1. ESTATE PLANNING 101: A BEGINNER’S GUIDE TO PLANNING FOR YOUR FUTURE

2. Why is Estate Planning Important? It allows you, while you are still living, to ensure that your property will go to the people you want, in the way you want, and when you want. To control your personal and financial affairs after you no longer can because of death or incapacity (for yourself and your family) To save as much as possible on taxes, court costs, and attorney’s fees (i.e. avoid probate if possible) To avoid disputes, such as, will contests Provides comfort that your loved ones can mourn your loss without being simultaneously burdened with unnecessary red tape and financial confusion

3. Most Common Documents Health Care Power of Attorney (a/k/a Proxy) Durable Power of Attorney HIPAA Release Will – Simple Will – Pour Over Will – Will Trust (Testamentary) Trust – Revocable (Inter Vivos) – Irrevocable – Supplemental Needs Trust – Credit Shelter Trust – Income Only Trust (Medicaid)

4. Health Care Power of Attorney Most important document in my opinion Allows an agent whom you designate to make health care decisions for you should you be unable to make those decisions for yourself Often contains a “Living Will Declaration” requesting the withholding of life support by artificial means when there is no reasonable chance of recovery Section where you can state if you want to be an organ donor Avoids guardianships In the absence of a proxy, health care providers generally look to your next of kin

5. Durable Power of Attorney Authorizes a designated person or persons to act on your behalf in making financial and legal decisions Generally used when authorized or when you are incapacitated Avoids guardianships/conservatorships Very powerful document which should not be taken lightly

6. HIPAA Release Health Insurance Portability & Accountability Act Allows doctors and other health care providers to give information about your health care to your agents, who are generally family members. HIPPA Release language in DPOAHC but clients may want other family members who are not their Agents to be granted access to information

7. Will Primary Estate Planning Document Directs the administration and distribution of your “probate” assets upon death – Can list specific bequests; OR – Attach a list to your will which you can update periodically Designates an Executor to pay your debts and taxes, and to handle the administration and distribution of your assets to beneficiaries Designates a guardian for your minor children (and can avoid distribution of money directly to them) It is a good idea to state family facts in the will which may help to prevent will contests Can obtain Testamentary Trust

8. Revocable or Living Trust Can be amended! Allows control over timing and terms of distributions to beneficiaries Often used to protect assets from creditors of a beneficiary (spendthrift provisions) Assets are subject to creditor claims of the grantor/testator (who established the trust) Private Process- assets do not go through probate Allows for estate tax planning and savings especially for married couples (Marital and Family Trusts) May be established during your lifetime and used with a “pour- over” will as your primary estate planning document Needed in RI to avoid Spouse’s Elective Share (Barrett v. Barrett)

9. Irrevocable Trusts Can not be amended by the donor Any property placed into the trust may only be distributed by the trustee as provided for in the trust document itself Used to help reduce or defer high value assets such as life insurance Income only trusts for Medicaid purposes (RI & MA laws are evolving- 5 year look back period)

10. Probate Property Assets in your sole name – Bank Accounts – Real Estate – Cash – Securities Tangible Personal Property (i.e. furniture, jewelry, books, etc.) Retirement Accounts payable to the estate Life Insurance payable to the estate

11. Non-Probate Property Jointly Owned Assets – Bank Accounts – Real Estate – Securities Assets passing by beneficiary designation – Life insurance (as long as the policies are not payable to your estate) – Retirement accounts (as long as the policies are not payable to your estate) – POD/TOD Assets held in Trust

12. If You Die Leaving a Spouse and No Children Personal Property – Spouse gets $50,000 plus ½ remaining personal property – Parents get balance of personal property, then brothers and sisters, nieces and nephews Real Estate – Spouse gets a life estate in all RI real estate. Also a court may set aside RI real estate up to $75,000 in value outright – Parents get all real estate subject to life estate of surviving spouse, then brothers and sisters, then nieces and nephews

13. Probate Process: What happens once you have passed away Purpose of probate: RI wants to make sure that your assets are distributed to the appropriate individuals Petition to Probate Will – Request that your will be admitted to probate and that an executor be appointed Probate courts have control over assets in your sole name and that do not pass by beneficiary designation – If the total value of such assets is less than $15,000 in RI, probate is not required. Probate Courts do not have control over – Joint Assets – Beneficiary Designations (life insurance and retirement accts) – Property held in Trust Probate has nothing to do with estate taxes

14. Rhode Island Estate Tax System State of Rhode Island estate tax exemption amount is fixed at $850,000. This was increased on January 1, 2010 from $675,000 $1,000,000 estate pays around $33,000 to RI 100% Marital Deduction – Just like the Federal Estate Tax, marital deduction is not available to unmarried couples or DP’s 100% Charitable Deduction

15. Gift Tax System Tax Free Gifts – $13,000 annually per donee – $26,000 per married couple – $1,000,000 lifetime federal gift tax exemption – Unlimited gifts for tuition and medical expenses (must pay the school or medical provider directly There is no RI gift Tax

16. Things to Remember Even if you do not have a probatable estate, you still need to file a Form 100 with the RI Division of Taxation RI automatically places a lien on real property once a person passes dies. An attorney will need to prepare the Form 100 to get an ITL (Inheritance Tax Lien) Discharge If you own investment property you may want to consider establishing a Rhode Island Limited Liability Company (LLC) to hold the property.

17. Questions???