Alyssa Evans

Finance 3060
Report
Estate Planning
Estate planning is a very important process of accumulating, managing,
conserving, and transferring of the wealth and possessions that we are wanting to give to
our dependents or whoever we so desire when we die. There are many goals, objectives,
and risks of estate planning. The common goals and objectives of estate planning include:
fulfill clients wishes when transferring the property, minimize transfer costs, minimize
transfer taxes, maximize net assets to heirs, guardianship should be provided, clients
health care decisions should be fulfilled, and be able to provide needed liquidity at death.
The risks that go along with planning an estate include: transfer taxes are excessive,
transfer costs are excessive, clients family is not properly provided for later on
financially, clients property transfer wishes go unfulfilled, and there isnt enough
liquidity to cover future clients debts or costs of their death. The estate planning process
consists of four steps, which include: determine what your estate is worth, choose your
heirs and decide what they receive, determine the cash needs of the estate, and select and
implement your estate planning techniques.
The client and planner relationship can come about in many different ways, even
though many clients are very hesitant about having a financial planner plan their estate
for them. Many clients feel this way because of the concern of expenses with estate
planning; they believe that estate planning is only for those who have a lot of money, or
to avoid their own death expenses. It is very important to gather client information and
their ways in which they want to transfer their estate. In addition, gathering a clients
information is essential because it allows the financial planner to gain a better
understanding of the clients finances and possible risks that could be involved. There are
many things a financial planner should collect, but I am only going to name a few: copies
of their wills and trusts, copies of their annuity contracts, their current financial
statements at that point in time, a very detailed list of assets and liabilities, and the family
information. Also, there are many common transfer objectives that go along with estate
planning. These transfer objectives include: avoid the probate process, use lifetime
transfers, plan for future children, transfer property as they want to make estate and taxes
cheaper so they can maximize their assets received by their past heirs, make sure to meet
liquidity needs at death, plan for incapacity of transferor, make sure to provide for the
needs to the spouse that is still alive, and be sure to make arrangements to fulfill the
charitable intentions of the transferor.
Estate planning requires financial planners to make sure they have effective
documents included in the estate plan. The basic documents of estate planning consist of:
wills, letters of instruction, property must have powers of attorney, durable powers of
attorney for health care, living wills, and do not revive orders. Wills are an important part
of any form of estate plan. It is a legal document that allows that person who made the
will to control how they want their property dealt with when they die. Letters of
instruction gives the specific details how the maker of the will wishes to distribute
possession and funeral wishes. This letter, which is given to the executor of the property,
can contain location of personal documents, if there are any safety deposit boxes, and

other financial information that they will need to take care of the estate. The power of
attorney allows a trusted person who is authorized to act on someone elses behalf. A
durable power of attorney for health care makes sure an agent is appointed to make any
sort of health decisions for someone who is not able to make those decisions. A living
will allows the person who owned the estate to provide information on their last wishes.
Also, the purpose of a living will allows people who are terminally ill to die when they
wish to. Do not resuscitate orders are when someone has been sent to the hospital and are
very close to death. In addition, this only applies to CPR and doesnt apply to other types
of medical treatment.
I found an interesting article about estate planning called, Five Things Every
Woman should know about when estate planning. Since around fifty years ago, women
have taken on a major role in the workplace. Therefore, women are now more involved in
the families financial areas and are now helping make long-term planning decisions. It is
known fact that women usually live longer than men. Also, women tend to earn less
money over their lifetime than the average man. There are five important aspects of estate
planning that every woman needs to realize. First, if she has children that are young, it is
important that she have a will. Second, women should get a financial power of attorney
that can keep them and their family out of the court system. Third, they should have a
durable power of attorney for their healthcare that allows her to choose someone to make
medical decisions if she is not able to do it for herself. Fourth, a revocable living trust can
help her avoid probate. Fifth, it is important to keep an eye on their beneficiary
designations and periodically review these designations.
It is very important to understand and avoid estate taxes in estate planning. Estate
taxes are a tax on the net value of a deceased persons estate. A gift tax is a tax when
someone transfers the property assets to another individual while not receiving anything
in return for the transfer. The unlimited marital deduction can only apply to spouses that
are still living and are United States citizens. Also, this deduction allows for assets to be
transferred free from any type of tax being added on to it. Generation-skipping transfer
taxes is where the shift of property takes place when it is given to someone who is two or
more generations younger than the person giving the gift. There are four steps to
calculate your own estate taxes. Step 1, you calculate the value of the gross estate, which
includes the assets of the deceased. These valued assets are life insurance, personal or
real property, pensions, and investments. Step 2, you calculate your taxable estate, which
is equivalent to the gross value of the deceaseds estate minus any debts, liabilities,
funeral expenses, or possible charitable deductions. Step 3, you calculate your giftadjusted taxable estate, which is equivalent to the taxable estate of the deceased with any
additional cumulative gifts of their lifetime that can be taxed. Lastly, Step 4, you
calculate your estate taxes, which are equivalent to the adjusted gifts multiplied by the
right tax rate for the estate.
A will is a legal document that allows the person, who has made the will, the right
to distribute the property, make who they want to be the executor, and make sure to avoid
any intestacy schemes. I found a really interesting article about the intestacy rules called,
Wills and inheritance: how changes to the intestacy rules affect you. On October 1,
2014, began the change in the testacy rules. When someone dies with no will in place,
there are rules to determine who is entitled to receive what. This caused the life interest
concept to disappear. Whoever the surviving spouse is, will take the first $250,000 in

assets, and then be entitled to the rest. The children will only be able to receive what ever
is left above the $250,000. In addition, the children would have to wait until at least 18
years of age to receive it. The rules of inheritance include the following in order: children
or their descendants, parents, brothers or sisters of their descendant, half siblings or their
descendants, grandparents, uncles or aunts or their descendants, half uncles or aunts or
their descendants, and the whole estate passes to the crown. With the new rule in place,
children are no longer at risk of losing their inheritance if after their parents die they are
adopted.
There are many different types of wills. Therefore, when choosing which will is
right for you, make sure to choose the one you believe in. We need a will so we make
sure our property goes to the desired heirs. Also, it enables you to avoid an administrator
appointed by the court and dealing with any associated costs. In Louisiana, we can form a
petition to be able to do Independent Administration, which allows you to make decisions
for succession without approval by the court. Wills can be hand written, generated by a
computer, or even oral. If you are able to get a will drawn up by a lawyer, it is considered
to be the safest way to write a will. When you are in the process of creating a will, it
should be signed by maker, witnessed by two or more people and signed by them, and
notarized. Be sure to always let someone know the location of your will and any
important estate planning documents upon your death.
A will is organized in the following steps: an introductory statement, payment of
debt and taxes clause, disposition of property clause, appointment clause, common
disaster clause, and attestation and witness clause. There are a variety of aspects that
require a will to be valid - they include: a person must be responsible for their decisions,
a person must be the actual one receiving the will, and the will must be able to pass state
laws to confirm it. You can update or change your will, which is called the codicil, by
instituting small changes in the will from the original. When you update or change the
will, your maker must sign, have two or more witnesses, and the original will must be
attached.
A trust is a legal entity that allows someone to figure out how they are going to
distribute their assets once they pass away. A grantor and trustee make up the
characteristics of trusts. A grantor is someone who transfers title into real property, seller,
to another, buyer, by grant deed. A trustee is someone given control to administer the
property in trust with a legal obligation only for specific purposes. There are two basic
types of trusts, which include a living trust and a testamentary trust.
A living trust is usually set up during the grantors lifetime he or she is still alive.
I found an article on living trusts called, Four Facts of Living Trusts. As stated in the
article, there are four claims to living trusts. The first claim is that a living trust will
protect your assets from the hassle, delay, and expense of probate proceedings. The
second claim is having living trust saves money over running a will through probate. The
third claim is that someones assets can be distributed much faster through a living trust
then it would if they were to go through the probate process. The fourth claim is that
someone would save taxes with a revocable living trust. There are two types of living
trust; these are a revocable living trust and an irrevocable living trust. A revocable living
trust is when the grantor has the right to change any of the trusts terms or even cancel it
at any point in time. In addition, a revocable living trust allows more privacy and ease

upon the distribution of the assets when the grantor dies. An irrevocable living trust is a
trust that cannot be changed after the agreement has been signed.
A testamentary trust is set up within a will and established upon the death of the
grantor. There are four different types of testamentary trusts, which include: Standard
Family Trusts, Qualified Terminable Interest Property (Q-TIP) Trusts, and Sprinkling
Trusts. Standard Family Trusts is great for ensuring the assets are held from the first
spouse that has passed away until the other spouse has passed also. While the living
spouse is still alive, they are able to withdraw income from the trust as necessary and
allow the estate to be reduced so taxes would not be as expensive. Qualified Terminable
Interest Property Trusts helps pass any income available to the living spouse without
having to change any names on the assets available. Also, it helps make sure these assets
will then be able to be passed on to their children when the living spouse passes.
Sprinkling Trusts allows for the distribution of assets on an as needed basis, instead of a
normal plan to a group of beneficiaries all at once.
There are so many benefits of using trusts to transfer your estate. These benefits
include: the avoidance of the probate process, trusts are harder to challenge in court,
helps children with certain needs they may have, helps keep money for those children
until they are able to reach maturity, and helps make children aware that they will be able
to receive some inheritance from any past marriages. I found an interesting article
entitled, Estate Planning: Is a trust beneficial? It discusses how a trust is beneficial
because it is such a useful estate-planning tool for families that have net worth. Also,
trusts consist of many advantages. One advantage is that it allows you to put conditions
on how and when your assets are distributed after you die. Another would be that it
allows you to reduce estate and gift taxes. Also, it helps protect your assets from any
creditors and lawsuits that may come your way.
Estate rights are when each spouse is legally tied to the other spouses estate by
common law. The Partnership Theory of Marriage Rights assumes that when a man and a
woman get married, that they will share everything equally. Estate rights consist of two
important types of assets, which are community property and separate property.
Community property is property after the marriage takes place. An example of
community property is: Husband and wife and they have children and he dies, who gets
the property? The propertys assets would be divided, so his wife keeps ownership of
her side and the other half goes toward the children. Therefore, the wife does not inherit
anything from the husband, but only her half. Another example is: Husband and wife
with no children and he dies, who gets the property? The wife would receive all of it,
which includes her half and her husbands half of the property. Separate property is
property before the marriage takes place and is owned only by one specific spouse. An
example of separate property is: Husband and wife and they have children and he dies,
who gets the property? The children receive the property upon the death of father and
the wife does not get anything. Another example is: Husband and wife with no children
and he dies, who gets the property? The brothers and sisters inherit the property and the
parents are only able to use it, but if the parents were no longer alive, the brothers and
sisters would receive all of it. Also, if the parents and brothers and sisters were no longer
living, the wife would receive all of the property.
Estate planning documents are very important to have written up in case you were
to become incapacitated at any given time. These advanced directive documents are

durable power of attorney, a living will, and a health care proxy. A durable power of
attorney is a document where you choose a person to take care of your legal matters and
sign their name on your behalf if you become incapacitated. This legal document is not
included in your will, but goes into effect right before your death. Everything in this
document should be very to the point in all-legal matters. There are two types of durable
powers of attorney, which only occur at a specific point in time and are called the limited
power of attorney and the springing power of attorney. A limited power of attorney may
only be able to take place during a certain time period during the will. A springing power
of attorney is one who jumps into effect when a certain event occurs. A living will
discusses the estate owners wishes regarding any future medical treatment in the case of
something happening with an illness or injury. This is called declaration in Louisiana. A
health care proxy appoints someone to decide on any health care decisions should the
estate owner not be able to handle it themselves.
I found an informative article entitled, Eight Smart Estate Planning Steps to Die
the Right Way. This article would be very helpful and to the point on estate planning.
First, write up a will. This allows you to make sure you die with a will and your estate
goes to your heirs and not people that are complete strangers. Second, consider life
insurance. By doing so, allows your family to have money to take care of funeral and
burial expenses upon your death. Third, establish three important documents that take
action at the end of your life. These documents are a durable power of attorney, release of
information letter, and advanced directive documents. Fourth, try to avoid probate so
there will not be as much legal matters upon your death. Fifth, set up trusts to be able to
avoid probate and any fees. Sixth, divide your estate to make sure certain heirs receive
certain parts of the estate they were supposed to inherit. Seventh, plan your funeral and
perhaps pay your funeral expenses in advance. Eighth, choose either burial or cremation.
In conclusion, estate planning is important for our daily lives and those who
surround us in our life. Many people make mistakes when they invest in estate planning,
which include: never creating a will, no signature on special documents, and forgetting to
keep up to date with past forms on the distribution of assets. Without estate planning, our
desired heirs would not be able to receive the assets from our property in the way we
wanted them distributed. Therefore, making sure beneficiaries receive what they were
entitled to upon the death of the owner of the estate is extremely important.