Joan Koonce, Ph.D., CPFFE

Professor and Financial Planning Specialist

Presentation Overview

• What is Estate Planning?• Estate Planning Objectives• Common Estate Planning Myths• Probate Process• Property Passed Through Probate• Property Passed Outside Probate• The Role of Gifts in Estate Planning• Other Estate Planning Issues

What is Estate Planning?

• The process of accumulating, managing, conserving, and transferring assets while taking into consideration personal objectives and tax and other legal issues.

Estate Planning Objectives• Transfer assets to the individuals or

organizations the deceased person wants to receive them

• Minimize transfer taxes– Income– Gift– Estate– State Inheritance– Generation-Skipping

Estate Planning Objectives Continued

• Minimize transfer costs– Documents– Lawyers– Accountants

• Maximize the amount of assets transferred to heirs

Estate Planning Objectives Continued

• Provide necessary liquidity– Funeral expenses– Final medical bills– Taxes

• Carry out the healthcare wishes of an individual

Estate Planning Myths

• Estate planning is needed by the elderly and wealthy people only.

• A simple will lasts a lifetime.• The state has laws to protect my estate.• Joint ownership with my spouse (for married

people) is a practical substitute for an estate plan.

• Estate planning is too expensive.

Probate Process

• The legal process of changing title of the deceased person’s assets (that do not change title in another way) from the deceased person to his or her heirs.

• Probate process involves:– proving the validity of an existing will.– supervising the distribution of assets to heirs.

Probate Process Continued

– making sure heirs receive clear titles to inherited property.

– protecting creditors by making sure that all valid debts are paid before assets are distributed to heirs.

• Not all assets go through the probate process.

Property Passed Through Probate

• Property passed via will• Property passed via state intestacy laws

because:– You didn’t create a written

will– You created a written

will, but it was invalid– Your will did not dispose

of all your property

Property Passed Through Probate Continued

• Property passed via will or state intestacy laws– Fee Simple (Sole Ownership)– Tenants in Common (TC)– ½ Community Property– Personal Property

Wills

• Legal document providing you (will maker) the opportunity to control how your property (assets) is distributed at death– Distribute your property to your heirs– Appoint an executor or executrix– Appoint a guardian for your children– Give assets to a charity– Disinherit individuals– Indicate how estate taxes should be paid

• Prevents your property from be distributed according to state laws (intestacy laws)

Legal Requirements for Wills in Georgia

• You must be at least 14 years old.• You must be of sufficient mind and

memory that you are creating a document to distribute your property after you die.

• The will must be in writing.• The will must be signed by you and

witnessed by at least two people who are not recipients of property distributed via the will.

Will Limitations• Disinherited parties can still contest your will.• Courts can invalidate certain restrictions or

sections of your will if deemed necessary.• State statutes may override parts of a will (i.e.,

a Year’s Support award for spouse and minor children).

Will Limitations Continued

• Will does not supersede automatic transfers after your death (i.e., contract or title).

• Will does not eliminate the payment of debts from your estate.

What Type of Will?

• Statutory Will

• Difference between a:– joint will and – mutual or reciprocal will (sometimes called a

sweetheart will).

Intestacy Laws

• What are Georgia’s intestacy laws?

Disadvantages of Dying Intestate

• Your assets may be distributed equally between your spouse and children.

• Your surviving spouse may give assets to people you do not want to have them.

• Your children may be given an equal amount, but their needs may be different.

• Probate court decides who will be the administrator your estate.

• Probate court decides who will be the guardian of your minor children or other dependents.

Property Passed Outside Probate

• Property that passes by:– State Contract Law– State Titling Law– State Trust Law

State Contract Law

• Transfers by Contract– Life Insurance– Retirement Accounts (IRAs, 403(b)s, 401(k)s,

Annuities)– Pay-on-death (POD) accounts

• Bank Accounts– Transfer-on-death (TOD) accounts

• Investments (Mutual Funds, Stocks, Bonds)

State Titling Law

• Transfers by Title– Joint Tenancy With Right of Survivorship

(JTWROS)– Tenancy By The Entirety (TE)

State Trust Law

• Transfers through Trusts• What is a trust?

– The title to a person’s assets are transferred to another party for the benefit of others.

• Parties to a trust– Grantor (Creator): Person who creates the

trust– Trustee: Person who manages the trust– Beneficiaries: Persons who benefit from trust

assets

Trusts

• Two Classifications of Trusts– Inter Vivos (Living) or Testamentary Trusts– Revocable or Irrevocable Trusts

• Purposes of Trusts– Manage assets for another– Protection from creditors– Split assets– Avoid probate– Avoid estate taxes

The Role of Gifts in Estate Planning

• Gifts reduce the value of your estate.• Gifts are taxable, but there are exclusions

and exceptions that can prevent taxation.• No Gift Tax Transfers

– Annual Exclusion– Lifetime Exclusion

The Role of Gifts in Estate Planning Continued

• Qualified transfers to educational and medical facilities

• Gifts to spouses

• Charitable gifts

Other Estate Planning Issues

• Documents Used to Handle Other Estate Planning Issues– Letter of Last Instruction

– Power of Attorney

– Living Will

– Georgia Advance Directive for Health Care

Letter of Last Instruction

• Provides details of your desires regarding:– your funeral and burial instructions.

• Letter is not legallybinding.

Powers of Attorney

• Legal documents authorizing another person (agent) to act on the behalf of another (principal).– May be revoked

• Powers of attorney should be durable.

• Your powers of attorney do not continue after you die.

Types of Powers of Attorney

• Durable Power of Attorney for Finances– Appoints a person to manage your property

and other financial issues

• Durable Power of Attorney for Health Care– Appoints a person to make health care

decisions

Living Wills

• Also referred to as an Advance Medical Directive or Health Care Proxy

• Legal document expressing your desires regarding the use of life sustaining equipment if you are not able to make the decision

• Georgia Medical Consent Law– Emergency Situations

– Non-emergency Situations

Georgia Advance Directive for Health Care

• Combines Durable Power of Attorney for Health Care, Living Will, and Guardianship in one form

Living Will: A Friend’s Response

• MY LIVING WILL

Last night, my friend and I were sitting in the living room and I said to her, “I never want to live in a vegetative state, dependent on some machine and fluids from a bottle. If that ever happens, just pull the plug.”

She got up, unplugged the TV, and threw out my wine.

Additional Information

• Find more estate planning information at https://www.fcs.uga.edu/extension/money

• Email: jkoonce@uga.edu

• Phone number: 706-542-4865