©2013, college for financial planning, all rights reserved. welcome

©2013, College for Financial Planning, all rights reserved.

Welcome

Expectations of Students

• Commitment of time and energy • Read the assignments prior to class• This course will help you:

o pass the CFP® Certification Examinationo better serve your clients/

grow your businesso be successful on the

College’s end-of-course examination

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Housekeeping Items

1. Professor contact informationLobby & Welcome e-mail

2. Tutorial in Lobby3. Status changes 4. Text chat5. Files for students6. Recordings7. Access Poll Layout

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Module 1Estate Planning Process & Goals

CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAMEstate Planning

Learning Objectives

1–1 Identify the nature of estate planning, basic estate planning definitions, and the nontax characteristics of property interests and forms of property ownership.

1–2 Analyze a situation to identify advantages or disadvantages of a form of property interest or ownership.

1–3 Evaluate a situation to select the most appropriate form of property interest or ownership.

1–4 Analyze a situation to determine whether a specific property interest is community or separate property.

1–5 Identify common estate planning goals and methods commonly used to achieve them.

1–6 Analyze a situation to identify estate planning mistakes, pitfalls, and weaknesses, and actions that can be taken to avoid such problems.

1–7 Describe the basic tasks in the estate planning process.

1–8 Identify the roles of the members of the estate planning team and the activities that constitute the practice of law.

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Video

• Play Video• LOs as Your GPS• 5:00 minutes• Play video from

Video Layout

Text chat or other questions

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Questions to Get Us Warmed Up

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Learning Objectives









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Types of Property

• Real Property• Tangible Personal

Property• Intangible

Personal Property

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Forms of Property Interests

Interests restricted by use

• Legal interests or title• Beneficial or equitable

interests or titleo Present interesto Future interest

Interests restricted by time

• Life estate• Term certainInterests restricted bycertainty of occurrence• Vested interest• Contingent interest 1-11


Powers of Appointment Terms

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General Powers of AppointmentHolder can appoint one or more of the

following parties• Holder, holder’s creditors, holder’s estate, or

creditors of the holder’s estate; andExercise of the power is not subject to• ascertainable standard such as health,

education, maintenance, or support (HEMS); or• prior consent of the creator (donor) or

a party with an interest adverse to that of the holder.

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Special (Limited) Powers of AppointmentHolder cannot appoint any of the followingparties:

• holder, holder’s creditors, holder’s estate, creditors of the holder’s estate; or

Holder can appoint one or more of these parties, but

exercise must be pursuant to

• ascertainable standard such as health, education, maintenance, or support (HEMS); or

• prior consent of the creator (donor) or a party with an interest adverse to that of the holder.

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Question 1

Which one of the following statements regarding powers of appointment is correct?a. A general power of appointment gives the

holder authority to manage all of the donor’s property.

b. A power of appointment exercisable in favor of the holder for his health, education, and comfort is a special power.

c. A power of appointment, whether general or special, can be exercised, released, or allowed to lapse by the holder.

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Question 2

Mary Ellsworth has established and funded an irrevocable trust for the benefit of her family.

She gave her husband, Tim, who is one of the income beneficiaries, “the right to demand that the trustee distribute no more than the greater of $5,000 or 5% of the value of the trust assets to any trust beneficiary during the last three months of any calendar year.

Which one of the following statements is correct?

a. Mary has given Tim a special power of appointment.b. Mary has given Tim a general power of appointment.c. If Tim has not demanded that the trustee distribute

any of the trust assets by December 31 of any year, he will be deemed to have released his power of appointment.

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Question 3

Which one of the following individuals is the holder of a “legal” interest?a. the income beneficiary of a trustb. the trustee of a trustc. the remainder beneficiary of a trust

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Learning Objectives









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Characteristics of Forms of Property Ownership

Sole Ownership• Absolute ownership

(also known as fee simple title); control by one individual during life and at death

• No survivorship rights; thus, probate is needed to transfer

• All income reportable by sole owner

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Joint Tenancy with Right of Survivorship(JTWROS)• Two or more owners of

undivided interest; equal interests presumed unless otherwise stated

• Survivorship feature at death

• Income split equally among all tenants if ownership is equal

• Excluded from probate estate

• Consent of other tenants not usually required for transfer of one tenant’s interest

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Tenancy in Common (TIC)• Fractional undivided interest owned by

unlimited number of tenants; interests can be equal but also can be unequal

• Division of income according to respective interests

• No survivorship rights; thus, probate is needed to transfer at death

• Unlimited alienation rights during lifetime

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Tenancy by the Entirety (TBE)• Only tenants are husband and wife• Equal undivided interests• Survivorship feature at death• Excluded from probate estate• Must have consent of spouse

to terminate or alienate

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Traditional Community Property (CP)• Each spouse has vested one-half interest

in most property acquired during marriage regardless of title

• No survivorship rights; thus, probate is needed to transfer at death

• Consent of other spouse may be required for one spouse to transfer interest

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Community Property Interests• Income earned by spouses

during marriage

• Property stipulated by nuptial agreement

• Appreciation on separate property due to contributions of nonowner spouse

• Separate assets commingled with community assets to the point that it can no longer be determined which are separate and which are community assets

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Noncommunity Property Interests

• income earned by spouses prior to marriage• interest earned on separate property of one

spouse• property received as gift by one spouse and

not co-mingled• property inherited by one spouse

and not co-mingled• property acquired

during marriage and classified as separate pursuant to a spousal agreement

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Estate Planning Implications for Migratory Couples

Moving from Community Property to Common-Law State• character of property acquired by

husband and wife living in community property state is not changed when they move to a common law state

• benefits of stepped-up basis in both halves of property are lost if property is divided

• record keeping is important to verify community nature of assets

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Estate Planning Implications for Migratory Couples

Moving from Common Law to Community Property State•Character of property acquired by husband and wife living in common-law state is not changed when they move to community property state

•Quasi-community property right: provides each spouse a vested right to one-half interest in marital property acquired in common law state if it would have been community property—had it first been purchased in community property state (recognized only in Wisconsin, Washington, California, Idaho, and Arizona)

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Question 4

Which one of the following statements regarding Henry White, who recently married for the first time, is correct?a. In a community property state, Henry’s

spouse is deemed to have a vested 50% interest in all of the property Henry owned at the time of the marriage.

b. In a community property state, Henry’s earnings from his job subsequent to the date of his marriage will be considered community property.

c. In a traditional community property state, any property Henry owns at death will go to his spouse by right of survivorship.

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Question 5

Which one of the following statements regarding different forms of property co-ownership is correct?a. Joint tenancy with right of survivorship

(JTWROS), tenancy by the entirety (TBE), and traditional community property (CP) are all forms of co-ownership that can be used by a husband and wife.

b. JTWROS, TBE, and CP are all forms of co-ownership that do not require a probate proceeding when one tenant dies.

c. JTWROS, TBE, and tenancy in common are all forms of co-ownership that require the consent of other co-owners before an owner can sell his or her interest in the asset.

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Question 6

If the proceeds from the sale of a community property home in a community property state are reinvested in a new home in a common law state, the new home will be considered to be community property.TrueFalse

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Question 7

Bill Jenkins owns a vacation home in another state. Bill wants to include his new wife, Edna, on the title to the vacation home. His primary concern is to avoid probate without making it possible for Edna to dispose of the property prior to his death without his consent.Which one of the following statements concerning the most appropriate form of titling and the rationale is correct?a. Tenancy by the entirety will prevent lifetime

disposition without Bill’s consent.b. Tenancy in common with Edna will eliminate the

need for ancillary probate.c. Sole ownership enables Bill to leave the home to

Edna outside of probate.1-31

Question 8

Placing property in tenancy by the entirety allows the owner to achieve the goal of maximizing premortem and postmortem flexibility.TrueFalse

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Forms of Property Ownership: Sole Ownership

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Forms of Property Ownership: Joint Tenancy with Right of Survivorship (JTWROS)

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Forms of Property Ownership: Tenancy in Common

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Forms of Property Ownership: Tenancy by the Entirety

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Forms of Property Ownership: Community Property

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Appropriate Forms of Property Interest

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Appropriate Forms of Property Ownership

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Appropriate Forms of Property Ownership

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Question 9

Survivorship rights are a characteristic of the tenancy by the entirety form of property ownership.TrueFalse

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Functions of the Non-Attorney Estate Planner

• data gathering, including identifying client objectives

• identifying possible problems that may adversely affect implementation of suggested techniques

• being aware of the availability, limitations, and problem solving potential of estate planning techniques

• outlining alternative solutions to general problem areas

• cooperating with and coordinating other professionals

• monitoring implementation of the plan1-44

Question 10

Which one of the following is an incorrect statement regarding the purpose of having an estate planning team? a. The team approach is necessary to

ensure professionalism and competence during each stage of the estate planning process.

b. The team approach may be necessary to accomplish all aspects of the estate plan in the shortest possible time.

c. The team approach is required by the CFP Board’s Code of Ethics and Professional Responsibility.

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Question 11

Which one of the following actions would probably not constitute the unauthorized practice of law by a non-attorney financial planner? a. drafting a power of attorney for a clientb. advising a client to conduct business as

a partnership rather than a corporationc. telling a client that property that is

titled in joint tenancy with right of survivorship will pass outside of probate at his or her death

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Module 1End of Slides

CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAMEstate Planning