Samantha and Sam Spartan are in their mid-30s and have two young children.

They live in a modest home and they have few investments. They have just started to save for retirement after paying off student loans and cutting up their credit cards. Samantha has a salary of $90,000 and Sam has a salary of $65,000. Because of their two young children, Steve (9) and Stacy (3), they purchased life insurance, but that is all they have done to date. Samantha and Sam have decided they should do some estate planning just in case. Samantha's sister, Sally Smith, would be a good person to take care of the kids if something happened to Samantha and Sam. They haven't talked to her about her willingness to take care of the kids. Samantha is worried if something happens to her, Sam won't be able to handle her estate. He isn't very good with paperwork. Sam is quite comfortable with healthcare decisions as well as daily financial management. They have not designated beneficiaries on any of their assets.

 

Their assets are as follows:

House (Entireties, net of mortgage) $50,000
 

Cash and Investments (JTWROS) $35,000
 

Samantha's IRA -$12,000, Sam is designated beneficiary. No contingent. IRA provider establishes default beneficiary as the estate
 

Sam's Roth IRA $10,000 -Samantha is designated beneficiary. No contingent. IRA provider establishes default beneficiary as the spouse if surviving and children if not
 

Samantha's Life Insurance1 $150,000 - Sam is designated beneficiary. Steve is the contingent.
 

Sam's Life Insurance $100,000 - no designated beneficiary 
 

Sam's Car $15,000
 

Samantha's Car $7,000

Laws of intestacy provide that if no living children 100% of the estate will go to the spouse. If there are children, 50% to the surviving spouse and remainder to be split evenly between surviving children. If no surviving spouse 100% to surviving children.

Questions:

Who should be the executor, successor executor, healthcare power of attorney, power of attorney, guardian, and trustee for each person and why? . Should Sam & Samantha include a trust?

Do Sam and Samantha have enough life insurance using the easy method, if not how much extra do they need (show calculation)?Easy Method is 7 years x 70% of salary?

Where should Sam and Samantha have primary and contingent beneficiary designations or use POD/TOD?

What are the consequences of naming the children, a potential trust, Sally, a charity, or the estate beneficiary? 

 What would happen to their assets and children if Sam died right now (be specific)?

 What would happen to their assets and children if Samantha died right now (be specific)? 

What would happen to their assets and children if they both died right now (be specific)? 

 

Some of my current answers that I am not sure are right:

Sam and Samantha should name each other as executors of their estates. An executer is a person that manages distribution of their assets in accordance with the directions stated in their will. Since Samantha worries about Sam's ability to manage his estate due to his lack of talent in handling paperwork, she might consider naming someone else, such as her sister or a professional in the field. They should name each other as their executer because the other person would be knowledgeable about their current estate and assets. They can also appoint more than one executer if they feel they cannot manage all the required paperwork. For instance, they can name each other and a financial professional such as a lawyer as a co-executer.

They should appoint a successor executor if one of them is unable to act in that capacity or they both die at the same time. An individual who serves as the successor executor could be a relative such as their parents, siblings or children, close friend, or an expert in the field like a lawyer or financial planner that they trust. In this case, since their children are so young and there is no mention of Sam or Samantha's parent being alive, I would suggest that they consider Sally, since they believe that she would be a good guardian for the children as well.

Additionally, they ought to name one another as their powers of attorney and healthcare power of attorney. If the other party is unable to make their own medical decisions, a healthcare power of attorney enables one person to act on their behalf. The power of attorney enables one person to manage the other's financial and legal affairs. If one of them believes that the other won't be in good enough health to make decisions or doesn't have enough knowledge about your medical history, they might look to other family members or close friends that they trust or a professional. The person that they choose should not be emotionally incapacitated after their death and be able to make the tough choices. Again, since Samantha is worried about Sam's ability, they might look into choosing a professional that knows the state that they live in's legal environment instead. Whoever they chose for this position should not have any criminal record or financial struggles that would allude to them possibly taking advantage of being power of attorney. 

Samantha and Sam have decided that Samantha's sister Sally Smith would be a wonderful choice to care for their children if something happened to them. As a result, they ought to designate Sally as the guardian of Steve and Stacy. It also helps that she is a relative of the children and would know them better than someone else. If Sally does not want to raise the children, they should look to other relatives or a close friend to take care of their children after death. 

A guardian is responsible for the physical and emotional well-being of minor children in the case that the parents are somehow incapable of providing for them. Sally, as guardian, will be responsible for the children's money if Sam and Samantha decided to leave their assets to their children, so she should understand how to invest and manage the children's money or have a professional she knows that can help her with it.

Sam and Samantha must finally choose a trustee who will be responsible for overseeing the trust's assets and allocating them in accordance with the conditions of the trust agreement. They may consider a relative, a close acquaintance, or a professional trustee like a bank or trust business (as long as they know that the business has their best interest). It's crucial that they choose someone they can rely on and who is qualified to handle the trust's assets. A trustee should not have financial problems.

They should also be somewhat familiar with financial concepts such as investments and asset management. When the children are old enough, Sam and Sally could also consider naming either of them as their trustee (or name one child for each parent) as long as there are no financial issues that they are struggling with, get along with each other (so that they will not fight over the estate), and are trustworthy. They could also consider naming co-trustees if they feel the need to do so.

If Sam died right now, the laws of intestacy would apply and the disposition of his assets would be determined by his will (if one exists), or by the state's intestacy laws. In the absence of a will, the distribution of assets would be determined by state law. In this case, since Sam and Samantha are married, the laws of intestacy would provide that Samantha would receive 50% of Sam's estate and the two children would receive the other 50% (divided up into each getting 25%). This would include the $15,000 car, the $10,000 Roth IRA, $100,000 life insurance and any other assets Sam owned at the time of his death. Sam's listed assets include a total of $125,000, so Samantha would receive $62,500 and Steve and Stacy would each receive $31,250 (received at the age of 18).

If Samantha died right now, the laws of intestacy would apply and the disposition of her assets would be determined by her will (if one exists), or by the state's intestacy laws. In the absence of a will, the distribution of assets would be determined by state law. In this case, since Sam and Samantha are married, the laws of intestacy would provide that Sam would receive 50% of Samantha's estate, while the other 50% would be divided up evenly and given to each of the children (as stated by the intestacy laws in the problem). This would include the $7,000 car, the $12,000 IRA, the $150,000 life insurance and any other assets Samantha owned at the time of her death. This totals $169,000, so $84,500 would go to Sam and Steve and Stacy would each receive $42,500.

 If both parents die right now without a will set in place, they would be said to have died in intestacy and their assets will be subjected to their state's intestacy laws. According to the information above, if there is no surviving spouse, 100% of the estate goes to surviving children. Thus, all assets including the house (net of mortgage), the $35,000 Cash and Investments (JTWROS), Samantha's IRA, Sam's Roth IRA, Samantha's life insurance, Sam's life insurance, Sam's car, and Samantha's car would be passed onto their children, Steve and Stacy. These assets are held until the child is of age 18 by a named trustee if there was a will by someone designated by the state. The guardian of the children chosen by the state would most likely be Sally. The assets total $379,000, so each child would receive $189,500.

 

I was wondering if I needed to take into account these when calculating the answers:

1 - Sam is designated beneficiary.  Steve is the contingent.

2 - No beneficiary designation

3 - Sam is designated beneficiary.  No contingent.  IRA provider establishes default beneficiary as the estate.

4 - Samantha is designated beneficiary.  No contingent.  IRA provider establishes default beneficiary as the spouse if surviving and children if not.