Estate Planning for the Financial
Services Professional
A Three Part Series of Interactive Lectures
Designed to Provide Financial Professionals
with the Skills Needed to put the Estate
Planning Conversation into their Toolbox of
Solutions to Meet a Clients’ Goals and
Objectives
Why Estate Planning?
• Improve knowledge as a financial advisor
• Easier to get appointments and gain client
confidence
• Combine financial planning concepts
• Significant increase in financial planning fees,
product sales and assets under management
What is Estate Planning?
• Commonly understood definition
– Last Will and Testament
– Health Care Proxy
– Power of Attorney
• Traditional Definition
– Add inter vivos (living) revocable trust
• Financial Advisors’ definition
The Estate Planning Learning Timeline
• Introductory concepts of property, probate and
intestacy
– Health Care Proxy, Living Will, Power of Attorney
• Revocable and Irrevocable Trusts
• Federal and State Estate and Gift Tax System
– Review Form 706 and the Gross Estate
– Deductions from the gross estate
• Marital Trusts; Bypass Trusts; QTIP and QDOT Trusts
• Life Insurance, Annuities, Qualified and Nonqualified
plans in the gross estate
• Powers of Appointment
Advanced Concepts
•
•
•
•
•
•
•
•
•
Estate Freezing Strategies
Chapter 14 & IRC Section 2702; IRC 7520
Grantor Retained Income Trusts (GRIT)
Family Limited Partnerships/LLC’s
Qualified Personal Residence Trusts
Private Annuities/Self-Cancelling Installment Sales
Asset Protection Trusts
Business Succession Models
Advanced Financial and Estate Planning Strategies
using Life Insurance and Annuities
“Do You Guys Have a Will? How About a Health
Care Proxy and a Power of Attorney”
Well I’m not an attorney, and I can’t draft your Wills for you, but
like a budget and life insurance and homeowner’s insurance and
a retirement plan, there are fundamental tools which all
responsible adults should have in place. Now you seem to me
like responsible people, so maybe you’re not fully aware of the
consequences of not having basic estate planning documents in
place. For example, if you die without a will, this is known as
‘dying intestate,’ and the laws of the state of New York define
what happens to your property at your death. Now you’re both
young, and god forbid one of you should die prematurely, but
these things do happen. Are you aware of the rules of intestacy?
God forbid both of you should die in a common accident; it’s an
almost impossible scenario but it does happen. Are you willing to
let the courts decide who will have guardianship of your children
and the property you leave behind?
How Property Passes at Death
• BY OPERATION OF LAW
– By contract (beneficiary designations; transfer on
death accounts; joint tenancies w/Rights of
Survivorship)
– Under Property Law (Joint Tenancies with Rights
of Survivorship; Tenants by the Entirety)
• PROBATE
• INTESTACY
What is a Will?
• NY Estates, Powers and Trusts Law § 1-2.19
– (a) A will is an oral declaration or written instrument,
made as prescribed by 3-2.1 or 3-2.2 to take effect
upon death, whereby a person disposes of property or
directs how it shall not be disposed of, disposes of his
body or any part thereof, exercises a power, appoints
a fiduciary or makes any other provision for the
administration o his estate, and which is revocable
during his lifetime.
– (b) The term “Will” includes a “codicil.”
What is Probate?
• From the latin root “probare” (to prove)
– The action or process of proving before a court of
competent jurisdiction (Surrogate’s Court) that a
document offered for official registration and
recognition is the genuine last will and testament of a
decedent
– The judicial determination of the validity of a will
• Probate does have advantages! Not always as
bad as Suze makes it seem. But it can be
horrendous! Age and family structure are critical
factors.
Probate versus Non-Probate
• The laws of Intestacy, and property which may
be passed via a Last Will and Testament, apply
only to “Probate Property.”
• At death, title to property can pass from the
decedent to another person in three ways:
– By Intestacy
– Through a Last Will and Testament
– By Operation of Law
How Does Ownership Pass at Death?
• How does ownership pass while you’re alive?
• Form of ownership may be determinative
• Beneficiary and Transfer on Death or Payable
on Death Designations
• Probate: the Last Will and Testament
• Intestacy
“By Operation of Law”
• Must first understand how property can be
owned
– The word ‘property’ is often used synonymously
and exclusively by the public to refer only to ‘real
property,’ either vacant land or residential real
estate, or commercial or investment real estate.
– But ‘property’ also refers to tangible personal
property; intangible personal property
Forms of Ownership
• An important concept for data gathering
– Financial Planning
– Estate Planning
• Sole owner
• Jointly, with rights of survivorship
• Jointly, as tenants in common
– Multiple persons may own as tenants in common
• As “tenants by the entirety” [H & W only]
Individual Titling
“SEVARALTY”
• Single owner
Joint Tenants with Rights of
Survivorship
• Each party owns an undivided one-half
interest in the entire property
• At death, the survivor becomes the sole
owner
– This is what “rights of survivorship” means
• Almost all married couples own their homes
as “JTWROS”
• Investment accounts can also be titled as
JTWROS
Tenants by the Entirety
• The “default” rule when married people take
title to property and no form of ownership is
indicated
Tenants in Common
• Two or more persons own a percentage of the
property
• Ownership percentage often 50/50, but does
not have to be
• At death, an owner’s interest passes via
intestacy or by will, but not to the co-owners
via ‘operation of law’
“By Operation of Law”
• Life insurance and annuity beneficiary
designations
• Individual Retirement Accounts
• 401(k)/403(b)/457 defined contributions plans
• Defined Benefit Plans
• Investment Accounts with “Transfer on Death”
designations
• Bank accounts with “in trust for”[ITF] or “Payable
on Death” [POD] designations
Young Families
• Generally good prospects for new financial
advisors to discuss “simple wills.” Complex
‘estate planning’ usually not needed.
• Guardian for minor children: somewhat over
played, but
• Depending on titling of assets, lack of basic
will may be devastating! [Intestasy]
Intestacy
• Estates, Probate and Trusts Law (EPTL) 4-1.1
– If unmarried: all to children
– If unmarried and no children, to parents, then
siblings; then nieces and nephews; then
grandparents (half to each side); then first
cousins. Then NY!
– If married and no children: all to spouse
– If married with children, $50,000 to spouse, then
remainder 50/50!
Intestacy = “Administration”
• The legal process of appointing a fiduciary (one or
more persons with legal authority to transfer property
of a decedent) is known as Probate when the decedent
dies with a valid Last Will and Testament
• The virtually identical process is known as
Administration when someone dies intestate.
• Quite often, the Probate process can actually be more
cumbersome and time consuming than Administration,
depending on a variety of factors (e.g., charitable
beneficiaries require involvement of Charities Bureau
of the Attorney General’s office); people tend to leave
numerous very small bequests to a dozen people.
Do Not Confuse Probate Property and
Property Subject to Estate Tax
• Although related, estate tax and probate
property and often confused
• Reducing Estate Taxes is usually an important
objective of estate planning (but not Level I)
What’s Worse Than Dying?
• “Many people assume that spouses are
automatically entitled to make medical
decisions for each other should one spouse
become incapacitated and need a medical
procedure. While there are provisions in the
law which allow for emergency medical
procedures
The Health Care Proxy
• Appoint a surrogate decision-maker to
authorize medical treatment or refuse medical
treatment
• Pre-dates the “living will” used in most states;
often confused
Other Presentations
• How to Network with Attorneys
– Where to find lawyers
– What to say and what not to say
– Managing expectation
• Income and Estate Tax Planning for Real Estate
Investors
Special Topics
•
•
•
•
Transferring insurance into a trust
The Transfer for Value Rule
1035 Exchanges
Split-Dollar arrangements, including multigenerational split dollar
• Converting joint and survivor contracts into
individual contracts
The Importance of Estate Planning
• If a person does not set forth their wishes, the
State of New York will do so for them
• Usually very disturbing prospects