Chapter 15
Personal Finance
Wills
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Estate – all assets minus debts at the time of
death.
Estate Planning – preparing a plan for
transferring assets at the time of your death.
Will – legal document that tells how you want
your estate to be distributed after your
death.
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Executor – carries out the transfer of
your estate when you die.
Simple will – short legal document
that lists the people you want to
inherit and what you want each to
receive.
Wills (cont.)
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You must have 2 witnesses to your
will (they can’t be in the will).
Holographic will – handwritten, not
recommended.
Inestate – when a person dies w/out
a will.
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Example of inestate distribution on p.
413.
Codicil – legal changes to a will. Must
be done by an attorney.
Power of Attorney
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Legal document authorizing someone to act
on your behalf.
Limited – lasts 30 days to a year or pertains
only to a particular transaction.
General – authorizes that person to make
decisions for you.
Trusts
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Legal document in which an individual (the
trustor) gives someone else (the trustee)
control or property, for ultimate distribution
to another person (the beneficiary).
Provides for heirs who might not be able to
effectively manage assets for themselves.
Minimizes inheritance or estate taxes.
Trustee may be a financial institution or a
person.
 Trusts
 Inter
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(cont.)
vivos (living trust) – exists during the life of
the trustor.
Testamentary trust (trust will) – takes effect
upon the death of the trustor. Useful if your
beneficiaries are minor children or if you wish to
avoid high taxes on your estate.
Probate is a court-supervised process of paying
your debts and distributing your property to your
heirs.
Joint Ownership
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Two or more people own an undivided
interest in a property.
Joint tenants w/ right of survivorship –
ownership is split 50-50 for estate tax
purposes. When one spouse dies, the other
automatically becomes the sole owner.
Joint tenants w/out right of survivorship –
when one person dies, the property passes to
his or her heirs.
Federal Estate Taxes
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Estate tax – tax on property (must meet the
minimum dollar amount) transferred by
deceased people to their heirs. Deducted
from value of the estate.
If you plan well, you can avoid estate taxes.
If you transfer property to a spouse or a
charity, you will not need to pay estate
taxes.
State Inheritance Taxes
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Tax on an heir who receives property from a
deceased person’s estate.
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The heirs pay this, not the estate.
Federal Gift Taxes
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Life estate – pass title to an heir, but you
may live on the premises for as long as you
live.
Gift tax – tax on a gift of money or property.
Paid by the giver.
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You may give up to $13,000 (per person in 2009)
year w/out having to pay a gift tax.
Gifts to a spouse or charity are exempt.
Federal/State Income Taxes
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The heirs must pay income tax for the
deceased based on what they earned the
year prior to their death.
A tax return must be filed before the estate
can be distributed to the heirs.
Personal Retirement Accounts
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Individual Retirement Accounts (IRAs)
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Retirement savings plan.
Pre-tax investment
You may contribute more if you
aren’t covered by an employer
pension plan.
Early withdrawals are subject to a
10% penalty.
Types of Personal Retirement Accounts
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Traditional IRA – contribution can be deducted
from your taxable income.
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Pay taxes when you retire and start collecting
benefits.
Roth IRA – taxes contributions, but not money
withdrawn at retirement.
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Tax is paid on your income before you contribute.
Never have to pay any other taxes on it.
Education IRA – for higher education costs.
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Can set up if you have children under age 18.
Withdrawals aren’t taxable.
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Annuities
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Purchased from insurance companies.
Provides regular payments – usually
for retirement.
Defined-Benefit Plans
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Known as a pension plan.
At retirement age, employees receive
monthly payments.
Employer makes the entire contribution.
You must be vested in the plan to receive it
if you leave the company.
If you leave the company, you must roll it
into an IRA or cash it out.
 An
employee is vested when they are able to
keep the money that the employer
contributed to their retirement account if
they leave the job.
Example, Varies from employer to employer.
# of Years
% of employer contributed funds the employee may take
with them when they leave the job
1
20%
2
40%
3
60%
4
80%
5
100%
Defined-Contribution Plans (Employeesponsored plan where employees may
choose to contribute also)
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401(K) Plans
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For companies that operate for a
profit.
Employees choose the % of salary
they want to contribute.
Employers may match some or all of
the employee contribution.
Defined-Contribution Plans (cont.)
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403(b) Plans
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Similar to 401K, but is for not-forprofits.
Schools, tax-exempt organizations, &
government units.
Earnings are tax-deferred and early
withdrawal penalties apply.
Social Security Benefits
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You are eligible after retirement if
you contributed during your work
years.
Your benefit is based on your
earnings and contributions to
social security.
If you were married for 10 years or
more, you may be entitled to
receive social security benefits
based on your spouse’s income.
 Social
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Security Benefits
Maximum social security retirement benefits are
available at age 65*. Age at which you will be
eligible for Social Security will be higher
Currently, people may receive reduced benefits
starting at age 62.
Most or all of your social security income will be
taxable.
*will continue to change over time
Military Benefits
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Retired military receive pensions after 20
years of active duty.
Pensions are payable regardless of other
sources of income.
Subject to income taxes.
Veterans may also get other benefits like
low-interest mortgages, special college
financing, and low rate insurance policies.
A
reverse mortgage is a loan against
the equity in the borrower’s home in
which the lender makes tax-free
monthly payments to the borrower.
 Your lender pays you.
 Must be repaid, with interest,
when you sell your home, reach
the end of the loan, or die.

Become an expert & prepare to inform the class on your topic.
 Create a PowerPoint or a Prezi. (5-6 minutes)
 Create a visual that helps reinforce your topic.
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Use all work time productively. This is part of your grade.
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Be kind to all members of your group. Include all members in decisions. All
members must contribute to the project.
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Practice your presentation before the day you give it.
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Note cards & a visual are required elements.
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Work days: last Friday , today, & tomorrow.
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Due date: Friday, November 16th at the start of class.
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Chapter 15 open-note test on Wednesday, November 21st
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Take notes during other group’s presentations. A note outline is available
on my website.
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Cite sources using MLA on each slide and works cited page. Minimum of
4 sources including textbook.
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Turn in research the day you present
 Your
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visual must be:
Informative
Creative
Relevant
Attractive
Enhance your
presentations
 Ideas:
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Painting
Sculpture
Poster
Video
Song (not a visual, I
know)
Storyboard
 Power
of Attorney, DNR  Wills & estates
 Trusts
 Defined contribution
plans (401k & 403b)
 Reverse Mortgage
 Defined benefits plans
 Individual retirement
(pensions plans)
plan (IRA)
 Social Security
 Estate & inheritance
tax
 Medicare & Medicaid
 Other approved topic