & grandchildren Right of Representation
58 Survivors : One child & grandchildren ? Right of Representation
59 Survivors : Grandchildren
60 Written Will
61 Question n What % of Americans die without a written will?
62 7 out of 10 do not have a will
63 Requirement n Sound mind u Know nature of property u Know those to whom he/she would give property
64 “Being of sound mind I spent it all.” Here is your DAD’S will
65 MAKING A WILL n Undue Influence
66 Adopted Children á Have same rights as your biological children
67 MUST a parent leave his/her children anything? NO!
68 “To my son I leave the pleasure of earning a living. For 25 years he thought the pleasure was mine. He was mistaken.” Dad’s Will
69 Heinrich Heine Made his wife sole beneficiary on the condition that she remarry because then “ there will be at least one man to regret my death ”
70 Non-Titled Property Owner is not identified with a written document
71 Non-titled property: n Guns n Tools n Furniture n Dishes n Linens & needlework n Collections
72 Personal Belongings n Wedding photographs n Baseball glove n Books n Christmas decorations n Jewelry
73 Washington Separate Listing Tangible Personal Property
74 Separate ListingItem my Grandma Ray’s Opal Ring my niece, Bethany Buczinski my Montana Sapphire Ring my friend, Barbara Miller DateSignature
75 Where to keep a will?? n Clerk of Court office n Attorney’s office n Safe deposit box n Don’t store original at home
76 Where is the will? n Inform family members or personal representative
77 Wills ????
78 Question n What % of deceased persons’ estates paid a federal estate tax in 2003?
79 Federal Estate Tax n 2 %
80 Federal Estate Tax Exclusions & Credits
81 Planning Technique Die in appropriate year !!!
82 Single Person-- Applicable Credit
83 Spouse takes all n Surviving spouse who takes unlimited marital deduction
84 $4 Million Estate (2007)-- Unlimited Deduction
85 Wife: $4 Million 2007
86 Instead take: n Partial u equal to amount of exclusion/credit n Leave rest to family trust with spouse income
87 Use Dad’s Applicable Exclusion on 4M Estate
88 Mom’s Estate
89 Estate Size $4,000,000 n Tax Savings With Planning u $920,000
90 Concern n What if….. Mom marries the “hunk” down the road?
91 Concern n What if……… Dad marries the “floosie” down the road?
92 Another approach n Q-tip Trust u Amount of exclusion/credit
93 Use Dad’s Applicable Exclusion on 4M Estate
94 Mom’s Estate
95 Estate Size $4,000,000 n Tax Savings With Planning u $920,000
96 Team Question n Value of John’s gross estate for federal estate tax purposes? u $2,500,000 Living Trust u $ 100,000 Saving Bonds/POD Wife u $ 150,000 Joint Tenancy/Son u $ 250,000 Life Insurance Policy u $ 500,000 Tenancy in Common with spouse
97 Team Question n Value of John’s estate? u $2,500,000 Living Trust u Included
98 Team Question n Value of John’s estate? u $100,000 Saving Bonds/POD Wife u Included
99 Team Question n Value of John’s estate? u $150,000 Joint Tenancy/Son u All included, unless contribution shown
100 Team Question n Value of John’s estate? u $250,000 Life Insurance Policy u Included
101 Insurance Proceeds included in estate if: n Receivable by estate n Receivable by another for benefit of estate n Decedent had incidents of ownership
102 $2.75 Million Estate $250,000 Policy 2007 Parent Owned
103 Parent Owned Policy-2007
104 $2.75 Million Estate Child Owner of Policy
105 Federal Estate Taxes Saved on $250,000 policy n Adult child as owner of policy save $115,000
106 Team Question n Value of John’s estate? u $500,000 Tenancy in Common with spouse u ½ half included u $250,000
107 John’s Estate Value $3,500,000 Exemption 2007 $2,000,000 ***$690,500 due in tax
108 Federal Gift Tax
109 Question n What is the amount that can be gifted yearly without a federal gift tax?
110 Annual Gifts $12,000 n To as many people as you wish n Tax free
111 Gift-splitting n Spouse may join in gift $24,000
112 Federal Gift Tax Exclusions & Credits
113 n Rewards u Winning Team
114 Marsha A. Goetting MSU Extension Family Economics Specialist P. O. Box Montana State University Bozeman, MT
115 Marsha A. Goetting