Test Your Estate Planning Awareness
Written by Bogutz and Gordon
How’s your estate planning awareness? In honor of Estate Planning Awareness Week (which has been celebrated in October for the past eight years), here’s an EP quiz.
1. How many Americans don’t have an updated estate plan?
A. 33 million.
B. 100 million.
C. 133 million
D. 333 million.
2. Over the next few decades, how much wealth are the baby boomers expected to transfer to their children and other beneficiaries?
A. $300 million.
B. $3 trillion.
C. $30 trillion.
D. $300 trillion.
3. If you have a Will, it probably . . .? (Choose all correct answers).
A. Directs how all of your assets are to be distributed at your death.
B. Directs how some of your assets are to be distributed at your death.
C. Helps your estate avoid probate as well as estate tax.
D. Appoints the person to be in charge of handling your affairs.
E.. Nominates a guardian for minor children.
F. Directs how your debts should be paid.
4. Once I sign a durable financial attorney, I’m set for life if I become incapacitated.
True or False?
5. In Arizona, the commonly known role of “executor” is called . . .
D. Personal Representative.
E. Supreme Commander.
F. Most despised family member.
6. My agent under a health-care power of attorney should not be permitted to:
A. Refuse treatment if I have been diagnosed with cancer.
B. Withdraw food and fluids if I have Alzheimer’s disease.
C. Decide my course of treatment if I don’t feel like it.
D. Sign a DNR on my behalf if I am unable to communicate my wishes.
7. If I want things to be easy for my kids, I should add a child to my home deed, bank account, and stock portfolio.
True or False?
8. A revocable living trust cannot do which of the following:
A. Avoid some or all estate taxes.
B. Protect my assets from my creditors.
C. Setup a trust to protect my children’s inheritance from their creditors.
D. Avoid probate.
E. Keep my estate plan from becoming a public record.
9. Once I have signed my documents, an update is: (Answer either essential or recommended)
A. Every five years.
B. If I get divorced.
C. If my spouse or child dies.
D. If I remarry.
E. If I get a lot richer.
F. If I get a lot poorer.
G. If the law changes.
10. Which of the following celebrities (and his or her estates) had the most disastrous estate plans?
A. Jimi Hendrix.
B. Hank Williams.
D. Robin Williams.
1. Number of Americans with no estate plan. Answer: C: It is estimated that more than 55% of the adult population (133 million Americans) does not have an up-to-date estate plan.
2. Wealth passed on by baby boomers. Answer: C.
3. Your will does . . . Answer: Probably not A. A Will typically does not govern ALL of a person’s assets. Any joint tenancy assets, life insurance policies, IRA or 401(k) accounts, or other accounts with designated beneficiaries are controlled by those separate arrangements and not by a person’s Will. Mostly not C. Wills do not help avoid probate. As for estate tax, most estates are likely not subject to that tax (the Federal exemption is $5.45 million per person), and if you have more than that, a Will could help avoid the tax, if structured in specific ways, but just having one does not automatically avoid taxation . Wills can do B, D, and E.
4. Durable financial attorney, once signed, you’re done? Answer: False. You should take a few more steps. 1) Ensure your current financial institutions accept the document. It is becoming more common for banks and brokerage firms to insist on their own forms, so check before there’s a crisis. 2) Make sure your named agent understands his or her role; he or she must act for you and in your interests, not their own or anyone else’s. 3) Update them every five years or so. Financial institutions don’t have to honor the powers, and a document being “too old” is a common reason they decline to honor them. 4) If someone is appointed as your conservator in a court proceeding, your financial power of attorney is terminated. If you want more certainty, you may be want to consider other planning options.
5. “Executor”? The best answer is D, Personal Representative. Under Arizona law, “personal representative” means an executor, and also “an administrator, a special administrator, or person that performs substantially the same function . . .” The term “executor,” however, is often used in Arizona’s trust and probate statutes. Answer C is also correct. An executor/PR is also a fiduciary, but fiduciary is not the title; “fiduciary” describes the level of responsibility and loyalty required.
6. Agent under health care power of attorney can’t . . . Answer: Possibly C, decide when you just don’t want to. Your agent under power of attorney can act only if you are unable to. Your agent must make health care decisions that are consistent with your desires and that are medically reasonable and appropriate. The treatment options in A, B, and D may or may not be medically reasonable or appropriate depending on the circumstances, and may or may not be consistent with your desires. The provisions in a Living Will usually kick in only if you are considered to have a terminal illness, or are in an irreversible coma, or persistent vegetative state and have no reasonable chance for recovery. Alzheimer’s disease and cancer are typically not terminal until late stages, so a diagnosis alone may not be sufficient.
7. Joint accounts/property. False, usually. Adding children while you are alive has a couple of major disadvantages: 1) Some of your property could become subject to your child’s creditors because your child would technically become a co-owner, and 2) Your property probably would pass directly to the child and not be divided with your other children or beneficiaries like specified in your will or trust. However, especially for small accounts, the convenience may outweigh the advantages. Even so, a properly drafted and up to date financial power of attorney should provide all the access a child might need to assist you.
8. A revocable trust can’t . . . Answer: B. A revocable trust does not avoid your own creditors. However, it can be structured to protect your kids’ inheritance and avoid estate tax at their passing. Any revocable trust, if properly funded, avoids probate, and if probate is needed, much of your estate plan still remains private because only a basic Will leaving your assets to the trust would need to be filed in court.
9. When to update? Answers: Recommended: Every five years (it’s good to have a schedule), if the law changes (read a bit to see if the law change might affect you), if someone dies, or you get poorer (your plan probably automatically adjusts, but it might not). Essential: Divorce (make sure you remove your ex and all of his/her relatives – or reaffirm your intent to provide for them!), remarriages (add in your new spouse – or affirm your intent to leave him or her out!); get a lot richer (keep an eye on the estate tax exemption, or consider adding charities and additional beneficiaries).
10. Worst celebrity plan? Answer: C. Prince. The “Purple Rain” singer died in April without a will, leaving a multi-million dollar estate to sort out. Since then, multiple individuals have claimed to be his children or relatives, and his estate may have to pay millions in taxes. As for the others, Jimi Hendrix died in 1970 without a Will, and familial tension has persisted; most recently, a merchandise lawsuit was settled between his siblings. Hank Williams died at 29 with no Will; his daughter Jett was born only five days later. Despite evidence he wanted to provide for his daughter (including a pre-birth custody agreement stating that he would have full custody), it was not until three decades later that she was recognized and entitled to one-half of his estate. The family of comedian Robin Williams famously feuded in court over his personal property, but the disputes were settled fairly quickly.