1. WILLS, “Living documents” and trusts Protecting Your Self and your wealth
12th Annual Financial Fitness Workshop
September 27, 2014
FPANY’s Public Awareness Committee in Partnership with NYU School of Professional Studies

2. Disclaimer
All information contained in these pages is for informational purposes only. It should not be considered legal advise. Please consult an attorney before taking any steps based on this information.
All information contained in this presentation is for informational purposes.
All financial advisors are committed to fiduciary standard. Professionals are bound to adhere to the Certified Financial Planner Board of Standards and Ethics and/or the Financial Planning Association Standards depending upon their designation.
The information contained in this document was provided on a pro bono basis. No compensation was obtained in exchange for services provided either directly or via a third party.
Financial Planning Association

3. What is an “Estate Plan”?
LEGAL DOCUMENTS
“Living Documents”
Wills & Trusts
Deeds to Real Estate
GIFTING DURING LIFE
Giving Outright or in Trust
529 Plans & UTMAs
Health & Education Expenses
ACCOUNTS & BENEFICIARY DESIGNATION FORMS
Joint & Individual Accounts
Life Insurance Policies
Retirement Plans

4. What are “Living Documents”?

5. Health Care Proxy A document regarding health care decisions
Names an “Agent”
Authority to make health decisions
Access to medical records
Organ Donation desires
Places limitations on treatment

6. Living Will States your desires when:
1. You are in a terminal condition; or
2. You are permanently unconscious; or
3. You are conscious but have irreversible brain damage and will never regain the ability to make decisions and express your wishes.
These conditions are sometimes referred to as "a vegetative state."

7. Power of Attorney
Designate a person(s) to manage your financial affairs.
States specific areas of your finances you are giving control over (can be all areas).
Can allow “Gifting” to others
Beware. This is a blank check. The person you designate could take all your money. They could go to jail for it, but the money may have disappeared before they are caught.

8. Post-Mortem Transfers
“Operation of Law” Transfers
Probate / Administration
Jointly Owned Property
Retirement Plans*
Life Insurance*
“Transfer on Death” [TOD] accounts*
Trusts
Anything with a “Beneficiary Designation” (Annuities, etc.)
Because we know who it goes to at death
* Do NOT name beneficiary as “”My Estate”: This makes it a Probatable asset
Everything Else
Because we don’t automatically know who it goes to
2 Legal Procedures:
If Will = “Probate”
If NO Will = “Administration”

9. Probate: When there is a valid Will
A PUBLIC process to validate and administer a Will
Executor brings Will to SURROGATE’S COURT
Places relevant parties on legal notice
 Court may appoint an attorney to represent minor children (a “Guardian Ad Litem”)
Court appoints a Guardian (if minors exist)
Executor delivers an “Inventory of Assets” with the court

10. Wills: What does a proper Will accomplish?
States who receives what property and how / when
Names an Executor: to administer Probate Estate
Collects assets
Pays creditors
Can bring lawsuits
Pays beneficiaries
Names a preferred Guardian for Minor Children

11. Testamentary Trusts A Trust created in a Will
Example: “My Trustee shall pay for my child’s health, education and support needs until he/she is 25, at which point the rest of the Trust shall be paid to him/her”
A Trustee is named
A different job than Executor (but can be the same person); only concerned with the money in Trust
Choose a Trustee you trust; can have more than one person serve at the same time

12. YOU HAVE A WILL WHETHER YOU HAVE WRITTEN ONE OR NOT
Guess What…
YOU HAVE A WILL WHETHER YOU HAVE WRITTEN ONE OR NOT

13. Administration: When there is NO Will
An Administrator is named and MUST deliver estate property as follows:
Who Gets What?
1. Spouse only - 100%
2. Spouse & Children - $50,000 to spouse +
50%/50% split between spouse and children
3. Children only - 100% divided equally
4. Parents only - 100% divided equally
5. Siblings only - 100% (Nieces and Nephews)
6. Grandparents only - 100% divided equally
7. Aunts + Uncles only - 100% divided equally
8. Cousins only - 100% divided equally
9. The State of New York
Who Gets Nothing?
1. Life Partners
2. Friends
3. Those relatives not “in line” (see left)
4. Pets
5. Organizations and Institutions
6. Business Partners
7. Specific Gifts to Specific People
8. Charities

14. Executor / Administrator Compensation (if not stated in Will)
ONLY paid for money passing through Probate or Administration:
5% for the first $100,000 probated ($0 to $100,000)
4% for the next $200,000 probated ($100,001 to $300,000)
3% for the next $700,000 probated ($300,001 to $1,000,000)
2 ½% for the next $4,000,000 probated ($1,000,001 to $5,000,000)
2% for all additional assets probated ($5,000,001 and Above)
Co-Executors may each be entitled to a full commission

15. Non-Testamentary Transfers
Joint Property
Life Insurance
Retirement Plans
Transfer on Death [“TOD”] accounts
Trusts

16. Jointly Owned Property
The Survivor needs the other owner’s Death Certificate (that is all)
No Probate or Administration needed
Positives
Negatives
Easy access to both owners
Minimal transfer costs
Non-trusted joint owner can empty the account
May have gift tax costs and consequances

17. Life Insurance
Beneficiary needs a Death Certificate and be on the “Beneficiary Designation Form”

18. Retirement Plans
Includes: IRAs, 401(k)s, 403(b)s, certain pensions, etc.
Beneficiary needs a Death Certificate and be on the “Beneficiary Designation Form”
Owner must begin taking Required Minimum Distributions [“RMDs”] the year after he/she turns 70 ½ (most people do it at 70 ½)

19. Inherited IRAs
Only a spouse can transfer one person’s IRA directly to his/ her own IRA
Everyone else: “Inherited IRA”
“The Nancy Smith Inherited IRA f/b/o Megan Smith- Jones”
The beneficiary must take RMDs no later than the year after owner’s death, even if the beneficiary is under 70 ½

20. Transfer of Death [“TOD”]
Also seen as “In Trust For” [“ITF”] or “Payable on Death [“POD”]
Owner retains total control during life
Can change beneficiary, take all funds out, etc.
Future beneficiary has no control until owner passes
After passing, beneficiary needs a Death Cert.
Ex: “Mary Smith Savings Account TOD Patrice Lange”

21. Trusts: Who is Involved?
Assets owned by Trust pass Outside of Probate
Creator / Grantor / Settlor
> Creates the Trust
> Determines Terms of the Trust
> Funds the Trust
Beneficiaries
> Entitled to the property under the terms of the Trust
Trustee
> Manages the trust property
> Follows the Terms of the Trust
> Entitled to a Commission

22. Trusts vs. Wills Wills Trusts Positives Typically cost less to draft
You should have one anyway
No Probate costs for assets transferred by Trust(s)
Private document
Fast distribution of funds / Continuity of control
May provide tax savings / government program access
Negatives
Eventual Probate Costs
All information is public
Longer time to access and distribute funds
You may need a “Testamentary Trust” anyway
More legal fees up front
Time / effort required to transfer assets into Trust

23. Revocable Trusts
A person can serve as all three parties at the same time
(1) amend or revoke the trust,
(2) if the Creator becomes disabled a Successor Trustee can continue to use Trust funds for the Creator’s benefit without requiring court approval
(3) upon the Creator’s death the Successor Beneficiaries can receive the remaining estate without the need of going through Probate

24. Revocable Trusts: + & - Benefits Detriments
Can be altered, amended revoked
Creator can transfer funds into and out of Trust whenever they want
Detriments
No savings on estate taxes
** Have to “Fund” the Trust:
Account / Deed Name:
“The John and Mary Smith Revocable Trust”

25. Four Types of Irrevocable Trusts
Estate Tax Saving Trusts (Non-Marital)
“ILITs” – Irrevocable Life Insurance Trusts
“GRATs & GRUTS” – Grantor Retained Annuity/Uni-Trusts
“QPRTs” – Qualified Personal Residence Trusts
Estate Tax Marital Trusts
“QTIPs” – Qualified Terminal Interest Property Trusts
“CSTs” – Credit Shelter Trusts
Medicaid / Disability Trusts
“SNTs” – Supplemental Needs Trusts
“IOCs” – Income Only Trusts (and “MAPTs” – Medicaid Asset Protection Trusts)
Charitable Trusts
CRATs & CRUTS” - Charitable Retained Annuity/Uni-Trusts
“CLATs & CLUTs” - Charitable Lead Annuity/Uni-Trusts

26. What Transfers are NOT Taxable?
Transfers Between Spouses
Any US Person’s Health and Education Expenses
The Annual Exclusion
Gifts of $14,000 (in 2014)

27. Gift & Estate Tax Exemptions
Fed v. NY
Federal Government
New York State
Gift Tax Exemption
$5,340,000
Unlimited
Estate Tax Exemption
Now: $2.062,500
2015: $3,125,000
2016: 4,187,500
2017: 5,250,000
2019: Fed Amount

28. “Credit Shelter Trust”
A Credit Shelter Trust [“CST”] is a provision of a Will or Trust that holds up to the federal or state estate tax exemption.
The surviving spouse can invade the CST if needed
Funds in the CST grow.
Upon the death of the surviving spouse all of the funds in the CST, including investment gains, pass to youngercontingent Beneficiaries

29. Irrevocable Life Insurance Trusts: “ILITs”
If done correctly, the life insurance proceeds pass to beneficiaries without estate taxes
Owner of Policy:
The ILIT
Beneficiary:
The insured life
Insured:

30. MEDICAID: Financial Eligibility Requirements
ASSETS
$14,450 in the recipient’s name
EXCEPTIONS:
“Burial Allowance” of $1,500
Life Insurance: $1,500 cash value
Personal Property (unlimited)
Your House (ONLY for Home & Community care)
Supplemental Needs Trusts
Income Only Trusts
Retirement Plans (IRAs) are exempted from assets if they are in “payout status”
MONTHLY INCOME
HOME CARE: $809per month
Any excess income must go to the recipient’s “SPEND DOWN”
INSTITUTIONAL (at a Nursing Home): ALL of the recipient’s monthly income in excess fo $50 must be paid to the NH to offset Medicaid payments

31. Types of Supplemental Needs Trusts
FIRST PARTY: The Beneficiary’s money is used to fund the Trust
Upon death trust funds MUST be used to pay back Medicaid before remaining funds are transferred to desired contingent beneficiaries
Individual Trusts:
The individual’s excess assets and “spend down” income can go into this Trust:
(1) the funding Beneficiary must be under 65 years old,
(2) individual must be “Disabled” under Social Security Laws,
(3) must be established by a parent, grandparent, legal guardian or court order
(4) there MUST be a payback provision to Medicaid
Pooled Trusts: Available to people who are over 65 and have no one to establish the Trust (#3 above)
THIRD PARTY: An outside individual’s money funds the Trust
Upon the Beneficiary’s death any remaining funds go to the contingent beneficiary
NO Medicaid Payback is required (because the Trust was never the Beneficiary’s property)

32. Drafting Legal Documents
See a lawyer who focuses on Estate Planning before drafting documents

33. Questions & Answers Daniel Timins, Esq. dan@timinslaw.com
477 Madison Avenue, Suite 240
New York, NY 10022
Slide show created by Daniel Timins, template created by Mark Salinger, CFP®
For more information about the Financial Planning Association of New York visit