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Free Estate Planning Basics Course – What to Know and Why

Last update on: Jun 17 2020
estate planning

Estate planning can be challenging, but this free course on the basics of estate planning makes the process easier to understand.

This free estate planning course is designed to educate people on the basics of estate planning. This free estate planning course breaks down the complex process of estate planning into smaller, more understandable parts. The course also explains the process in clear terms.

With this approach, you’re more likely to understand the estate planning process. Many people don’t have estate plans, because they don’t understand what estate planning is and don’t know how to start planning. Others have estate plans but admit they don’t understand much of their plans.

Most people believe that estate planning primarily is tax planning. That is not the case for a good estate plan. Many non-tax issues are vital and need to be resolved before tax issues are considered. This estate planning course explains that if these non-tax issues are ignored or slighted, heirs will be worse off, and the goals of the estate owner thwarted.


Estate planning course basics: Defining the estate.

The estate planning process begins with a list of assets and liabilities and their values. The assets, of course, include all the tangible things and financial accounts you own. But for estate planning purposes,

assets also include many things that often are overlooked.


Life insurance is included in the estate if the insured has incidents of ownership. Annuities are included if payments will continue to a beneficiary. Trusts of which the estate owner is a beneficiary might be included, depending on the trust terms. Jointly owned property, living trusts, partnership interests, retirement accounts, IRAs, 401(k)s and some employer benefits are among the assets often included in the estate and should be included in the plan.

The assets then must be valued. With publicly-traded property, valuation is easy. But with real estate, collectibles, business interests, and many household items it can take some time to determine the value. If an estate plan is a few years old, the values might have changed, perhaps enough to require a change in the plan.

Identifying assets and their values also helps with administration of the estate. If the administrator has a list of the assets and their estimated values, the process will be much faster and less expensive. If the administrator has to locate the items and have them appraised, time and money will be lost.

After you have identified assets and their values, this course on the basics of estate planning recommends updating the list at least annually. Be sure your administrator knows where the list is as well as where your files and records concerning the assets are located.


You need a will.

It doesn’t matter how rich or poor you are or which state you live in. When you don’t have a will that divides your property, state law does it for you.

In Virginia, when there’s no will the surviving spouse gets only one third of the estate. The rest goes to the children and stepchildren. In neighboring Maryland, the surviving spouse gets half the estate. Did you note the reference to stepchildren? In some states the stepchildren receive the same share as your children, even if that’s not what you intended and discussed with your spouse. It often also doesn’t matter what ages the children are or how much money each has. When there are children and there is no will, the share received by a surviving spouse might not be enough to support his or her lifestyle.


Estate planning course basics: Estate liquidity.

It is not enough to reduce taxes and probate. You must be sure the estate will have enough cash or liquid assets to pay expenses and debts. These include paying for management and upkeep of property while the estate is processed. You don’t want the estate to sell assets to pay basic expenses.


Estate planning course basics: The Tax Apportionment Clause.

This clause states whether the death and income taxes related to a particular asset will be paid by the individual inheriting that asset or by the residuary estate (the estate left over after specific bequests). Even if your estate doesn’t face federal estate taxes, there could be state and local taxes. If you don’t decide how they are paid, in most states, they will be paid out of the residuary estate. That means less for whoever gets the residuary estate, and that usually is your spouse and children.


Estate planning course basics: Choosing the players.

There is work involved in administering every estate, even a small estate. The assets must be identified, located and listed, as must the debts. Documents must be filed with the probate court, and debts must be paid. Then, assets are sold or distributed to heirs as directed by the will. If one or more trusts are created by the estate, there must be a trustee and assets must be transferred to the trust.

Too many times appointing the people to perform these tasks is an after-thought. Many people automatically select either the estate planning lawyer or the oldest adult child as the executor. In most states, a lawyer-executor receives a percentage of the estate for serving as executor. Choosing a non-lawyer as the executor can reduce costs. A friend or family member often will serve for free and hire a lawyer on an hourly basis to do work that requires expertise. If you choose a non-lawyer, select a responsible family member or friend who will waive a fee, perform the duties responsibly and is able to work with the attorney and any other experts required by your estate. The selection of a trustee is even more important, since that is a long-term position.


Estate planning course basics: Who is included?

In many estates, this is an easy decision, but for many others it is not. Sometimes there are reasons to consider excluding a child from the estate. Some estate owners want to include grandchildren, some do not. Or non-family members and charities might be included, especially in larger estates. There are many blended families today, and decisions must be made over whether to include stepchildren and grandchildren in the will. Ideally, this is determined before marrying a spouse with children from a prior marriage, but it doesn’t always happen that way.

Before excluding a child from the estate, this estate planning course lists a couple of other options that should be considered.

One option this course on estate planning basics provides is leaving property through a trust. The trustee controls how much property is distributed and when it is distributed. You also can establish distribution formulas. Another option in this estate planning course is to leave the child something, but less than an equal share with the other children. In addition, include a provision in the will that says anyone who challenges the estate and loses will not inherit anything. This approach is most likely to work if the person is left enough wealth that he won’t want to risk losing it.

If you do include beneficiaries other than your natural children, or exclude a child, it is important to discuss this with each of the children. Family dissension and hard feelings are less likely if people are not surprised when the outline of the will is revealed.


Estate planning course basics: What are the shares?

The estate owner needs to consider all the beneficiaries (minor and adult) and his goals. Minor beneficiaries can’t inherit property legally. Anything left to the minor beneficiary will end up in a court-supervised guardianship or a restricted account as dictated by a judge and state law. Adult beneficiaries (18 or older) can inherit property directly, can receive their inheritance in stages, or the estate owner can create a discretionary lifetime trust. Then, the estate owner can decide if unequal shares to the main beneficiaries are consistent with the goals. There is no right or wrong answer to this issue. What is important is that the estate owner let the beneficiaries know ahead of time if the shares will be unequal.


Estate planning course basics: Lifetime gifts.

Most discussions of gifts that free courses focus on when discussing the basics of estate planning are the estate tax implications of lifetime gifts. In general, if the estate might be taxed, taxes can be reduced if at least some property is given during life. Some people stopped or reduced lifetime gifts in recent years because very few estates will be taxed.

But in this free course on the basics of estate planning, the non-tax aspects of lifetime giving are important to examine. Your loved ones might benefit greatly from receiving gifts now instead of waiting until some unknown time in the future to inherit. Also, you might enjoy seeing how the gifts are used and benefit your family. Lifetime giving also gives you the opportunity to see how the gifts are used so you can evaluate the amounts you want to give in the future. If you decide there are

good non-tax reasons to make lifetime gifts, discuss with your estate planner the best way to make those gifts.

Remember, as discussed in this free course on the basics of estate planning that lifetime gifts can be given outright or through a trust. You also can give non-cash gifts. Unconventional ways of giving include paying for family vacations, referring business clients, or paying for financial planning. Don’t forget, of course, to retain enough wealth to ensure your standard of living.


Estate planning course basics: Generation-skipping transfer taxes.

Generation-skipping transfer taxes can be imposed at the highest federal estate tax rate (40% in 2020). Grandparents transfer money or property outright to their grandkids or other relatives without first leaving it to their offspring to bypass an inheritance being subject to estate taxes. The GST can be imposed on lifetime gifts made to beneficiaries either directly or through trusts. These individuals need to have a “beneficial interest” in the trust, meaning they are entitled to the trust’s principal and interest earned.


Estate planning course basics: Managing property.

Many people want to benefit their loved ones, either now or through their estates. But they either want to retain some control or are concerned about how the wealth might be used (or abused). There are different ways you can provide benefits for loved ones but also retain some control so that the money isn’t wasted and the heirs don’t become sluggards. But there are pros and cons of using controls in giving.

Some heirs need financial help but should not be given outright control of the wealth. But some estate owners try to exert too much control or give the wrong incentives.

Discuss the different options with your estate planner and determine which is the best choice for you.


Estate planning course basics: Special assets.

In some estates, the major special asset is the family home or vacation home. These are assets in which most family members have some emotional investment as well as a financial interest. In many families there also are personal mementoes and household furnishings that might have non-monetary value either to you or to members of your family.

After completing this free course on the basics of estate planning, you should review your assets and talk to family members to determine which assets have special status. There are many ways to consider handling such special assets that this course on estate planning covers. The methods vary, depending on the type of asset. Surprisingly, personal assets that have fairly low monetary value cause some of the worst disputes among heirs, so take care how you distribute them in your estate plan.

Other types of special assets discussed in this course on the basics of estate planning are those that are precious to you and require special care or knowledge, such as antiques, collections and businesses. These assets require special care to maintain their value and need to be sold by a knowledgeable person to realize their value. It is best to identify who will be the next owner of such assets or who will sell them early in the estate planning process. Some people find a friend or family member who will value and take care of the asset and who is deserving of it. Others learn that it is best to find a buyer during life or a charity that will receive it through the will. An alternative is to leave detailed instructions for the executor on how to maintain the asset, how much it might be worth, and how to find a seller at fair value.


Estate planning course basics: Protective documents.

A complete estate plan has some protective documents.

The first is the financial power of attorney. This empowers someone, or a group of people, to manage your assets and pay bills when you can’t. Again, without this document a court has to be asked to appoint a guardian or custodian to manage your finances. It might not be the person you intended, and the process will cost some money.

The second document is the medical or health care power of attorney. Most estate planners these days recommend that there be several documents. There is a living will, which states your general wishes about using medical treatment or equipment to extend life. You also can have a do not resuscitate order that describes when cardiopulmonary resuscitation (CPR) or similar measures shouldn’t be used. A powerful document is the medical power of attorney. Like the financial power of attorney, this appoints one or more people to make medical decisions when you aren’t able to do so.

Few business owners engage in viable succession planning, which is a reason why few businesses survive much past the first generation. A proper succession plan begins at least five years before you think a transfer might occur. You need to put in place financial and other systems so the business is attractive and understandable to potential buyers. If you want your children or current employees to run the business, you need to let them know and prepare them. This could mean giving them more responsibility even when you aren’t ready to step aside.


In this Free Course on The Basics of Estate Planning You Will Learn That Often the Most Valuable and Important Element of an Estate Plan is a Two-part Package.

One part is a letter of instructions to the executor. This explains in some detail and in plain English how you want the estate to be handled. It can provide advice and details that aren’t appropriate for a will. The other part of the package contains copies of key documents. These include recent tax returns, income statement, balance sheet and a list of all your financial accounts and property. These days you also should list all your online accounts, including e-mail, with the usernames, passwords and any other access information.

You can put such a package together with my booklet, To My Heirs: A Book of Final Wishes and Instructions, available to my subscribers through the Bob’s Library tab on the www.RetirementWatch website.


Estate planning course basics: When to start.

Estate plans are among the biggest victims of procrastination. People find many reasons not to finish plans. The prospect of tax law changes has put many plans on hold. Some of the issues listed in this course on estate planning basics can be difficult ones, and tax law options are full of tradeoffs that are not easy to assess.

You don’t have to resolve all the issues right away. Have a basic will drafted so at least your assets are divided by the state. You can do the estate plan in installments. This free course shows you how to put together a simple, basic estate plan now. Then, work toward the ideal plan as you learn more about the tools available, refine your goals and resolve disagreements.

Do not let imperfections and uncertainty leave you with no estate plan or an outdated plan. Things will occur that will affect your estate plan — marriage, divorce, having children, a loved one dies, moving to a new state, or buying or selling a business. State and federal laws are always changing. Fortunately, most parts of an estate plan can be changed. The only permanent steps are gifts you make today and the lost opportunity of gifts you do not make. The rest of a plan can be changed. If one or more issues are tough to resolve, don’t let that leave you with no plan. Execute the will or other documents with the best plan you can develop today. Revisit the other issues mentioned in this course on estate planning basics periodically with your estate planner and perhaps with family members. If a better solution appears, have the will and other documents re-drafted. It is not unusual for an estate plan to be developed in stages or to change over time.


October 2021:
Congress Comes for your Retirement Money
A devastating new law has just been enacted, with serious consequences for anyone holding an IRA, pension, or 401(k). Fortunately, there are still steps you can take to sidestep Congress, starting with this ONE SIMPLE MOVE.

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