Table of Contents
Introduction 1 Who Needs This Book 1
How to Use This Book 2
How This Book is Organized 2
Part I: Estate Planning Fundamentals 2
Part II: Where There’s a Will, There’s a Way 3
Part III: Matters of Trust 4
Part IV: Life, Death, and Taxes 4
Part V: Estate Planning for Family Businesses 5
Part VI: Crafting a Comprehensive Estate Plan 5
Part VII: The Part of Tens 6
Icons Used in This Book 6
Part I: Estate Planning Fundamentals 7
Chapter 1: Congratulations: You Have an Estate! 9
What Is an Estate? 10
The basics: Definitions and terminology 10
Property types 13
Types of property interest 14
Why You Need to Plan Your Estate 17
Why Your Estate-Planning Goals Are Different from Your Neighbors’ 19
Why Estate-Planning Lingo Is Not Really a Foreign Language 21
The Critical Path Method to Planning Your Estate 22
Getting Help with Your Estate Planning 24
How to make sure your team of advisers is “FAIL” safe 25
Working with Certified Financial Planners (CFPs) and other financial planning professionals 26
Knowing what to expect from your accountant for your estate planning 28
Your insurance agent and your estate 28
Working with your attorney 29
Chapter 2: Bean Counting — Figuring Out What You’re Worth 31
Calculating the Value of Your Real Property 32
Your home on the range 32
That timeshare in Timbuktu and other hideaways 33
Your investments as a landlord 33
Your real estate partnerships 33
Calculating the Value of Everything Else: Your Personal Property 34
Tangible personal property — items you can touch 34
Intangible personal property — bank accounts, stocks and bonds 36
Dead Reckoning: Subtracting Your Debts from Your Assets 37
Giving Gifts Throughout Your Life to Reduce Your Estate’s Value 38
Calculating Adjustments in Your Estate’s Value Due to Life Changes 39
Part II: Where There’s a Will, There’s a Way 41
Chapter 3: Understanding the Basics of Wills 43
Planning for Your Will 44
Getting to Know the Different Types of Wills 45
Simple wills 46
Other types of wills 47
Choosing Your Will’s Contents 48
Opening clauses 49
Giving clauses 49
Ending clauses 54
Safeguarding Your Will 54
Changing, Amending, and Revoking Your Will 55
Why you may need to change your will when something happens 56
Ways to change your will 57
Protecting Your Loved Ones from Your Unloved Ones 58
Figuring Out Your Will Status 59
Testacy: When you’ve nailed everything down 59
Intestacy: When you die with zero “willpower” 60
Partial intestacy: When the vultures start circling 61
Chapter 4: Tied Hands and Helping Hands: What You Can and Can’t Do with Your Will 63
Making Your Peace with Statutes That Affect Your Will 64
Identifying Statutes that Your Will Can Change 64
Abatement — there’s not enough in the cupboard for everyone 65
Ademption — some property is missing 67
Antilapse — someone dies before you do 68
Divorce — high noon at Splitsville 68
Simultaneous death — sorry, but we have to talk about it 69
Living (and Dying) with the Laws that Your Will Can’t Change 70
Community property 71
Spousal elective shares 72
Homestead allowance — keeping a house for kiddies and spouse 73
Homestead exemption — how the law protects your house from your creditors 74
Exempt property — how the law protects your personal property from creditors 74
Family allowance — drawing from your estate to protect your family 75
Oops! Taking care of VIPs who aren’t in the will 76
Chapter 5: Probate: Top of the Ninth for Your Estate 77
Probing Probate: What You Should Know 77
The probate process 78
Some complicating factors to the probate process 81
Knowing the Good, the Bad, and the Ugly of Probate 82
Probate: The good side 83
Probate: The bad and downright ugly side 84
Streamlining the Probate Process 86
Appointing Your Person In Charge 86
Identifying your personal representative’s role 87
Deciding who’s eligible to be your personal representative 90
Avoiding the pitfalls 91
Paying your personal representative 92
Thinking Things Through When Someone Asks You To Be a Personal Rep 93
Chapter 6: Dodging Probate: Saving Time and Money with a Will Substitute 95
Understanding Will Substitutes 95
Sorting through the List of Will Substitutes 97
Figuring out joint tenancy 97
Setting up a living trust 102
Focusing on the costs of living trusts 107
Identifying Some Less Common but Worthy Will Substitutes 108
Tenancy by the entirety — the spouse’s option 108
Joint tenancy bank accounts 109
Savings bonds 109
PODs — payable on death accounts 110
Deeds 111
IRAs and your other retirement accounts 111
Part III: Matters of Trust 113
Chapter 7: Understanding Trusts 115
Defining Trusts, Avoiding Hype 115
Shazam! An oversimplified definition of trusts 116
Adding a bit of complexity with an ingredient list 116
Adding some lawyer talk to the definition 117
Attaching all the bells and whistles to a trust 118
Trust Power — Making Your Beneficiaries Smile 120
Avoiding taxes 121
Avoiding probate 121
Protecting your estate (and your beneficiary’s or beneficiaries’ estate) 122
Providing funds for educational purposes 122
Benefiting charities and institutions 123
Sorting Out Trusts — from Here to Eternity 123
Trusts for when you’re alive versus when you’re gone 123
Changing your mind: Revocable and irrevocable trusts 127
Chapter 8: Trusts You May Want to Trust — or Not 129
Saying “I Do” to a Marriage-Oriented Trust 129
Marital deduction and QTIP trusts 130
Bypass trusts 131
Considering Charitable Trusts 132
Charitable lead trust — everything has its limits! 132
Charitable remainder trust 133
Protecting Your Estate With Protective Trusts 134
Spendthrift trusts — “you get it when I say so!” 134
Supplemental needs and special needs trusts — keep the “recovery agents” away 134
Educational trusts — “you’re going to use it only for school!” 136
Minor’s trusts — “I’m thinking about your future!” 136
GRAT, GRUT, GRIT: Chewing over the Grantor-Retained Trusts 137
Sidestepping Estate Taxes with an Irrevocable Life Insurance Trust 138
Chapter 9: Working a Trust Into Your Estate Plan 141
Linking Your Estate-Related Tax Planning with Your Trust Planning 142
Looking at Your Goals and Objectives for Setting up Trusts 142
Deciding What Property to Place in Trust 144
Linking Your Estate-Planning and Trust Goals with Specific Property 144
Stepping Back and Comparing Both Trust and Nontrust Options 145
Weighing Trust Tradeoffs 146
Finalizing Your Choices — Dotting I’s and Crossing T’s 148
Part IV: Life, Death, and Taxes 149
Chapter 10: Preparing for the Tug of War with the Taxman 151
Navigating through the Bermuda Triangle of Federal Taxes 151
The gift tax 152
The generation skipping transfer tax, or GSTT 153
The estate (death) tax 153
Deciphering State Inheritance and Estate Taxes 154
Protecting Your Property (Including Home Sweet Home!) from the Estate Recovery Act 156
Chapter 11: The Gift Tax: Isn’t Giving a Gift Enough? 159
Giving a Gift: The Basics 160
There are gifts — and there are taxable gifts 160
Not all gifts are taxable 162
Looking Inside Three Common Gift Tax Situations 164
Example No 1: $5,000 to darling daughter 164
Example No 2: $5,000 each to all three adorable kids 164
Example No 3: $21,000 to the fairest of them all 165
Entering the Twilight Zone of Credits and Exclusions 166
Hold on — more complications ahead! 167
Smoothing over the 2004 wrinkle 168
Gift Splitting 170
Valuing Gifts 171
Fair market value 171
Filing Gift Tax Forms 175
Chapter 12: Skipping Around the Generation Skipping Transfer Tax 177
The GSTT: A Parable 177
Taking Comfort from the Exemption: A Cool Million and Rising 179
Playing Hopscotch: Understanding Generation-Skipping Transfers 180
Knowing the rules for skipping generations (so you don’t break ’em) 181
Clarifying the generations and confusing complications 182
Making Sense of GSTT Tax Rates 183
Looking Deeper into Generation-Skipping Transfers and the GSTT 184
Scanning over the skip types 184
Direct skips 185
Indirect skips 185
Chapter 13: Paying or Not Paying the Death Tax: That’s the Question 187
Discovering Federal Estate Tax Basics 187
Figuring out how the federal estate tax works 188
Using your exemption to sidestep the government 188
Looking at federal estate rates (specifically the highest rates) 191
Tracking a moving target 192
Digging Down to the Bottom Line 192
Figuring out your gross estate’s value 193
Calculating deductions from your gross estate 194
Going for extra credit 198
Choosing How to Pay Estate Taxes 198
Filing the Estate Tax Return 199
Stepping Up to the Plate and Filling the Bases (Basis) 199
Chapter 14: Planning to Minimize All Your Estate-Related Taxes 201
Figuring Out Where You Are Today 201
Determining your estate’s value 202
Totaling your gifts to date 202
Checking the tax tables 203
Looking out for tax traps 204
Fortune Telling: Picturing the Future as Best You Can 205
Predicting the future 206
Looking at several scenarios for the federal estate tax 207
Blending your present strategies into the future 209
Considering the impact of death, divorce, and other bum breaks 210
Carefully comparing, then betting the house and rolling the dice 210
Hmmm Deciding on Strategies and Tradeoffs 211
Gifting versus leaving property as part of your estate 212
Imagining the ups and downs of leaving your estate to your spouse 214
Avoiding estate taxes on your ife insurance proceeds 215
Using gifts below the exclusion amount 215
Double dipping on tax savings from charitable gifts 215
Putting Together a Comprehensive Estate-Related Tax Plan 216
Fixing the holes 216
Starting on that gift giving 216
Setting up trusts if necessary 217
Planning ahead for property transfers upon your death 217
Part V: Estate Planning for Family Businesses 219
Chapter 15: Grasping the Basics of Estate Planning for Family Businesses 221
Defining “Family Business” 221
Making the Critical Estate-Related Decisions Upfront 223
Choosing to stay or go 223
Adjusting the family business ownership picture 224
Deciding on your succession plan’s details 226
How the Form of Business Ownership Affects Your Estate 227
Sole ownership — everything is mine! 227
Partnership — we’re in the business together 229
Corporation — limiting my liability 230
Limited partnership — a mix of corporation and partnership 231
Limited liability company — the new kid on the block 232
Calculating the Value of Your Family Business 233
Book value 234
Discounted cash flow 234
Sales multiple 234
Liquidation value 234
Getting to the bottom line — with expert help 235
Dealing with Business Evolution — Stuff Darwin Never Imagined 236
Chapter 16: Transferring Ownership and Paying Estate Taxes in a Family Business 239
Exploring the Ins and Outs of Buy-Sell Agreements 240
Looking at a typical buy-sell agreement 241
Funding the buy-sell agreement 242
Selecting the right form of buy-sell agreement 243
Thinking through your buy-sell choices 246
Transferring Ownership to a Family Member 247
Identifying Estate Tax Considerations for Family Businesses 248
Watching as the family-owned business exemption sunsets 250
Doing it Moe’s way: Spread out! 251
Valuing real estate for estate tax purposes 251
Shopping for more discounts at the family-business store 252
Part VI: Crafting a Comprehensive Estate Plan 255
Chapter 17: Factoring Insurance into Your Estate Plan 257
Using Insurance to Protect Your Assets 258
Protecting what you’ve already got 259
Insuring the future: Protecting what you hope to acquire 260
Shielding the gifts you hope to leave behind 261
Sorting Out the Kinds of Coverage You Need 263
Life insurance 264
Health insurance 266
Disability income insurance 267
Long-term care insurance 269
Automobile insurance 269
Homeowner’s or renter’s insurance 270
Umbrella liability insurance 270
Looking Closer at Life Insurance 271
Whole life insurance 271
Term insurance — no cash value while you’re alive 272
Business-provided life insurance 273
Understanding Life Insurance Tax Implications 274
Asking the Right Estate-Related Questions About Insurance 276
Chapter 18: Connecting Your Retirement Funds to Your Estate Plans 279
Deciding What Your Nest Eggs Are Really For 280
Strategy No 1: Satisfy your needs and plop the leftovers away 281
Strategy No 2: Walk the balance beam between retirement needs and estate plans 281
Linking Retirement and Estate Planning: A Tough Job, But You Can Do It 282
Tapping into a traditional pension plan 282
Managing your IRA accounts 286
Estate planning for 401(k) and similar plans 288
Social Security and your estate planning 289
Chapter 19: Estate Planning in Exceptional Situations 295
Working a Divorce into the Plan 296
Divvying up the stuff — and ignoring the estate plan? 296
Considering children and divorce 301
Planning for Unmarried Relationships 304
Untangling the Complexities of Guardianship and Your Estate 305
Guardianship for your children 306
Guardianship for yourself 307
Doomsday Stuff: Factoring Incompetence and Death into Your Plan 307
A durable power of attorney — your personal representative while you’re alive 308
The living will — giving directions when you can’t communicate 309
Realizing why the court appoints a guardian when you’re incompetent 310
Taking Care of Fluffy, Spot, and Bootsie 312
Part VII: The Part of Tens 315
Chapter 20: Ten Questions to Get You Rolling on Your Estate Plan 317
Why Do I Even Need an Estate Plan? 317
If I Need an Estate Plan, Why Doesn’t Everyone Have One? 318
What Are My Top Three Estate-Planning Goals? 318
Whom Do I Want to Take Care Of? 319
What’s the Best Way to Protect My Children? 319
How Much Help Do I Need? 320
What’s My Budget for Estate Planning? 320
Does My Attorney Have the Right Experience? 320
Who Are My Confidants about These Plans? 321
How Do I Know I Can Do My Estate Plan? 321
Chapter 21: Avoiding Ten Common Mistakes and Problems in Your Will 323
Forgetting to Review Your Will Annually 323
Forgetting to Include a Residuary (“Leftovers”) Clause 324
Forgetting the “Just in Case” Contingencies 324
Sticking With Your Personal Representative When You Really Need a Substitute 325
Forgetting About All Those Pesky Statutes that Affect Wills 325
Getting Too Precise in Your Will 326
Using Your Beneficiaries as Will Witnesses 326
Failing to Factor in the Personal Side 327
Keeping Important Information From Your Attorney 327
Rushing Through Your Will 328
Chapter 22: Ten Estate-Planning Resources on the Internet 329
Smartmoney com 330
Estateretirementplanning com 330
Estateplanning com 330
Savewealth com 330
Moneycentral msn com 331
Estateplanforyou com 331
Law freeadvice com 331
Actec org 332
Nolo com 332
Nafep com 332
Index 333
