Principles of Estate Planning, 3rd Edition

Carolynn Tomin, Colleen Carcone

• Publisher: The National Underwriter Company
• Year: 2018
• Print ISBN: 9781949506044
• eBook ISBN: 9781949506051
• Edition: 3
• Topic: Personal Development
• Subtopic: Wealth Management

The Principles of Estate Planning, 2nd Edition is newly revised with updated information on the most current developments in the estate planning field, including ATRA-related tax changes, the use of the new ABLE accounts for medical expenses planning, information on the use of trust protectors, and planning techniques that can be used for newly recognized same-sex marriages.

The book is a complete single-volume source that covers all aspects of estate planning, from the basic principles of property transfers to complex financial techniques that can be used to deal with a wide variety of client circumstances. The authors bring a wealth of experience in both professional and academic arenas that help students understand the concepts that are critical for achieving important professional designations as well building a successful practice with real-world examples of common estate planning problems.

This textbook allows students to work with the most current information, thus helping to gain a better understanding of how to advise clients in the real-world using real numbers. Teach your students using the most up-to-date estate planning textbook on the market.

The authors, Carolynn Tomin and Colleen Carcone, fully address all of the CFP® Certification Examination Principal Topics for Estate Planning. In addition to this on-target approach, Principles of Estate Planning features:
• Content that is systematically organized into subtopics to help simplify the understanding and retention of complex material
• "Chapter Contents" that outline the topics addressed in each chapter
• "Learning Objectives" in each chapter that provide topic focus
• "Client Situations" that present practice scenarios and illustrate the practical application of key concepts in client situations
• "Practitioner Tips" that provide practical advice and guidance
• "Practice Standards" that highlight the related steps in the financial planning process from CFP Board's "Standards of Professional Conduct"
• Chapter summaries, key terms, and review questions that aid recall, retention, and review of the topics
• And much more!

Chapter 1

Introduction to Estate Planning

TOPICS COVERED IN THIS CHAPTER:

Estate Planning Process

• Seven steps in the estate planning process

Fiduciaries

• Types of fiduciaries

¤ Executor/Personal representative

¤ Trustee

• Duties of fiduciaries

• Breach of fiduciary duties

Learning Objectives

• Explain the importance of estate planning and what it can accomplish.

• Describe the unauthorized practice of law.

• Identify the financial planning practitioner’s role and responsibilities in the estate planning process.

• Define fiduciary duties and identify the parties that would be subject to them.

Chapter Contents

Overview

Who Needs an Estate Plan?

Situations That Require Advanced Estate Planning

The Estate Planning Process

Step 1: Understanding the client’s personal and financial circumstances

Step 2: Identifying and selecting goals

Step 3: Analyzing the client’s current course of action and potential alternative courses of action

Step 4: Developing recommendations

Step 5: Presenting recommendations

Step 6: Implementing recommendations

Step 7: Monitoring progress and updating the plan

The Unauthorized Practice of Law

The Financial Planner’s Role

Financial Planner Responsibilities

Fiduciaries

Executor Responsibilities

Trustee Responsibilities

Chapter Highlights

Key Terms

Review Questions

OVERVIEW

Estate planning is the process of planning for the accumulation, conservation, and distribution of an estate in a manner that most efficiently and effectively accomplishes a person’s goals. The purpose of an estate plan is to provide personal protection and financial security to an individual and his family. Most people spend a lifetime accumulating assets and want to distribute them to their loved ones in a manner that reduces transfer taxes and distribution costs. They also want to protect their assets from financial, economic, and creditor risks that might diminish value and affect their ability to achieve their financial planning goals. These common estate planning objectives are addressed in the estate planning process through the development of a comprehensive estate plan that is integrated with a client’s overall financial plan and personal goals.

The client’s estate planning team is led by an attorney. The estate planning attorney is the person primarily responsible for developing the plan and for drafting the legal documents. Financial planners and other advisors may have an important role to play in the estate planning process, and they can provide better service and greater value to their clients by understanding the fundamental principles of estate planning. This knowledge will help planners recognize deficiencies in a client’s estate plan that can be addressed in collaboration with the client’s estate planning team. Planners can also use their knowledge to assist clients in determining realistic estate planning goals and priorities, and they can ensure that the estate plan is properly implemented and monitored once recommendations have been developed.

The financial planner and other professionals, such as insurance specialists, trust officers, and accountants serve the client with specialized expertise. Planners can contribute to the development of an estate plan with their unique knowledge of a client’s personal and financial situation and their grasp of estate planning techniques and strategies. The client is best served when all team members work together to formulate, execute, and maintain a plan that meets a client’s needs and accomplishes his estate planning objectives.

WHO NEEDS AN ESTATE PLAN?

An estate is defined as the rights, titles, or interests that a person, living or deceased, has in property. The manner in which assets are owned determines how they will pass at death, and to whom they will pass. Without proper planning, property could pass to the wrong person in the wrong manner. And if there is no will, individually owned property will pass to others according to state distribution rules, known as state laws of intestacy. Therefore, every adult older than age 18 should have an estate plan.

Estate planning is essential for people who want to care for and provide financial support for spouses, domestic partners, minor children, parents, or other relatives or dependents during their lifetime and after their death. Proper estate planning can preserve a client’s assets for the benefit of others. Estate planning is especially needed for:

• spouses, partners, children, or other dependents who cannot handle or do not wish to handle money, securities, or a business;

• children, spouses, or other dependents who are emotionally or mentally challenged, emotionally disturbed, or physically handicapped;

• spouses, children, or other dependents who are expected to have their own significant wealth;

• elderly parents who are financially—and perhaps emotionally—dependent on their children to provide them with support and care; and

• pets that need to be cared for after an owner’s death.

Estate planning is also needed to prepare for incapacity. Legal documents such as durable powers of attorney, health care proxies, living wills, and trusts can be used to make legal, financial, and healthcare decisions for the benefit of an incapacitated person. Trusts are important estate planning instruments because they can provide continuity of income and asset management in the event the trust creator, the grantor, becomes incapacitated. In the absence of documents such as a power of attorney, the courts will appoint a guardian or a conservator to make these types of decisions on behalf of an incompetent person.

SITUATIONS THAT REQUIRE ADVANCED ESTATE PLANNING

A simple will may be appropriate to meet many clients’ needs, but more sophisticated planning is indicated for people who own substantial assets. A common estate planning goal is to reduce taxes when property is transferred to others. Such taxes take the form of gift taxes, estate taxes, and generation-skipping transfer taxes. Because the estate tax exemption amount has increased significantly over the past several years, many clients will focus on income tax planning within their estate plans. Estate planning is essential for individuals with:

• Estates that exceed $11,180,000 in 2018. Estate planning can minimize estate taxes and consequently transfer more family wealth to beneficiaries.

• Highly appreciated or other unique assets. Understanding the income tax consequences of transferring assets during life or at death has important consequences for an estate and will be an important component of planning.

• Closely held business interests. Estate planning can provide for the orderly transfer of a business to a key employee or a competent family member.

• Charitable objectives.

• Property owned in more than one state.

• Special property such as fine art or a coin, gun, or stamp collection.

• Asset protection concerns for heirs.

• Estates that need sufficient liquidity to pay debts, expenses, and taxes owed at death.

THE ESTATE PLANNING P...

Table of contents

• Cover 
• Title Page
• Copyright Page
• Summary Table Of Contents 
• Detailed Table Of Contents 
• Foreword
• Preface
• About the Authors
• Acknowledgments
• Chapter 1: Introduction to Estate Planning
• Chapter 2: Property Interests
• Chapter 3: Community Property
• Chapter 4: Methods of Property Transfer at Death
• Chapter 5: The Probate Process
• Appendix 5A: Executor’s Primary Duties
• Chapter 6: Wills
• Chapter 7: Incapacity Planning
• Chapter 8: Trusts
• Chapter 9: Income Taxation of Trusts, Estates, and Beneficiaries
• Chapter 10: Gifting Strategies
• Chapter 11: Gift Tax Calculation
• Chapter 12: Gifts to Minors
• Chapter 13: The Gross Estate
• Appendix 13A: Federal Estate Tax Calculation
• Chapter 14: Estate Tax Calculation
• Chapter 15: The Marital Deduction
• Chapter 16: Marital Trusts
• Chapter 17: Charitable Transfers
• Chapter 18: State Death Tax Deduction
• Chapter 19: Generation-Skipping Transfer Tax
• Chapter 20: Powers of Appointment
• Chapter 21: Life Insurance Planning
• Chapter 22: Irrevocable Life Insurance Trusts
• Chapter 23: Estate Planning with Retirement Benefits
• Chapter 24: Estate Freeze Strategies
• Chapter 25: Intra-family and Other Business Transfer Techniques
• Chapter 26: Family Limited Partnerships and Limited Liability Companies
• Chapter 27: Business Planning Strategies
• Chapter 28: Estate Planning for Non-traditional Relationships
• Chapter 29: The Intersection of Income and Estate Tax Planning
• Chapter 30: Common Estate Planning Considerations
• Appendix A: Tax Rate Schedules
• Appendix B: Valuation Tables
• Glossary
• Index