Estate Planning for
Financial Planners
Chapter 1:
Introduction to Estate Planning
© 2007 ME™ (Your Money Education Resource™)
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Estate Planning Definitions
 Estate planning: The process of accumulation,
management, conservation, and transfer of wealth
considering legal, tax, and personal objectives.
• Decedent – A deceased person.
• Heirs – People who inherit under state laws.
• Legatees – People who inherit under the will.
• Donor – Person who gives a gift.
• Donee – Person who received the gift.
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
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Goal of Estate Planning
 Effective Transfers
 Decedent’s assets are transferred based on his
wishes.
 Efficient Transfers
 Transfer costs are minimized.
 Minimize transfer taxes.
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Gift Tax
GST Tax
Estate Tax
State Inheritance Tax
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
4
Common Goals and Objectives
(2 of
3)
 Minimize transfer costs.
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Lawyers’ fees
Accountants’ fees
Cost of documents
Court fees
 Maximize net assets to heirs.
 Exhibit 2.4: Generally taxes and transfer
costs will consume at least 30% of an
estate
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
5
Common Goals and Objectives
(3 of
3)
 Provide liquidity at death, which is
needed for last medical, taxes, and
burial costs.
 Fulfill client’s health care wishes.
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
6
Impediments to Reaching Goals
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Unwillingness to face mortality.
Procrastination.
Current good health.
Cost.
Lack of knowledge.
Unaware of value of assets.
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
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Risks in Failing to Plan
 Client’s property transfer wishes go
unfulfilled.
 Transfer taxes are excessive.
 Transfer costs are excessive.
 Client’s family is not properly
provided for financially.
 Insufficient liquidity to cover client’s
debts, taxes, and costs at death.
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
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Who Needs Estate Planning?
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Karen is married with 4 children.
Donna is married with no children.
Bill is single with 3 cats.
Kali is single with no pets or children.
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
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Why the Interest in Estate
Planning?
 Federal Transfer Tax – 40% in 2014
 People have an interest in directing
their assets at their death.
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
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The Six Basic Steps in
Estate Planning
1. Establish the Client/Planner Relationship.
2. Gather client information and establish
objectives.
3. Determine the client’s financial status.
4. Develop a comprehensive plan.
5. Implement the plan.
6. Review and update plan when necessary.
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
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Establish the Client/Planner
Relationship
 Talk to your existing clients.
 Estate planning is not required! Many
clients won’t do it unless they are
encouraged.
 Detail your services.
 Send an Engagement Letter.
 Explain how you will be paid
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
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Collecting Client Information
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Current financial statements
Family information
List of assets and liabilities
Copies of policies (i.e., medical, disability, & life)
Annuity contracts
Wills and trusts
Identification of POA and GPOA
Previously filed returns (i.e., income & gift tax)
Assets transferred to loved ones
Other pertinent information
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
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Determine the Client’s Transfer
Objectives
 Common Transfer Objectives
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Transfer property to desired beneficiaries
Minimize taxes, maximize assets to heirs
Avoid probate process
Use lifetime transfers – gifts
Meet liquidity needs at death
Plan for children
Plan for incapacity of transferor
Provide for needs of surviving spouse
Fulfill charitable intentions of transferor
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
14
The Estate Planning Team
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Attorney
CPA
Insurance Professional
Financial Planner (Team Captain)
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
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The Unauthorized Practice of
Law
 Certain activities are clearly reserved
for attorneys (drafting legal
documents).
 Must be licensed attorney in
jurisdiction where practice is
occurring.
 Planner should refer client to licensed
attorney for legal advice.
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06