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Slide 1: Who we are? Practice Areas  Estate Planning  Personal Injury, Auto & Work Accident  Employment & Labor
Slide 2: Estate Planning By Ziad Rawashdeh, CPA Attorney at Law Phone 909-393-0660 Fax 909-393-0430 Email ziad@zrawa.com Website: www.zrawa.com
Slide 3: Presentation Objectives & Road Map • • • • • • Summary of California Estate Planning law Estate Planning Common Tools Explanation Comparison of these Tools Why California Residence need Estate planning Example to understand the big picture Open questions & answers
Slide 4: What is estate planning? The biggest misconception: • Many people mistakenly think that estate planning only involves the writing of a will • A will is part of the planning process, but you need other documents to fully address your estate planning needs. Such as:  Revocable Living Trust    Durable Power of Attorney for assets(For each Spouse) Durable Power of Attorney health care (For each Spouse) Pourover Will (For each Spouse)
Slide 5: Good Estate planning process involves • People: you, your family, other individuals and, sometimes, charitable organizations of your choice. • Your assets: properties with all forms of ownership. • Your future needs: in case you ever become unable to care for yourself.
Slide 6: Who needs estate planning? Everyone needs estate planning, whether your estate is large or small. A small estate the plan may focus on: • How and who will managed your assets for your benefit during your lifetime if you ever become unable to manage them yourself. • Under what circumstances it makes sense to distribute your assets during your lifetime. • How and by whom your personal care and health care decisions will be made during your lifetime if you become unable to care for yourself. • How and to whom your assets will be distributed after your death. • Who will be the guardian of your minor children when you are unavailable A large estate the plan must address, • Various ways of preserving the estate assets for the beneficiaries’ benefit • Tax Planning: Any strategy required to reducing or postponing estate tax
Slide 7: What are assets included in your estate? • Includes all of your assets, held in your name alone or jointly with others at fair market Value • Like: Bank accounts Real estate Stocks and bonds Furniture Retirement Accounts Life insurance cars and jewelry.
Slide 8: Common Statistics: The ironic thing is that most clients think their estate plans are set up correctly. In fact: • One or two out of ten do NOT even have a simple will. • Nine or ten out of ten do NOT have Durable Powers of Attorney. • Five to Six out of ten do NOT have Trusts A & B for estate tax planning. • Nine or ten out of ten do NOT have a Family Limited Liability Company or Family Limited Partnership. • Seven or eight out of ten do NOT have an Irrevocable Life Insurance Trust
Slide 9: What Happens if you Die (Intestate) Without A Will? • California law applicable by default, • Distribution according California law & may be inconsistent with your wishes • The Estate will be distributed through probate • Court will appoint guardian for minor children
Slide 10: What is Probate? It is a court-supervised process for transferring a deceased person’s assets to his heirs. • Involves Court: Absent of a will, the court would appoint an administrator to handle your estate. • No Privacy: Your estate & its value will become a public record. • Expensive: Lawyer’s fees & executor’s commissions are based on a statutory fee schedule, 6-8% • Time consuming: must give a notice & wait
Slide 11: What a Will Does? • Your assets will be distributed according to you wish not according State law • Choose individuals or charitable organizations who will receive your assets after your death. • Nominates an executor who will be appointed by the probate court to manage your estate, pay your debts and taxes; and distribute your estate according to the instructions. • Nominates guardians for your minor children.
Slide 12: Living Trust A trust is a legal arrangement in which the grantor transfers control of his or her property to a trust, which is managed by a trustee.
Slide 13: What does a Revocable Living Trust Do? Avoid Probate While Maintaining Total Management & Control of Assets with a living trust Assets are put into the trust and most people name themselves as the trustee in charge of managing their living trust’s assets. By naming yourself as trustee, you can remain in control of the assets during your lifetime. A successor trustee administered for your benefit during your lifetime and transferred to your beneficiaries when you die all without the need for court involvement
Slide 14: The difference between a Revocable Living Trust & a Will Description Living Trust Will NO NO NO NO NO NO YES YES Avoid Probate No Court involved Eliminates the requirement of public notices Your estate plan private and the records do not become public Provides for assets management if you are unable to manage assets due to health problems Avoids proving incompetency in a court proceeding Allows for optimum tax planning, yet requires NO extra tax returns or filings Management & control your own assets & NO management fees required Nominates a guardian to supervise & care for your minor children YES YES YES YES YES YES YES YES YES YES YES YES YES NO NO Children Trust: can be held and administered for the benefit of minor child until they are older Support Trust: can be held and administered for the benefit disabled You can revoke or change any terms any time as long as you are still competent YES
Slide 15: What happens if you become unable to care for yourself? You can choose those who will care for you, your estate and health if you ever become unable to do so for yourself by making your own arrangements in advance. Durable Power of Attorney Assets Management • Trustee of a living trust, provides the necessary management of all assets held in trust. Agent or attorney-in-fact in a durable power of attorney for property management handles limited financial transactions and deals assets that may not have been transferred to your living trust. Directive/durable power of attorney for health • Attorney-in-fact makes health care decisions for you if you ever become unable to make such decisions. This legal document should contain your wishes concerning matters such as: • All health care issues • Organ donation • Funeral • •
Slide 16: EXAMPLE John & Mary are husband & wife., with 2 children Sara 2 yrs and Alex. 5 yrs They own; Property Home Rental Small Business 401K John 401K Mary Life Insurance John Life Insurance Mary TOTAL Market Value Equity Owned 950,000 300,000 800,000 450,000 100,000 100,000 750,000 750,000 100,000 350,000 75,000 75,000 500,000 500,000 2,000,000 Let us assume that John & Mary had an accident in 2011 and John dies, Mary Dies one month later. The whole world (friends, neighbors, and Relatives) knows that John and Mary wanted to give everything they have to their children Sara and Alex.
Slide 17: Scenario 1: John & Mary did nothing, die (Intestate) without a will
Slide 18: Scenario 2: John & Mary have a Will only: The result same as scenario 1 except: 1- Estate properties will be distributed according to John & Mary’s Will 2- Sara & Alex’s guardian will according to their Will
Slide 19: Scenario 3: John & Mary have an Estate Plan During John & Mary life: All assets funded to a Revocable living trust * For the benefits of John & Mary * Full management & control by John & Mary
Slide 20: Scenario 3: John & Mary have an Estate Plan When John dies • Distribution of John’s share Bypass Trust to May & the children benefits • Distribution of Mary’s own share to Marital trust to her benefit • Management & control by Mary & adult children
Slide 21: Scenario 3: John & Mary have an Estate Plan • • • • • When Mary dies Estate will be funded in trust to the benefit of Alex & Sara’s benefits Management & control by Alex & Sara if they are adults If Alex & Sara minors; management & control by a trusted person or Corporate Trustee Alex & Sara’s guardian will be named by parents Estate Passes to Children with NO ESTATE TAXES
Slide 22: Scenario 3: John & Mary have an Estate Plan What about the estate taxes? 2,000,000 Estate’s Value John dies on 4/1/2011 Mary dies on 12/1/2011 TRUST A: 1,000,000 John’s exemption passes to trust A & held for Mary’s use for life then to Sara & Alex TRUST B: 1,000,000 Mary’s exemption passes to Sara & Alex on Mary’s death Summary: at Joe’s death 1,000,000 poured in trust A to utilize his estate tax exemption, & at Mary’s death her 1,000,000 poured in trust B to utilize her estate tax exemption, The result the entire estate pass with no taxes
Slide 23: If your Estate Value is more than 2,000,000 • Definitely; you need special planning, please call the office at 909-393-0660
Slide 24: Why trust avoid probate? • Because the property is re-titled to the trustee before the death of the trustor • In case of a Will the title stay in the deceased spouse name
Slide 25: Why Do You Need to have a Plan • Protect your children by naming their guardian not allowing the court to appoint their guardian. • Protect your assets & be sure they are not going to unwanted person • You worked very hard to make your assets, let them go to your beloved ones • Legally avoid Estate Taxes like any other wealthy American • Name a trusted person to make your personal & health decisions if you are unable to make them yourself, & do not allow the court to do them for you
Slide 26: Contact information 5843 Pine Ave. Chino Hills Ca 91709 Phone: 909-393-0660 Fax: 909-393-0430 Email: ziad@zrawa.com Internet: www.zrawa.com