Colorado Agriscience Curriculum
Section: / Advanced AgribusinessUnit: / Personal Financial Planning
Lesson Title: / Estate Planning
Colorado Ag Education Standards and Competencies / AGB11/12.03 - The student will be able to formulate and analyze financial records and use the information for evaluation and planning.
Understand estate planning.
Colorado Model Content Standard(s): / English Standard 1: Students read and understand a variety of materials.
English Standard 4: Students apply thinking skills to their reading, writing, speaking, listening, and viewing
English Standard 5: Students read to locate, select, and make use of relevant information from a variety of media, reference, and technological sources.
Student Learning Objectives: / 1. Students will understand the need for, and uses of Estate Planning
2. Students will understand the elements of estate plans
3. Students will understand the importance of a will, living will, and life insurance in estate planning
4. Students will understand the importance of trusts in estate planning
5. Students will understand the tax laws in estate planning
Time: / Two 50 minute class periods – find a natural break in the lesson
Resource(s): / Estate Planning , Iowa State University
Farm and Ranch Business Management, John Deere
Estate Planning, Colorado Bar Association
http://cobar.org/group/display.cfm?genid=415&printerversion=y
Instructions, Tools, Equipment, and Supplies: / Italicized words are instructions to the teacher, normal style text is suggested script.
Prop for Interest Approach
Drawing paper, crayons, markers, or colored pencils
Interest Approach: / Use a scenario from your own experience or use the one that follows to show how proper estate planning can be used to ensure the family farming operation can make it through the death of a primary owner of the operation.
Bring some things of value to class. These could be a belt buckle, a keepsake, a deed, a tool, etc. that could be used as props.
Good morning class. Today we are going to learn about how people make sure the things they have get to the right person when they are done with them. I have some things here that are like that. I have a belt buckle I won when I was in high school, a deed to some land, …etc.
Some of these I would like to give to my children right now. Some of them I won’t be done with for sometime; yet I would like them to also go to my children later. What are some ways I could accomplish this?
Responses should be from: make them a gift, to leaving them to them when you die etc.
Let the students respond and see what their knowledge level is in this area. There may be someone who has or is dealing with some of this in their family. If they can share some without giving too much detail it could lead to a great discussion.
Those are all great responses. There are many ways to make sure your wishes are carried out. But too many people do not. How many of you or your parents have a will that explains what happens when they are gone?
Only one in four people who die have a will. This means that they cannot decide who gets what, or what is done with their possessions, or have their wishes fulfilled.
We spend our whole lives gathering these things and then leave them to the court or others to fight over who gets them when we die. No one wants to think about when they die, yet we all would like a say in what happens to what we have.
Estate planning is the way this can happen. That way my land, my belt buckle, my life’s possessions will get to the people I wish to have them. Let us look at the advantages to estate planning.
Objective 1: / Students will understand the need and used of Estate Planning
[Slide 2] FACTORS to Consider in Estate Planning
· The objectives of the plan
• The portion of the estate required by the surviving spouse to provide sufficient income
• Plans that will work regardless of who dies first
• Provisions that should be make in case the surviving spouse should remarry
• Estate planning requires legal documentation with specific legal requirements
• Estate plans can be changed and should be reviewed annually
[Slide 3]
Estate planning is used to develop a plan to transfer all of one’s property from one generation to the next or within a generation.
Estate planning often involves the use of a will—and that is an important part. A will, of course, is a document, usually in writing, designating a person’s wishes regarding the disposition of property after death. A will becomes effective at death.
But. . . a will is only one part of an estate plan. Other factors should be included in a comprehensive plan including methods of owning property; insurance, its ownership and beneficiary designations; gifts and other transfers of property, both during life and death.
[Slide 4]
Estate planning often is considered a special concern of the aged, where the probability of death is greater.
But younger people, especially young couples with minor children, also have a great deal to gain from planning—and possibly much to lose if they don’t plan.
While the probability of death is not as great for younger people, the effect of death may be greater in view of the twin problems of care of minor children and management of their property in the event of death of both parents.
[Slide 5]
Estate planning should be directed at three levels of concern:
1. What to do with the property if one spouse should die, assuming there are a husband and wife.
2. What to do with the property if both spouses should die. Custody of minor children may be an important question here and a guardian can be nominated in the will. Also, minor children are not considered competent to manage property so a trust, for example, could be a helpful item to include in the parents’ wills.
3. What to do with the property if the entire immediate family should die. This may be the first level of concern for single persons who are by themselves the “immediate family.” For couples, if there is no estate plan, the order of death may determine which side of the family will receive the property. For example, in an accident where the immediate family is killed, but members die at different times, the property goes to the heirs of the person who dies last. So the order of death may determine whether the property goes to the husband’s side of
the family or the wife’s.
Determining the objectives of an estate plan is the most important step.
If you can identify and articulate your objectives—what the property is to be used for and for whose benefit—the chances are quite good that a plan can be developed to accomplish your goals.
Objective 2: / Students will understand the elements of estate plans.
[Slide 6]
As we introduce 3 ways to transfer legal ownership, take a few minutes to draw a picture next to each major topic in your notes. For example, as we talk about wills – take down the information regarding wills in your notes; then draw a picture that represents this information to you. Make sure to draw a picture for EACH major topic we cover!!!
3 Ways to Transfer Legal Ownership
• Wills– a legal statement of a person’s wishes concerning the disposal of property after death.
• Gifts – Land may be given away by a deed that is properly signed. Personal property can be given away by handing over the property with the apparent intention of making the recipient the present owner
• Trusts – a way of transferring your assets with stipulations on how or when the assets can be used
[Slide 7]
Now that we’ve identified three ways to transfer legal ownership, let’s look at 5 components of Estate Planning – keeping in mind, you’ll need to draw a picture of each topic as it’s discussed – in addition to / or in place of (if you’re really artistic or a budding cartoon artist) traditional classroom notes.
Objective 3: / Understanding the Importance of a will, living will, and life insurance in estate planning
[Slide 8-9] Wills--
Reasons for having a will
• They allow you to distribute assets as you wish, not as the law of descent decree
• They reduce costs and time of settling an estate
• You can name your own executor/executrix of the will to save time and money
• You can name a guardian for minor children
• You can establish trust funds
• The family can avoid internal conflict among its members
• Can be amended at any time
[Slide 10] Living Will or Medical Directive --
• Gives directive to doctors and family of your wishes as to what medical interventions should or should not be used to prolong your life.
• Increases your chances of advocating your wishes when you cannot– but does not guarantee you wishes will be met.
• A healthcare agent may be better than your family members because of the stress of making the tough decisions if you are incapacitated
[Slide 11] Gifts --
• You may give up to $12,000 a year to an individual (or $24,000 if you're married and giving the gift with your spouse). You may also pay an unlimited amount of medical and education bills for someone if you pay the expenses directly to the institutions where they were incurred.
• If you donate to a charitable gift fund or community foundation, your investment grows tax-free and you can select the charities to which contributions are given both before and after you die.
[Slide 12] Life Insurance --
• Life insurance may be an extremely important asset in building your estate plan and should be coordinated with it. Tax consequences should be reviewed with your attorney. Cooperation between your life insurance underwriter and your attorney is important in getting the best answers to some of the following questions:
• Do I need life insurance for my family security, to guarantee payment of a mortgage, to provide cash for taxes and administrative costs after my death or to provide for long-term care?
[Slide 13] Life Insurance --
• Should I place any of my insurance policies in trust during my lifetime?
• Who should own the life insurance policy and who should be the beneficiary of its proceeds?
• Is life insurance subject to taxation as part of my estate?
[Slide 14] Life Insurance provides:
• Family needs money for expense if your assets are tied up for a time after your death
• Can provide mortgage payment and debt relief especially for unexpected death
• Beneficiary gets the cash and it does not become a part of your estate if they own the policy
• Life insurance is not to make money during your lifetime but is avoid burden during your death
Now we are going to have an eye witness moment to check to see if you’ve understood the ‘meat’ of this lesson.
Find someone who is wearing the same color shirt as you - in 30 seconds I want you to quickly sit next to your partner and choose someone to be the interviewer and someone to be interviewed – during this process the interviewer needs to ask the interviewee specific questions related to the information on wills that’s been presented. Make sure to make your questions relevant to WILLS!
Interviewers raise your hand when you are ready you will discuss wills for 30 seconds. Go! Time!
Switch interviewers and interviewees. Discuss Living Wills for 30 seconds. Go!
Time! Switch interviewers and interviewees. Discuss Gifts for 30 seconds. Go!
Time! Switch interviewers and interviewees. Discuss Life Insurance for 30 seconds. Go!
Excellent discussion! Now let’s discuss trusts.
Objective 4: / Understanding the importance of trusts in estate planning
[Slides 15 & 16]
• Trusts are designed for people who have sizeable assets in real estate or business.
• Allow you to stipulate certain conditions be met before heirs receive inheritance
• Want to support your spouse or family even if the remainder of the estate goes to others
• You want to maximize your tax exemptions
• You have a disabled relative or minor children to care for
• Continuity of the family operation (farm) and bypass as much tax as possible
[Slide 17 & 18] 5 Standard forms of Trusts
• Credit shelter trust– you write a will bequeathing an amount to the trust up to the amount of your estate-tax exemption then pass the rest to your spouse tax-free
• Generation-skipping trust– allows you to transfer a substantial amount of money tax-free to your grandchildren
• Qualified person residence trust– will remove the value of you residence from your estate
• Irrevocable life insurance trust– removes your life insurance from your estate
• Qualified terminable interest property trust– will direct your assets to particular relatives
[Slide 19] Understanding the importance of business structure in estate planning
• Corporation – the individual interest in the corporation is all that is passed on and taxed. The corporate plan can dictate the transfer of shares
• Cooperative or LLC’s – the bylaws dictate the extent of tax liability and how the assets will be passed on to heirs before or after death of a shareholder
Quick – we are going to do a Hieroglyphics moment!
At your table you need to draw the 5 standard forms of trusts. You have 5 minutes to create your drawing.
Be prepared to share your drawings. Who would like to share their drawings!
Excellent work!
Objective 5: / Understanding the tax laws in estate planning
[Slide 20-22] Tax Laws