- Welcome to today's estate planning webinar sponsored by PBS North Carolina and specifically by the PBS NC Legacy Society, our supporters who've informed us that PBS NC is in their estate plan.

We're pleased to have a very large audience this morning, and if you're one of our fans, members, donors, sustainers or Legacy Society members, we thank you so very much for your support and interest.

Our CEO, David Crabtree, sends his greetings, and as he often says, it takes everyone, from our employees, volunteers, supporters, to all make PBS NC work.

Thank you for being part of our team.

I'm Warren Bingham, the Planned Giving Officer at PBS NC.

In my role, I assist our supporters who desire to make gifts through their estate plan or to make gifts through special financial arrangements, such as charitable gift annuities, charitable trusts, and life insurance policies.

PBS North Carolina first went on the air in early 1955, 69 years ago, as the 10th public television station in the nation.

This was 15 years before the creation of nationwide PBS, which we readily joined once it was established.

Today, PBS NC's audience reach, which spans all of North Carolina and parts of South Carolina, Georgia, Tennessee and Virginia, is the third largest among the nation's PBS affiliates.

From the beginning, our organization has focused on education, information and entertainment, and that has not changed.

Indeed, we're pleased that today's webinar is a form of education and offered on the internet, where folks from everywhere around the world can find us.

I also want to thank you for your financial support.

While over half of our budget is met by private donations and corporate underwriting, estate gifts are important to us too.

So keep that in mind as you consider the charitable component of your estate plan.

My colleagues in development and marketing and communications have done a great job in creating this morning's educational opportunity for you.

If you're a longtime viewer of ours, you might know us for Julia Child, Mr. Rogers, the Muppets, "Masterpiece", "My Home, North Carolina", "North Carolina Weekend" or "State Lines" and "PBS NewsHour", not to mention the artist Bob Ross and "Downton Abbey", but today, my team is pleased to offer you the expertise of attorney Charlie Davis at Poyner Spruill law firm of Raleigh.

Poyner Spruill is an old and highly regarded law firm with offices in Raleigh, Rocky Mount, Charlotte, and Southern Pines.

Charlie Davis is a native of Central North Carolina, hailing from Moore County.

He earned his bachelor's and law degrees with distinction at UNC Chapel Hill.

Focusing on estate planning, tax and business law, Charlie is recognized as an expert in estate planning and probate law by the North Carolina State Bar.

We're grateful for Charlie's time and expertise.

This morning, please keep your questions until the end or put them in the chat as we go along.

We're gonna let Charlie get through this entire presentation before we'll address some of your questions.

At some point early to mid next week, around May 7 or 8, you will receive an email from us in follow up to today's webinar, and in that, we'll have a way to reach a site that you can watch this webinar all over again if you so choose and also to show you how to get up at Charlie or us at PBS NC.

So be on the lookout for that email next week.

Okay, folks, get your pen and paper ready.

We're about to begin.

I welcome Charlie Davis.

Thank you so much, Charlie.

- Thanks, Warren.

Good morning, everybody.

My name's Charlie Davis, as Warren mentioned.

I'm an attorney at Poyner Spruill in Raleigh.

You know, we've got offices in Charlotte, Raleigh, Rocky Mount, Southern Pines.

I do trusts and estates work.

I also do some business work and some tax work.

When I say that I do trusts and estates work, that means I do estate planning, estate administration, tax planning.

I do some business planning.

Many of our trusts and estates clients are closely held business owners.

We do charitable planning all within the trusts and estates sphere.

So it's a pretty broad area.

As Warren mentioned, I am a lifelong North Carolina resident.

I grew up in the Southern Pines, Pinehurst area, and I've been in The Triangle for the last 15 years or so.

Next slide please.

So just some quick background on my law firm.

We are in downtown Raleigh in the PNC Building.

I mentioned we have offices across the state of North Carolina.

We are only located in North Carolina.

We have some attorneys that are licensed in other states, but we focus on North Carolina-specific issues, and in addition to trusts and estates work, we do all kinds of things, business work, employment law, banking law, health care, bankruptcy, commercial real estate litigation.

Most anything you could think of, we have handled at some point in time in the past.

So this presentation's gonna discuss estate planning issues in general.

It's also gonna talk about some related subtopics.

This is for educational information purposes only.

It's not legal advice to any particular individual.

If you have questions about how any of this might apply to you individually and to your specific circumstances, we'd be happy to talk to you.

There's also a lot of really good trusts and estates lawyers across the state.

So if you have any questions about how this may apply to you, please reach out to me or another trusts and estates attorney and they can help you wade through those issues.

I think Warren mentioned this already, but please do enter questions throughout the presentation as you have them.

We're gonna answer questions at the end.

So we'll have them in the chat.

We will answer them at the end so we have time to get through all of the materials today, and we will answer as many of them as we can.

So please put them in the chat, and if your question is not answered, you can feel free to reach out to me after this presentation.

I'd be happy to try to answer it for you.

Okay, next slide please.

All right, so this is on the basics of estate planning.

So the question is, what is estate planning?

So it's more than just having a will.

That is the document that most people associate with having an estate plan.

So certainly that's a very important document, but it's more than just that document, and really, it's more than just having a set of documents.

It is gonna consider a lot of different things like taxes, creditor protection, your beneficiaries and their life circumstances, your charitable aspirations, particular property that you own, reducing taxes, avoiding what we call accidental disinheritance.

We'll talk about all of that today.

So estate planning really is a process.

You carefully consider your life circumstances, your assets, your family, your goals, and you develop a plan that's gonna reach those goals when considering all of those other things.

However, there are various documents that are important to this process.

Those are listed here.

Many of them are listed here.

I'll go over each of these, give you an overview of what each of them is, what it does, why it's important to have, and then we'll move on to other areas in estate planning.

So the first one on this slide, the first document is a financial power of attorney.

So this is a document where you name someone to help manage your finances and property while you are living.

It is vitally important to consider having one of these while you're alive.

It can help avoid a guardianship if you ever become incapacitated.

So if you get to the point in life where you're unable to manage your own property, you will need help managing it, and if you don't have a financial power of attorney in place where you appoint an agent to help you with that, you likely would have to have a guardian appointed to oversee your property and to get access to it and to continue paying your bills, and you wanna avoid that if you can.

Guardianships are very public.

You get declared incompetent in a court of law, and although you may not have the capacity anymore to continue managing your finances and property, that doesn't mean that you don't still have the wherewithal to understand what is happening in that courtroom, and being declared incompetent is likely very embarrassing for people.

It's also, you know, public.

So anybody can go see that you've been declared incompetent.

The guardian that is appointed to manage your property has to report to the clerk every year showing what they've done on your behalf and get approval for that.

So it can get expensive, time consuming.

So you just want to avoid it if you can.

If you have a financial power of attorney in place where you've already appointed someone to help you with your property, you likely can avoid a guardianship in most circumstances.

And so this is an easy way to make things easier for your life and that of your family if you have this in place.

A financial power of attorney is a pretty simple document generally.

There's even a pretty good statutory form that the legislature has put out and which was drafted in large part by North Carolina estate planning attorneys.

So this is an easy document to have.

It's very important that you think about doing it.

It is only effective during your lifetime.

So once you pass away, the agent you've nominated, that you've appointed in your financial power of attorney no longer has access to manage your property.

When you die, the person who then has that access would be your executor, and we'll talk about that in a second.

So when you have a financial power of attorney, you're probably going to want to name at least one backup agent.

So you name one person who would be your primary person to help you with your finances, and you wanna name at least one person as a backup to that person because if something happens to your primary agent, you're gonna want somebody to be able to step into their shoes.

And that's particularly important if we are at a time when you are no longer able to manage your own finances, which means you can't sign a new power of attorney.

So you wanna have a succession plan in place, and it's good to consider having more than one backup.

So have a couple backups.

You can name as many as you want.

You can also name co-agents as your agent under a financial power of attorney.

So you can nominate multiple people to act together on your behalf.

You can specify that they have to act together.

You can specify that they may act independently of each other.

It is very important if you're gonna name co-agents though that you really consider whether or not both of them are responsible people and also that they get along and will work together in your best interests.

So, you know, don't just name two agents because you have two children and you don't wanna treat them differently.

You really need to think about how they will act and how they will work together, and if they won't work together well, it's probably not a good idea to name them as co-agents for you on your behalf.

So usually, financial powers of attorney are immediately effective when you sign them.

So the person that you've nominated as your agent, if you're married, that's likely your spouse, can go ahead and start acting immediately.

Some clients get concerned with that.

They don't want someone to have this authority until they are unable to act themselves, and so they want it to be effective only upon their incapacity.

That's what we call a springing power of attorney.

It springs into effect upon your incapacity.

These types of powers of attorney were very popular many years ago.

They have since lost their popularity.

You can still do them.

The reason they're not as popular is who determines if you've become incapacitated, right?

You have to have some determination that you're incapacitated in order for it to spring into effectiveness, and usually the financial institution or other party who is relying upon your power of attorney is gonna want proof that you're incapacitated, which means likely a certification from a doctor, maybe two doctors, and that may need to be recorded at the register of deeds before they will rely on it, which of course is probably something you don't want recorded at the register of deeds, that you're incapacitated.

So what we usually advise clients is have a power of attorney that is immediately effective and make sure you're choosing people that you trust are gonna use it correctly and which also means that they won't use it until they need to.

One other point on this before I move on to the next document.

These are great tools to use to allow your children to step in and help you or someone else to step in and help you with your finances, like paying your bills, without adding that person to your account as a joint owner.

So a lotta times, people will go to the bank and say, "Hey, look, I need help paying my bills.

I would like to add my child who's with me today to my bank account so that they can help me pay my bills."

Usually when you do that, the bank will add that person as a joint owner to your account, and likely when they do that, they've added them as a owner with a right of survivorship.

So there are some consequences of doing that that you need to be aware of.

First is, when you add a joint owner, you are likely subjecting that account to the liabilities of that joint owner.

So you have now subjected your own money to the liabilities of someone else.

So you need to be very careful about doing that.

The other issue is you may unintentionally disinherit your other beneficiaries when you do this.

If you have three children, one of which lives near you, the other two are, you know, live not close to you, you may think that the child that lives close to you is the person to help you with your finances, and that is oftentimes a good choice, assuming that person is a responsible child, but when you add them to your account, likely with a right of survivorship, what you've done is given them that account when you pass away, which means that your other children that don't live close to you won't own that account after you pass away.

If it's a large account, you may have just accidentally disinherited them from a lot of money that you would've intended to be split between the three of your children.

That can be fixed.

Your child who received everything can be generous and share it with his or her siblings, but as you can imagine, that's not always the case.

Children don't always get along.

Children who helped out mom or dad prior to death sometimes feel entitled that they should receive more because of the help they offered, and so it's a problem you just wanna avoid, and you can avoid it if you just use a financial power of attorney instead of adding a child to an account.

Okay, so the next document is a health care power of attorney.

It is similar to a financial power of attorney in that you are appointing someone to make health care decisions for you in the event you are unable to make those for yourself.

A difference between these two is your health care power of attorney is only effective upon your incapacity as determined by a doctor.

So as long as you can make your own health care decisions, no one else can make them for you.

One other difference between these two documents, the financial power of attorney, aside from the obvious financial versus health care decision-making, but your financial power of attorney completely loses its power after your death.

Your health care power of attorney still has some effectiveness after you die.

Your health care agent has the authority to dispose of your remains after you die.

So your health care power of attorney is generally the person dealing with the funeral home after you pass away.

The importance of this document is it allows you to choose who's going to be making health care decisions for you after you're unable to do so yourself, and choose an order.

You should of course have successor agents here and exclude people that you don't want to make health care decisions for you or who you don't want to put that burden on.

It also allows you to place limitations on your health care agent's ability to act or to color in the lines about particular health care decisions.

You can specify certain treatments that you would or would not want to receive, things like that.

So it is a very important document to have.

If you don't have a health care power of attorney, your next of kin would be the party that is allowed to make health care decisions for you, but that could be numerous people.

If you've got, you know, if you're not married and have a few children, that's all of your children.

And so you wanna make sure, you know, if you don't want all your children having to make decisions together, that you've listed a succession of people in a health care power of attorney.

So a similar document to the health care power of attorney is an advanced directive for a natural death.

Sometimes this is also called a living will.

This doesn't appoint anyone to make decisions for you, but it tells your family and your health care agent what your decisions would've been in that very end-of-life situations.

So this is where you specify your end-of-life wishes.

There are three scenarios where you can essentially say, "Don't keep me alive artificially if this scenario exists."

The first is if you have an incurable condition that will result in your death in a relatively short period of time.

The second is if you become unconscious and to a high degree of medical certainty you'll never regain your consciousness.

This is like being in a coma and your doctor is, you know, as certain as they can be that you'll never wake up, and the third is if you suffer from advanced dementia and your doctor is as medically certain as they can be that you'll never regain your cognitive ability.

So if any of those scenarios exist, you can specify on your advanced directive that you don't wanna be kept alive artificially in those scenarios.

You can also give your health care agent the authority to override your choices in this document.

So some people decide that, you know, they don't want anybody to be able to go against what they've said on this document, but others, maybe they have a health care agent who is in a health care-related field.

They think they have some superior knowledge on health care issues.

They may want their health care agent to have a chance to override this decision, maybe get a second opinion.

There's no right or wrong answer to this, but you can specify all of that on this document.

I think the value of this document is that it tells your loved ones what your wishes would've been at the very end of life when they're having to make an awful decision about whether or not to keep you alive and when your health is very poor.

And so this document allows them to make your decision and not feel like they are making their decision.

So it really is a gift to your loved ones if you have a document like this.

Sometimes the health care power of attorney and the advanced directive are combined into one document.

It is completely fine for that to be the case.

My law firm typically does this in two separate documents, but you can have one document that specifies all, that appoints a health care agent and discusses end-of-life treatment as well.

So the next document on this list is your will.

As I mentioned earlier, this is the one that everybody associates with estate planning, and for good reason.

It's a very important document.

Everybody needs a will.

Your will is gonna control your assets that are in your name at your death that are not in a joint account with a right of survivorship and which do not have a beneficiary designation associated with them.

So as you may imagine, if you're married and you own many of your assets jointly, there's a good chance when the first of you passes away, your will does not do quite as much because you own things jointly with a right of survivorship or things are payable on death to the surviving spouse.

And so your will may do more when the second of you passes away or if you're not married because you may own more things, you know, independently from other people.

This document's also where you appoint your executor who is in charge of administering your estate after your death and who, so they step into your shoes essentially and wind up your affairs.

And so you get to specify who you want that to be and a succession of executors to make sure someone that you want to serve is there and ready to go when you pass away, and you give your executor powers in your will.

They have statutory powers, but you can give them powers in addition to what they can do via North Carolina statute.

You also appoint your guardian for your children, for your minor children in a will typically, and so it's important to have a will so you can specify who you want to be the guardian of your children after you pass away if you still have minor children.

Of course your will is only applicable after your death.

It is not really your will until you die, right?

It doesn't get declared as your last will and testament typically until after you pass away.

There is a process these days where you can get your will declared as your will before you die.

This would be used if you expect your beneficiaries to fight after you die, but hopefully, most of you would not have that scenario, and so your will is just not your will until you die when the clerk declares it to be your will and enters it into probate, which we will talk about in a second.

If you don't have a will, your property will still go to someone, and North Carolina has a statute.

It's called the intestate succession statute.

And so this North Carolina statute specifies who will get your property.

It is likely not who you would think would get it necessarily or who you may want to get it.

So for instance, if you're married and you have children, your spouse and children will share in your estate after you pass away without a will, depending on how many children you have.

So your spouse is entitled to the first 60,000 of personal property.

That's things other than real estate essentially, and then they get one half of the rest of your property if there's only one child or one third if there's more than one child, and your children get the rest.

If you don't have any children and you're married but your parents are still living, then your spouse splits your estate with your parents.

So your spouse gets the first $100,000 of personal property and then a half of everything else.

Your parents get the other half of everything else.

That is likely not what people would want in most scenarios.

It may be what they want in some scenarios, but for most people, when you're married, you want most property, or if not all of it, to go to or for the benefit of your surviving spouse first if living.

And so it is important to have a will so you can get around the Intestate Succession Act if that's not what you would want.

Another important reason to have a will is if you have minor beneficiaries.

So in those scenarios I just discussed, if you have children and a spouse with no will, your spouse will or your children will receive a part of your estate, and if that person, if that child is a minor then and if you don't have a will, your surviving spouse or the surviving parent of that child would have to apply to the court to become their legal guardian to manage property on their behalf.

Just like the guardianships I discussed earlier, this requires reporting to the clerk every year for what has been done with respect to the property of that child, and so you wanna avoid that if you can.

So even though that child may have a natural guardian still living, a surviving parent, that person can't manage property for them without becoming their legal guardian, which is court appointed and court supervised.

You can solve this issue by having a will that leaves property to a trust for the benefit of the child.

We'll discuss that in a bit.

It can leave property to a custodial account for a child if it's a smaller amount.

You can leave property to a 529 education savings plan account for their benefit, again, if you're leaving a smaller amount to them.

So there are lots of ways to solve this issue, but you can't solve it if you don't have a will.

So the next document on this list is a trust.

This is just a preview that we will talk about trusts on a later slide here.

There's all kinds of trusts out there.

What we're talking about mostly for just general estate planning is what's called a revocable or revocable trust, and we'll discuss that later.

Those are used for probate avoidance, and so stay tuned.

Beneficiary designations are also vitally important estate planning documents.

You may think that they're less important 'cause it's just, you know, a beneficiary form for your 401k or your IRA or for your life insurance or perhaps for just a financial account, but for a lotta people, their 401ks and IRAs and their life insurance is the largest asset they have, and so naming a beneficiary of those accounts or policies that align with your general estate plan is extremely important.

You can have a perfectly drafted estate plan, but if your beneficiaries don't align with it, your estate plan may not do a whole lot.

So we'll discuss that later as well.

Not listed on this slide are a couple other documents just that you should be aware of.

You can have what's called a HIPAA authorization document where you allow someone to access your protected health information, or multiple people.

Your health care power of attorney, the agent on that document will have access to that, but if you wanna name other folks to have access to your protected health information, you can do that.

If you have minor children, you can also do what's called a standby guardian appointment where you appoint someone as your child's guardian.

You typically do that in a will, but this document would apply even if you have not yet passed away but maybe you're incapacitated and can no longer care for your child.

So you can have a separate standalone document that appoints a guardian.

And then sometimes people will have a separate document that authorizes access to their digital assets.

You can authorize this access in a financial power of attorney or a will as well, but some people will have a standalone document.

This would be access to your cryptocurrency accounts, your Google account, so Gmail, Google Photos, anything like that, your Facebook, social media accounts.

So you can designate access to that as well in a separate document.

Okay, next slide please.

Okay, so I mentioned probate before.

So this is the process of distributing a deceased individual's assets to his or her beneficiaries after death, and this is where your will comes into play after you pass away.

This process, you've probably heard the word probate before.

It gets a bad reputation, for good reason at times, and it can be a good idea to avoid it if you can, but it's not necessarily an inherently bad process.

There are good things that come out of it, and we'll talk about that.

It is a good idea to avoid it though if you can, and it makes sense to do so.

We'll talk about that in a second.

If you remember from the last slide, the assets that your will controls, which we call probate assets or assets that are just in your name without a right of survivorship and without a beneficiary designation, so those are gonna go through what's called probate.

This process in general is your executor named in your will applies to become your executor.

They get appointed by the clerk.

They get issued what are called letters testamentary.

This is the document that gives your executor the power to act on behalf of your estate.

It's kind of like a financial power of attorney for your estate.

It'll tell the world that your executor has the authority to transact on behalf of the estate.

Your executor then runs a notice in the newspaper that says that you've passed away and that creditors are given a three-month period to come forward with any creditor claims that they may have.

Your executor also gives direct notice to creditors that they know exist.

So if your executor knows there are creditors out there, like let's say a payment for your last hospital stay, they would have to directly reach out to the hospital and let them know that you've passed away if they don't know already and collect that creditor claim.

Your executor doesn't have to do that if they accept a claim is valid.

So they don't have to give actual notice if they say, "Yeah, I understand that this is a claim, and I'm not disputing it."

So you do that.

Your executive then collects your assets.

They file an inventory at the three-month mark that says what your assets were, what your probate assets were.

We call this a 90-day inventory sometimes, but it really is, it's three months, which is not necessarily 90 days.

They then file accountings annually until the estate administration is done.

In the meantime, what they're doing is paying your debts, finishing your obligations like filing tax returns, whether that's your final income tax return or filing an estate tax return if that is required, and then making distributions to your beneficiaries per the will.

Sometimes the probate process can finish up within a year.

Sometimes it takes over a year or multiple years to complete, and so it can be time consuming.

It is court supervised.

Everything is filed by your executor at the clerk of court's office, and then it can be expensive.

You pay fees on assets of the estate.

It's .4%.

And so that maxes out at $6,000.

So it's not a huge fee in the grand scheme of things, but it is a fee that you may be able to avoid.

You have legal fees, likely, if you're going through probate, if you've hired an attorney to help, and this process is public.

Everything that is filed can be seen by anybody in the world that wants to go see who your beneficiaries are, what you had.

So as you can imagine, lots of people want to avoid this to the extent they can, and it is not all bad though.

The notice of creditors, I think, is a great benefit to beneficiaries.

It gives creditors a very short period of time to come forward and file claims, and if they don't do that within that three-month period, they're forever barred.

So it does give some certainty to beneficiaries that they're not gonna have a creditor coming after them a couple years later to get paid from the assets of the estate.

Some assets are easier than others to get through probate.

So for instance, cash accounts are pretty easy to get through probate.

North Carolina real estate is easy.

I'll talk about that in a second.

Other assets that just don't have a lot of activity.

So one of the issues with getting an asset through probate is reporting to the clerk every transaction with respect to that asset.

And so if a particular asset, like a non-interest-bearing bank account is in your estate, that's easy to get through probate.

The value doesn't change really.

You just have to go and transfer that account to the beneficiaries.

That's easy to do.

Assets that have lots of transactions, like brokerage accounts, they've got lots of interest, dividends, reinvestments all the time that you don't control necessarily, those can be difficult to account for and can get expensive.

So they're great to try to avoid probate on.

Large cash accounts are good to try to avoid probate on simply because they generate fees.

Otherwise they're fairly easy to get through probate, and then just assets that you'd like to keep private are great to avoid probate on, right?

If it's a probate asset, it gets reported publicly.

So if you don't want that, there are ways to avoid it.

So real estate, I've got an asterisk here on the slide beside that.

So if you have real estate that is not in North Carolina, you would likely have to have a probate proceeding in that other state or jurisdiction to pass it on to your beneficiaries.

So it's good to try to avoid that.

You can avoid it with a trust, a revocable trust we'll talk about in a second.

You can possibly avoid it with a limited liability company as well.

You just need to be careful about transferring real estate, particularly if it has debt on it.

You don't wanna trip yourself up and violate the terms of the debt instrument if you transfer an asset to avoid probate on it.

So you need to review that with an attorney before you make any transfers.

North Carolina real estate, though, doesn't go through your typical probate process.

So first off, if you own real estate jointly with a right of survivorship or, like, if you own it with your siblings, let's say you inherited property from your parents and you and your siblings own this beach home together jointly, maybe you own it with a right of survivorship, that avoids probate because of the right of survivorship.

The deed to that property says that there's a right of survivorship, no probate.

Same thing with married couples that own property together, is there's a special ownership type called tenancy by the entirety, which married couples can benefit from.

It's essentially joint with right of survivorship with some extra creditor protection bells and whistles, but so when one spouse dies, the survivor becomes the owner.

No probate on that asset.

Other real estate, though, property that you own individually without a joint owner or that you own jointly with someone else without a right of survivorship, this property doesn't go through typical probate, and your will serves as the deed when you pass away.

So when your will gets probated after your death, i.e., declared as your last will and testament, the property vests as of your date of death in the beneficiaries listed in your will, and that's it.

They own the property at that point in time, and that's all that's needed to pass real estate to the beneficiaries.

So there's no fees on that real estate typically, no separate deed.

And so real estate can pass very easily at death, North Carolina real estate, and because of that, we oftentimes don't put North Carolina real estate in a revocable trust because we just don't see that there's a ton of benefit to it.

It doesn't necessarily hurt to do it, but we just don't.

You know, you're gonna pay a few hundred dollars to put it into your trust because you gotta do a new deed.

If you're gonna have to have some amount of probate in any event, your will can just serve as that deed at your death without having to pay for that extra deed, but there could be other reasons to consider having it in a trust or given to your executor to deal with.

If let's say you have five children and you want your children to receive this property, well, what if they're gonna wanna sell it after your death?

If your will has given it to all five of them, as of your date of death, you've now got five owners of a parcel of real estate that have to decide what they're gonna do with it and agree on a sales price, and so that can be a pain if they don't all get along.

So you can do a number of different things to deal with that.

You can leave it to a revocable trust.

You can have it in a revocable trust at your death.

You can give it to your executor and direct your executor to sell it before distributing proceeds.

All this to say, talk to an attorney about this issue and come up with a good plan that's gonna make this efficient for your beneficiaries after you pass away.

One further point here before we move on to the next slide.

You may say, "Oh, I want to avoid probate, so I'm just gonna gift property while I'm still living to my beneficiaries.

If I don't own it at my death, then it doesn't go through probate," which is true.

You just wanna be careful about gifting though.

There are some pretty hefty income tax consequences of gifting.

No one owes tax upon receiving a gift.

No one owes income tax upon receiving a gift, but when you gift property, the person who receives that gift receives a carryover tax basis from you, which is essentially what you paid for the property.

So let's say you have a home that you bought, you know, many, many, many years ago for $100,000.

It's now worth $500,000.

If you gift it to your children before you die, they have a tax basis of $100,000 in it.

If they sell it the next day, they have a $400,000 capital gain that they owe tax on.

If instead you leave this property to them at your death through your will, property like this that is in your estate at your death gets a stepped up income tax basis to fair market value at your death.

So at your death, that property's worth $500,000.

Your beneficiaries receive it with a tax basis of $500,000.

If they sell it the next day, no gain, no taxable gain.

So they pay zero tax on that property.

So gifting can be much more expensive to your beneficiaries than just letting property get to them at your death.

Okay, next slide please.

All right, so this next slide lists various assets that a will does not control.

So there are three main categories of these assets: property held with a right of survivorship, property that is controlled by beneficiary designation, and property that is in a trust.

The main assets controlled by beneficiary designation are life insurance and retirement accounts, although there can also be pay on death or transfer on death designations on various financial accounts like checking, savings, brokerage, that kinda stuff.

So your life insurance, as long as you have named a beneficiary other than your estate as the beneficiary, you're gonna avoid probate on those funds, and you really typically aren't gonna wanna name your estate as the beneficiary.

You do need to be careful with beneficiary designations though.

For instance, if you have minor children, you don't wanna name your minor children as direct beneficiaries of life insurance money because that requires a guardian to be appointed and receive that money for them.

Instead, you should consider some other strategy like naming a trust that is for the benefit of your children as the beneficiary.

Retirement accounts, these are IRAs, 401ks, 403bs, other assets that have qualified money in them usually related to employment.

These are also controlled by beneficiary designations.

They have their own set of very complicated tax rules that we could spend an entire day on.

In general, your spouses can roll IRAs and 401ks at your death into their own and treat it as if it's their own, meaning they don't necessarily have to start taking required minimum distributions from those accounts.

Other individual beneficiaries are gonna have a 10-year period to withdraw funds from those accounts.

If you name a non-individual other than a qualified trust, that beneficiary's gonna have five years to take the money out.

Some trusts can take advantage of this 10-year rule.

These are all general rules.

There are exceptions, and then there are exceptions to the exceptions.

Consult with an attorney about your specific scenario on these accounts, but in any event, as long as you've named a beneficiary other than your estate, which you do not wanna do with these accounts, you don't wanna name your estate, so as long as there's another beneficiary, you avoid probate on these accounts.

So they're easy to avoid probate on.

Just don't name your estate.

Assets that are owned jointly with a right of survivorship, these are typically real estate or financial assets like bank accounts or brokerage accounts.

Those avoid probate because the contract you have with the financial institution, usually on a signature card, says that the surviving owner becomes the owner.

So those avoid probate.

Pay on death and transfer on death accounts, these are where you can just name a beneficiary of a financial account.

So usually for cash accounts, they're called pay on death.

For accounts that own securities, they're typically called transfer on death, but they're essentially the same type of account.

Your named beneficiary receives those funds after your death.

These are very common now.

You just need to be very careful about naming beneficiaries on these accounts or owning things jointly.

As I mentioned earlier, this can lead to unintentional disinheritance.

If you have minors that are your beneficiaries, you really don't want them receiving these assets directly, and it can just generally disrupt what your plan would've been.

Let's say you have a will that you wanna leave, you know, a few charitable gifts off the top, say $10,000 to three different charities, but you've named beneficiaries on every account that you have, your estate's not gonna have the $30,000 needed to make those charitable gifts after your death.

So you just need to be careful about naming beneficiaries and making sure you know that you've got a plan that is gonna be able to be carried out after your death.

Assets owned by a trust, I know I keep saying we're about to get there.

The next slide is discussing trusts.

So we'll talk about that in a second.

As I mentioned on the last slide, gifted assets also avoid probate, right?

But just be careful about gifting capital assets because of that huge income tax benefit that you get from owning property at your death.

So just be careful there.

Okay, next slide.

So the main trust that is a part of an estate plan or can be a part of an estate plan is what's called a revocable trust or a revocable trust.

I always say revocable 'cause you can revoke it.

I think it makes it easier to remember what it is.

Obviously revocable is the same word, but I just call it a revocable trust.

I think that makes it easier to understand.

There's no right or wrong way to say it.

This is just another way to own assets.

A trust is a relationship between three people.

It is the grantor, that's the person who set the trust up, the trustee, this is the person who holds legal title to the assets and manages it, and the beneficiary, this is the person who benefits from the assets that are being held in trust.

Revocable trusts that you set up today are, you serve in all of those roles.

You are the grantor, you are the trustee, and you are the beneficiary.

These trusts are really just you by another name.

They do not exist for income tax purposes while you're alive.

So you don't have to file separate tax returns for them.

Really the sole reason for using these trusts is probate avoidance.

That's because although these assets are still yours to do with as you wish, if they're in the trust, technically when you die, you don't own them.

Your trust does, and so you don't have to report them to the clerk's office on any probate forms typically, and they maintain privacy.

Your trust does not become a public document after you pass away.

And usually those assets that are in a trust can be dealt with more efficiently.

They're not subject to the same court oversight and/or court filing requirements that can hold up the probate, the passing on of assets at death.

These types of trusts are not what you think of when you think of like a trust fund baby or, you know, these trusts created to pass on dynastic wealth in ultra-high-net-worth families.

Certainly those clients use revocable trusts as a part of their estate planning, but we're not talking about that.

So people of modest means, many of them have revocable trusts because it makes things easier at death and not necessarily because they're creating huge amounts of wealth for beneficiaries.

The way you avoid probate on assets in a trust is to put them into your trust before you pass away.

The most common assets to do this with are brokerage accounts.

I'm not talking about IRAs and 401ks.

You do not put those into a trust.

You rely on beneficiary designations for those, but just traditional investment accounts.

Certain business interests are sometimes owned by a trust.

Out-of-state real estate can be held in a revocable trust, and so you wanna review with your attorney what assets you have, how you own them, and whether or not it's a good idea to consider putting them into a trust before you pass away.

The other benefit of a trust in addition to, a revocable trust, in addition to maintaining privacy and offering this probate avoidance is that it offers a good beneficiary designation for assets, so life insurance, for example.

If you name your trust as the beneficiary, your trust would receive those assets after your death and then distribute those funds according to what your trust says.

So it can sort of serve as a funnel for your assets, and if you ever wanna make changes to that, you can change the trust, but you don't necessarily have to change the beneficiary designation 'cause your trust is already the beneficiary.

So you don't have to update that every time you make changes.

If you have a trust, a revocable trust, you will still have a will, but the residuary beneficiary in your will is usually your trust.

So it says, "When I die, the residue of my estate gets paid to my trust."

So this helps maintain privacy.

Your will would show that your trust is the beneficiary, but your trust would not show up publicly generally.

We call this a pour-over will.

So it helps maintain privacy of your estate plan.

Okay, next slide.

So this slide just mentions a lotta the things I just discussed with the advantages of a revocable trust.

So you get this probate avoidance.

There's usually not court supervision over a revocable trust after you die.

There's no court fees, and let me take a step back.

So I said this is revocable.

You can change this at any time.

That is not the case after you die.

Once you die, your trust is set in stone.

It says what it says and so only you can change it, but you can do that up until the point that you pass away.

So again, it avoids probate.

There's no court supervision generally, which means you don't pay fees on the assets that are in your trust at your death.

It maintains privacy, can simplify your estate plan.

I think it's important to remember though that there aren't one-size-fits-all estate plans.

Not everybody needs a revocable trust.

Revocable trusts can benefit a lot of people, but they're not the absolute right answer for everybody.

Sometimes there are clients that it makes sense to just have a will.

They may have all adult beneficiaries and they don't want the expense of having a trust in addition to a will and all of their beneficiaries are responsible adults.

So that may be someone that doesn't need a trust.

If you've used beneficiary designations to name adult beneficiaries or charities as beneficiaries of your assets, perhaps you don't need a revocable trust.

So again, there's no one size fits all.

There are plenty of great estate plans that are only based on a will.

And so, again, you don't always have to have a trust, but they can be very helpful.

Okay, next slide please.

Okay, so we've talked a lot about sort of these basic estate planning documents, including a trust.

There's all kinds of other issues that can come up in estate planning, and so this next slide just lists various different things to consider in your estate plan.

These things can be addressed in the various documents we've just talked about.

They can be addressed in separate irrevocable trusts, so trusts that you can't change, and so we'll go over each of these listed here briefly.

So incapacity planning.

So this is planning both for your own incapacity and for the incapacity of a minor.

So we've hit on this already today, but to plan for your own incapacity, you need a financial power of attorney and a health care power of attorney, and if you have a trust, you need backup trustees named in your trust document so that the assets in your trust can also be managed by someone else if you need it.

Hopefully you don't ever need to use your financial power of attorney or your health care power of attorney, but most people aren't that lucky, right?

They suffer from some incapacity at the end of their life, and so having someone there to help with that is vital.

With respect to minors, every minor is legally incapacitated.

So they can't manage their own property legally.

They have to have someone else do it for them, and so you need a plan for that if you're leaving property to a minor or gifting property to a minor.

We think that generally a trust is the best option for the benefit of a minor.

These trusts can say that the trustee, who may be their parent or a third-party corporate trustee, has the authority to make distributions on behalf of your beneficiary for their health care, for their education, for their maintenance, for their support, for all kinds of different reasons.

The trust could also be just completely discretionary in the discretion of the trustee, but it allows someone else who's responsible to manage property on behalf of that minor or other beneficiary until the time you decide the trust should go away.

So that could be upon the minor reaching a certain age, 25, 30, 35, maybe older.

It could last for their lifetime, but it allows someone to privately manage this property on behalf of the minor.

You can also do custodial accounts.

I mentioned that before.

They're sometimes called UTMA accounts, Uniform Transfers to Minors Act accounts.

You can transfer money to 529 plans for them, but you just need to have the forethought to think about this before you pass away and make sure this is in place to deal with that issue.

Okay, so the next item on this list, estate tax planning.

Many of you may have thought that we were gonna spend a lotta time on estate taxes today, and the good thing is not many people are subject to the estate tax anymore, and so it just is less applicable than it used to be.

So there's a gift tax and an estate tax and they are intertwined with each other.

The general rule is that during your lifetime or at death, you can give away up to some amount of property free of gift and estate taxes.

The amount that you can give away free of those taxes is generally called your estate tax exemption.

Currently the exemption is just over 13 1/2 million per person, and married couples can combine that amount to be about 27 million total.

The ability to combine your exemptions is what we call portability.

I'll mention that word a little bit later.

So most people aren't gonna be subject to the estate tax.

So we talk less about this type of planning these days because the exemptions are so high, but it is still very important for a lotta people to consider.

These exemptions, so the 13 1/2 million, is scheduled to get cut in half in 2026.

These numbers are adjusted for inflation every year.

Really, the number currently is $10 million as adjusted for inflation all the way back to 2010, which is why it's 13.6 million.

So the inflation-adjusted number in 2026, it'll be 5 million as adjusted for inflation, and so we think that'll be 7 million, maybe a little more per person.

So the exemptions are coming way down, but they're still very high in 2026.

That's 14 million per married couple.

If you're lucky enough to be close to these exemption amounts, you should consider various strategies to avoid this.

This can involve gifting property, particularly gifting it to trusts.

It can involve setting up an estate plan that says, "The maximum amount that can pass free of the estate tax goes to this separate trust that will be excluded from the estates of my beneficiaries, and then the rest goes to my spouse."

Using that type of plan generally results in zero estate tax when the first spouse dies because you've either used your exemption or you've given the rest of it to a surviving spouse, which usually qualifies for a marital deduction for estate tax purposes.

And everything that has gone into that first trust, we sometimes call it a credit shelter trust or a family trust, that is excluded from the estate of the surviving spouse usually.

So the appreciation after your death on the assets in that trust pass free of estate tax.

However, if you are not going to be subject to the estate tax, the tax you want to plan for and avoid is the income tax.

Income taxes and estate taxes at death are typically inversely related.

So if you are planning to avoid the estate tax in some strategy, you are usually giving up the ability to have an income tax basis step up at death.

So assets that are included in your estate get a basis step up at death, like we discussed earlier.

If you're leaving assets to a trust to intentionally exclude them from your spouse's estate, when your spouse dies, they don't get an income tax basis step up.

That makes a lotta sense when you are definitely gonna be subject to the estate tax because the estate tax is 40%, which is higher than the capital gains rate these days, which is 20% or 23.8 if it's got the separate net investment income tax associated with it, but 40% is a lot higher than 23.8.

So if you're gonna avoid a tax and you're gonna be subject to both of them, you wanna avoid the 40% tax.

If you're not gonna be subject to the estate tax though, it makes no sense to have a plan that plans to avoid the estate tax 'cause you're not gonna be subject to it anyways, and you ought to then plan to avoid the income tax, which usually means keeping things until you die, holding onto them until you die so you can get that basis step up.

Okay, so the next point here is creditor protection.

So this is very important to some people.

There are strategies you can use to protect assets from your own creditors.

There are also strategies that you can use to protect assets from the creditors of your beneficiaries.

First off, if you're doing creditor protection for your own creditors, you have to be very careful.

If you currently have creditors coming after you, you can't do a lotta these strategies because they would end up being fraudulent transfers to avoid a creditor that you know about.

So you can't do that.

It's against public policy.

But if you're, you know, just sort of worried about these issues that don't yet exist or perhaps you're in a litigious profession, like lawyers or doctors, a lotta doctors are subject to malpractice claims, you can structure things in a way that help reduce your creditor exposure.

You can do this with, obviously your first step is having adequate insurance.

That's the first step in any creditor protection, make sure you're adequately insured, but then that special real estate ownership between spouses I mentioned earlier called tenancy by entirety, that gives extra creditor protection.

Retirement accounts in North Carolina, so 401ks, IRAs, including inherited accounts, those are protected from creditors.

So putting money into those accounts to the extent you're able can help with creditor protection.

Limited liability companies can help with creditor protection, or other corporations, particularly by siloing off liability.

So you own a beach home.

If you own that through an LLC and you operate it as a true LLC, you respect that it exists and don't just treat it as if it's your own separate asset, then, you know, somebody slips and falls at your beach house, there's a good chance your personal assets not in the LLC will be protected from your creditors because only the LLC's assets would be subject to that creditor claim.

There's more you can do with your beneficiaries.

You can leave things in trust for the benefit of a beneficiary that is protected from their creditors.

We call this a spendthrift trust.

Most trusts for beneficiaries that are drafted these days are spendthrift trusts.

They are protected from creditors.

That is a huge, huge benefit that your beneficiaries can get from leaving assets to them in trust.

The next part, bullet point, keep it in the family, this is just really a variation of creditor protection.

So trusts for the benefit of a beneficiary allow the beneficiary to benefit from that property but allow you to control who gets it after your death, including making sure it goes to your grandchildren or stays within your bloodline.

Some people are concerned that if they leave assets to their children directly, their children might get divorced and those assets could end up getting caught up in a divorce action, or, you know, your surviving spouse might get remarried, and so you are afraid that the assets that you intended to go to your children would then end up with some new person that you have never met before.

So trusts can help plan for all of that.

They can allow your loved ones to benefit from your property but for you to control the ultimate disposition of who gets it when people pass away.

Another type of trust that you should be aware of is what's called a special needs trust or a supplemental needs trust.

Those terms are used interchangeably, and these are for the benefit of beneficiaries with a disability who may be eligible to receive or are already receiving some type of government benefit like Medicaid or SSI, which stands for Supplemental Security Income.

An inheritance by these beneficiaries would likely kick them off of those benefits that they receive, and it can be difficult to get back on those benefits once you've been kicked off, and there are some services available through those programs for beneficiaries that may not be available to the private public or to the public in some private manner that are not on these programs.

And so it's really important for these beneficiaries that they maintain their eligibility so that they can continue to thrive and get the services that they need to thrive through these programs.

And so the way you do that is you have this supplemental or special needs trust that's for the benefit of the beneficiary.

These allow the beneficiary to maintain eligibility while also having a pot of money to pay for things that the government benefit doesn't cover.

So these are fully discretionary trusts and the trustee is mindful of government benefit eligibility and usually doesn't make distributions that would kick them off of that.

So these are extremely important.

If you have one of these types of trusts or you have a beneficiary that could benefit from this, the selection of your trustee of this trust is really the most important question to answer in this part.

You want someone who will be very responsible but will also be well versed in the supplemental needs trust rules and the rules about all these government benefit programs, and there are lots of third-party trustees that have that knowledge, but you wanna make sure somebody's gonna do a great job and not have a footfall that could end up being extremely costly to your loved ones.

Okay, this last bullet point, incentive trusts, this is just an example of the flexibility you have with trust planning in your estate planning.

So I'm not suggesting that this is something that everyone should do, but it is an option out there.

So you can use a trust to incentivize certain behavior of your beneficiaries.

So for instance, if you want your beneficiaries, let's say you want your grandchildren to go to college, you can leave property in a trust for them that allows them to receive a lump sum benefit upon graduation from a four-year institution or a community college or whatever requirements you wanna put on it.

So it gives them something to work for.

Sometimes clients are concerned about the work ethic of their beneficiaries, and so they want to have property that benefits them, but they also don't want, you know, this trust to disincentivize them from working and being a productive member of society.

So you could say, "Look, you know, you can have distributions for health care reasons, but otherwise no distributions unless you earn income, and we'll match dollar for dollar your earned income."

So that has been useful to people in the past, that type of trust.

You can also provide in trusts that, "Look, if you go into some public service profession, like being a teacher or a police officer, firefighter, that may not pay as well, or you enter the charitable world, you work for a charity."

A lot of these positions are great for the community, but they don't always pay very well, and so you could have a trust that says, "Look, if you go into this, you get, you know, more.

The trustee should give preference to making distributions to you to allow you to maintain the standard of living that you had growing up or, you know, to supplement your lifestyle above and beyond what, you know, your lower paying job might have."

These are all great reasons to have an incentive type trust.

I do think you need to be careful with drafting incentive provisions in a trust.

You know, you can get a little too cute at times.

You can make things a little bit too restrictive.

If you make things too restrictive, the selection of your trustee may get more and more difficult 'cause some trustees aren't gonna want to deal with some of these more complicated incentive provisions, but these are all conversations to have with your attorney and perhaps with who you may choose as a trustee so that you can make sure your plan is drafted to match what your goals are and in a way that will be practical to carry out going forward.

Okay, next slide please.

So the next slide is just to list some various charitable planning goals or strategies that you can use.

So a major part of estate planning for a lot of people is making sure their charitable wishes are carried out.

And particularly for people that may not have children, you know, the charities are oftentimes their main beneficiary.

And people that have children as well, many of them wanna leave large charitable gifts.

And for those that are fortunate enough to be very wealthy, they may have plenty of assets to go to their children and make large charitable gifts in addition to that so that they can do good things in the world with what they've earned.

So currently, you can make, you know, outright gifts to charity during your lifetime.

If you make contributions of cash, deductions are limited to 60%.

Income tax deductions would be limited to 60% of your adjusted gross income, and in a year, if it's a non-cash asset, that's 30% if you've held that asset for one year or longer.

So you can get an income tax deduction for charitable contributions.

Currently, if you've held an asset for less than a year, your deduction is generally gonna be limited to what you paid for the asset or its fair market value if lower than what you paid for it.

So there's not a ton of benefit from gifting assets that you have owned for less than a year, but if you've owned it for more than a year or if you're making a cash contribution, you can both do great things in the world with your money and also get an income tax deduction.

If you make a charitable gift at death, it's fully deductible for both income and estate tax purposes.

So much better tax benefit if you've gifted at death, but if you wait until death to make a gift, you also don't get the benefit of seeing your charitable dollars at work.

So that is certainly something to be weighed.

Currently, if you have an IRA, you can do what's called a direct IRA charitable rollover of $100,000 a year from your IRA if you've reached the age of 70 1/2.

This can be used to cover all or part of your required minimum distribution from these accounts, and when you do this, you don't have to recognize that RMD as income.

So it goes directly to the charity.

It doesn't show up on your income tax return as part of your gross income.

So that's a huge benefit.

Unfortunately, you can't do this with a 401k.

It has to be an IRA.

So while IRAs and 401ks are oftentimes lumped together when we talk about these types of issues, this is a main difference that's very important.

So if you wanted to do this and you still had money in a 401k, you ought to talk to your attorney and your financial advisor to see about potentially rolling some of that 401k over into an IRA.

There are other issues that can crop up with that though.

So don't just go do it without talking to somebody first.

So you can name a charity as a beneficiary of your retirement accounts, your life insurance, or other asset at death.

That's a direct way to benefit someone or a charity.

Gift annuities, so these are you make a gift to a charity and they then provide you a stream of income for life, and whatever's left when you pass away is kept by the charity.

You get a current income tax deduction for this for the remainder interest that you're leaving to the charity, and then part of the income stream that you receive back is taxable to you, but these are commonly used, particularly if you've got a asset that's appreciated a lot in value and you don't wanna recognize the income tax and you don't need the asset to support your lifestyle.

You could give it to a charity and it can be used as a part of a charitable gift annuity.

Charitable trusts are like charitable gift annuities, but they're more complex.

They do similar things.

You give property to this charitable trust.

The charitable trust then pays you an income stream for life and the remainder goes to charity at your death.

A lotta times, these are used for more complex assets, real estate, closely held business interests.

You gift those to the trust, get an income tax deduction at that time, and then the charitable trust sells that asset.

You don't recognize income upon that sale, and then you just pay income as you receive the annuity payments every year.

So it can avoid and defer income taxes, particularly for more complex assets.

Private foundations and donor-advised funds, these are another great option to consider, particularly donor-advised funds.

You give money to a community foundation or, like, Fidelity has a donor-advised fund, and you get a charitable deduction for that, and then you are an advisor to that charity, community foundation or whoever else, the custodian, about where they should consider making gifts each year.

So you get an immediate deduction for the gift, but then over time, they can make grants every year from the funds that you've given.

So it's a good way for you to benefit a bunch of different organizations and see your dollars at work.

Private foundations are similar.

You have a whole lot more control over private foundations.

With donor-advised funds, you've given the money away when you give it to the charity, and you're just an advisor and they don't have to follow your advice.

They likely are going to follow your advice because they want you to continue giving money to them, but technically, you've given that money away.

With a private foundation, you really do control where the grants go.

You're much more involved.

They're much more expensive to set up.

They have much more complicated tax rules around them.

So private foundations are really used by higher-net-worth individuals to do similar things that a donor-advised fund would give them just in a more simplified manner.

Okay, next slide please.

Okay, so the last few minutes of this presentation, I'm just gonna go over some issues with and strategies with the Tax Cuts and Jobs Act.

That was in 2017, if you remember.

It made a lotta changes to the tax code, particularly in the estate world.

This is where the lifetime exemption from the estate tax, that 13 million, 13.6 million that I talked about earlier, was doubled.

So it previously was 5 million as adjusted for inflation.

This act doubled it, and because of the way this act was passed as a part of budget reconciliation, it wasn't allowed to increase the deficit for the government over beyond a 10-year period, and so these changes sunset, they go away in 2026 to comply with that requirement, which means they're coming back down to 5 million as adjusted for inflation in 2026.

And this is only as long as Congress doesn't act again.

I mean, so this is a quote-unquote "permanent change", but it's only permanent until Congress acts.

So, you know, stay tuned on whether this gets extended or not, but if Congress does not act, exemptions are getting cut in half in 2026.

So this act also maintained the portability concept, which is where married couples get to combine their exemptions together.

It was discussed that perhaps that could go away at some point in time, but the Act did maintain that ability.

Importantly, in order to get this benefit, you have to file an estate tax return in the estate of the first spouse to die.

If you don't do that, you don't get portability.

So it's very important to remember that and to have an attorney advise you about this when the first of you passes away.

The Act also maintained the step up in income tax basis at death that I have talked about for assets that are owned in your name at death.

This is another topic that gets brought up frequently about if they're gonna make tax changes, are they gonna do away with this?

This is a huge, huge tax benefit to taxpayers, particularly if you're able to buy an asset and hold onto it for a very long period of time.

There's a good chance it will have appreciated a lot over that period of time, and if you hold onto it until your death, you wipe out the income tax liability associated with all that growth.

So it's a huge benefit.

This act maintained that, which is great.

Next slide please.

So what does all of this mean for you, you know?

What effect does the Tax Cuts and Jobs Act have on you and its impending change to cut these in half?

So if you are lucky enough to have, to be at or above these exemption levels, you ought to use your exemption before it goes away.

So if, you know, you and your spouse haven't made any gifts during your lifetime that would use this exemption, you give $27 million away to a trust today or to multiple trusts that would use your exemption, you'd pay no tax.

You'd get it outta your estate, and in a year and a half from now when these exemptions get cut in half, you will have gotten the benefit of that additional exemption that is now gone for everyone who didn't use it.

So use it before you lose it.

You can do that with outright gifts or probably more commonly gifts in trust.

This last bullet point on here mentions a GST exemption.

This is a little bit more complicated than we need to get into today, but there's a separate tax called the generation-skipping transfer tax.

It is related to the gift and estate tax, and it applies to gifts that skip a generation, so you gift property to your grandchildren or a trust for your grandchildren instead of to your children.

There's an exemption from that tax.

It's the exact same amount as the gift and estate tax exemptions.

And so you can do planning for all three of these taxes together.

Some trusts that currently exist are not exempt from the GST tax, which means if they make a distribution to someone in a, you know, to a grandchild or further descendant, you would owe GST tax upon that distribution.

Now that you have additional GST tax exemption as a result of the Tax Cuts and Jobs Act, you can apply some of that exemption to old trusts by filing a gift tax return.

So if that applies to you, we'd be happy to discuss it with you.

Okay, so next slide please.

So for those of you that may or may not be subject to the estate tax at death because you're hovering around those exemption levels or you're not there yet but you have high earning potential and you're, you know, likely to live long enough for that to continue to grow, you can go ahead and make use of your extra exemption before it goes away if it is feasible to do that.

You certainly don't want to give away property that you may need later in life.

So, you know, if you're pretty young, giving away, you know, $13 million when your net worth is, you know, 15 or 16 is probably not the right decision, right?

You'd be giving away the majority of your net worth.

If you are much older, then perhaps it makes sense to do some of this.

And so the other thing to do is implement some flexible planning strategies like, you know, giving your surviving spouse the right to do what's called a disclaimer, which can, it really just gives flexible planning to allow the credit shelter trust I discussed earlier to come into existence if it would make sense to do so at the time of your death based on what assets are available, what estate tax exemptions are at that time.

A lot of old estate plans had what I call force-funded estate planning.

The estate tax exemptions used to be, you know, a million dollars or less, and so you'll see a lotta wills and trusts that say, "The maximum that can pass free of estate tax goes to this family trust and the rest goes to my spouse or to this marital trust."

That was done to maximize estate tax planning when many more people were subject to the estate tax.

When exemptions were a million dollars, if you had a reasonably successful career, you owned your house and had some life insurance, you probably were subject to the estate tax.

These days, those same people are nowhere near estate tax exemption levels, even though they've been very successful over their lives, and so you probably don't want that force-funded plan anymore 'cause you're probably, you know, you may not be subject to the estate tax.

Okay, next slide please.

Okay, so this last, the second to last slide talks about what happens for people that are not gonna be subject to the estate tax.

So you've done well but you're just not anywhere close to having $13 million.

If that's you, join the club.

I'm in that as well.

And so, you know, what can you do here?

So really, the good thing is you have flexibility to focus on non-tax, non-estate-tax issues in your plan.

You don't have to worry about the estate tax.

So what can you focus on?

So first off, make it income tax efficient.

If you have an old plan that has a force-funded estate tax plan, you need to get rid of that 'cause you're planning to avoid a tax that you're not gonna be subject to.

So you can probably simplify your plan a bit.

You can focus on other issues like creditor protection of your beneficiaries.

So, you know, really, you can change the focus of your plan from being driven by estate tax issues to being driven by family dynamics and what you want to, how you want your beneficiaries to benefit from your property after death.

Okay, next slide.

So I mentioned this earlier.

If you're married and your spouse passes away, you should talk to an attorney to decide whether or not you need to file an estate tax return.

Even if you aren't required to file one because your assets are not at a level that requires filing, which means your assets would be close to that exemption amount, you still probably want to consider filing an estate tax return so you can get that portability benefit which allows you to inherit your spouse's unused exemption.

That never goes away.

Even if Congress decides to reduce estate tax exemptions to a million dollars, you will still have the unused exemption of your deceased spouse, which could be, you know, up to $13 million.

So that is free to you or you get it for the cost of filing an estate tax return.

And then I mentioned this a bunch today, you know, focus on income tax planning these days unless the estate tax is likely to apply to you.

So there are lots of income tax issues that we can plan for and make things more efficient for your tax, for your beneficiaries and without having to worry about the estate tax.

Okay, so that gets me through my slides.

I think we're gonna open this up for some questions, and Warren is gonna join us again to help get through some of those, and we can move on to the next slide.

- Okay, I'm back, and Charlie, thank you so much.

I'm gonna talk slowly to give Charlie a chance to catch his voice again, but thanks for the patience of the audience.

Thanks for your many great questions.

We have a lot of them lined up there for you, Charlie, and we'll get to as many as we can.

You've done a nice job touching on a lot of different things, and folks have some real basic interests and questions, and then they have some that they definitely need to hire you, I think, for.

So they do run the gamut.

I'm going to go back to the top of the questions.

And it was a, yes, Tanya was asking regarding powers of attorney, so going back to the beginning, do those documents need to be filed, say, with the court system or is that something that can be kept in home or with family, trusted relatives, or with, say, the executor of your will, that sort of thing?

What do you think there?

- Yeah, that's a great question.

So it can be you can file those in various places, but usually, you don't have to these days.

So for your financial power of attorney, it used to be that you had to file it in order for it to be relied upon.

You filed it at the register of deeds office.

These days, most every third party that would be relying on a power of attorney does not need to be recorded for that for them to rely on it.

The statute was changed recently to provide that you didn't have to record them.

Sometimes they still want you to record it.

It's up to you whether or not you're gonna fight that.

The issue is if you record it and then you wanna change it later, you have to record a revocation of that prior recorded document.

And if you're doing a real estate transaction, it needs to be recorded.

If your agent is gonna sign a deed for you, it needs to be recorded, but otherwise, you typically don't have to.

We advise clients to not record them automatically, and they can be recorded whenever, whenever you need 'em to be recorded.

So you can hold off on doing it and you may not ever have to record that.

The health care power of attorney doesn't have to be recorded anywhere.

It's a good idea to give that to your doctor next time you go to your primary care visit.

A lot of doctors' offices are tied into the cloud, and so, you know, your document can be uploaded to the system so that it's easily accessible if you ever were to enter the hospital, particularly if it's the same hospital.

Like, let's say you are a patient of UNC health care or Duke health care, they'd have easier access to it if it's been uploaded to their portal.

You can also give these for safekeeping to, the secretary of state has a service for this.

We typically don't advise clients to do this 'cause for the same reason that if you change 'em, you'd have to then update 'em, and they can easily be emailed to the party that needs them.

But yeah, so typically those don't have to be recorded.

Your will doesn't have to be recorded either until you pass away, and so most of these documents, you don't need to worry about recording.

Okay, so I've got a couple other questions here that have been forwarded to me from the chat.

So how do we find an expert trust and estate professional?

That's a great question.

So there is a designation with the state bar that is a Specialist in Estate Planning and Probate Law that attorneys can take an exam to become certified for it.

Attorneys can't call themselves an expert unless they have this designation.

If you go to ncbar.gov and click on Specialty Certification, I think, and then you can find a specialist near you.

So that's one way.

There's, you know, 100 or so specialists across the state of North Carolina.

Just because an attorney's, I am a specialist.

I've taken the exam to become a specialist.

They also require more continuing education than just your typical attorneys.

Attorneys have to get 12 hours of CLE every year.

Specialists in estate planning have to get 24 hours annually on average over a five-year period and they have to focus on estate planning topics.

So there's a good chance if you have a specialist that has that certification, they're a very good attorney.

There are plenty of attorneys that do not have this designation who are great trusts and estates attorneys.

So, you know, getting referrals from trusted advisors that you have, like your financial advisor or your CPA, is another way to find someone who could help, but that designation does give a little bit of credence to the attorneys that have it.

There's also an organization called the American College of Trust and Estate Counsel.

It's also known as ACTEC.

I believe if you go to ACTEC, ACTEC.org, you can find an attorney that is a part of this national organization that's peer elected.

It is sort of the premier group for estate and trust attorneys across the country.

And so if you find an attorney that is an ACTEC attorney, they likely also are a very good lawyer.

And so a lot of ACTEC lawyers in North Carolina are also certified specialists, but they don't have to be necessarily.

And so I'm not an ACTEC.

I haven't practiced long enough to be in the group yet.

I would love to be a member one day, but so an ACTEC Fellow is what they're called.

Those would be great attorneys, or board-certified specialists would also be great.

Okay, so somebody asked to discuss the difference between a DNR, a do not resuscitate, and an advance directive.

So that's also a great question.

DNRs are medical orders that are signed by doctors.

So I can't prepare a DNR for you.

You'd have to get that from your primary care physician or when you enter a hospital.

So an advance directive directs you to not be kept alive artificially in certain scenarios, but it is not a medical order.

So that's the difference.

Next time you go to your doctor, if you want to have a medical order that says, "Don't resuscitate me if something happens," then you should talk to them about that and you can get that taken care of there.

Someone has asked if they have a will that was done in another state, is it valid in North Carolina?

Great question.

The answer is yes, it is valid.

North Carolina and every state recognize wills that are done in other states as long as they were done in accordance with the law of that state at that time.

So yes, your will is still valid.

It is a great idea to have an attorney in your home state review documents from another state to see if they need to be updated.

So this is really a practical issue.

I mean, there may be state-specific issues that need to be addressed that are not addressed in your old will.

There's also just some extra hoops to jump through if you pass away in North Carolina and you have a will that is not a North Carolina will.

It's not that difficult to do, but it's just a good idea to have it looked at, and it may make sense to just get a refresh and have a North Carolina will so you don't have to jump through those extra hoops.

There may also be other things that need to be addressed now anyways, and if that's the case, then you can just have North Carolina documents after that.

Okay, if you have a revocable trust, do you need a separate will?

You still would have a will.

Everybody has a will.

Your trust would be the beneficiary of that will, but your will does a couple things.

So, you know, it appoint your executor and guardian for minor children if you have that as an issue, and it also sweeps assets into your trust that aren't there at your death.

So you still need a will.

It may not do a whole lot, but you still need one if you have a revocable trust.

So that's a good question.

Does a beneficiary of a financial account supersede your will?

Yes.

The beneficiary named with the financial institution will become the owner of that asset after your death, and so that's a great probate avoidance device.

You just need to be careful with it.

What happens if your beneficiary dies and you don't update it?

You're subject to whatever the financial institution's default rule is on who gets it.

Sometimes it's just your estate.

Sometimes it's the beneficiaries of your beneficiary, and there's no set rule about it, and so you just need to be careful.

If you have a revocable trust as a part of your estate plan, we usually advise clients to not have beneficiary designations on assets other than retirement accounts and life insurance so that your trust can deal with it and make sure we know exactly what's gonna happen.

Okay.

Let's see.

So, okay, next five questions were given to me here.

If I have prepared my own will, will it need to be certified and taken to my county's courthouse for safekeeping or is there something else that needs to occur?

This is a great question.

First off, be very careful about preparing your own will.

I mean, this is very self-serving coming from a lawyer who prepares wills, but you don't know what you don't know, right?

So I don't sort of, I don't diagnose my medical conditions.

If I think something's wrong, I go to the doctor, right?

So same idea if you don't know what issues could crop up or what the, you know, what consequences your will has, you know, if you've done it yourself and you don't have training in all of these issues.

You do not have to take a will, whether you drafted it on your own or if an attorney's drafted it, to your courthouse for safekeeping.

You can do that.

That is available.

This is sort of the same issue of, you know, what if you wanna change it?

You know, you have to go get it and then just put the next one on, you know, at the courthouse if that's what you were gonna do.

We usually tell people to just keep it wherever you keep your important documents.

If you have a fire safe, a fireproof safe at home, that's a great place.

You can use safety deposit boxes.

You gotta be careful if you put a will in there.

You wanna make sure somebody has access to it after you die, otherwise the clerk's office is gonna have to drill it open, but that can be a good place to put it.

You may have another place at home where you keep your important documents, but it is important to keep, you know, to keep that in a safe place.

If you have no family or a trusted person to appoint executor or power of attorney, is there a professional one can appoint to serve?

Would an attorney serve in that capacity or what professional would?

Great question.

There are lots of professionals that will serve as executors or powers of attorney.

You just need to have a conversation with 'em.

So some attorneys will do that.

We choose to not serve in those roles.

We would like to be the attorney, and if you're both the attorney and the agent, sometimes there can be conflicts of interest that arise and we just choose not to do that, but it doesn't mean that it's wrong if a lawyer serves in those roles, and lots of them do.

So that can be a good option.

Accountants will sometimes serve, and then corporate trustees like banks or trust companies can also serve.

Usually they don't wanna be a financial power of attorney.

Sometimes they don't wanna be an executor, but they do like being trustees.

They're very good at their job.

They are the most expensive trustee as well generally, but they're very good typically at what they do, and they can be a great option in lots of situations.

The main thing is you need to talk to whoever you're gonna appoint before you appoint them because they're not required to serve if you've named them.

So you need to make sure they're willing to do so.

So should you name your trust as a beneficiary of life insurance?

Someone asks if I can clarify on that.

The answer is it depends.

You need to talk to your lawyer about it.

Commonly we have the trust.

We advise people to name their trust as the beneficiary of life insurance because it allows your trust to control the disposition of those proceeds, which can have a lot of different contingencies in it based on future events, but that's not the right answer for everybody.

You need to have it reviewed and make a decision, you know, an informed decision based on advice from your attorney.

Perhaps your surviving spouse is the best primary beneficiary at times.

Your adult children may be a great beneficiary.

A charity may be a great beneficiary.

It really depends on what your goals are and what's gonna make things most efficient after your death.

Okay, what are the primary issues for second marriage, unblended families or blended families, each spouse has an adult child.

Lots of issues come up with that.

So we could spend hours on this, [laughing] but so first off, if you get married and you do not have a premarital agreement in place, your spouse has inherent rights to inherit from you, and so those are issues that have to be addressed, and your spouse can inherit a certain amount from you depending on how long you've been married.

So that's one issue.

You can use trusts to meet that obligation and also provide for remainder beneficiaries, but that's an issue to wade through.

The other issue is, you know, how complicated do you want the plan to be on the front end versus how much certainty do you want to have about where your assets are going after your death, right?

So if you've got a second marriage, separate children from previous marriages and you want things to be simple so you just wanna leave everything outright to your surviving spouse, well, you're then trusting your surviving spouse to leave everything the way you would've wanted at their death, which may not be what happens, or your surviving spouse could get remarried again, or they could get sued and those assets would be subject to the claims of their creditors potentially.

So, you know, trusts can solve this problem, but it also adds complication for sure.

Okay.

Let's see here.

So I think that may be it, unless I missed one.

Yep, I think that's it.

So Warren's back.

- Charlie, thank you.

Thank you for catching those questions.

I'm sorry we couldn't get more, but we do need to keep moving today.

Charlie, outstanding presentation, most impressive, and a lotta great material there.

I know that a lot of people do have specific situations personally or in their family or businesses and life in general, and so Charlie and professionals like him are there to help you.

Thank you, audience, for joining us today.

For our PBS NC supporters, we're very grateful to you.

Thank you so much.

I remind you that next week, I think around Tuesday or Wednesday, we'll try to get the email out to you that will have a way for you to find this webinar recorded and you'll be able to watch it again or cutting to the parts that you want to see, and it will also have information about how you can be in touch with both Charlie or myself if you have an interest in assisting PBS North Carolina in your estate plan.

Thank you so much again.

Y'all have a great afternoon.