1.  Estate Planning

2.  Financial Planning (FIN 551 – 552 – 553) o Managing the Wealth of a Client Wealth Accumulation CFPs – Portfolio Management Wealth Protection Insurance Agents – Policies Wealth Distribution Lawyers – Estate Planning o FIN 553 Part One – Estate Planning

3.  Learning Objectives o Define Estate Planning o List Goals of Estate Planning o List Risks (Failure to Plan) o Determine Who Needs Estate Planning o List the steps in Estate Planning o Name the Professionals Involved in Estate Planning o Describe Unauthorized Practice of Law  What are the issues, concerns, or potential problems for a financial planner?

4.  Definition of Estate Planning o The plan that distributes the assets of the individual prior to and at death such that they match the wishes of the deceased and o Provisions are made for needed liquidity needs at death Funds available to family/heirs Funds available for funeral costs Funds available for medical costs o Follow healthcare instructions of individual Advance directives such as feeding tubes, assisted breathing, extending life treatments, etc. o Children (minors) are provided proper support Children are placed in custody of individuals at choosing of client Protection of assets distributed to children

5.  Estate Planning Defined - Continued o Planning ahead of a clients death to distribute wealth with consideration of legal, tax and personal issues. Effective transfer (assets transferred to desired individual or institution) Efficient transfer (minimizes taxes and transfer costs) Timely transfer (avoid delays in distribution)

6.  Goals in Estate Planning o Fulfill Client’s Wishes o Documents Legal and Appropriate for Client’s Wishes  What are some of the basic wishes a client makes in an estate plan? o Directs named assets to specific person or charity o Directs documents to be completed to set up future needs distributions o Directs terms for distribution of un-named assets o Healthcare instructions or individual that has power to make decisions o Funeral instructions o Others?

7.  Risks of Failing to Do an Estate Plan o No Will Die intestate and Laws of State determine heirs o No Will Court determines child care o No Will Allocation of assets to minimize taxes not guaranteed o No Will Contested estate could delay distribution of assets o No Will Financial burdens for family while assets in probate o No Health Directive Medical care costs could wipe out assets Prolong life past desire of individual

8.  Who Needs Estate Planning o Everyone who Has minor children Has assets that would need distribution at death Spouse will get title to many assets but not all More on this in later chapters Has health issues or specific desires on health care Has a preference on funeral and burial desires  What could happen without plan o Guardianship of Children to inappropriate adult o Poorly titled asset does not go to “rightful” for person o Much of wealth lost to transfer costs and taxes o Major delay in distribution as estate is contested

9.  What Can Estate Planning Do? o Preplanning of asset distribution can lower taxes Giving specific assets that have a stepped up basis to a charity avoids taxes – example share of stock Charities are not-for-profit so it is a tax free-distribution o ByPass-Trust allows maximum tax deductions for married couple Separate assets at death of first spouse Allows surviving spouse access to assets and tax deduction o Power of Attorney Allows designated individual to act in the interest of the individual while still alive but incapacitated so estate is maintained and does not lose value o Other ?

10.  The Six Steps in Estate Planning  1. Establish the Client/Planner Relationship o Division of Tasks – Lawyer leads in Estate Planning o Legal documents can require lawyer  2. Collect Information o Financial Statements, Tax Filings, Asset Titles, Etc. o Family and Family Histories (health of parents, children with special needs, etc.) o Insurance policies o Legal documents (Powers of Attorney, Health Directives, Wills, Trusts, etc.) o Other items such as prior gifting, annuity contracts, lawsuits pending, etc.  3. Determine Clients Financial Status o Examine assets, cash flow, liabilities, insurance coverage, future liabilities (children’s education for example) and living standard o Analyze information

11.  4. Develop a Comprehensive Estate Plan o Match the comprehensive plan to the desires and the financial status of the client Goals of client should be realistic Plan should support a realistic outcome Plan should provide for potential contingencies  5. Implement the plan o Usually plan has some immediate steps or short term goals that put client on a “successful” path  6. Set Specific Review Periods for Plan o Circumstances change overtime and plan must be adjusted to meet the changes that alter the outlook

12.  The Financial Planning Team o Typically three to four professionals Certified Financial Planner, Insurance Agent, Estate Lawyer Could also include broker or other financial professional o Initial planning usually with CFP and CFP serves as the professional with the overview of the entire plan Recommends other professionals o Insurance Agent Reviews insurance needs and policies that support the plan Life insurance, long-term care, property and liability insurance o Estate Lawyer Legal documents (wills, trusts, healthcare directives, power of attorney) Files proper papers with court for estate distribution

13.  Problems with seeking advice and instructions from non qualified individuals  Unauthorized Practice of Law o States have laws that license the practice of law and estate planning is included in these laws o Advice from unauthorized individual may not be bad advice but your recourse may be limited o If you are providing the advice and not authorized your liability could be significant o Documents prepared may not be accepted by the court  Other issues with non-professional advice?

14.  What are the implications for Financial Planning? o Estate Planning is an essential part of the financial plan and a poor estate plan can hurt clients o Clients need to have thorough evaluation of current financial status and see that it matches their personal goals o Legal documents provide insurance against decisions that are in conflict with desires of client o Wealth management served with good estate plan o Other issues?