Estate Planning 101 for Baby Boomers Baby Boomer

Estate Planning 101 for Baby Boomers Baby Boomer Senior Expo Santa Clara Convention Center June 5, 2010 Jesse Dogillo Certified Financial Planner™ Nancy Williamson Attorney at Law

What are the objectives of a proper Estate Plan? An Estate Plan expresses your hopes, values and wishes for future generations. An Estate Plan is your last communication to your loved ones. An Estate Plan helps you to think about you and your families’ future, and plan for future needs (e. g. long term care needs, housing, etc. ) An Estate Plan allows you to give as much or as little to your children.

What are the objectives of a proper Estate Plan? (cont’d) Minimize expense, cost and delays, in distributing your assets to WHOM you want and in the MANNER that you want. Protects assets from unnecessary taxes and expenses, disgruntled heirs and/or unscrupulous solicitors.

“Now read me the part again where I disinherit everybody” New Yorker Cartoon Dec. 7, 1940

“Being of sound mind, I spent it all” “Go First Class, Your Heirs Will”

The Most Common Mistake – Not Having a Plan If you do not have a Plan, the Government will impose a distribution plan for you. Unfortunately, most Americans fall into this category, as only 30% of all Americans have an Estate Plan (e. g. a basic Will. )

What Are the Consequences of Not Having a Plan? In the Event of Incapacity – Court Control What is capacity? Who determines capacity? At Death - Probate What is probate? Probate is costly Probate Fees For example, the fee to file any type of Petition in Probate Court is $355. Costs The cost is 3% to 8% of the estate’s value. Attorney’s Fees These vary, depending on the size and complexity of the estate

Consequences of Not Having a Plan (cont’d) Probate is time consuming. An average probate will last anywhere from one year to two years in Santa Clara County The Process The first 4 -6 weeks File Petition; Publish Notice of Petition to Administer Estate; Mail Notices; Hearing Date The next 6 weeks to one year Prepare Inventory; Give Notice to Creditors; Pay Debts; File Tax Returns File Accounting and Petition for Final Distribution The next year to two years Hearing date; Distribute Assets; and File Declaration for Final Discharge Source: Superior Court of CA, County of Santa Clara, Probate Court Self Service Center Website

Consequences of Not Having a Plan (cont’d) Flexibility and Control – the Court has control over your assets in the event of incapacity or death. Privacy – All probate documents are public record.

Celebrity Example: Jimi Hendrix Mistake: Never writing a will. Story: Music legend Jimi Hendrix died at age 27 in 1970 without a will. Under state law, his dad, Al, got everything, leaving his close brother Leon with nothing. Al built Hendrix's musical legacy into an $80 million venture, but in his own will cut out Leon and his family, in favor of his adopted daughter through a later marriage. Source: Mayoras, Andrew W. & Danielle B. Trial and Heirs, Famous Fortune Fights!

What If I have a Plan – I Have Executed a Will In the event of Incapacity – Court Control At Death – Probate

What If I have a Plan – I Have Executed a Will (cont’d) Court Costs and Attorney’s Fees Expensive – The cost is 3% to 8% of the gross assets of your estate. Attorney’s Fees Time Consuming – it generally it takes one to two years to complete a probate proceeding.

What If I have a Plan – I Have Executed a Will (cont’d) Flexibility and Control The Court has control in the event of incapacity. At death, the Court will control distribution. Privacy All documents filed in Probate Court are public record.

Celebrity Example Warren Burger Mistake: Creating an Ineffective Will Chief Justice Warren Burger died in 1995 with a $1. 8 million estate and a will of 176 words he typed up himself. There's something to be said for brevity, but in this case, his family paid $450, 000 in estate taxes, something that could have been easily avoided. And his executors had to pay to go to court to get approval to complete administrative acts, such as selling real estate, that typically a well-drafted will would have allowed without court approval. Source: Mayoras, Andrew W. & Danielle B. Trial and Heirs, Famous Fortune Fights!

The Most Common Planning Mistake – People Procrastinate, Plan Incorrectly or Fail to Plan! Typical Reasons Avoid it Fear of death Complicated Family Situation Misperceived expensive costs Incorrect Planning Will or Trust Substitute Example: Parents own real property in common with their children to avoid Estate Planning Problems Need child’s permission to sell the property Realized Capital Gain, depending on appreciation of the property

The Most Common Planning Mistake – People Procrastinate, Plan Incorrectly or Fail to Plan! (Cont’d) Alternative State law enables your children to receive a “stepped up basis” on the property value if they inherit property at your death. In 1950, you purchased a home for $15, 000 and now it is worth $500, 000. If the children inherit it, they will realize ZERO capital gains. Illustration: Market Value Stepped Up Basis ZERO Capital Gains $500, 000 <$500, 000> 0

Possible Solution A Revocable Living Trust is an Estate Planning device that utilizes many planning benefits. At Incapacity – No Court Control At Death – No Probate

Possible Solution (Cont’d) Time – Distribution is quick and easy Flexibility and Control – while you are living, you can amend or cancel your Living Trust Privacy – the documents are private and accessible by the public

How Does a Living Trust Work? Grantor (You) Creates and Controls the Trustee Manages the Trust Successor Trustee(s) Steps in for Trustee Beneficiaries Receives Assets When You Die

Benefits of a Living Trust Avoids probate at death, including multiple probates if you own property in other states Prevents court control of assets at incapacity Brings all your assets together under one plan Provides maximum privacy Quicker distribution of assets to beneficiaries Assets can remain in trust until you want beneficiaries to inherit

Benefits of a Living Trust (Cont’d) Can reduce or eliminate estate taxes Inexpensive, easy to set up and maintain Can be changed or cancelled at any time Difficult to contest Can protect dependents with special needs Prevents unintentional disinheriting and other problems of joint ownership Professional management by a corporate trustee or professional fiduciary is available

Disadvantages of a Living Trust The cost to set-up is typically more than the cost of a Will There is typically a cost to amend or alter the Living Trust The time spent funding and/or re-titling assets to the Living Trust

Other Important Planning Devices Power of Attorney for Financial Decisions Power of Attorney for Healthcare Decisions and Advance Healthcare Directive

Multi-Disciplinary Approach To Estate Planning The Multi-Disciplinary Approach It is useful to use several types of professionals so that your legal, financial, and insurance needs are addressed. For example, an ideal team would include: An Attorney A Financial Planner An Insurance Agent A Certified Public Account Note: However, depending on your particular circumstances, you may not need all of the aforementioned professionals.

Estate Planning Package What do we provide? The Living Trust and all related documents, including but not limited to the Declaration of Living Trust, Certification of Living Trust, Powers of Attorney, Advance Health Directive, etc. Financial Planning Review and Personal Financial Statement. We are providing a special Estate Planning Package price for all Baby Boomer attendees who are interested. Please see us afterwards, if you are interested. Note: Jesse Dogillo and Nancy Williamson maintain separate practices and all fees are billed independently. Mr. Dogillo is a financial planning professional and is not an attorney. A living trust may not be appropriate for all clients. The attorney may recommend estate planning options other than a trust. A flat fee will be charged for services.

Do You Have Any Questions? Jesse Dogillo, CFP ® 1290 Parkmoor Avenue Third Floor San Jose, CA 95126 (408) 528 -7060 myplanner 888@gmail. com www. bayadvisers. com Nancy Williamson, Esq. 1290 Parkmoor Avenue San Jose, CA 95126 (408) 528 -7060 Nancy@San. Jose. Wills. And. Trusts. com www. San. Jose. Wills. And. Trusts. com Visit me on Facebook: Nancy. Williamson-Attorney-at-Law-San. Jose-Wills-and-Trusts

Thank You for Attending!