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Estate Planning For MillennialsPresented to Financial Planning Association of Los Angeles
October 24, 2017
Presented By:
LAURA M. CHOOLJIANAttorney at LawD: 310.201.7571F: [email protected]
MEGAN F. RIVETTIAttorney at LawD: 310.785.6844F: [email protected]
1900 Avenue of the Stars, 21st Floor, Los Angeles, California 90067
GreenbergGlusker.com
Overview
Components of a basic estate plan and its benefits
Addressing the attitudes of NextGen/Millennial clients
Planning for incapacity
Transferring assets upon death
Additional components of an estate plan
Tax considerations
Online legal document services vs. attorney-drafted estate plans
Reasons to start estate planning under the age of 40
Top Five Excuses for Avoiding Estate Planning
Death & taxes – I’d rather not think about it.1.
It costs too much money.2.
Who would I leave my assets to anyway?3.
I wish I had an estate.4.
I’m too young – there’s plenty of time!5.
The Basics of an Estate Plan: The What
Will Revocable/Living
Trust Nomination of
Guardian for Minors Digital Assets
Disposition
Advance Health Care Directive
Power of Attorney for Asset Management
The Basics of an Estate Plan: The Why
Centralized management of your affairs on incapacity
Disposition of your assets on death
Relieving the “decision burden”
In the event of your incapacity, how will your property be managed and health care decisions be made on your behalf?
How will you deal with your property and the people you love in the context of death and disability?
Benefits of a Basic Estate Plan
Creditor Protection for Beneficiaries
Avoid Costly
Probate
Second Marriage
Privacy
Peace of Mind
Tax Advantages
Lifetime Management of Affairs
Planning for Incapacity and Avoiding a Conservatorship Advance Health Care Directive Power of Attorney for Asset Management Revocable Trust Nomination of Guardian
Disposition of Assets on Death
Revocable Trust Will (pour-over vs. dispositive) Joint Tenancy with Right of Survivorship Community Property with Right of Survivorship “Pay on Death” or “Transfer on Death” Accounts Assets with beneficiary designations (i.e., life
insurance and retirement assets) Digital asset designations
Advance Health Care Directive
Designates an agent to make health care decisions for you in the event that you are unable to make those decisions for yourself.
Allows you to instruct your agent regarding various health care matters. Your agents will be bound by your wishes.
Allows you to prevent court battles over your care between your agent and other relatives.
Gives your agent the power to manage any of your assets not held in trust.
Principal reason to have a power of attorney: avoid a court-appointed conservator.
Can limit the duration and powers granted to your agent.
Power of Attorney for Asset Management
Springing Power of AttorneySpringing Power of Attorney
Becomes effective only on your incapacity.
Requires written certification by your doctor of incapacity.
General Power of AttorneyGeneral Power of Attorney
Becomes effective immediately. Remains in effect until
revocation or death.
Revocable Trust
With limited exceptions, only property held in a trust will avoid a court-administered probate on your death.
Transferring property to a trust by itself does not change the characterization of your assets as community or separate property.
Transferring property to a revocable trust does not have any tax effect at the time of the transfer.
You retain complete control over your assets as Trustee of your trust.
Can be revoked or amended during your lifetime.
Trust property would be managed by the Trustee in the event of incapacity and death.
Makes gifts to beneficiaries following your death.
A General Assignment will transfer to your revocable trust any tangible property and other assets that do not have formal registration (e.g., jewelry, furniture, china, silver, etc.).
Any assets with formal registration (e.g., your residence or other real property, investment accounts, etc.) should be retitled in the name of the Trustee by signing the appropriate transfer documents.
Funding Your Trust
Last Will and Testament
On your death, your Will is lodged with the clerk of the Superior Court in the county where you reside.
Once lodged with the court, a Will is a public document. “Pour-Over”Will“Pour-Over”Will
Ideally, all or most of your assets are already titled in your name as Trustee of your revocable trust. Any assets in your individual name “pour” into your revocable trust.
Your Will is not used to distribute your assets to your beneficiaries.
Your assets and the terms of distribution are protected from becoming a matter of public record if your trust is fully funded.
Dispositive WillDispositive Will
Your Will provides the terms of who gets what and how much of your assets.
The terms of your Will are a matter of public record.
Statutory fees are imposed by the Probate Code based on the value of the assets subject to disposition by the probate court.
Nomination of Guardian
Nominates one or more people to become the parental guardian to care for a minor child.
You are nominating a person, not appointinga person. Your nomination must be approved by the court.
However, a court typically will honor the parents’ nomination unless the child’s best interests dictate otherwise.
Providing for Your Pets
You cannot leave property to your pet. However, you can make sure that your pet is
taken care of after you pass away. You can ensure that:
– Your pet will go to a caring person or organization.
– The new caretaker will have resources needed to care for your pet.
Digital Assets
Who will have authority to access or manage your digital assets after you die?
Digital assets include email accounts, blogs, social media accounts, financial accounts, digital files, apps, or any other online or digital account or file.
Revised Uniform Fiduciary Access to Digital Assets Act– Use an online tool to express wishes (e.g., instruct service
provider to delete account or designate a person to manage account)
– If there is no online tool available, you can designate a digital asset fiduciary in your estate planning documents.
– If there are no instructions in your estate plan, then the service provider’s Terms of Use will govern.
Other Cost Effective Testamentary Devices
Holding legal title to assets with a Right of Survivorship
Revocable Transfer on Death Deed (“TOD Deed”) Beneficiary Designations (Insurance/Retirement Assets) “Pay on Death” or “Transfer on Death” Accounts
Joint Tenancy with Right of Survivorship
Joint Tenancy with Right of Survivorship
Available to anyone. Only deceased party’s one-half interest
receives a step-up in basis at his or her death.
Community Property with Right of Survivorship
Community Property with Right of Survivorship
Only available to spouses. Both halves of the community receive a
step-up in basis at the first spouse’s death.
Life Insurance
Beneficiaries receive proceeds (i.e., the death benefit) from the policy income tax free.
Proceeds from a life insurance policy can provide liquidity to pay estate tax at death.
Life insurance becomes more expensive as you get older. Proceeds from a life insurance policy are included in your
estate and subject to estate tax if (i) you own the policy or (ii) the policy is payable to your estate.
Having an insurance policy owned by and payable to a properly structured Irrevocable Life Insurance Trust (ILIT) avoids subjecting the policy to estate tax at the death of the insured.
U.S. Federal Transfer Taxes
1. Gift Tax: Applies to lifetime transfers.
2. Estate Tax: Applies to value of estate at death.
3. Generation-Skipping Transfer Tax: Applies to transfers two or more generations below the transferor’s generation (lifetime or at death).
Year Gift/Estate Tax Credit
Gift/Estate Tax Rate
GSTT Exemption
GSTT Rate Annual Exclusion
2016 $ 5.45 Million 40% $5.45 Million 40% $14,000
2017 $ 5.49 Million 40% $5.49 Million 40% $14,000
2018 $ 5.6 Million 40% $5.6 Million 40% $15,000
Online Legal Document Companies vs. Attorney-Drafted Estate Plans
I’ll create my own estate plan online and save a bundle!
Reasons why that may be a bad idea:– High potential for error that can have significant
costs after you die.– They are not permitted to give you legal advice or
to determine the legal sufficiency of your DIY documents.
– The documents are not tailored to individual life situations – there is no individual customization.
Top Five Reasons to Start Planning Under Age Forty
Maintain privacy, avoid family fights and avoid costly probate court proceedings.
5.
Ensure your business is not impacted by your death.
4.
Engage family in active planning.3.
Put measures in place early on in case of unexpected incapacity or death.
1.
You’ll have a say.2.
What You Should Recommend to Every Client
Advance Health Care Directive Power of Attorney for Asset Management Review/Update Beneficiary Designations List of Assets and Accounts Nomination of Guardian (if minor
children)
When Advisors Should Recommend Additional Estate Planning to Millennial Clients
Children Marriage/Divorce* Family rift Purchase of home or other real property Business succession planning Pre-liquidity event planning Approaching a taxable estate
Estate Planning For Millennials
Presented to Financial Planning Association of Los AngelesOctober 24, 2017
Presented By:
LAURA M. CHOOLJIANAttorney at LawD: 310.201.7571F: [email protected]
MEGAN F. RIVETTIAttorney at LawD: 310.785.6844F: [email protected]
1900 Avenue of the Stars, 21st Floor, Los Angeles, California 90067
GreenbergGlusker.com
