Estate Planning University

“In this world nothing can be said to be certain, except death and taxes.”

–           Benjamin Franklin

Death and Taxes – As much as we do not like talking about the former we find the two guaranteed things in life are easily reviewed together. This quarter we want to bring your current estate plan to the forefront, help brush the dust off and enable intentional planning around Your Purpose and Your Legacy.

 “By failing to prepare, you are preparing to fail.”

–           Benjamin Franklin

California is known as a “trust state” and it is likely you will have created a trust before you pass away. If you don’t have a trust you need to start thinking about your current estate plan in the unlikely event of your death. If you die intestate, which is without a valid will, California has a plan for you whether you like it or not. Having a living trust can help you avoid this time consuming and expensive scenario. Likewise, if you have taken the necessary steps to create a living trust it is important to ensure your trust is properly funded, reviewed periodically for changes in the law and your intent is clearly communicated to those you will leave behind. Dependent upon your circumstances you may also require more advanced estate planning strategies to protect your loved ones and transfer assets to the next generation.

In our continued commitment to assist individuals, families and businesses to enable a lifetime of rational, informed and well-reasoned financial decisions, we have put together a list of considerations for you and your family to review regarding Your Estate Plan.

We have identified three levels of estate planning and invite you to choose the appropriate course based on where you are at in the process:

  • Undergraduate – You are just getting started.
  • Post-Graduate – You have a Living Trust in place and need a review.
  • Doctorate – You have a complex estate and require advanced planning.


IMPORTANT NOTE: California Probate Code and The State Bar of California provide you with a blank, form-fill copy of a statutory will, financial power or attorney and health care directive. If you have not completed these basic estate documents, please contact us and we are happy to provide you these documents as a part of the value we provide.

Create A Will – A will allows you to designate who you want to inherit your property and serve as guardians to care for minor children should something happen to you or your spouse.

Consider A Trust – Like a will, a trust allows you to designate the transfer of your assets to your desired beneficiaries while ensuring survivors won’t have to deal with probate court, which can be a time-consuming and expensive process.

Create Health Care Directives – Writing out your wishes for health care can protect you if you become unable to make medical decisions for yourself. Health care directives include a health care declaration (living will) and a power of attorney for health care, which gives someone you choose the power to make decisions if you are unable[i].

Create A Financial Power of Attorney – With a durable power of attorney you can give a trusted person authority to handle your finances and property if you become incapacitated and unable to handle your own affairs. The person you name to handle your finances is called your agent or attorney-in-fact (but doesn’t have to be an attorney)[ii].

Make Final Arrangements / Cover Funeral Expenses – Whether you have life insurance, a funeral payment plan or enough in assets to cover your arrangements, you should review your wishes with loved ones and guardians. Make your wishes known regarding organ and body donation and disposition of your body — burial or cremation. It is important to communicate your intentions to those surviving you.



IMPORTANT NOTE: Estate tax laws change over time and require you to review your estate planning documents. We encourage you to review the entire document specifically for the requirement to create a mandatory division into an “A” and “B” trust and for “stretch” IRA provisions which help to preserve assets.

Create an Inventory of Your Assets & Liabilities

Physical Assets: A good rule of thumb is to take a look around your home or business and determine what items have a value north of $100. Such items might include the home or business location itself, TVs, Computers, Vehicles including Recreational Vehicles, Jewelry etc.

Non-Physical Assets: These items are assets which you cannot touch, feel, taste or smell. These would be accounts in your possession such as bank accounts, brokerage accounts, Insurance policies, annuities etc.

Liabilities: It is important to make a list of open credit cards, auto loans, mortgages, HELOCs and any other open debts you may have so that your spouse or designated trustee/guardian can quickly and easily settle your estate.

Review IRA, 401(k) and Other Retirement Accounts – If you have changed jobs over the years, it is quite likely you have several different 401(k)-type retirement plans open with past employers or maybe even several different IRA accounts. While this normally won’t create a big problem while you are alive (except lots of additional paperwork and account management), you may want to consider consolidating these accounts into one individual IRA account to take advantage of better investment choices, lower costs, a larger selection of investments, more control and less paperwork for estate purposes.

File Beneficiary Forms – In life things change. It is crucial to keep current with ALL of your beneficiary designations. By naming a beneficiary for bank accounts, brokerage accounts, annuity contracts, retirement plans and other assets you create a situation in which the assets will pass via contract to the beneficiary listed at your death. No matter how you list these accounts/policies in your will or trust, depending on the registration of the account, the beneficiary listing will take precedence[iii]. Contact the customer service team or plan administrator for a current listing of your beneficiary selections for each account. Review each account to make sure the beneficiaries are listed exactly as you like and in accord with your trust.

Review Your Life Insurance Needs – If you have young children, own a house or have the potential to owe significant debts or estate tax when you pass away, life insurance may assist with the planning for such situations. When was the last time you reviewed your policies? Are you over-insured? Under-insured? Being over-charged? Life insurance Death Benefit proceeds are also includable in your Gross Estate if not registered properly potentially resulting in unintended tax consequences. Review the registration of life insurance on a regular basis to protect against this scenario.

Understand Estate Taxes – The updated 2016 Estate Tax Exemption is $5.45 million ($10.9 million for a married couple)[iv]. What does this mean? For deaths in 2016, the federal government will impose an estate tax at your death if your taxable estate is worth more than $5.45 million ($10.9 million for a married couple)[v].  If you find that you may be nearing this threshold, it is a good time to review your options for tax savings.

Protect Your Business – If you are the sole owner of a business, you should have a succession plan. If you own a business with others, you should have buyout agreement options and review the ways to fund them.


2016 Estate Tax Exemption: $5,450,000 
2016 Annual Gift Tax Exclusion: $14,000
2016 Estate Tax Top Rate: 40%

Wealth Transfer Strategies – For investors with large estates looking to reduce potential taxes there are certain gifting vehicles which make it possible to pass assets to the next generation tax free. Direct payments for Medical care of a loved one or direct payments to Educational Organizations are not restricted by annual exclusion. If you have children or grandchildren there are options to accelerate the funding of a 529 plan to help reduce your estate tax liability. The annual exclusion remains $14,000 in 2016. This means that you can gift $14,000 per individual, or $28,000 for a married couple, to as many individuals as you would like, without reducing your lifetime exemption[vi]. These options should be reviewed.

Irrevocable Trust Planning – Property placed into an Irrevocable Trust no longer belong to the Grantor’s estate, it now belongs to the Trust (a separate entity). Changing the ownership of assets can be a powerful way to reduce estate assets and provide protection from creditors.  The term “irrevocable” generally implies the trust cannot be changed under any circumstances, but this may not always be the case.  Just like renting a house or leasing a car, the assets are still there for your benefit. A special power of appointment in the trust document may allow the Grantor the freedom to modify the named beneficiaries at his discretion without affecting the benefits of the irrevocable trust[vii].

Charitable Gifts – Whether an outright donation, Charitable Remainder Trust (CRT), Charitable Lead Trust (CLT) or Pooled Income Fund (PIF) is used, gifting to your favorite charity can be a powerful and self-rewarding way to minimize your estate tax liability[viii]. If you have children it is wise to share your intent with them ahead of time so they understand your reasoning. Discussing your estate plan with your family serves to minimize surprises when an inheritance is distributed. In the case of giving to charity, you’re not only talking about money, you’re talking about creating a legacy. This may be something your kids will not only admire, but also want to carry on.

Endowment & Foundation Planning – While Charitable Gifting allows for immediate use of funds, dependent on the circumstances it might make more sense to grow the assets you ultimately would like to donate for the benefit of your favorite charity. The use of an Endowment Strategy or Foundation Planning can be a great way to make an irrevocable gift now that will provide for tax benefits today and tomorrow, while also allowing for the continued management and oversight of growth of those assets.

Handling What Life Throws At You – No matter where you are in the process, you should review all of your estate documents every three to five years. A significant life change (marriage, divorce, birth of child and so on) triggers an immediate review. Keep the following documents close for easy review and compilation[ix]:

a.)        Will

b.)        Trust(s)

c.)        Insurance policies

d.)        Real estate deed(s)

e.)        Certificates for stocks, bonds, annuities, etc.

f.)         Bank accounts, mutual funds, and safe deposit boxes

g.)        Qualified Retirement plans, 401(k) accounts, IRAs, etc.

h.)        Debts: credit cards, mortgages and loans, utilities, and unpaid taxes

i.)         Funeral prepayment plans and any final arrangement instructions you have made.

Our purpose is to enable a lifetime of rational, informed and well-reasoned financial decisions. We are here to assist you in all stages of the estate planning process. We welcome your input and ask that you contact us with any questions or to help you establish your own approach to ensuring that your estate plan is organized, effective and up-to-date.

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