Lorman Foundations Of Estate Planning 07

The Greatest The Greatest Estate Planning Estate Planning

TechniquesTechniquesEarl H. Cohen and Jeffrey C. Earl H. Cohen and Jeffrey C.

O’BrienO’Brien

Mansfield Tanick & Cohen, P.A.Mansfield Tanick & Cohen, P.A.

© 2007 Mansfield Tanick & Cohen, © 2007 Mansfield Tanick & Cohen, P.A.P.A.

Copyright 2007 Mansfield Tanick & Cohen, P.A.

What We’ll Discuss What We’ll Discuss TodayToday

Foundations of Estate Planning-Top Estate Foundations of Estate Planning-Top Estate Planning MistakesPlanning Mistakes

Estate and Gift Tax BasicsEstate and Gift Tax Basics The Top Estate and Gift Tax Planning TechniquesThe Top Estate and Gift Tax Planning Techniques Estate Planning and Succession Planning for Estate Planning and Succession Planning for

Business OwnersBusiness Owners Top Asset Protection TipsTop Asset Protection Tips Estate Plan Implementation and Post-Mortem Estate Plan Implementation and Post-Mortem

PlanningPlanning Case Study DiscussionCase Study Discussion And a few other ideas along the way!And a few other ideas along the way!

Foundations of Foundations of Estate PlanningEstate Planning

Jeffrey C. O’BrienJeffrey C. O’Brien

Mansfield Tanick & Cohen, P.A.Mansfield Tanick & Cohen, P.A.

© 2007 Mansfield Tanick & Cohen, © 2007 Mansfield Tanick & Cohen, P.A.P.A.


Part One: The Part One: The Importance of an Importance of an

Estate PlanEstate Plan


Estate Plan by Default – Estate Plan by Default – The Intestacy StatutesThe Intestacy Statutes

Uniform Probate Code (adopted in Uniform Probate Code (adopted in Minnesota) provides for certain “default” Minnesota) provides for certain “default” rules as to administration of an estate in rules as to administration of an estate in the absence of a will.the absence of a will.

Intestacy statutes Intestacy statutes ASSUMEASSUME how the how the decedent would have wanted his/her decedent would have wanted his/her estate distributed.estate distributed.

Determination of heirs; equal distributionsDetermination of heirs; equal distributions Spousal shareSpousal share Intestate succession can pose problems for Intestate succession can pose problems for

surviving heirs, especially with combined surviving heirs, especially with combined families and family-owned businessesfamilies and family-owned businesses


Ten Things Estate Ten Things Estate Planning Can Do For YouPlanning Can Do For You

Provide for your immediate familyProvide for your immediate family (guardians for minor (guardians for minor children)children)

Provide for other relatives who need helpProvide for other relatives who need help (elderly (elderly parents, disabled relativesparents, disabled relatives

Get your property to beneficiaries quicklyGet your property to beneficiaries quickly (revocable (revocable trusts)trusts)

Plan for incapacityPlan for incapacity (powers of attorney, health care (powers of attorney, health care directivesdirectives

Minimize expenses Minimize expenses (avoid probate)(avoid probate) Choose executors/trustees for your estateChoose executors/trustees for your estate Ease the strain on your family Ease the strain on your family (funeral planning)(funeral planning) Help a favorite causeHelp a favorite cause (charitable gifts) (charitable gifts) Reduce taxes on your estateReduce taxes on your estate Make sure your business goes on smoothlyMake sure your business goes on smoothly


Avoiding ProbateAvoiding Probate

Costs moneyCosts money

Takes timeTakes time

PublicPublic


State and Federal Estate State and Federal Estate TaxesTaxes

Federal Estate Tax Applies to Federal Estate Tax Applies to Estates With Value of $ 2,000,000 Estates With Value of $ 2,000,000 and moreand more

Minnesota Estate Tax: 1,000,000Minnesota Estate Tax: 1,000,000 Note: valuation of estate for estate Note: valuation of estate for estate

tax purposes includes life insurance tax purposes includes life insurance proceedsproceeds


Appointments of Guardians Appointments of Guardians for Minor Childrenfor Minor Children

Lack of an estate plan means decedent Lack of an estate plan means decedent parent has no say in who serves as parent has no say in who serves as guardian for surviving minor childrenguardian for surviving minor children

Arguments ensueArguments ensue State will appoint conservator to manage State will appoint conservator to manage

orphaned children’s assets; only lasts orphaned children’s assets; only lasts until age 18until age 18

Solution: take care of these issues in your Solution: take care of these issues in your willwill


Health Care InstructionsHealth Care Instructions

Worst case scenario: Terri SchiavoWorst case scenario: Terri Schiavo Setting forth in writing your desires Setting forth in writing your desires

as to health care, particularly health as to health care, particularly health care in the event of terminal or care in the event of terminal or critical illness, provides clarity and critical illness, provides clarity and eliminates arguments among sideseliminates arguments among sides


Business Succession Business Succession PlanningPlanning

Most family business owners want Most family business owners want the ownership of their business to be the ownership of their business to be transferred to the children who are transferred to the children who are active in the businessactive in the business

More on this later today…More on this later today…


Part Two: The Basic Part Two: The Basic Estate PlanEstate Plan


Basic Estate Plan Basic Estate Plan DocumentsDocuments

Last Will and TestamentLast Will and Testament Health Care DirectiveHealth Care Directive Power of AttorneyPower of Attorney Durable Power of AttorneyDurable Power of Attorney


Last Will and Testament Last Will and Testament – Statutory Requirements– Statutory Requirements Minnesota has codified the basic Minnesota has codified the basic

requirements of a willrequirements of a will Testator must be of the age of majority Testator must be of the age of majority

(18)(18) Testator must be “of sound mind and Testator must be “of sound mind and

memory” – must understand what he/she memory” – must understand what he/she is signingis signing

Will must be (i) in writing; (ii) signed by Will must be (i) in writing; (ii) signed by Testator; and (iii) witnessed by at least Testator; and (iii) witnessed by at least two other peopletwo other people


The “Simple” WillThe “Simple” Will PreamblePreamble Article One: Payment of Expenses/TaxesArticle One: Payment of Expenses/Taxes Article Two: Special GiftsArticle Two: Special Gifts Article Three: ResidueArticle Three: Residue Article Four: Fiduciary SelectionArticle Four: Fiduciary Selection Article Five: Fiduciary ProvisionsArticle Five: Fiduciary Provisions Article Six: General Governing ProvisionsArticle Six: General Governing Provisions Article Seven: Guardians/ConservatorsArticle Seven: Guardians/Conservators Self-Proving AffidavitSelf-Proving Affidavit


Simple Will: PreambleSimple Will: Preamble

I, TESTATORI, TESTATOR, , of ___________ County, of ___________ County, State of MinnesotaState of Minnesota, , revoke any prior revoke any prior wills and codicilswills and codicils, , and make this my and make this my willwill..


Article One: Payment of Article One: Payment of Expenses/TaxesExpenses/Taxes

Provide for payment of expenses of Provide for payment of expenses of last illness and funerallast illness and funeral

Provide for payment of debts and Provide for payment of debts and administration of estate administration of estate

Provide for payment of estate taxesProvide for payment of estate taxes


Article Two: Special GiftsArticle Two: Special Gifts

Provide for gifts of personal propertyProvide for gifts of personal property Written list permitted (524.2-513)Written list permitted (524.2-513) Specific gifts of cars, cash, jewelry, Specific gifts of cars, cash, jewelry,

etc. should be specifically listedetc. should be specifically listed


Article Three: ResidueArticle Three: Residue

Provides for distribution of all assets Provides for distribution of all assets not distributed in Article Two as not distributed in Article Two as special giftsspecial gifts

If Testator is married with children, If Testator is married with children, Testator will likely want to include Testator will likely want to include trust provisions in the event spouse trust provisions in the event spouse predeceases and children are still predeceases and children are still minorsminors


Article Four: Fiduciary Article Four: Fiduciary SelectionSelection

Nomination of personal Nomination of personal representative and successor(s)representative and successor(s)

Nomination of custodians under Nomination of custodians under Uniform Transfers to Minors Act for Uniform Transfers to Minors Act for gifts to beneficiaries under the age gifts to beneficiaries under the age of 21of 21


Article Five: Fiduciary Article Five: Fiduciary ProvisionsProvisions

Administrative Powers: Administrative Powers: To sell propertyTo sell property To settle claimsTo settle claims To continue a businessTo continue a business To make distributionsTo make distributions

Administrative Provisions:Administrative Provisions: Request for formal administrationRequest for formal administration Waiver of bond requirementsWaiver of bond requirements


Article Six: General Article Six: General Governing ProvisionsGoverning Provisions

DefinitionsDefinitions Rules of ConstructionRules of Construction

Governing LawGoverning Law Written lists of tangible personal Written lists of tangible personal

property controlproperty control Intentional OmissionsIntentional Omissions

““I have intentionally limited gifts to my I have intentionally limited gifts to my descendants to those provided in this descendants to those provided in this will”will”


Self-Proving AffidavitSelf-Proving Affidavit

It is recommended that the witness It is recommended that the witness signatures be separately notarized signatures be separately notarized (in the event a witness cannot be (in the event a witness cannot be located)located)

An affidavit is typically attached as An affidavit is typically attached as the last page of the will, signed by the last page of the will, signed by testator and two witnesses and testator and two witnesses and notarizednotarized


Health Care DirectiveHealth Care Directive

Part I: Appointment of Health Care Part I: Appointment of Health Care AgentAgent

Part II: Health Care Instructions: Part II: Health Care Instructions: General thoughts/desires on health careGeneral thoughts/desires on health care Desires as to specific types of treatmentDesires as to specific types of treatment

Part III: Making It Legal:Part III: Making It Legal: SignedSigned Two Options for acknowledgment – Two Options for acknowledgment –

notarized or signed by two witnessesnotarized or signed by two witnesses


Statutory Short Form Statutory Short Form Power of AttorneyPower of Attorney

Minnesota Statutes Section 523.24Minnesota Statutes Section 523.24 Statutory Form Power of Attorney Statutory Form Power of Attorney

allows for appointment of allows for appointment of attorney(s)-in-fact to handle financial attorney(s)-in-fact to handle financial matters for the principalmatters for the principal

Form also allows for election as to Form also allows for election as to whether attorney-in-fact can transfer whether attorney-in-fact can transfer property and if an accounting is property and if an accounting is requiredrequired


Durable Power of Durable Power of AttorneyAttorney

Durable Power of Attorney is effective from date Durable Power of Attorney is effective from date of execution until deathof execution until death

Continues even if principal is disabled, Continues even if principal is disabled, incompetent or absentincompetent or absent

Durable Power of Attorney goes beyond financial Durable Power of Attorney goes beyond financial matters and also governs personal carematters and also governs personal care

Practice tip: if executing a general durable Practice tip: if executing a general durable power of attorney and a health care directive, power of attorney and a health care directive, attorney-in-fact and health care agent should be attorney-in-fact and health care agent should be same (because agent must heed principal’s same (because agent must heed principal’s wishes in health care directive)wishes in health care directive)


The Top Ten Estate The Top Ten Estate Planning Mistakes!Planning Mistakes!

Not having a properly drawn will!Not having a properly drawn will! Relying on Joint Tenancy!Relying on Joint Tenancy! Leaving everything to a spouse!Leaving everything to a spouse! Leaving everything to one child!Leaving everything to one child! Failing to Plan for adequate Failing to Plan for adequate

liquidity!liquidity!


The Top Ten Estate The Top Ten Estate Planning Mistakes!Planning Mistakes!

Having insufficient life, health and Having insufficient life, health and long term care insurance!long term care insurance!

Failure to make lifetime gifts!Failure to make lifetime gifts! Failure to keep life insurance out of Failure to keep life insurance out of

your estate for tax purposes!your estate for tax purposes! Failure to transfer assets to trusts!Failure to transfer assets to trusts! Failure to make proper beneficiary Failure to make proper beneficiary

designations for retirement plans!designations for retirement plans!