Transcript 2013 Estate Planning

Recognizing the Need to
Engage in Estate
Planning
Presented by Anita Purewal CPA MSBA
Who Needs Estate Planning?
 2014 Estate Tax Exemption:
• $5,340,000 /Individual
• $10,680,000/Couple
 2014 Annual Gift Exemption $14,000
 Only the 0.14% of all estates in 2013 will
owe tax
 Estate tax 40%
(lower than income at the
brackets for fed & CA)
highest
You Need Estate Planning
 All Estate Plans should:
– Designate someone to:
• Manage your assets
• Make health care and personal care decisions for you if you
ever become unable to do so for yourself.
 Small Estates
– Address WHO
• Maximize Basis Step-up – Who will pay Income tax
 Large Estates
– Address WHO & HOW to:
• Minimize Transfer Taxes (Gift, Estate & GST)
• Preserving assets for beneficiaries
Estate Planning Affirms Your Intent &
Powers
 Estate planning is the process of legally
structuring the future disposition of your estate.
 Through estate planning, YOU may determine:
• Whom do I want to receive my assets—and when?
• Who should manage those assets if I cannot—either during
my lifetime or after my death?
• Who should make decisions on my behalf concerning my care
and welfare if I become unable to care for myself?
• What do I want done with my remains after I die and where
would I want them buried, scattered or otherwise laid to
rest?
What is an Estate?
 Estate = Net Worth
– ALL Assets at Fair Market Value
• Real Property, Life Insurance Proceeds, Personal
Property, Investments, Retirement Accounts,
Payments due to you
– Less Liabilities (Secured & Unsecured)
– Less Funeral Expenses, Medical Bills, Estate
Administration Expenses
No Estate Plan
 Intestate
– Requires Probate Court (8-10 Months)
– Assets Pass to legal heirs under statute:
• Community Property to Surviving Spouse
• Separate Property
– ½ to Surviving Spouse & ½ to Sole Child
– 1/3 to Surviving Spouse & 2/3 to Surviving
Children/Descendants (Grandchildren etc.)
Intestate Estates - Probate
 Probate: Court Supervised Process to transfer
title of Assets
– No Privacy
• Probate Records are open to the public
– Probate Fees (Statutory)
For Executor & Attorney EACH
• 4% of the first $100,000
• 3% of the next $100,000
• 2% of the next $800,000
• 1% of the next $9,000,000
$4,000 x 2 = $8,000
$7,000 x 2 = $14,000
$23,000 x 2 = $46,000
$113,000 x 2 = $226,000
Intestate Estates – Probate (cont.)
 Probate Avoidance
– Assets with Designated Beneficiaries:
•
•
•
•
•
•
Retirement Plan Accounts
Pay on Death Assets (i.e. U.S. Bonds)
Transfer on Death Assets (i.e. Securities Accounts)
Life Insurance Proceeds
Assets held by Trusts
Assets titled WROS
– Joint Tenancy WROS
– Community Property WROS
Intestate Estates - Succession
If you die with:
here’s what happens:
• children but no spouse, parents, or siblings • children inherit everything
• spouse but no children, parents, or siblings • spouse inherits everything
• parents but no children, spouse, or siblings • parents inherit everything
• siblings but no children, spouse, or parents • siblings inherit everything
a spouse and children
• spouse inherits all of your community property
and 1/2 or 1/3 of your separate property
• children inherit 1/2 or 2/3 of your separate
property
a spouse and parents
• spouse inherits all of your community property
and 1/2 of your separate property
• parents inherit 1/2 of your separate property
a spouse and siblings, but no parents
• spouse inherits all of your community property
and 1/2 of your separate property
• siblings inherit 1/2 of your separate property
Estate Planning – Beyond the Financial
 Essential Basic Documents:
– Will
• state who you want to inherit your property and name a
guardian to care for your young children should
something happen to you and the other parent (avoids
court appointed guardian)
– Advance Health Care Directive
• can protect you if you become unable to make medical
decisions for yourself. Health care directives include a
health care declaration ("living will") and a power of
attorney for health care, which gives someone you
choose the power to make decisions if you can't
Estate Planning – Beyond the Financial
(cont.)
 Essential Basic Documents (Cont.):
– Durable POA
• financial power of attorney for finances, you can give a
trusted person authority to handle your finances and
property if you become incapacitated and unable to
handle your own affairs.
– Trust
• hold your property in a living trust, your survivors
won't have to go through probate court, a timeconsuming and expensive process.
Trusts
 Inter-Vivos – Created & funded during the settelors life
– may or may not be in the estate (Revocable/Irrevocable)
– Latin for “among the living”
 Testamentary – Came into existence at passing of settelor
– included in the estate
 Revocable
– included in the estate
 Irrevocable – settelor can’t revoke
– Not included in the estate
– Creditor Protection from Settelor’s Creditors
 Tax
– Trusts are at the highest marginal Individual tax Bracket at only $11,950 of Taxable
Income (Fed)
– California – better trust brackets & no Estate Tax
Contact Info
Anita Purewal, CPA MSBA
GALLINA LLP
925 Highland Pointe Drive, #450
Roseville, CA 95678
(916) 784-7800
Email: [email protected]
“I want to leave my children enough that they feel they can do anything,
but not so much that they do nothing.” ~ Warren Buffet
“Never say you know a man until you have divided an inheritance with
him.” ~ Johann Kaspar Lavater
“I would as soon leave my son a curse as the almighty dollar.” ~ Andrew
Carnegie