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FCS 3500 Financial Skills for Life

by: Amanda Notetaker

FCS 3500 Financial Skills for Life FCS 3500

Marketplace > University of Utah > Human Development > FCS 3500 > FCS 3500 Financial Skills for Life
Amanda Notetaker
The U
GPA 3.361
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About this Document

(Week 9 - Estate Planning)
Financial Skills for Life
Jaron Poulson
Class Notes




Popular in Financial Skills for Life

Popular in Human Development

This 7 page Class Notes was uploaded by Amanda Notetaker on Monday March 7, 2016. The Class Notes belongs to FCS 3500 at University of Utah taught by Jaron Poulson in Fall 2016. Since its upload, it has received 25 views. For similar materials see Financial Skills for Life in Human Development at University of Utah.


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Date Created: 03/07/16
FCS 3500 Financial Skills for Life ESTATE TRANSFER | FORMS OF OWNERSHIP Sole Ownership Advantages? full control + flexibility Disadvantages? all income taxed to the sole owner + full inclusion in the sole owner's gross estate + subject to probate + subject to claims of creditors Joint Tenancy with Right of Survivorship (JTWROS) Advantages? avoids probate + income shared between tenants Disadvantages? loss of control over disposition at death Consequences? JTWROS with a spouse one-half included in the gross estate of decedent (regardless of contribution) step-up in basis for one-half of the property JTWROS with someone other than a spouse full value of property included in the gross estate unless survivor proves consideration furnished Tenancy in Common Advantages? control over the fractional interest + can bequeath the fractional interest at death + income shared between tenants Disadvantages? subject to probate + loss of control over co-tenant's interest Presumption of tenancy in common Trust Ownership Grantor transfers assets into a trust for the benefit of the beneficiaries and remainderpersons -The income beneficiaries have a right to receive income from the trust for life (life estate) or for a specified number of years (estate for years) -The remainderpersons are entitled to the trust assets remaining after the death or the termination of the income interests Methods of Property Transfer at Death -Transfers through the probate process -probate is when you hire an attorney for yourself and an attorney representing the assets of the deceased individuals, go to a judge in a court of law and petition on why you should be the one responsible for the assets, everything goes public -Transfers by operation of law -Transfers through trusts -Transfers by contract Transfer of Assets at Death By operation of law property held in joint tenancy with right of survivorship will pass to the survivor By contract retirement plans and life insurance proceeds pass according to the terms of the beneficiary designation document By trust all property held in trust will pass according to the provisions in the trust document By will all remaining property will pass according to the decedent's will (if the decedent did not leave a will, the property will pass under the laws of intestacy) property passing by a will is subject to probate Intestate A person who dies without leaving a will All property not passing by operation of law or contract will pass under the intestacy laws of the decedent's state of residency Probate Advantages? minimizes the possibility of future claims against the estate by heirs and creditors Disadvantages? delays distributions + increases costs of estate administration (court costs, executor's fees, lawyer's fees) + all information is available to the public Probate Estate Probate estate includes all asseets passing under the Will plus any assets that name the estate or the decedent as the owner or beneficiary i.e. if Gordon names himself as the beneficiary of his life insurance policy, the plicy will be included in his probate estate Ways to Avoid Probate Probate can be avoided by having assets pass under: -contracts -trusts -operations of law -other will substitutes (payable on death, deed in escrow) Ancillary Probate Additional probate proceeding that must be repeated in any state in which the decendent owned real estate Will A document that directs the disposition of property owned by an individual at the time of death A will may be revised or amended by codicils at any point up until death Appoints legal guardian for children under 18 A will must be signed and witnessed (usually by 2 people) Holographic will A handwritten will, valid in some states without the formality of witnesses Nuncupative will an oral will Power of Attorney A power of attorney (POA) authorizes a erson named in the document to act on behalf of the person singing the document (property + health care) Howard Hughes Died intestate with $230 mil estate, settled after 34 years Escheat The legal process by which a state government acquires the estate of a person who dies without a will AND has no living relative Ownership in a Community Property State Community Property equal ownership interests in any property acquired during marriage with earnings of either spouse Separate Property property acquired befoe marriage, by gift or inheritance after marriage, or recovery for a personal injury during a marriage Annual Gift Tax Exclusion $14k (2015) annual gift tax exclusion per beneficiary per year can double amunt fo $28k (2015) if spouse agrees to gift split created by Congress to cover birthday, anniversary, holiday, graduatiton and other gifts during the year Charitable Deduction Taxpayers can claim an unlimited charitable gift tax deduction (there are no AGI limitations) Revocable Trust A revocable trust provides that the trust can be revoked or changed by the grantor at any time The grantor must be alive in order to exercise the power to revoke or amend the trust After the grantor's death, the revocable trust becomes irrevocable because no one has the power to revoke it Irrevocable Trust With an irrevocable trust, the grantor retains no right or power to change the trust and gives up control over the trust property permanently A revocable trust can be made into an irrevocable trust during the grantor's lifetime if the grantor gives up the power to revoke Charitable Remainder Trust An irrevocable trust that is structured so that a current beneficiary receives income from the trust while leaving the remainder to a remainder beneficiary that is a qualified charity upon death Inter vivos and Testamentary Trust Inter vivos trust are trusts created during the grantor's lifetime (trust assets avoid probate) Testamentary trusts are trusts created at the grantor's death (typically through the will and trust assets are subject to probate) Special Needs Trust A special needs trust is an irrevocable trust set up by a grantor for the benefit of an elderly parent or child The trustee can make discretionary distributions The trust assets are not considered resources available to the beneficiary that could reduce assistance from public authorities Estate Tax Applicable credit amount (unified credit) $5.43 mil applicable exclusion amount in 2015 40% tax on amounts above the applicable amount Is deducted from the estate before any transfers are made Why repeal it? the tax unfairly confiscates wealth the tax reduces investment by small business the tax decreases overall societal wealth by decreasing the incentive to work hard the tax discourages farmers from giving their land to their children The 2010 Tax Act added a portability feature between spouses for the exemption from estate taxes for taxpayers who die after 2010 and before 2013; portability was made permanent by the American Taxpayer Releif Act of 2012 ($5 mil in 2011 & 2012, $5.43 mil in 2015) Surviving spouse can now use any remaining exemption amount from deceased spouse


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