Welcome
Estate Planning
The Vincent E. Bonazzoli Law Firm, P.C. 210 Broadway, Suite 102 Lynnfield, MA 01940 (781) 596-1500 info@vbestateplanning.com www.vbestateplanning.com
DEFINITION OF ESTATE PLANNING
• What is estate planning? • “I want to control my property while alive and well, plan for me and my loved ones if I become mentally disabled, and then give what I want to whom I want, when I want and the way I want – all at the lowest possible overall cost to me and those I love.”
RESULTS
• Will your estate plan work the way you want it to work? • “It’s not about documents – it’s about results!”
ASSET FLOW ANALYSIS
• Who gets your assets? • Who has authority over your assets at death or during your incapacity? • Do you need court approval to act? • Will your estate have to pay estate tax?
Wills vs. Trusts
Probate
Clients want to avoid Probate
What is Probate?
Probate
Only Probate assets go through Probate.
What are Probate assets?
Trusts
What is a trust?
Instructions
Trusts
A trust is a bucket!
Instructions
ESTATE PLANNING AUDIT: QUESTION #1
• Have you reviewed your estate planning documents in the last 3 years (i.e. your trust, will, power of attorney, health care proxy, living will)? Has your estate plan been created or updated since January 1, 2003 to protect you against the new Massachusetts Estate Tax and to avoid the unnecessary payment of taxes at the time of death of the first spouse?
Separate State Estate Tax (For deaths in states that have decoupled)
Illinois, Kansas, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia*, Wisconsin and District of Columbia have decoupled.
Connecticut, Nebraska and Washington retained their own tax by enacting similar but separate estate taxes. * Virginia’s Estate tax to be repealed in 2007 (See http://www.cbpp.org/5-23-02.sfp.htm)
Recent Changes in the Law
A separate State Estate Tax 17 states plus D.C. have a SEPARATE STATE ESTATE TAX!!!!!!!!!!!!!!!!!!!!
Most State Estate Tax Rates
Rates range from 8/10% of 1% to 16% (Connecticut, Nebraska and Washington have different rates.)
Comparison of Federal Coupon and State Coupon
YEAR
MA COUPON
FEDERAL COUPON
2003 2004 2005 2006 2009 2010 2011
$700,000 $850,000 $950,000 $1 Million $1 Million $1 Million $1 Million
$1 Million $1.5 Million $1.5 Million $2 Million $3.5 Million No Estate Tax $1 Million
ESTATE PLANNING AUDIT: QUESTION #1 - ISSUE
• Trusts prepared prior to 2003 typically have language that will cause a Massachusetts estate tax to be paid WHEN THE FIRST SPOUSE DIES. 2003 20052005 20062008
$2,000,000
2009
$3,500,000
Taxable Estate $1,000,000 $1,500,000 Massachusetts $33,200 Tax Due
$64,400
$99,600
$229,200
ESTATE PLANNING AUDIT: QUESTION #2
• Are all of your assets, excluding your retirement accounts, owned by a revocable trust or individual other than you or your spouse? Does your estate planning attorney have an automatic annual updating process to ensure that your estate plan is current?
ESTATE PLANNING AUDIT: QUESTION #2 - ISSUE
• Your trust planning will not work for purposes of avoiding probate, and maximizing estate tax savings, unless assets are titled (owned) in the name of the trust. • In my experience, over 90% of trusts do not own the assets they are intended to protect. • This results in the family having to go to Probate Court to settle an estate. • This also results in the payment of unnecessary estate taxes.
ASSET FLOW ANALYSIS
• Everything in estate planning boils down to asset ownership. • How you own assets during life, during disability, and at death will determine whether you pay estate taxes and whether your estate will have to go through Probate Court.
ESTATE PLANNING AUDIT: QUESTION #3
• Do your beneficiary designations on IRA’s, 401K’s, life insurance, and annuities guarantee that assets will not be distributed to underage or “irresponsible” children and/or grandchildren?
ESTATE PLANNING AUDIT: QUESTION #3 - ISSUE
• If the beneficiary designation on an IRA, 401K, life insurance policy or annuity is a child, then these proceeds will go directly to the child, notwithstanding any protections included in your trust. • Beneficiary designations on these assets should be consistent with your overall trust plan. – Example: Real life case
ESTATE PLANNING AUDIT: QUESTION #4
• Does your estate plan allow your children complete control over their assets while protecting the assets they control from divorce proceedings and divorce property settlements?
ESTATE PLANNING AUDIT: QUESTION #4 - ISSUE
• In my experience, over 95% of estate plans leave assets to children outright, free of trust, without any asset protection, leaving the assets exposed to children’s divorces, lawsuits, and unwanted creditors. • There is a way to allow a child to have full control of their inheritance while also providing asset protection (against the “outlaws”).
ESTATE PLANNING AUDIT: QUESTION #5
• Have you provided asset protection for your children to protect your assets against creditors, bankruptcies or other unintended predators?
ESTATE PLANNING AUDIT: QUESTION #5 - ISSUE
• In my experience, over 95% of estate plans leave assets to children outright, free of trust, without any asset protection, leaving the assets exposed to lawsuits, and unwanted creditors. • There is a way to allow a child to have full control of their inheritance while also providing asset protection (against the “outlaws”).
ESTATE PLANNING AUDIT: QUESTION #6
• Have you organized all of your financial records, deeds, tax information, insurance information, and estate planning documents in one secure place or central location, and does your family know where these are kept?
ESTATE PLANNING AUDIT: QUESTION #6 - ISSUE
• If your financial information and records are not organized (by the person who knows where everything is) before death or disability, the family is left with a morbid scavenger hunt trying to find and re-create financial information and records during an emotionally troubling time. • The family may not be in a position to make timely important financial and tax decisions without this information.
ESTATE PLANNING AUDIT: QUESTION #7
• Does your health care proxy comply with the new medical records privacy act called HIPAA to allow your family to receive medical records when you are not able to obtain them yourself? If you do not have a health care proxy, check “NO.”
ESTATE PLANNING AUDIT: QUESTION #7 - ISSUE
• The new privacy laws require changes to health care proxies and/or the preparation of HIPAA releases in order to allow spouses and family members the ability to obtain medical records. • Without these documents, physicians and medical facilities are not releasing medical records, even during emergencies.
ESTATE PLANNING AUDIT: QUESTION #8
• Have you and your family had a meeting with your estate planning attorney and other advisors along with your trustees and/or selected children to inform them of your estate plan? (This does not require a full disclosure of your assets.)
ESTATE PLANNING AUDIT: QUESTION #8 - ISSUE
• The first time most families find out about a family member’s estate plan is after death. (These are the people that need to implement your plan – the documents don’t do the work for them.) • The families are typically in the grieving period and the families are ill-equipped to learn and comprehend what the plan is about. • The family, often times, is required to make timely decisions that will affect income and estate tax liabilities and asset protection.
ESTATE PLANNING AUDIT: QUESTION #9
• Have your CPA and financial professional had a conversation with your estate planning attorney regarding your estate plan?
ESTATE PLANNING AUDIT: QUESTION #9 - ISSUE
• In order for your estate plan to work, your estate planning attorney must be in communication with your accountant and financial planner, and they should work as a team in taking care of you and your family.
ESTATE PLANNING AUDIT: QUESTION #10
• Does your estate planning attorney provide continual counseling and advice regarding new assets acquired in your estate and accept your phone calls without charging by the hour?
ESTATE PLANNING AUDIT: QUESTION #10 - ISSUE
• Estate planning is a process and not an event. • Estate plans must work at the time of death or disability, and that date is not known to any of the parties. • No one will know today what the law, your assets, your goals, and what the most recent planning techniques will be at the time of your death or disability.
ESTATE PLANNING AUDIT: QUESTION #10 - ISSUE
• Therefore, the only way to ensure that your plan will be up to date is for your estate plan to regularly be updated, and agreed upon by the attorney and the client that the estate plan will be updated on a regular basis. • If updating is required, our experience is that the plan will work and families are taken care of.
ESTATE PLANNING AUDIT: QUESTION #10 - ISSUE
• Therefore, we recommend meeting with an estate planning attorney to draft your legal estate planning documents, who has a REQUIRED updating program.
ESTATE PLANNING AUDIT WHAT WAS YOUR SCORE?
• Please count the number of checked “yes” boxes to figure your score. • If you have scored less than 100% (10/10), the probability that your family will pay unnecessary estate taxes, attorneys’ fees, probate fees, administrative fees, and any other settlement fees is almost guaranteed. I recommend that if you have anything less than 10/10, you meet with an estate planning attorney to address these issues. Please be advised that I am not providing you with any legal advice. I strongly recommend that you meet with an estate planning attorney immediately to address any missing or incomplete items.
QUESTIONS?
• Please complete your seminar evaluation and return it to Alicia • Thank you for attending!