1. Personal Finance Garman/Forgue Ninth Edition
Chapter 18: Estate Planning
PPT slide program prepared by Amy Forgue, University of Kentucky.

2. Learning Objectives
Identify the ways that your estate can be transferred through contracts and a will.
Determine how trusts can be used to transfer assets and reduce estate taxes.
Summarize the benefits of preparing advance directive documents.
#3: on p 541, “features” is singular – OK as is here?
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3. Learning Objectives (cont.)
List the questions and documents needed to simplify the settlement and transfer of your estate.
Explain the potential impact of estate and inheritance taxes.
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4. Introduction
Estate: your worldly possessions and financial wealth less any debts you owe.
Estate Planning: definite arrangements made during your lifetime that are consistent with your wishes for the administration, disposition, and transfer of your wealth and worldly possessions to your dependents and others when you die.
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5. How Your Estate is Transferred
Probate
Probate Court: special court specifically charged to conduct the distribution of assets of people who have died.
Probate court-supervised process that allows creditors to present claims against an estate and ensures the transfer of a decedent’s assets to the rightful beneficiaries.
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6. How Your Estate is Transferred
Nonprobate property: property that does not go through probate.
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7. Transfer Your Estate by Contracts
Transfers by beneficiary contract designation
Beneficiary: A person or organization designated to receive a benefit.
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8. Transfer Your Estate by Contracts
Beneficiary designation: legal form signed by the owner of an asset providing that the property goes to a certain person or organization in the event of the owners death.
Contingent (or Secondary) Beneficiary: The beneficiary in case the first-named beneficiary has died.
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9. Transfer Your Estate by Contracts
Transfers by property ownership contract designation
Joint Tenancy with Right of Survivorship (or Joint Tenancy): each person owns the whole of the asset, and can dispose of it without the approval of the other owner.
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10. Transfer Your Estate by Contracts
Transfers by payable-at-death contract designation
Payable-at-Death Designation: status granted to individuals who are not joint tenants and who might need to access accounts without going through probate.
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11. Wills Transfer the rest of your estate by will.
Transfers with a will go to your desired heirs
Testator: writer of a will and owner of the estate.
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12. Wills
Codicil: legal instrument with which one can make minor changes to a will.
Executor (or Personal Representative): Person responsible for carrying out the provisions of a will and managing the assets until the estate is passed on to heirs.
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13. Wills
Guardian: Person responsible for caring for and raising any child under the age of 18 and for managing the child’s estate.
Letter of Last Instructions: Nonlegal instrument that may contain suggestions and recommendations useful to the survivors.
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14. Wills Without a will, your property may not go to the desired heirs.
Without a will, an estate transfers to various relatives according to the law in that state, e.g. spouse, children, parents
Right of Escheat: law by which an estate transfers to the state if no surviving relatives exist.
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15. Trusts
Trust: legal arrangement between you as the creator of the trust and the trustee, the person designated to manage any assets in the trust.
Used to transfer assets and reduce estate taxes
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16. Trusts Grantor (or Settler, Donor, or Trustor): creator of a trust.
Trustee: Person charged with carrying out the trust for the benefit of the grantor(s) and heirs.
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17. Trusts Grantor (or Settler, Donor or Trustor) Trustee Corpus
Beneficiary
Remainder Beneficiaries
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18. Trusts
Living Trust: a trust that takes effect while the grantor is still alive.
Testamentary Trust: a trust that takes effect only upon the grantor’s death.
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19. Trusts
Revocable Living Trust: grantor maintains the right to change the trust’s terms or cancel it at any time, for any reason, during his or her lifetime.
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20. Trusts
Irrevocable Living Trust: arrangement in which the grantor permanently gives up ownership and the right to control of the property, to change the beneficiaries, and to change the trustees.
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21. Trusts
Testamentary Trusts: become effective upon the death of the grantor according to the terms of the grantor’s will or a revocable living trust.
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22. Estate Rights Spouses have legal rights to each other’s estates
Partnership Theory of Marriage Rights: Presumes that wedded couples intend to share their fortunes equally.
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23. Estate Rights
Community Property Laws: assume that the surviving spouse owns half of everything that both partners earned during the marriage.
Community Property: consists of property acquired during marriage, except for separable property.
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24. Estate Rights
Separable Property: a property wholly owned by the one spouse.
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25. Advance Directive Documents
Prepare advance directive documents in case you become incapacitated!
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26. Advance Directive Documents
Durable Power of Attorney: a document in which you appoint someone, called an attorney-in-fact, to handle your legal or business matters and sign his or her name to documents.
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27. Advance Directive Documents
Limited (or Special) Power of Attorney: narrower in scope and could be restricted to one specified act or a certain time period.
Springing Power of Attorney: “jumps” into effect when a specified event occurs.
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28. Advance Directive Documents
Advance Medical Directive: a medical guideline that pertains to treatment preferences.
Health Care Proxy: legal document in which individuals designate another person to make health care decisions if they are rendered incapable of making his or her wishes known.
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29. Advance Directive Documents
Living Will: instructs health care providers of your wishes should you become terminally ill with no hope of survival and unable to express your wishes.
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30. Estate and Inheritance Taxes
Federal Estate Tax: Assessed against a deceased person’s estate before property is transferred to heirs or assigned according to terms of a will or state intestacy laws.
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31. Estate and Inheritance Taxes
Exclusion Amount: The value of assets that may be transferred to heirs without incurring an estate tax.
The first $2.0 million of a taxable estate is exempt from the federal estate tax.
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32. Estate and Inheritance Taxes
Marital Deduction: allows an estate to pass on an unlimited amount of assets to a surviving spouse free of estate taxes.
Inheritance Tax: based on how much the beneficiaries get and their right to receive it.
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33. The Top 3 Financial Missteps In Estate Planning
People slip up in investing in estate planning when they do the following:
1. Not having a will.
2. Not having signed advance directive documents.
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34. The Top 3 Financial Missteps In Estate Planning
3. Forgetting to update forms you have signed that contractually award assets, like life insurance and retirement and checking accounts, to ex-spouses, parents, siblings and others because those instructions override your will.
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35. Good Money Habits in Estate Planning
Every three years or whenever you family situation changes, review the beneficiary and ownership designations in your life on insurance policies, retirement plans, bank accounts, and other assets to make certain they will transfer the property according to your wishes.
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36. Good Money Habits in Estate Planning
Always have both an up-to-date will and a letter of last instructions, and revise them as major life events occur.
Prepare and regularly update advance directive documents so others can make the right decisions for you if you become incapacitated.
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37. Good Money Habits in Estate Planning
Once a year, discuss with your spouse or significant other your family’s financial and estate plans.
Be positive that certain family members or friends know where you keep financial records, advance directives, your will, and an estate planning checklist.
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