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ESTATE PLANNING FORPARENTS OF MINOR CHILDREN

Isis Maternity

Expert Speaker Series

Jaime T. Kim

Material presented here is intended for information purposes only. It should not be construed as legal advice or the formation of an attorney-client Material presented here is intended for information purposes only. It should not be construed as legal advice or the formation of an attorney-client relationship. Please consult an attorney for individual advice regarding your own personal situation. relationship. Please consult an attorney for individual advice regarding your own personal situation.

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I. INTRODUCTION – A PROCESS

II. COMMON MISCONCEPTIONS

III. DOCUMENTS WHICH EFFECTUATE THE PLAN

- WILLS

- TRUSTS

- DURABLE POWERS OF ATTORNEY

- HEALTH CARE PROXIES

- APPOINTMENTS OF GUARDIAN

IV. TAXATION

OVERVIEW

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• Identifying your personal and financial goals, including:

• Planning for incapacity;

• Providing for spouses and children upon death;

• Avoiding probate; and

• Minimizing taxes.

• Choosing the people who will:

• Manage your assets for your benefit if you are unable to;

• Make health care decisions when you cannot;

• Take responsibility for your minor children’s day-to-day care; and

• Manage your children’s inheritance.

• Establishing documents to effectuate your goals; and

• Reviewing title to your assets in order to take full advantage of your estate planning documents, including:

• Updating beneficiary designations on retirement accounts and life insurance policies; and

• Re-titling individually held property.

I. INTRODUCTION – A PROCESS

ESTATE PLANNING IS A COMPREHENSIVE PROCESS WHICH INVOLVES:

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• Only the wealthy need an estate plan;

• There are adequate substitutes to a well-conceived estate plan, e.g., joint

ownership, designation of beneficiaries, etc.:

• Under current law, if you die without a will, your individually-held

property will be split between your children and your spouse, which

requires your spouse to obtain guardianship of his/her own minor children

through the Probate Court;

• Do-it-yourself estate planning may sound appealing from a cost

perspective, but can backfire by failing to minimize estate taxes or take into

consideration: state-specific probate laws, unique family dynamics, various

options for managing each child’s inheritance, and how to properly title

your specific assets.

• Taxability of joint property, life insurance and retirement plan assets:

• Avoiding probate does not save estate taxes.

II. COMMON MISCONCEPTIONS

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WILL – a written instrument executed with certain formalities, which:

• Must be filed with the Probate Court for allowance upon

death;

• Disposes of property held in your individual name as you so

desire;

• Nominates a personal representative, i.e., executor who will

be responsible for settling your estate;

• Recites powers to be conferred upon a personal

representative;

• Directs payment of taxes;

• Nominates a guardian for minor children.

III. DOCUMENTS WHICH EFFECTUATE THE PLAN

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TRUST – a written instrument which transfers property from one person to

another to be held for a third party. A trust may function like a Will

and comes in different forms:

• Testamentary (created under a Will);

• Living (created during lifetime);

• Revocable (may be changed at any time);

• Irrevocable (may not be changed).

III. DOCUMENTS WHICH EFFECTUATE THE PLAN

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TRUSTS, CONTINUED

• Purposes of revocable trusts:

• Provide for financial management in the event of

incapacity;

• Privacy of arrangements (probate avoidance);

• Provide framework for management of assets for the

benefit of spouse, children, other more remote issue;

• Minimization of estate tax;

• Contemplate unique circumstances, e.g., family

members who have special needs, blended families.

III. DOCUMENTS WHICH EFFECTUATE THE PLAN

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TRUSTS, CONTINUED

• Purposes of irrevocable trusts:

• Estate and gift tax minimization:

• Life insurance;

• Charitable arrangements;

• Gifting to younger generation beneficiaries.

• Asset protection:

• Creditors;

• Preserve eligibility for public benefits.

III. DOCUMENTS WHICH EFFECTUATE THE PLAN

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Pour Over WillAny individually-

owned assets will be directed by the Will

and “pour over” to 1st Spouse’s Revocable Trust AFTER being subject to probate

Assets titled in name of the Trust or that name the Trust as

beneficiary will flow directly to the Trust upon death without

being subject to probate

Assets that name 2nd Spouse as

beneficiary

Assets owned by 1st Spouse and 2nd Spouse

jointly

Pass directly to 2nd Spouse

Marital Fund

Trust is managed for the benefit of 2nd Spouse until his/her death

1st SPOUSE’S

REVOCABLE TRUST

PROBATE COURT

III. DOCUMENTS WHICH EFFECTUATE THE PLAN:

Example of Flow of Assets Upon 1st Spouse’s Death

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Pour Over WillAny individually-

owned assets will be directed by the Will

and “pour over” to 2nd Spouse’s Revocable Trust AFTER being subject to probate

Assets titled in the name of the Trust or that name the Trust as beneficiary will flow directly to

the Trust upon death without being subject to probate

2nd SPOUSE’S

REVOCABLE TRUST

PROBATE COURT

Marital Fund

Trust is managed for the benefit of 2nd Spouse until his/her death

Family Fund

Upon 2nd Spouse’s death, trust is managed for the benefit of the

children

1st SPOUSE’S

REVOCABLE TRUST

MERGE

Family Fund

Trust is managed for the benefit of the children

III. DOCUMENTS WHICH EFFECTUATE THE PLAN:

Example of Flow of Assets Upon 2nd Spouse’s Death

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DURABLE POWER OF ATTORNEY – a written instrument that

appoints an agent to handle legal, business and financial affairs:

• General vs. Limited;

• Designed principally for future incapacity;

• Avoids time, expense and emotional burden of probate court

involvement (i.e., conservatorship).

III. DOCUMENTS WHICH EFFECTUATE THE PLAN

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HEALTH CARE PROXY – a written instrument that appoints an agent

to make health care decisions when you can no longer

communicate your decisions yourself:

• May include a Living Will, e.g., language that directs no

heroic measures or artificial means are used which prolong

life if living in intractable pain and not expected to regain

cognitive faculties.

III. DOCUMENTS WHICH EFFECTUATE THE PLAN

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LIFETIME APPOINTMENTS OF GUARDIAN – 2 TYPES:

• APPOINTMENT OF GUARDIAN OF A MINOR – a

written instrument that appoints a guardian in the event of

both parents’ death or incapacity:

• A Will only comes into effect upon death;

• Guardian named must file acceptance with court before

authority to act commences.

• APPOINTMENT OF TEMPORARY AGENT FOR

CARE OF MINOR CHILDREN – a written instrument that

appoints a short-term guardian when absence is planned:

• Guardian’s authority to act is immediate but can only

last up to 60 days after document is signed.

III. DOCUMENTS WHICH EFFECTUATE THE PLAN

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IV. TAXATION

Take Advantage Of Tax Minimization Tools:

• Federal and State Estate, Generation-Skipping, Gift And Income Tax Exemptions;

• Annual Gift Tax Exclusion;

• Unlimited Marital Deduction:

• Certain Limitations For Non-U.S. Citizen Spouses.

• Charitable Deduction:

• Outright Gifts;

• Charitable Gift Annuities;

• Charitable Remainder or Lead Trusts;

• Donor Advised Funds;

• Private Foundations;

• Conservation Easements/Restrictions.

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HOW DO I GET STARTED?HOW DO I GET STARTED?

Feel free to bee in touch with any questions or concerns you have regarding your

personal situation

(781) 237-0150(781) 237-0150

jkim@kingandnavins.comjkim@kingandnavins.com

Thank you!Thank you!

~ Jaime T. Kim~ Jaime T. Kim