Pl Plan annin ning g fo for Li r Life fe an and d Be Beyo - - PowerPoint PPT Presentation

Pl Plan annin ning g fo for Li r Life fe an and d Be Beyo yond nd

In Intr troduct duction ion to to Es Esta tate te Pla lannin ing

NANBEN panel discussion on Estate Planning – Wills and Trusts

Webinar – June 20, 2020

SU SUMMARY

The NANBEN panel of experts will present an introduction to Estate Planning and discuss the key building blocks to create a Plan – Wills, Trusts, Life Insurance and Power of Attorney. The panel will provide a practical perspective on how to create an Estate Plan and the different avenues to create a good plan.

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TODAY’S SPEAKERS

Mark Chockalingam who leads the NANBEN investments group will moderate the session on Estate Planning. Kanna Meyyappan is a professional Chemical Engineer and has worked in the Oil & Gas consulting industry for 30+ years in the US. Retired in 2018 and has pursued financial planning and retirement strategies and has been mentoring high school kids. Selvan Boominathan is an attorney specializing in tax issues for startups. He has been practicing for 15 years in the Washington DC area predominantly helping small businesses to minimize their tax impact. Srinivasan Palaniappan is an Enterprise Architect by profession enabling commercial clients succeed in their Digital Commerce mission. A Happy Camper living in the DC region for about 18+ years. He has worked with an attorney on setting up an Estate Plan. Kanna Meyyappan, Selvan Boominathan and Srinivasan Palaniappan have been involved in their own retirement planning process and will share their knowledge and experience in today’s session.

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Qui uick k Po Poll l

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✓ Do you have an Estate Plan ✓ Yes ✓ No? ✓ If you do have a Plan, you have a ✓ Will ✓ Trust ✓ Both

DISC SCLAI AIMER MER

This presentation is of a general nature and is provided for informational purposes only for the personal use of the audience. This presentation is not tax advice and is not intended to provide advice on any specific situation. This presentation is also not intended to provide financial planning advice. The intent is to create only awareness among the audience to set up their estate plan and share some general guidelines. Individuals should get appropriate professional advice to do their financial planning. The views expressed by the speakers during this presentation represent the speakers’ personal

• pinions and do not reflect the views of any organization.

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Ob Obje jecti tives ves

1. What is an estate plan? 2. Why is it important? 3. How to get it done? 4. Practical Perspectives 5. Cross-border issues

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WHA HAT IS A S AN EST ESTATE E PL PLAN?

• Simply: any plan to transfer assets. Can be before
• r after death.
• Basic estate plan for most people has 3 elements:

○

Living Trust,

○

Will, and

○

Powers of Attorney (financial, medical, etc.) PLUS

○

Life insurance - Not technically part of the estate plan, but plays an important part in planning for life and beyond

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INTRODUCT ODUCTION ION TO O SE SENTHI HIL L AND VA VALLIAMMA MAI I FAMILY

Get to know Senthil and Valliammai family -

• Typical family

○ Senthil - Husband (Spouse); Age 40, working professional ○ Valliammai - Wife (Spouse); Age 38, works for a firm ○ Palani (son - 10 years old) & Meena (daughter - 8 years old)

• Financial status:

○ USA ■ Owns a home ■ Checking and Savings accounts ■ Portfolio of stocks and bonds ■ Jewelry & Antique ○ India ■ Owns a home ■ Owns some lands

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BA BASI SIC C DEF EFINITI ITIONS ONS - TRUS USTS

Trust:

• Entity created under state law to hold and manage assets (corpus)
• Irrevocable/Revocable

○ We will be discussing only revocable trusts. Irrevocable trusts are rare and done for specific reasons. Settlor: The person who creates the trust. A.K.A “grantor”. Trustee(s): Fiduciary agent who is entrusted to manage the trust. State law and the Trust document governs the rights/responsibilities. Trustee powers can be split Beneficiary: people or entities benefit from the Trust/Will Trust Certification - notarized

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BA BASI SIC C DEF EFINITI ITIONS ONS - WILLS LS

Will: Legal document that declares how property will be inherited upon death.

• A.K.A “last will and testament”
• Each state has different rules about what is a will. Some are expansive (even a note written on a

napkin right before death can be a will).

• However, best practice is to have the will notarized and witnessed.

Decedent: Person who dies. Executor: Person who executes the will. Makes sure the property is given according to the will. The will specifies the powers of the executor. Heir(s): Person/entity that inherits assets upon Decedent’s death

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Es Esta tate te Pla Plan fo n for Se Sent nthi hil l an and Va Valliam amma mai

• Nagarathar culture – raising kids responsibly and supporting them through out. Key is to support

them if something unexpected happens to us

• The Senthil-Valliammai Trust dated June 15, 2010

○

Revocable

○

Settlors- Senthil & Valliammai

○

Trustees - Senthil & Valliammai

○

Second set of Trustees if both die at the same time and the kids are minors:

■

Ganesh - Senthil’s brother

■

Alagu - Valli’s sister

○

Beneficiaries:

■

Kids - Palani & Meena and any kids in the future

• Will

○

Prepared and signed on the same day (June 15, 2010)

■

Kids share all the assets equally (based on the appraised value)

■

May assign specific items to selected individuals (jewelry, real estate, etc.)

■

May add a charity and assign specific proceeds

○

Executor - could be the same trustees

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BA BASI SIC C DEF EFINITI ITIONS ONS - POA POA

Powers of Attorney Advanced Health Care directive: type of durable power of attorney specific to medical care

• “Durable” means this POA is in force even if the grantor is

disabled

• Can specify the kinds of life-saving measures to be used,

medical professionals and facilities to be consulted, etc.

• Tip:

○ Choose your POA carefully to minimize emotional decisions Financial power of attorney: POA specific to financial matters, can be durable or non-durable

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BA BASI SIC C DEF EFINITI ITIONS ONS - LIFE IN E INSU SURAN ANCE CE

Life Insurance

• Insured– The person(s) covered by the insurance policy.
• Face Amount– The dollar amount that the insurance policy would pay out upon the death of the

Insured.

• Primary Beneficiary– The person(s) designated to receive insurance proceeds upon the death of

the Insured.

• Contingent Beneficiary– The person(s) designated to receive the insurance proceeds if the

Primary Beneficiary is no longer living.

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BA BASI SIC C DEF EFINITI ITIONS ONS - LIFE IN E INSU SURAN ANCE CE

• Term Life Coverage– The type of coverage that lasts for only a specified period of time (the

“term”) and has a defined ending date. The face amount would be paid to the designated beneficiary if the Insured dies while the policy is in force. Relatively inexpensive.

• Whole Life Coverage– The type of coverage that can last for as long as the Insured is alive,

provided that all of the premiums are paid. This type of coverage usually keeps the same premium rate throughout the life of the policy. Premiums could be paid up in a fixed time period (10 to 25 years).

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LIFE E INSU SURANCE NCE DET ETER ERMINA INATIO TION

How Much Life Insurance Do You Need?

• Several calculators online to see how much you
• need. For example:

https://www.bankrate.com/calculators/insurance/ life-insurance-calculator.aspx

• Beneficiaries: Spouse & Children;

Pro Tip: Avoid your Trust as beneficiary - The insurance proceeds are tax free to the beneficiary!

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SE SENTHI HIL L AND VA VALLIAMMA MAI I FAMILY

• The Senthil-Valliammai POA

○ Financial - Same trustees or a different person ○ Health – Advanced Health directive established: preferably a close trusted friend (to minimize emotional influence) or along with a trustee

• Life insurance

○ Term life on Senthil - $2 MM ( 25 years fixed rate expiring @ 60) ○ Term life on Valliammai- $1 MM ( 25 years fixed rate expiring @ 55) ○ Whole life for $100K each on Senthil and Valliammai ○ Used insurance calculators to estimate the face value for various situations

• Separate will (hand written and attested by witnesses or Notary) for Indian

assets - home and lands

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WHA HAT HA HAPP PPEN ENS S IF YOU YOU DO N O NOT OT HA HAVE VE AN EST ESTATE E PL PLAN?

For example, in California:

• Any community property (joint assets held by married

couple) will go to the spouse

• Accounts with named beneficiaries are transferred

Probate for remainder:

• Cap: If remainder is less than $150K, then no probate
• Process can take 6 months to 1 year, attorneys fees of 1-

4% of total gross asset value, and court fees

• Probate Process: Appoint an executor, gather up

Decedent's assets, file estate tax return, file inventory and appraisal of all assets with the court, pay out all benefits and bills Pro Tip: Estate plan is critical to transfer assets to the next generation.

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WHY HY DO DO YO YOU U NEE EED AN ES ESTATE E PL PLAN?

• AVOIDS PROBATE

○ Process where Probate Court proves a last will and testament, which means verifying that the will is legal and the deceased person’s intentions are carried out. ○ Probate also occurs when there is no will and a probate court must decide how to distribute the assets of the deceased’s estate to the heirs. ○ Probate can be expensive: court fees, attorneys fees, and other expert fees (valuation, financial experts, etc.) ○ Probate is a slow and long process – takes a year or more ○ Limit or ceiling on estate value for probate - varies in each state (general guideline <$100K)

• Estate plan reduces stress/tension among family members
• Estate plan means heirs get their inheritance quicker (by avoiding

probate)

• Good way to keep track of all the different accounts and assets.

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WHA HAT MAY N Y NOT OT BE BE IN INCL CLUD UDED ED IN TH THE E PL PLAN?

Some assets do not need to be included:

• Retirement accounts, life insurance policies all have “beneficiaries” that are

automatically given the assets upon death.

• Home that is held as “joint tenants” with spouse will automatically go to the

surviving spouse.

• Liquid assets (bank accounts, cash) under a certain amount do not need to

be included. They will have beneficiaries. Each state has different limits. There are different parts to the estate plan, so carefully plan which asset needs to be included in each document.

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WHA HAT SH SHOUL OULD BE BE IN INCL CLUD UDED ED IN TH THE PL E PLAN?

• Family business:
• LLC interest can be put into trust during lifetime. If it is a grantor/revocable trust, then it

is not a separate entity from the grantor. The trust will survive upon death and interests be transferred to heirs per trust terms.

• Will could specify who will inherit LLC interests and how much, and what powers each

person will have after Decedent’s death.

• Properties:
• family home,
• rental/investment properties,
• personal property (jewelry, art, antiques, etc.)
• Stocks, bonds, other portfolio assets, excluding retirement accounts

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SE SENTHI HIL L AND VA VALLIAMMA MAI I FAMILY

• Advantages in establishing “The Senthil-Valliammai Trust”

○ Avoid probate ○ Kids get their inheritance immediately ○ Due to Advanced Health directive, “Life support” decision happens without emotional effect

• Life insurance

○ If one parent dies, surviving parent gets the tax free payment as primary beneficiary ○ If both die at the same time, insurance payment from both policies will be distributed to the kids

• Death certificate & Certificate of Trust will be the main documents to access all

assets, bank accounts, stock portfolio, etc.

• KEY POINT – let the kids know about where (may be a safe box) they can find

the TRUST Docs, list of all assets, various accounts, deeds, etc.

• Information age – location of Passwords for phone, computers, various

accounts – becoming a critical piece of information when people die unexpectedly

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WHAT IS “FUNDING” THE TRUST

FUNDING - Simply put, transferring assets into the trust. A living trust is valid ONLY AFTER the creator executes the necessary documents and then “funds” the trust. Two ways to move assets (fund) into Living Trust

• Assigning Ownership Rights - Assigning rights from

individual to trust ○ Assets has no title like Jewelry, Art work, promissory notes, Intellectual property, business interest etc.

• Changing Title - Changing the name of owner from

individual or joint-tenant to trust ○ Grantor holds title in assets like real estate, bank account, investment account, stocks, bonds etc.

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REV EVOCA OCABLE BLE VS

• VS. IR

IRREV EVOCAB OCABLE LE TRUS UST

REVOCABLE TRUSTS (Living Trusts) IRREVOCABLE TRUSTS Terms can be changed anytime before the grantor’s death Terms cannot be changed Grantor can select new beneficiary or trustee Grantor cannot change the beneficiary

• r trustee

Assets can be managed and changed by the grantor Assets put into an irrevocable trust cannot be removed Assets are still part of the grantor’s estate Assets are no longer part of the grantor’s estate Grantor retains ownership and control Grantor no longer owns them Grantor must still claim assets on his/her tax returns Not included on grantor’s tax return, beneficiary must pay income taxes upon distributions Can be claimed by creditors Protected from the grantor’s creditors

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SP SPEC ECIAL CON CONSI SIDERAT ERATIONS IONS

• If the Decedent has minor children, the Will can create a trust to invest assets and protect

property.

○ The trust assets may be given to the children only at specific time. For example, when

they turn 18 or 21, when they graduate college, or when they get married.

• SIMULTANEOUS DEATH: If both spouses die at the same time, the Will can specify who

take guardianship over children, other issues.

• Review and revise or make amendments to the trust as the time passes by. Recommend to

do this every 20 years. May add provisions for grand kids

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IMPL PLICA CATION TIONS S FOR OR NON ON-US US CI CITIZE ZENS

US Citizens versus US Domiciliaries

• Creation of Trust - rules are the same for US

Citizen and Permanent Residents.

• Temporary and non visa holders - generally

not applicable but check with an EP attorney.

• Will - anyone can create it irrespective of

their status (Citizen, Visa holders)

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IMPL PLICA CATIO TIONS NS FOR OR NON ON-US US CI CITIZE ZENS S (contin ntinued ued)

Estate tax rate: same for US citizens, US domiciliaries, and non-US domiciliaries Different credit amounts (basic exclusion) (as of 2019):

• US citizens and domiciliaries: up to $11.4 million excluded from

estate

• Non-US domiciliaries: only is $60,000 excluded from estate and all
• ther US assets are dutiable

H-1B visa: considered a US domiciliary.

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ASSETS IN IN INDIA IA OR OR A FO A FOREI EIGN GN COU COUNTRY

• US Trusts need not include any assets which are not under the

jurisdiction of US.

• Typically, if the interest income from the foreign deposits or large

accounts are reported in US Tax Return, those can be included in the Trust; however, please consult your CPA/CA abroad

• Will for Indian assets

○ Will created in US Estate planning does not include Indian assets. ○ Separate Will must be created for Indian assets - a hand - written will with two witness signature may suffice. To have a formal Indian will, it is good to create a document on a stamp paper and get a “Notary Public” signature in addition to the witnesses ○ Probates in India - complex subject. Disposal of properties in big Cities (Urban land) require probated document to show that there is no lien on the property. Consult a local lawyer to get specific advice for your personal situation

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RES ESOUR OURCES CES

• LegalZoom plan for one person starts - from $179 - $329
• NOLO’s Quicken Willmaker/Trust 2020 - 89.99 (downloadable kit /

with coupon code MD40 you get it for $54)

• Employer Sponsored Benefits - from $11-$14 / pay

check(ARAG / Hyatt Legal Plans / LegalShield)

• Suze Orman Kit - from $69 - $199
• Private attorney - Bespoke solution. Generally fees ranges

from $2,500 - $3,500

• Free Online Services (www.doyourownwill.com /

www.netlawinc.com ) Note: if you try to DIY, it is easy to put it off until “later”. And later may never come.

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Q & Q & A A

Thank you!

Nanben Investments Webinar 29