Estate Planning; Protecting Your Legacy

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Amber Posthauer: Hello, everyone! Thank you for joining us today. We're gonna get started here in 60 seconds to allow for everyone to get connected. We'll get started shortly.

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Amber Posthauer: Welcome, everyone, to Estate Planning, Protecting Your Legacy. Thank you all so much for joining us.

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Amber Posthauer: Please send questions to the Q&A located on your Zoom menu bar. We'll try our best to answer all of your questions, but if for whatever reason we're unable to get to your question today, please email learning at nfp.com.

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Amber Posthauer: Today's presentation is being recorded. We'll be sharing the recording in the coming days. At this time, I'd like to hand over the call to our speaker. Nate, the floor is yours.

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Nathan Williams: Thank you, Amber, appreciate it.

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Nathan Williams: And to start off here, my name's Nate Williams. I've been working in the financial services industry now for coming up on 6 years here. I've been with NFP for 5 of those years.

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Nathan Williams: I'm a certified financial planner recipient, and really my role at the company is I work as a wealth planner for two of our senior advisors, and

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Nathan Williams: One of whom has been operating his business now, coming up here on about 51 years. So, as you can imagine, with a 50-year-old year old financial planning business.

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Nathan Williams: We are working with a lot of second and third generation family members of the original people that he started working with. So, I've had a ton of experience, especially working with legacy families.

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Nathan Williams: As well as we have a lot… large variety of people who are building wealth for the first time and just needing to set up their first set of estate planning documents.

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Nathan Williams: And it's one of those things where I will frequently get calls on a weekly or even monthly basis, just, hey, you know, uncle passed away, apparently there's some money somewhere, we have this will, what do I do next? So, by no means am I in a…

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Nathan Williams: state attorney. I can't give direct legal advice, but I can walk through, just provide some basic education, like I'll do here today. I'll give some tips and advice of what we see on a daily basis.

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Nathan Williams: And then I'll also talk a little bit about.

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Nathan Williams: best practices and things to keep in mind. And before I really jump into the material today, I just wanted to quickly talk about two of the, kind of.

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Nathan Williams: common things that we see that lead to a lot of problems when it… especially surrounding estate planning. And the first is really just

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Nathan Williams: taking action, right? Estate planning's something that you never really want to think about, and hopefully… unfortunately, one day it's going to become a reality, but you're hoping it's never tomorrow, right?

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Nathan Williams: So, I can't tell you the amount of times clients go in, and they will spend anywhere from $2,000 to $10,000 on this really great estate plan, but if you don't update your beneficiaries, shift assets into trusts.

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Nathan Williams: do the little things, you're just drastically overpaying for a piece of paper, right? So.

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Nathan Williams: Take some action, even if during the call today, this is recorded, I can answer questions, but if it's been 5 years since you've gone and looked at your 401 beneficiaries, or you don't know how that life insurance policy is set up.

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Nathan Williams: take some action and just go do it. I can't tell you the amount of times where we get to working on something, and it's, oh shoot, that never got updated.

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Nathan Williams: And then the other one is just…

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Nathan Williams: having a conversation, right? If you put together a great estate plan, or you're concerned about a family member, and you know that you're going to be involved in their estate plan, I'm not saying that you need to go sit down your 22-year-old and talk about how much money they're going to receive if you tip over tomorrow.

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Nathan Williams: But just having a very simple conversation of, hey, mom, or hey, dad, how do you set up a healthcare directive? Who is that person? Where is the copy, right? Or if your kids are older.

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Nathan Williams: hey, everything is going to be split up equally. Our intention is that everybody's treated fairly. However, we need to assign a trustee or a personal representative

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Nathan Williams: to handle our affairs. We're choosing this person, but our intention is that everything's going to be split evenly. Just those quick conversations can resolve a ton of family issues, and unfortunately, we see a lot of it. So if you take any two things away from today, please

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Nathan Williams: Take some action, and then two, have a conversation with the people that You think you need to.

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Nathan Williams: So, from here, I'll start jumping into the presentation.

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Nathan Williams: The agenda for today is going to be covering the basics of estate planning to start. So, what is an estate plan? How does it work? And then we're going to get more into the details for… in terms of planning for incapacity, wills and probate, tax considerations, and finally rounding it off trusts.

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Nathan Williams: If you don't know… if you have no knowledge of estate planning in general, the first half of this should be really good in terms of just helping you with the basics.

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Nathan Williams: If you've been someone's personal representative, or you're working through it right now, and you have a good understanding, the first half might be a little bit of repeating information, but there should be some really good information on the back end for you.

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Nathan Williams: And with that, I'll jump into…

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Nathan Williams: common questions that we… are typically answered through an estate plan. So, how do you want to be cared for in the event of your… you become incapacitated? Who do you want handling your healthcare affairs?

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Nathan Williams: Also, with that is obviously the financial side. So, who will be receiving your assets? How are those assets going to be distributed? Are there certain assets that you want people to receive? Are there certain assets you don't want people to receive?

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Nathan Williams: Property, especially real estate, can get handled a little bit differently. Typically, right, there's costs associated with that. Retirement accounts are another good example, where that's liquid cash sometimes.

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Nathan Williams: We see it a lot where you don't want that person to receive a significant lump sum all at once, especially if they're a little bit younger in their early 20s.

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Nathan Williams: What are things that you can do? Who's going to be managing the estate?

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Nathan Williams: Does that… the person you've deemed as trustee know that they're the trustee?

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Nathan Williams: Or if it's a child and you're older, do they know that they'll be handling your financial affairs in the event that you pass?

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Nathan Williams: You can also seek professional help. There's a lot of great probate attorneys out there. You can go the route of designating a firm to handle a lot of these manners for you. Obviously, there's a cost associated with it, but it's a great way to make sure things are handled in a professional manner.

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Nathan Williams: And then finally, who's going to be the guardians for the minor? And the last one is just what's going to be the liquidity source for your estate. So, these are all things that an estate plan should cover.

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Nathan Williams: Next tier is just who needs an estate plan. The most common thing that we hear is, you know, estate plans are only for the ultra-wealthy.

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Nathan Williams: And while the ultra-wealthy probably need a little bit more of a robust estate plan, pretty much everybody needs a basic set of documents, especially when it's talking about a healthcare directive, a financial power of attorney, and a basic will, and potentially even just a living trust, right?

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Nathan Williams: Those simple sets of documents can do huge…

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Nathan Williams: large amounts of benefits for you. It's especially important if you have minor children. I'll quickly talk on it. I live in the state of Minnesota here. Our age of majority is 21. I'm gonna pick on, let's say something happens to you and a retirement account passes to that child.

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Nathan Williams: What's going to happen is a trust will get it set up, they can't access that money at… when they're a minor, but upon the age of majority, they are going to be able to get their hands on it, right? Having a trust that can

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Nathan Williams: set up parameters around, alright, when they turn 21, I only want X percent for them to receive. When they're 25, 30, they can have the remainder percent, or so on and so forth. Can do a lot of good, especially not wanting to hand over a 21-year-old, potentially a million dollars, right?

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Nathan Williams: Other areas where you definitely need an estate plan is if you're over your federal or your state's

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Nathan Williams: estate tax. So, right now, the federal exemption is all the way up to $15 million. It's very rare that we see people over that. It's also $15 million per person. I'll cover this more later on in the present…

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Nathan Williams: Another important piece, and we see it very frequently, is if you own property in more than one state.

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Nathan Williams: the probate process is… goes state by state, right? It's handled at the state level. So, especially here in Minnesota, we have a lot of snowbirds.

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Nathan Williams: even if your state of residency is Florida, if you own property here in Minnesota, you should have at least a rough plan in place, because handling your estate, there's gonna be two separate processes going on, because you're going to have to settle the majority of it in Florida.

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Nathan Williams: And then Minnesota as well, too, and I'll talk a little bit more about the tax situation.

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Nathan Williams: Later on in the presentation when it comes to having property in two different states.

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Nathan Williams: And then financial privacy is another large concern. Probate is public record, right? So, if your assets pass through, that information opens up, and it is

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Nathan Williams: People can find it, and it's really unfortunate, and we see it a lot, is if someone passes and a large amount of their assets go through probate.

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Nathan Williams: You are going to get tons and tons of calls from real estate brokers, unfortunately, financial professionals. Everyone's going to be trying to help you or sell you things.

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Nathan Williams: And then the last one is if you own a business, that can be a huge priority as well, making sure that if you're no longer around, who's going to step in and run that business? Or if you have it set up where everything

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Nathan Williams: passes to your spouse, and that person's never ran the business before, right? That can create large issues, and is a huge reason why you would need an estate plan.

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Nathan Williams: Oh.

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Nathan Williams: My bad, Sam. I didn't realize there was more to come on this, so I think I covered that fairly well, though. Here's kind of the next things that we'll be talking about, and I kind of already reviewed it, so I'm going to keep moving here.

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Nathan Williams: First thing I want to dive into a little bit more on is just planning for incapacity, and this is at the

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Nathan Williams: healthcare level, so I talked about it a little already. There's a couple different ways you can do this. You can write it into your living will, so if you…

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Nathan Williams: Are single, have no kids, anything like that, and

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Nathan Williams: It can be oftentimes a little bit easier to just put all your wishes within your will if something does happen to you, and that can be a good sort… a good way to just handle those matters without having potentially an awkward conversation with a niece or nephew.

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Nathan Williams: the very… the most common, I would say, what we see is having some sort of healthcare directive with either a durable power of attorney, a springing power of attorney, or just a general power of attorney.

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Nathan Williams: And I can cover those three definitions here quickly. Essentially, a springing power of attorney gives someone the ability to make healthcare decisions on your behalf, in this case.

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Nathan Williams: in the event that you're incapacitated, right? So, that spring… springing name means that there has to be an event. That event is a doctor's note stating that you are incapacitated. Durable means that you

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Nathan Williams: Have the ability to make decisions on that individual's behalf as soon as

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Nathan Williams: that healthcare directive is signed. So, it gives them full access from the date of signature, even if something happens to you. This one is, I would say, probably the most common, especially between spouses, where we'll see it the most.

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Nathan Williams: Also, if…

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Nathan Williams: Someone is older in their late 80s or early 90s, it's very common that we see a child have a durable power of attorney on a parent.

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Nathan Williams: The last piece of this, and this… you kind of see it in the movies a little bit more, is, you know, say you have someone in mind that is… would be a great person to be your durable power of attorney, however, you're worried that if you're incapacitated, that

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Nathan Williams: You don't want to be hooked up to life support the rest of your life.

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Nathan Williams: You can have a Do Not Resuscitate order that pairs along with any of these documents. So, just because you have a Do Not Resuscitate doesn't mean you can't have a durable power of attorney or springing power of attorney. You can have that document alongside. So, if

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Nathan Williams: someone's gonna do whatever it takes to keep you alive, you can still have that do not resuscitate

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Nathan Williams: Order, but oftentimes where we see this the most is typically when somebody's had

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Nathan Williams: prior health issues, so if someone's had a stroke in the past, or has had a serious cognitive decline, and their quality of life has deteriorated quite rapidly, this is where we'll see a do not resuscitate order typically come in.

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Nathan Williams: Switching from the healthcare side of things over to the financial side of things.

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Nathan Williams: this is gonna be very similar. Instead of focusing on healthcare, this is going to be your… for your finances. So, the first is a power of attorney.

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Nathan Williams: Again, this can be set up durable springing, or just a general power of attorney. A general power of attorney on healthcare is pretty rare. It can be a little bit more common on the finances side, especially for

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Nathan Williams: Business owners or ultra-high net worth individuals, where they might have somebody that they need help run their business and needs to be able to sign documents on their behalf, and they want it so that in the event something happens to them.

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Nathan Williams: that person is cut off from making financial decisions, and their family can step in. So that's where it can be a little bit more common on that end of it. The other piece that doesn't require any

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Nathan Williams: document or anything like that is just setting up basic joint ownership. And what that allows is most common between spouses, but

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Nathan Williams: each person can make… has full control over the account. Now, there's types… different types of joint ownership. There's joints with rights of survivorship, there's joints tenants in common.

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Nathan Williams: There's some other ones as well, but those are kind of the two main ones you see. It also depends on if your state is community…

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Nathan Williams: property, or…

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Nathan Williams: I'm not gonna get into all of it, but the big thing on joint property is that if something happens to you, that other person can step in and make decisions right away.

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Nathan Williams: most common one is a joint bank account, right? If something happens to you and your spouse needs to wake up and pay the bills tomorrow, having that joint ownership can be a big thing.

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Nathan Williams: The other piece that isn't on here, but I would encourage you to consider, say there is…

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Nathan Williams: a large asset, and you don't necessarily want joint ownership, give spouse, or that loved one, or whoever it is full control of that asset, but you know if something happens to you, they need to be able to access the funds.

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Nathan Williams: You can set up a transfer on death, if it's a brokerage account, or a payable on death, if it's a bank account. And all that means is that the date…

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Nathan Williams: After you, that person is going to need is a death certificate. They can take it to the bank or their wealth management firm, and I'll just speak for us, as soon as we get a death certificate, it takes…

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Nathan Williams: one to maybe two weeks for those funds to transfer over to the other person. So, takes a little bit of time, but it's very simple, very easy, especially compared to going through a probate process to have that transfer on death or payable on death titling. If you want something that's going to be just immediate, and that loved one doesn't have to worry about getting a death certificate and waiting those couple of weeks.

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Nathan Williams: Joint ownership is a good solution there.

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Nathan Williams: And then the last is having some sort of trust set up, in this case, a living trust. This is going to allow you to write a lot more rules into place, and it can work kind of similarly to having that…

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Nathan Williams: Transfer on death or death, where a living trust in this case, is really gonna act like…

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Nathan Williams: essentially an extension of yourself while you're living. It is tied to the same social security number as you, there's not an extra tax return you gotta go fill out. You can shift assets in and out of it whenever you'd like. There's no tax ramification for doing so.

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Nathan Williams: So it's very flexible while you're living, and then when you passed that

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Nathan Williams: revocable or living trust becomes irrevocable. All your subset rules are gonna kick in. So, I'll give an example of a very common thing, and what we see a lot is having a revocable trust own a brokerage account, or the deed to a home.

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Nathan Williams: And the way that the trust is written is that if something happens to one spouse, the other assumes immediate control and has the ability to do whatever they'd like with the assets, and then if the second… if the other spouse

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Nathan Williams: Faust either deceases earlier than anticipated.

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Nathan Williams: then there's going to be a lot of rules and another successor trustee to help manage for the kids. So, I would say having a living trust can add a ton of benefit. We highly encourage it. It… not only does it add these rules, but it also bypasses probate, and I'll talk a little bit more about the probate process later on as well, too.

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Sam Walker: Hey, Nate, before you move.

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Nathan Williams: So, what happens…

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Sam Walker: Questions in the chat.

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Nathan Williams: Sorry, I'm…

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Nathan Williams: Mmm…

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Nathan Williams: Okay, we have a power of attorney set up for my father, and…

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Nathan Williams: House is on your list, how does the POA get help?

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Nathan Williams: In the end. I guess I'm a little bit confused by the question, Ann Maria, on that part.

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Nathan Williams: And…

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Nathan Williams: Ashley, to your point, power of attorney does end at death. I was not trying to communicate that it doesn't. Upon death.

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Nathan Williams: Afterwards, whoever is going to be the personal representative would be handling the fares of the estate.

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Nathan Williams: Mmm… Next question here…

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Nathan Williams: Do you need to renew a power of attorney, or is it good forever? Most cases, it's…

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Nathan Williams: You don't need to renew it,

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Nathan Williams: You don't need to re… If it is… Very old, or…

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Nathan Williams: If the power of attorney was set up when that person wasn't of sound mind, there's ways that it could be contested, but it… power of attorney isn't something that you need to renew.

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Nathan Williams: Yes, this… so, for… would a spouse have healthcare… a power of attorney for healthcare matters? The spouse will, in most cases.

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Nathan Williams: It can still be nice to have the document ready to go.

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Nathan Williams: That way, you can bring it in, you can immediately start making decisions, but in most cases, especially if it's something life-threatening, the spouse is going to have the ability, and the doctors are going to turn to you to help make decisions.

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Nathan Williams: And then, yeah, there's a good point on here from Kate,

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Nathan Williams: on the Do Not Resuscitate order, there are some things that you can specify, so…

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Nathan Williams: that is all… again, I'm trying to provide a little bit of general advice here in terms of just making sure you have in place what you want to have in place, but there are ways where you can take it a step further and really make sure that, you know, if your quality of life deteriorates

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Nathan Williams: beyond a certain point, that you can make sure that that do not resuscitate order kicks in.

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Nathan Williams: Sam, if it's alright, I'm gonna circle back to the rest of these, I just want to keep moving to be timely here.

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Nathan Williams: And any questions I don't answer, I'll get back to you via email, so I'm not trying to avoid any questions here.

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Nathan Williams: In terms of what happens if you die without an estate plan.

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Nathan Williams: there's going to be a couple of different things. Like I was talking about before, the joint ownership is going to kick in, so if you don't need to have a will in place… well, I shouldn't say you don't need to have a will in place. If you have joint ownership, it doesn't take the will

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Nathan Williams: to assume control of the account, right? So, joint ownership is a great way. IRAs, retirement plans, life insurance, you can have beneficiaries set up. Beneficiaries are going to supersede the will, so…

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Nathan Williams: I'll just use a very real example. If someone passes and they have an IRA account with us, or they have a 401 ,

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Nathan Williams: all that provider or carrier is going to need. They're going to need your information to set up a new account, but they're going to need a copy of the death certificate, and then they're going to take the beneficiary information on file, and then they're going to pay it out

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Nathan Williams: based upon how that's set up. Having worked through a number of these, I do want to kind of hit on the point of

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Nathan Williams: When, especially on both the life insurance and a 401 , every carrier and record keeper is going to have their specific set of

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Nathan Williams: things that you need to follow and do, right? I get that the money is intended for you, and yes, it is your money, but if you're not filling out paperwork properly, or you're not doing something the way that they want you, you have to follow their process at the end of the day, and it's… it can be very difficult, but I just…

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Nathan Williams: Like to say that, having unfortunately worked through some of these cases.

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Nathan Williams: Where I get very frustrated when a life insurance policy is supposed to pay out immediately, but the carrier doesn't have some sort of document form, a reason for debt, or some little thing that's tying it up.

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Nathan Williams: and they're not paying out. I understand your frustration, but there is a process that needs to be followed, so I'd just like to bring that up.

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Nathan Williams: All other properties, so if you don't have beneficiaries set up, not joint ownership, and you don't have a will, so there's nothing to probate, essentially, then it's gonna go to intestacy laws of your state.

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Nathan Williams: And with that.

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Nathan Williams: try to advance it here. Every state is going to be a little bit different on this topic. How it can typically work is that your immediate family are going to be

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Nathan Williams: compensated and receive your financial assets.

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Nathan Williams: This example is just kind of broadly in how it can work here in Minnesota, but what would happen is that your wife would receive half.

00:25:42.800 - 00:25:54.919
Nathan Williams: And then your direct children would receive the remaining shares. If you have a blended family, it works a little bit different. I'm not going to get into that, but essentially.

00:25:55.110 - 00:26:03.179
Nathan Williams: spouse receives half, children are going to have the remainder spread out equally. And where this can create

00:26:03.430 - 00:26:06.649
Nathan Williams: A little bit of an issue, especially as…

00:26:07.480 - 00:26:10.659
Nathan Williams: And when you're thinking about it in terms of

00:26:11.420 - 00:26:18.110
Nathan Williams: If the wife needs all… if your wife or your husband needs all the financial assets to take care of the household.

00:26:18.650 - 00:26:24.000
Nathan Williams: Now, all of a sudden, Because it's for the beneficiary of the children.

00:26:24.130 - 00:26:34.579
Nathan Williams: The wife can still access the funds, but there's going to need to be a trust to set up, it's going to have to get pulled from a different account. It takes a little bit more effort and work

00:26:36.270 - 00:26:48.979
Nathan Williams: And are kind of ignored, in a way. One of the other things I'll bring up, because I know I'm… obviously, the whole point of today is trying to be pro, take action, go get these documents and things in place.

00:26:49.110 - 00:26:52.369
Nathan Williams: Trust and Will is a…

00:26:52.520 - 00:26:56.720
Nathan Williams: easy source to get a basic set of documents.

00:26:57.070 - 00:27:18.630
Nathan Williams: I still really recommend you finding a local attorney. We can help you with referrals and things of that nature. There's great attorneys that charge a flat fee out there. It's obviously going to be more expensive than going to a website and getting it done, but if you're looking for a really low-cost option, I mean, I've seen Trust and Well do…

00:27:18.630 - 00:27:25.319
Nathan Williams: Some pretty solid work for what you're paying, and it can be an easy way just to get an initial set of documents in place.

00:27:25.480 - 00:27:36.060
Nathan Williams: Keep staring at the chat here… Oh, Sam's working through…

00:27:36.240 - 00:27:39.659
Nathan Williams: through some of the questions. Thank you for doing that, Sam.

00:27:41.330 - 00:27:44.159
Nathan Williams: So, wills and probate.

00:27:45.210 - 00:27:47.489
Nathan Williams: What's going to happen is…

00:27:48.310 - 00:27:58.070
Nathan Williams: Most likely, there's going to be some assets that aren't in a trust, don't have beneficiaries set up, and are going to need to go through the probate process.

00:27:58.500 - 00:28:15.340
Nathan Williams: In certain states, there is also what's called… you can do a small claims affidavit. A real-life example, a client's, again, uncle passed away. His estate was a relatively small amount, it was $10,000, $20,000, $30,000.

00:28:15.560 - 00:28:18.030
Nathan Williams: here in Minnesota, they were able to

00:28:18.330 - 00:28:34.279
Nathan Williams: go fill out a small claims affidavit, have it signed off, and avoid, essentially, the entire probate process, and just use that claim affidavit, along with a copy of the death certificate to disperse the money among the nieces and nephews. So.

00:28:34.280 - 00:28:49.830
Nathan Williams: There are some other ways around it, but primarily what's going to happen, especially for sizable estates, is you're going to have… there's going to be some sort of probate process, and what you do is you file for a petition.

00:28:49.880 - 00:29:06.500
Nathan Williams: For the probate. There is then going to be a hearing. At the hearing, the will is going to be read. The will is going to establish who the personal representatives are, how the assets should be distributed, and then from there, there's…

00:29:06.570 - 00:29:18.170
Nathan Williams: going to be a window of opening for creditors and other financial institutions, so if there's mortgage debt, credit card debt, all of those things will

00:29:18.430 - 00:29:25.090
Nathan Williams: Come in order, and will have to be resolved before the estate can distribute the remaining cash.

00:29:25.230 - 00:29:34.239
Nathan Williams: And then once that is resolved, letters of testamentary will be received, and that's kind of…

00:29:34.390 - 00:29:35.660
Nathan Williams: I'll call it…

00:29:35.990 - 00:29:51.599
Nathan Williams: your ticket to kind of get to the end of the probate process. That letter testamentary for the personal representative is going to… what's going to allow you to go to the bank with a copy of the death certificate and say, hey.

00:29:52.260 - 00:30:03.699
Nathan Williams: so-and-so is no longer here, I'm the executor of this state, here's the letters of testamentary, and that's what's going to allow the bank to start distributing the funds and setting things up.

00:30:03.730 - 00:30:21.380
Nathan Williams: things up accordingly. I walked through that process just to show that, one, it is a very orderly process, right? So, we have had attorneys recommend clients actually going through the probate process. I'll pick on… in Texas, it's…

00:30:21.760 - 00:30:30.950
Nathan Williams: fairly quick, and they don't have an estate tax, so that makes things very easy. As soon as the financial affairs are in order.

00:30:31.460 - 00:30:50.850
Nathan Williams: I've seen… I've heard of clients having a Zoom call that takes 15 minutes to get a letter of testamentary, so very, very simple and easy in certain states. Other states I'll pick on here in Minnesota, it can drag out and get a little bit longer, but the biggest thing is that probate is

00:30:50.850 - 00:31:01.540
Nathan Williams: an orderly process, it can drag out, especially if somebody tries to contest a well. We're working through a client… with a client right now who's going through that.

00:31:01.540 - 00:31:12.109
Nathan Williams: You know, what could have taken 3 to 6 months can all of a sudden start to drag out almost over a year, especially if somebody is trying to contest something that the will has set up.

00:31:13.880 - 00:31:19.310
Nathan Williams: I think that covers will and probate.

00:31:19.990 - 00:31:21.950
Nathan Williams: Fairly well.

00:31:26.000 - 00:31:30.900
Nathan Williams: I walked through the pros and cons of probate there,

00:31:31.330 - 00:31:39.050
Nathan Williams: Typically, timing is on the shorter end, can drag out longer if there are some issues.

00:31:39.200 - 00:31:48.319
Nathan Williams: It can also be a few more hoops to jump through. I'll just give you a comparison. If the deed to your home is in the trust.

00:31:48.560 - 00:31:52.579
Nathan Williams: Then that trust owns it, and that spouse can assume control.

00:31:53.330 - 00:32:02.579
Nathan Williams: Technically, you don't have to change that deed right away, right? That spouse just has access to it, based upon how the trust is written.

00:32:02.700 - 00:32:12.890
Nathan Williams: Versus if the deed of the home is joint ownership, you're most likely going to want to remove the other spouse's name, especially before you go to sell the home.

00:32:12.890 - 00:32:25.070
Nathan Williams: Or you're going to have to switch it from the other spouse's name over to your name, so that's one area where trust can save you some time and some hassle, as well as bypassing the probate process.

00:32:25.210 - 00:32:29.540
Nathan Williams: And then the other big piece is just that probatis public record.

00:32:30.170 - 00:32:32.739
Nathan Williams: So I've worked through that.

00:32:33.060 - 00:32:43.039
Nathan Williams: several times here. Let's transition over to the tax side of things. So, this is where…

00:32:44.980 - 00:32:49.600
Nathan Williams: Estate planning gets a bit more complex in terms of

00:32:49.910 - 00:33:06.979
Nathan Williams: trying to avoid an inheritance or death tax. There's many different types of trusts that you can set up. There's gifting that you can do. There's gifting that's set up up here, where you can do a generational skip transfer, so there's a lot of different things that you can do.

00:33:06.980 - 00:33:11.980
Nathan Williams: If you're in this case, the biggest thing I would say is…

00:33:11.980 - 00:33:19.160
Nathan Williams: If you go home tonight, or you go look online right now, and you're over either your state's…

00:33:19.160 - 00:33:26.629
Nathan Williams: Estate tax, or there's an inheritance atta… inheritance tax at your state.

00:33:26.640 - 00:33:31.330
Nathan Williams: I would highly encourage you speaking to someone. I don't want to give…

00:33:31.750 - 00:33:35.310
Nathan Williams: definite advice at fam… how are you…

00:33:35.820 - 00:33:47.520
Nathan Williams: How your family is and what your financial goals are play a very crucial role into how you set this up, and especially if you have a federal estate problem.

00:33:47.520 - 00:33:59.910
Nathan Williams: you're definitely going to want to speak with somebody. We have a fair amount of experience in this, so we can gladly either refer you or directly help you if this applies to you.

00:33:59.980 - 00:34:02.520
Nathan Williams: But, key things to keep in mind.

00:34:02.820 - 00:34:04.760
Nathan Williams: In terms of gifting.

00:34:05.260 - 00:34:15.040
Nathan Williams: Each person is allowed to give up to $19,000 per year without having to pay or file a gift tax.

00:34:15.340 - 00:34:26.950
Nathan Williams: And that is per person, right? So, what we will commonly see is… and what you can do is, if it's husband and wife, you each have $19,000,

00:34:26.949 - 00:34:42.740
Nathan Williams: that you can gift to any one person, and this is a calendar year, so you could do $19,000 in 2026 come December, and then you could do… I'm forgetting if that's going to be inflation adjusted here come the end of the year, but let's call it the same for next year, 2027.

00:34:42.929 - 00:34:49.660
Nathan Williams: you can do another $19,000. So, if you're slightly over, let's say, your state's

00:34:49.760 - 00:35:00.700
Nathan Williams: estate tax level, and you're looking at it and saying, hey, you know what, most likely I'm going to have some assets that are going to pass to the next generation here, to my kids.

00:35:01.100 - 00:35:12.340
Nathan Williams: they could really use the money now, whether that's going back to school, buying a home, or something like that. I'd much rather see them enjoy a portion of what I've built here today.

00:35:12.550 - 00:35:21.210
Nathan Williams: Very common that we'll see people either gift up to the gift tax exclusion amount, that $19,000,

00:35:21.600 - 00:35:33.780
Nathan Williams: Or they'll split it, so if your husband and wife, you can combine it. Each person can give $19,000 and get you to that $38,000 total in a given calendar year.

00:35:35.050 - 00:35:44.399
Nathan Williams: As I mentioned before, there is a federal state tax amount of $15 million, and that is per person and portable.

00:35:45.710 - 00:35:53.659
Nathan Williams: your gift exclusion amount is also $15 million, and the way they work is they're hand-in-hand, right? So…

00:35:53.860 - 00:35:55.850
Nathan Williams: Let's say you have a…

00:35:56.280 - 00:36:13.179
Nathan Williams: $15 million estate, and you're a single person, right? As you sit today, you're not going to owe a dime in estate tax, but as soon as you start going higher, you're most likely going to have an estate tax issue. If you decide to take $5 million and put it into

00:36:13.520 - 00:36:22.559
Nathan Williams: some sort of trust that is outside your estate, or… I'm gonna change it up here. Let's say you give $5 million directly to…

00:36:22.970 - 00:36:24.260
Nathan Williams: a nephew.

00:36:24.650 - 00:36:41.200
Nathan Williams: that $5 million that you gift immediately moves down your $15 million down to $10 million on the estate tax side, and you start to use up your federal gift tax. So, they work hand-in-hand together, and gifting doesn't necessarily

00:36:41.200 - 00:36:45.060
Nathan Williams: Immediately remove all of your estate tax issues.

00:36:45.170 - 00:36:53.019
Nathan Williams: The state-level rules can match this. Each state can work a little bit differently as well, too.

00:36:53.020 - 00:37:05.889
Nathan Williams: Here in Minnesota, again, it's that 3.6 million non-portable between spouses, so significantly lower than the 15, and if you gift it above that

00:37:05.910 - 00:37:23.170
Nathan Williams: $19,000 per person, and you use the exclusion, you're gonna start knocking down that $3.6 million further. Now, you can also opt to pay the gift tax, there's different things, but I'm probably getting a little too far into the weeds on this topic. Essentially.

00:37:23.170 - 00:37:33.259
Nathan Williams: If you're gonna gift to a person and it's above $19,000, I would suggest just making sure you call some sort of financial professional to make sure you're doing it accordingly.

00:37:37.610 - 00:37:43.979
Nathan Williams: And then, federal gift tax, we really reviewed this fairly well already here.

00:37:44.240 - 00:37:47.439
Nathan Williams: And I reviewed the lifetime gifting.

00:37:47.600 - 00:37:56.670
Nathan Williams: One other thing to consider, I'm gonna go back to a brokerage account here. If you have…

00:37:58.080 - 00:38:13.760
Nathan Williams: stock that you've held forever, and you're never going to sell it. We see a fair amount of this. You know, let's say Grandpa worked at PepsiCo, and has owned it for years and years and years. He's sold portions of it, but he's always kept this pet…

00:38:13.880 - 00:38:15.400
Nathan Williams: PepsiCo stock.

00:38:15.840 - 00:38:20.820
Nathan Williams: When they pass, what you get is a step up in basis upon death.

00:38:20.960 - 00:38:30.050
Nathan Williams: Real estate works similar to this as well. So, let's say Grandpa bought it at $100 a share, it trades at $200.

00:38:31.260 - 00:38:45.189
Nathan Williams: today, and Grandpa passes today, you get a step up upon his death, so your new tax basis is going to be that $200, and essentially, that $100 of unrealized capital gain

00:38:45.190 - 00:39:03.270
Nathan Williams: is, in a way, forgiven, right? So, keeping certain assets that have appreciated within your state or in your ownership and not gifting them right away can be another very efficient tax tool to use that step-up of basis upon death.

00:39:03.280 - 00:39:06.529
Nathan Williams: The… where you see it the most common is if…

00:39:06.620 - 00:39:20.250
Nathan Williams: parents or a grandparent passes and they own a home, that step up a basis upon death can be used to offset that capital gain in a home. So that's probably where we see it the most common.

00:39:22.750 - 00:39:32.569
Nathan Williams: And… There are a few exclusions to the gift tax. Like I was saying, you can do $19,000 to…

00:39:32.730 - 00:39:44.480
Nathan Williams: per individual, so if your son is married, you can give $19,000 to your son and your daughter-in-law. That's a common way to kind of get

00:39:44.850 - 00:39:57.169
Nathan Williams: pass along more than just the 19. There is an exemption for 529 accounts, so you can do up to $190,000 in one year.

00:39:57.290 - 00:40:12.730
Nathan Williams: if you do that, or essentially, if you go above the 19, you just have to make sure that you wait a set number of years. It's fairly rare. If you're gonna go above the 19,000,

00:40:13.380 - 00:40:19.480
Nathan Williams: I would just say make sure you're talking with somebody, and it's $19,000 in a given year.

00:40:22.310 - 00:40:28.579
Nathan Williams: And then there is no gift tax amount paid directly to a school for an individual's tuition.

00:40:28.920 - 00:40:35.500
Nathan Williams: And then there is also no gift tax associated with covering medical expenses for an individual, and…

00:40:35.710 - 00:40:40.440
Nathan Williams: I'd say that generically, obviously there's gonna be a little bit of…

00:40:40.930 - 00:40:51.460
Nathan Williams: If you're paying for a serious medical bill and it's going above that, you don't have to worry if it is, you know, an elective type of medical bill.

00:40:51.570 - 00:40:56.219
Nathan Williams: I can't give you legal advice or tell you if that's gonna qualify or not.

00:41:00.750 - 00:41:17.500
Nathan Williams: So this is just a little bit more basics surrounding trust. Like I was talking before, there's both revocable and irrevocable. A revocable or living trust is going to be the most common that you see. It acts as really an extension of yourself.

00:41:17.800 - 00:41:27.769
Nathan Williams: And then, in terms of an irrevocable trust, that's going to be an entity that's outside your estate.

00:41:29.230 - 00:41:33.980
Nathan Williams: And the biggest thing that trusts allow you to do is avoid probate.

00:41:36.690 - 00:41:52.960
Nathan Williams: Life insurance is another important planning tool. This is really what can help step in and provide a source of liquidity upon one's passing. The biggest thing, and what we commonly see is, especially employer life insurance, right?

00:41:53.010 - 00:41:58.509
Nathan Williams: Depends on your employer, but many times there can be coverage, and what that can do is just help

00:41:58.610 - 00:42:04.940
Nathan Williams: Pay out, help cover some of the initial burial or funeral costs associated with it.

00:42:05.130 - 00:42:26.520
Nathan Williams: Another huge point that life insurance can do is it can help you get around some of the estate taxes if it's set up and done accordingly. I'll kind of leave it at that there. Also, life insurance proceeds can help get around inheritance attacks, if your state has it. Again, these are kind of

00:42:26.520 - 00:42:31.069
Nathan Williams: Really more advanced planning topics, and are really for those that…

00:42:31.070 - 00:42:38.599
Nathan Williams: Where you know you're going to be passing wealth on to the next generation, or you're wanting to pass wealth on two generations from now.

00:42:40.200 - 00:42:57.269
Nathan Williams: So, with all that, and I know I covered a lot of different things here, and some stuff was way into the weeds, I'm hoping that the beginning part of the presentation, there was a helpful tip, so I'll kind of open it up for some questions here, and I'll work back. I know Sam has been covering the chat fairly well.

00:42:57.270 - 00:43:16.220
Nathan Williams: But please feel free to ask questions, and if there's any I don't get to here today, I'll make sure that I respond to you via an email, but this really wraps up the presentation, so thank you for spending 45 minutes with me here today, and hopefully this was helpful in terms of covering estate planning.

00:43:18.990 - 00:43:26.010
Nathan Williams: Amber, I'll… turn it back over to you here as I read through some of the questions.

00:43:27.690 - 00:43:29.090
Amber Posthauer: Oh, right.

00:43:29.190 - 00:43:33.310
Amber Posthauer: Well, thank you, Nate, for sharing your valuable time and expertise with us today.

00:43:33.350 - 00:43:51.929
Amber Posthauer: To reiterate, today's presentation was recorded. We'll be sharing the recording in the coming days. At the end of this call, a survey will populate in a new window. Please take a brief moment to complete the survey, as it lets us know what topics are important to our listeners, and helps make our education program as current and relevant as possible. That concludes our webinar for today.

00:43:51.930 - 00:43:54.959
Amber Posthauer: Thank you, everyone, for joining us, and have a great day!