FIN 3564 Estate and Trust Planning Estate Planning Paper 2016 Winter

This assignment was started in the 2005 Spring semester estate planning class, and seems to be highly appreciated by all of the classes. In fact, many students have told me that this assignment is quite rewarding and gives relativeness, realism and appreciation of the subject of estate and trust planning. There is also considerable flexibility in the assignment. In past classes the paper was due near the end of the course. In order to gain the advantages and understanding that you will gain from doing this paper sooner, and, therefore, be able to relate and appreciate this course sooner, I thought it would be best to give you this assignment and have the paper due at the middle of the course. The assignment is to interview from one to three people about what are their estate plans, or as you will find from some, their lack of estate plans and their reasons for not doing any estate planning. However, a vast number of people do not fully understand what estate planning is and, therefore, will not always initially relate to questions concerning their estate plans. In this case, you will have to explain to your interviewees what is estate planning and why it is so important. Thus, you will be playing an advocate role. Estate planning is an enigma and can have sinister connotations that have been perpetuated by fiction through books, television shows and movies. Thus, there are a tremendous number of myths and misunderstandings about estate planning.

FIN 3564 Estate and Trust Planning Estate Planning Paper 2016 Winter

While some interviewees will not relate to the term estate planning, almost everyone understands what a will is and can relate to the questions whether or not they have a will. So in approaching some interviewees it may be best to start off with questions like, “Do you have a will?” If so, “Tell me about the will and what you wanted it to accomplish?” If not, “Why not and any plans to make a will in the future?” Another approach you may wish to try would be to ask, “If God forbid, something would happen to you today, what plans have you made for your family?” However, as you will learn in this course, the will is just a part of estate planning and there are other important estate planning documents such as a durable power of attorney (both property and healthcare), living will, and revocable and irrevocable living trusts. Many business owners have also executed buy-sell agreements. Please probe and explore these documents with your interviewees as well. Here again, you may have to play an advocacy role. However, if a good discussion is started many interviewees may tell you about these documents in their description of their estate plans. Do not assume that your interviewees know or understand the exact name or nature of the estate planning documents that they have had prepared for them. Interviewees quite often get mixed up as to which document is which document and what the various documents do (just like students). This means you may have to gently probe in your interview the interviewee’s understanding to the document they have. Here again you may have to play an advocacy or education role. The assignment, obviously, entails asking questions and skillfully probing for information. This is a skill required of all good financial and estate planners. Most importantly, we are interested in what are the interviewee’s goals and objectives; what are they trying to accomplish and has their planning, so far, accomplished their objectives? So here are the parameters for completing the assignment:

FIN 3564 Estate and Trust Planning Estate Planning Paper 2016 Winter

• Unlike written communication in the academic world – i.e. most term papers that are supposed to be lengthy by nature – the business world requires brevity. Therefore, the maximum length for this paper is three pages, and I have no objections if it is shorter.
• It is always a good policy to spell and grammar check a document. Please have someone proof read it who knows English and is a good writer. I am not an English teacher, and, accordingly, I am not grading on these factors. However, the use of clear communication is important and encouraged, and a skill you will need in your careers. During the last couple of semesters, I have had papers turned in with unbelievable flagrant writing mistakes that are not worthy of a person who is a senior at UMSL. So please, please, have your paper read and reviewed and proofed by, again, someone who knows English and how to write.
• Quality and depth is more important than quantity. It, therefore, is better to have one in depth quality interview than three interviews. However, interviewees will vary considerably in the length and depth of their answers and some may just not have much to say about estate planning and wills.
• It is imperative to use and understand proper estate planning terms and terminology. For example, understand the difference between an executor or administrator and a trustee, the difference between a durable power of attorney for healthcare and a living will. This requires, of course, that you really learn the terms as they are brought up in the course.
• In the past students have interviewed a variety of different people that includes parents, classmates, teachers, business associates, bosses and business owners. One student interviewed everyone in her office, including her boss, and what was fascinating was the diversity of answers.

FIN 3564 Estate and Trust Planning Estate Planning Paper 2016 Winter

• For those students in the life insurance and employee benefits class please interview different people than for the similar assignment in that class.
• It will not be unusual if you receive in responses to your questions a variety of misconceptions and misunderstandings about estate planning from your interviewees. Just record their responses and your observations. Also, try to be an advocate and educator and describe these actions and results in the paper. Explain to your interviewee the consequences of not planning.
• With some interviewees you may want to explore charitable relationships and intentions. For example, find out if there are any charities – such as a school, museum, zoo or church – that they contribute currently to and ask if they have considered these institutions in their estate plans.
• “Feeling” questions and responses are far more important than factual, or data, questions. While you may need factual, or data, information for perspective and to describe the overall circumstances of the interviewee, the overall objectives of what the interviewee wants to accomplish and his or her feelings about family, community, businesses, potential beneficiaries is the heart of estate planning.
• It is not necessary to reveal the name or names of your interviewees. However, it is a good idea to describe the relationship, if any, that you have with the interviewee. Would, also, like to have an indication of the interviewee’s family net worth, and the possibility of any significant inheritances.
• Do an actual in person, face to face interview! A phone interview is allowed in cases of clarification after the face to face interview, or if the interviewee is out of town. DO NOT IN ANY WAY ATTEMPT TO DO THE INTERVIEW BY EMAIL OR TEXTING!
• Do not attempt to fake or make up, in whole or in part, an interview. Believe me I can tell! After over 35 years as an estate planner I know which arrangements make sense and which are science fiction. Naturally, students will make mistakes in terminology. That is understandable. However, to describe planning techniques that would be thoroughly inappropriate for the family situation described in the interview merely to try to impress me that you know the terminology of these techniques is intolerable!

FIN 3564 Estate and Trust Planning Estate Planning Paper 2016 Winter

• It never ceases to amaze me how many students fail to either read these instructions or read them at the beginning of the semester and forgot to reread them while completing their papers. So please reread these guidelines and instructions right before your interviews and right before writing your paper.
• In lieu of this assignment, or for extra credit, I am open to alternative research and papers. Naturally, we both have to agree to the alternative. For example, one year a student from India did a paper on estate planning in India.
• Please feel free to ask me any questions you may have about this assignment or your interviewees. Over the years four situations have come up in a few of the student interviews that I think you should be aware of and how you might approach these situations:
• It is amazing how many folks think that just because they executed a will or some of the other estate planning documents, that they think their planning is complete and they never have to do anything again. The first thing to do in this situation is to find out when these documents were completed? The second question is to find out if the estate plan took into consideration the forms of ownership of all property and beneficiary designation for life insurance and retirement plans. In other words, was this an integrated, coordinated, thorough estate plan? It is interesting to note just how easy it is to screw up an estate plan merely by selling or obtaining other assets and improperly titling the assets acquired or the fact that the new assets were not documented in the current estate plan, such as listings of specific bequest items.
• If your interviewee has an ownership in a business – whether as a sole proprietor, partner, limited partner, member of an LLC, or shares in a C or S corporation – ask the interviewee what he or she plans to do with the business upon his or her retirement, disability or death? The main two choices are to either sell the business or keep the business for the family. Both choices have serious planning implications. If they are to sell the business the question would be to who, at what price and how are they going to finance or pay for it? If they plan to keep the business who is going to run the business, and, maybe, how do you treat all family members fairly?

FIN 3564 Estate and Trust Planning Estate Planning Paper 2016 Winter

• As you will learn in this class, the will, durable power of attorney for property, durable power of attorney for health can and advanced medical directive (living will) are essential estate planning documents for most folks. In many situations, the revocable living trust is also a very important estate planning document. However, with the current estate tax exemption amount in 2016 at $5.45 million per individual or a combined $10.9 million for a married couple, an irrevocable trust is unnecessary and not appropriate unless the trust is needed for asset protection purposes or the individual or family net worth exceeds the estate tax exemption amount. In the past, too many students have brought up the irrevocable trust as an estate planning option where that option would be completely inappropriate given the current net worth of the interviewee or his or her family. (Of course, this can all change depending on who gets elected in November of in the future.) The point here is students need to assess the situation of their interviewees and, if they discuss with their interviewees needed estate planning documents, suggest those estate planning documents that are appropriate given the interviewee’s situation and net worth.

FIN 3564 Estate and Trust Planning Estate Planning Paper 2016 Winter

• It seems in every class a student runs into some person whose plan is to either directly bequeath another individual, or name that individual as beneficiary of life insurance, with the expectation that individual will use the money to care for someone else who the person making the plan thinks is incapable of managing money. This is not a guardianship or trustee arrangement – which is a fiduciary arrangement – which would be okay and legally a far better arrangement. While the person left the money to care for another is under a moral obligation, they are not under any legal obligation. Any granting of money to the person to be cared for, over the annual exclusion which we will discuss in class, is a taxable gift. Furthermore, what would happen to the money expected to be used for someone else under this arrangement, if the individual expected to care for another either goes bankrupt, becomes involved in a divorce proceeding, or dies? The money would not end up where intended. It has become my custom to provide each student an analysis and evaluation of their paper via email. Some of these emails will be more detailed than others and it is not unusual for the email to print out to two or three pages.

FIN 3564 Estate and Trust Planning Estate Planning Paper 2016 Winter

Generally, I write the separate evaluations in a Word document and copy them into individual emails to students which are all sent out at the same time. Normally each of the papers is read three times. First, I read all the papers at once to get a feel for all the papers. Then I reread each paper for specific comments and grade evaluation. Frankly, this process is damn time consuming, and part of the reason I limit the papers to three pages. I also try to do the grading when I can allot sufficient continuous time in my schedule to do it right. Thus, when I start grading the papers is determined by my other commitments at the time, what is on my plate and going on in my life; some of which I will not know at the start of the semester when I assign the due date for the paper. If I know I will not be able to grade the papers shortly by the due date, I will extend that due date. It is unfair for me to require you to turn in a paper by a certain date if I know, in advance, that I will not be able to read your papers right away. That does not preclude you from turning in your paper early or by the original due date. Rather it is meant as a courtesy to you. While I know your schedules are busy and you all have full plates, I do encourage you not to procrastinate doing this paper. The best thing to do is early on determine who you are going to interview and seek their permission to do the interview. The best time to do the interview itself is after we have completed, at least, the first four chapters. With potential interviewees who could have estate tax issues, i.e. estates worth over $5.45 million in 2016, then you may not want to do the interview until either you have read or we have completed chapter 6; and you may also want to read or skim over chapter 8.
Good luck and have fun with this assignment!