Estate Planning Basics January 30, 2020 whitman

Estate Planning Basics January 30, 2020 www.whitman.edu

Agenda What Is An Estate Plan? Finding Advisors Power of Attorney Wills and Trusts Financial Snapshot Special Assets & Taxes www.whitman.edu

What IS an Estate, Why Plan? A. Your estate is everything you own at death, such as bank accounts, investments, real estate, insurance, and personal property (vehicles, furniture, jewelry, art, copyrights, etc). B. A complete estate plan speaks for you. It should: A. Specify any life-prolonging medical care you wish to receive and the person to make decisions on your behalf. B. Specify a person to make financial decisions on your behalf. C. Specify any funeral and burial arrangement you want. D. Specify a guardian for any minor children. E. Identify who receives your property. F. Directs how your heirs receive your property. www.whitman.edu

Why Plan Now? A. Planning now allows you, while you can, to choose how you will be cared for and who will receive your property. B. Without a plan in place, state law and a judge will decide what happens to you and your property. C. Once you have a plan, you should review it: A. B. C. D. E. F. Every 5 years Marriage Divorce Death of a spouse or partner Birth of child Death of child or primary beneficiary www.whitman.edu

Finding Advisors A. Professional advisors should be utilized to provide you with the best advice for your plans and aspirations. B. Advisors will help you navigate questions about: A. Community property B. Evaluating and drafting wills and trusts C. Power of attorney D. Health care directives E. Dispositive options F. Possible taxes G. Selecting a personal representative/executor and/or trustee www.whitman.edu

Power of Attorney Durable Financial Power of Attorney – – – Appoint a person to manage your finances in certain situations. Your attorney-in-fact can have broad powers to manage all of your finances. Becomes active under certain conditions you define or when your doctor determines your lack of capacity. Durable Health Care Power of Attorney, Living Will, and Advanced Medical Directive – – – Appoint a person to serve as your agent for health care decisions. Define, broadly or specifically, the type and manner of care you wish to receive if you no longer have the capacity to make decisions. www.whitman.edu Becomes active under certain conditions you define or

Wills and Trusts A will is a legal document governing the disposition of your property subject to probate. – – – Probate assets are subject to state law, subject to public inspection. Probate laws provide for court filings and creditor deadlines. Court venue for disputes. A trust (i.e. a revocable living trust) is a legal entity that holds your assets during life and distributes the assets at death. – – – Assets held by a revocable living trust are excluded from probate. Private transfer of assets. www.whitman.edu Private provisions of trust.

Wills and Trusts Both wills and trusts can include dispositive provisions to control the use of and/or access to inheritance. – – – A testamentary trust can be established by both structures. The terms of the trust will determine the type of trustee needed. Options are very flexible. Certain assets distribute independently from wills and trusts. – – – POD (banks) and TOD (brokerages) provisions Retirement Accounts Life Insurance www.whitman.edu

Financial Snapshot Estimate your (or your family’s) balance sheet – – – Collect your financial records. January through March are good times – annual statements and tax forms are typically mailed. Organize into assets (property) and liabilities (debt) Review the beneficiary designations of your property – – – – Pre-tax retirement accounts, such as IRAs, 403(b)s, 401(k)s After-tax retirement accounts, such as Roth IRAs Investment and bank accounts Life insurance and annuities www.whitman.edu

Special-Attention Assets Pre-tax retirement accounts – 401(k); 403(b); traditional, rollover, and SEP IRAs; 457 plans. – Retirement accounts funded with pre-tax earnings are subject to income tax. Does not apply to Roth structures. – Income tax due when withdrawals are made. No more “Stretch IRAs.” – Income tax due when inherited by a non-spouse (IRD). Deferred annuities – – – Any increase in value of annuity is taxable as income when received. Survivor benefits (surrender value) will be partially taxable as income. www.whitman.edu Discuss options with your insurance/annuity company.

Possible Taxes Income Tax – Retirement Accounts – – – Income in Respect of a Decedent (IRD) Pre-tax assets will be taxed at some time Review your 401(k), 403(b), IRAs, and deferred annuities Estate and Gift Tax – Washington and Oregon have state-level estate tax – WA: 2,193,000 OR: 1,000,000 Federal estate and gift tax starts at 11,580,000 Capital Gains Tax Reduction – Cost basis step-up upon death www.whitman.edu

Additional Resources Washington State Bar Association: – https://www.wsba.org Thomson Reuters: – http://estate.findlaw.com/ FINRA (Financial Industry Regulatory Authority) – http://brokercheck.finra.org/ Online Templates - Information Only – Please seek an advisor – https://eforms.com/power-of-attorney/wa/ – https://eforms.com/power-of-attorney/or/ FreeWill – Information Only – Please seek an advisor – https://www.freewill.com/ Contact Me: – Ext. 5989 or [email protected] www.whitman.edu