- Good morning everyone.

I'm Warren Bingham, Plan Giving Officer for PBS North Carolina.

Welcome to today's estate planning webinar sponsored by PBS North Carolina and specifically by our PBS NC Legacy Society.

The Legacy Society are those donors who support us through their will and estate plans and we're mighty grateful to them.

I extend greetings also from our CEO, David Crabtree, who is a big believer in engagement with the public and we're pleased to have such a large audience this morning for this webinar.

PBS North Carolina is celebrating its 70th year.

We're actually 15 years older than PBS itself.

What started as a single broadcast station at UNC Chapel Hill in January of 1955 now reaches all of North Carolina and parts of Virginia, South Carolina, Tennessee, and even North Georgia.

We have the third largest audience reach in the United States among PBS affiliates and we're proud of that.

We also reach the world now through the internet and hence you're here this morning.

Well over half of our budget is met by private support and estate gifts are an important part of that.

So if you're updating your estate plan, please keep us in mind when you get to the charitable component.

If you're a long time viewer of ours, you might know the names Julia Child, Bob Ross, and Mr. Rogers.

But this morning we're happy to have Mr. Davis with us.

Charlie Davis, let's bring Charlie into the room.

Good morning, Charlie.

- Good morning.

- Charlie is a distinguished attorney with Pointer Spru Law Firm of Raleigh.

He has all the certifications that anyone would want who works in tax and estate planning.

And Charlie is top notch at that.

He is a North Carolinian.

He is from Southern Pines originally and he earned two degrees from UNC Chapel Hill.

He is recognized as an expert in planning and probate law by the North Carolina State Bar.

And we're mighty grateful that Charlie now for the second year running has agreed to lead this webinar for us.

Please keep your questions to the end, but you may type them in the chat as we go along and we'll field those at the end.

But unless Charlie is so moved, we're not gonna answer questions as we go along.

We're gonna try to get done by noon either way at the latest.

And if you'll hold your questions and be patient to get the answer, we'll address those as best we can late in the webinar.

At some point in, I'd say a couple of weeks, those who register for this webinar will receive an email from us and it will tell you how to, it will have a link to this recorded webinar at that time.

It's gonna take us a while to make it available.

So if you'll be patient, but you will get an email from us, I'd say in 10 to 14 days, and it will have a link to find this webinar.

And also we'll have information about how to reach us at PBSNC or how to reach Charlie at his office.

Okay, so look out for that email.

And now folks, get your pencil and pad ready 'cause we're gonna let Charlie start talking and you'll need to take notes for this class.

Thanks, Charlie.

- Thanks, Warren.

So as Warren mentioned, my name's Charlie Davis.

I'm a partner at Poyner Spruill.

I'm an estate planning lawyer.

That means I do all kinds of work in the estate and trust world, estate administration, estate planning, tax planning, estate planners typically get involved in business planning as well.

Most of our, many of our clients have closely held entities that they need advice on and that are a part of their estate plan.

Charitable planning, we help clients make charitable gifts and structure those in a tax efficient manner.

And so we do a lot of things as estate planners that are not just wills.

We will talk about that today.

As Warren mentioned, I'm a lifelong resident of North Carolina.

I grew up in the Moore County area, Southern Pines, Poyner area.

And I've called the triangle home for the last 15 or so years.

All right, next slide.

Okay, so just briefly about my law firm.

We're here in North Carolina.

I'm based in our Raleigh office.

I work out of all of the offices that we have, offices in Charlotte, Rocky Mountain, Southern Pines as well.

I do trust and estates work and my firm does all kinds of things in addition to that, business work, employment work, banking work, healthcare, pretty much anything.

We don't do much criminal work or residential closings, but pretty much anything else we will do.

So we're gonna talk about estate planning today in general and various related and sub topics of that.

Just a reminder, this is for educational purposes only.

It's not legal advice.

If you wanna discuss your specific situation, feel free to reach out to me.

I'd be happy to help you with that.

But this is just to give you some basic information about the estate planning process and what you ought to be thinking about when you come to me or another lawyer.

There are lots of really good and excellent estate planning lawyers across the state.

So there are plenty of people that you can be in good hands with.

As Warren mentioned, please put your questions in the chat and we will address them at the end.

We certainly will not be able to get through all of them, but we'll get through as many as we can.

We'll try to choose those that we think are broadly applicable to everybody.

And again, if your question doesn't get answered, my contact information will get circulated and feel free to reach out and we're happy to help you with anything that you need.

Okay, next slide.

All right, so what is estate planning?

So a lot of times when people think of estate planning, they think of having a will.

That is the most common document that you think of, but it really is more than just that.

And it's more than just a set of documents.

There are other types of documents we'll go over today that are a part of this, but it really is a comprehensive plan that thinks about your family, your assets, and what your goals are and how to make sure those goals are carried out in a way that is efficient for you, your family, and your taxes.

When we do estate planning, we're gonna consider all kinds of things, taxes, creditor protection planning, your beneficiaries and whether or not they are responsible or ready to handle an inheritance on their behalf, planning for your disability or the disabilities of your beneficiaries, what your charitable goals are, how can we accomplish that?

Do you have items that you wanna leave that don't have huge monetary value but have large sentimental value?

How are you gonna leave those assets to your family?

So we're gonna try to do all that in the estate planning process, also in a way though that allows assets to pass efficiently and with the least amount of taxes as possible at your death.

Although estate planning is not just having a will or having a set of documents, there are common documents that are a part of the estate planning process.

Most of the most common ones are listed here.

We're gonna go over each of these.

So the first they're listed is your financial power of attorney.

Sometimes this is also called a general durable power of attorney.

So this document is where you appoint someone during your lifetime to help you with your finances and your property management.

It is vitally important that you have a document like this in place because if you ever become incapacitated and are no longer able to manage your affairs, you want someone to be able to help you with that.

If you don't have a financial power of attorney in place, there's a good chance that you may have to have a guardian appointed to manage your property for you.

And you wanna avoid that if you can.

That's a public process.

You get taken to court and declared incompetent.

And so just because you may be legally incapacitated, it doesn't mean you still can't, you're not aware of what's going on in certain circumstances.

And so that can be very embarrassing for someone.

And the guardian that's appointed has to account for their activity to the clerk of court every year to say what they've done on your behalf.

And so there's public policy behind that.

We wanna protect people who are vulnerable, but to the extent you have the ability to appoint someone privately to manage your affairs for you, that can avoid having a guardian appointed for you and avoid this sort of public display of your affairs.

So the financial power of attorney can really help avoid that process.

This document is only effective while you are living.

When you pass away, the power that you've given your agent in this document goes away.

When you set one of these up, it is usually a good idea to consider having more than one person named in succession as your agent.

So if you set up, if you prepare or sign a power of attorney and you appoint your spouse as your primary agent or another family member or child, you probably wanna name a backup because that person that you've named may not always be able to serve.

They may pass away.

They may themselves become incapacitated.

And so it's a good idea to have a succession of people serving.

You can name co-agents on these documents.

If you have two children that you wanna treat equally and you don't wanna upset them by choosing one over the other, you can choose multiple people to serve in this role.

You wanna be careful about doing that.

Having multiple people can make their job more cumbersome and may require more joint action, which can be more difficult to do than just having one person.

But you can certainly do that.

If you choose co-agents, they need to be able to work together, right?

If your children don't get along, it's not a good idea for them to be named as co-agents on a power of attorney 'cause they won't be able to work together on that document either.

So an important thing to remember about a power of attorney and other means of managing your property is that this really is probably the better way to do it.

Sometimes individuals will go to the bank and say, "Look, I need my child to help me with my finances.

So please add them to my account."

And that's a reasonable thing to think about doing, but it can be very problematic when you do that.

There may be people in this presentation who have done it and that's okay.

It's okay if you've done that, but there may be a better way and you can fix the issue if you need to.

So if you add a child to your account, likely what the bank is gonna do is make the account a joint account with a right of survivorship.

So when you do that, you've given your child access to your money so they can help pay your bills, but you've potentially also exposed that account to your child's liabilities.

If your child gets sued, they're now a joint owner on this account that's actually your money.

So it may be difficult to protect that from your child's creditors.

The other issue is that it may accidentally disinherit other children.

If you are doing this because you have your child that lives near you, that helps with your finances, you want them to have access to your money, but you have three other kids that live in other states, when you make this account a joint account with a right of survivorship, your one child who is the joint owner is gonna receive that account at your death.

And they would have to be very friendly with their siblings to want to split it with them.

And if they do that, it is a gift by them to their siblings.

So you wanna avoid accidentally disinheriting other beneficiaries by, or inadvertently doing that by adding someone to your account.

So usually when you prepare financial powers of attorney, or when we prepare them these days, they're usually immediately effective.

So you've named someone to help you and they can immediately start helping you.

Sometimes clients are wary of that.

They say, I don't need help yet.

I don't want someone to be able to help me until I am incapacitated.

You certainly can have a document that isn't effective until you're incapacity.

We call that a springing power of attorney.

They're less common these days.

And the main reason for that is in order for it to spring into existence, you have to be incapacitated, which likely is gonna require some type of declaration that you are incapacitated.

If a bank's gonna rely on a springing power of attorney, they're gonna wanna see a written declaration of your incapacity.

They may even require that it get recorded at the registered deeds office.

And so that can be cumbersome in public if it's recorded at the registered deeds.

And so we typically don't draft those unless the client wants that.

And it's usually a better idea, we think, to make it immediately effective.

Obviously you need to choose someone that you trust to make good decisions on your behalf and who won't act if you don't need them to act.

So I mentioned this document's also called a durable power of attorney.

That word durable just means that it survives your incapacity.

So if a power of attorney is not durable, when you become incapacitated, the agent's authority goes away.

Which of course is, you know, the point of these documents in most cases is for it to be able to be used when you are incapacitated.

And so most every power of attorney that gets drafted these days is a durable power of attorney, if it is being used for your general affairs.

Okay, so the next document on this list is a healthcare power of attorney.

It is similar to a financial power of attorney in that it appoints someone to help you make decisions and manage your affairs.

In this case, it's with respect to healthcare.

So your healthcare agent is able to make decisions regarding your healthcare if you are unable to do so yourself.

Another key difference between these two documents is that the healthcare power of attorney is effective only upon your incapacity.

As long as you can make your own decisions, your healthcare agent cannot make them for you.

And so you name someone to act on your behalf, but until you are actually incapacitated, you're the only one that makes decisions for your healthcare.

This document is the power of your healthcare agent mostly goes away when you pass away because no healthcare decisions are needed anymore.

The one exception to that is with respect to disposition of your remain.

So your healthcare agent is the person who has the authority to decide how that will happen.

So if you have strong feelings about how that will happen, you wanna be buried in a certain cemetery, family plot, you wanna be cremated, whatever other instructions you might have, you wanna make sure your healthcare agent knows them.

You can specify those on the document itself, or you can just let your healthcare agent know what your thoughts are there.

But that, so the healthcare agent would have authority after your death with respect to disposing of your remains.

The document itself, there's a North Carolina statutory form for a healthcare power of attorney that many attorneys use, or they use some version of that that they've created as a form.

And so that form usually allows you to sort of color in the lines on healthcare decisions as well.

So if you have certain thoughts on particular types of treatment that you would or wouldn't wanna receive, you can specify that there.

If you have particular religious beliefs that would require certain types of treatment or not allow certain types, you can specify that on your healthcare power of attorney as well.

The next document is another healthcare document.

It's called an advanced directive for a natural death.

It's also known as a living will, which is somewhat of a misnomer because it doesn't dispose of property like your actual will.

But that's what it's called.

This document doesn't appoint anyone to do anything for you, but it tells your healthcare provider and your healthcare agent what your choices would be at the end of life.

If you're unable to state them yourself.

And so this is where you can specify whether or not you want to receive life prolonging measures.

If your doctor has gotten to the point where they believe that you don't have a chance of survival without those life prolonging measures.

So you can essentially say, look, let me go naturally.

If one of three scenarios in North Carolina exists, the first is if you have an incurable condition that's gonna result in your death in a relatively short period of time.

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

That's sort of like the Terry Shivo scenario, if you guys remember that from Florida.

And the last is if you suffer from advanced dementia into a high degree of medical certainty, you will not regain your cognitive ability.

If any of those scenarios exist for you, and if you would not want to be kept alive artificially in those scenarios, you will want to have an advanced directive for a natural death to specify that.

You can give your healthcare agent the authority to override your choices on this document.

You don't have to do that, but you can.

And so sometimes people who would not want to be kept alive artificially in a vacuum, but don't really know what circumstances might exist at that time, which could be 20 years from now or whenever, they feel more comfortable giving their healthcare agent the power to override the document.

Some people don't want that at all.

They don't want anyone to be able to change their decision on the document.

And you can specify all of that.

I think the important thing to think about with this document is not really how legally enforceable it would be if it needed to be enforced.

And I think it's more about the gift that it gives to your loved ones, that you have made the decision for them.

And so if they are put in an awful situation where they're having to decide whether or not they're going to keep you alive or not, you have told them, look, if this scenario exists, do not keep me alive, so that they are making your decision and not their decision.

So it allows them to sleep easier in a very difficult time.

OK, so those are the documents that are typically effective while you are alive.

The next document is your will.

And that's the most common document that people associate with estate planning.

This is effective at your death.

Your will is not really your will until you die, because you can change it at any time.

So when you die, that's when it becomes your official will.

And this document controls the assets that you own at your death that are in your own name that do not have a beneficiary designation associated with it.

So we're going to unpack that throughout this presentation.

But your will only controls assets in your individual name that do not have a beneficiary designation associated with it.

It doesn't control assets like life insurance and retirement accounts that are payable to named beneficiaries.

It doesn't control assets that are in a joint account held with a right of survivorship, because the contract with the bank says who gets that property when you die.

It's the joint owner.

So for married couples who own many of their assets jointly, when the first person, first spouse passes away, there's a good chance that there is not a whole lot that is controlled by your will, because you may have many joint accounts.

You may have assets that are payable to the surviving spouse.

It may be that the only asset that you really have is some of your tangible stuff, your furniture, clothes, things like that, and a vehicle may go through the will.

But otherwise, there may not be that much.

That's not the case for everybody.

Some married couples have separate assets for various reasons.

But a lot of times when the first spouse passes away, there is not a ton that goes through a person's will.

In addition to passing on that property, your will also is where you appoint an executor of your estate.

This is your legal representative after you pass away.

So that person steps into your shoes, essentially, and winds up your affairs.

We're going to talk about that process a little bit later.

But that's what the executor does.

So I mentioned this earlier.

Your will is only applicable after your death.

In addition to appointing your executor, you also can appoint guardians for your minor children in your will.

And so lots of times, people who have minor kids, they, in their will, will specify who will be the guardian if the parents have passed away.

So the question is, what happens if I don't have a will?

Lots of people don't have one, haven't yet gotten around to doing their estate.

And so each state, wherever you live, that state is going to have a law that says what happens to your individually owned property at your death.

In North Carolina, it's called the Intestate Succession Act.

It's got a similar name in most states.

If you pass away without a will, that's called dying intestate.

And so if that happens to you, and if you're married and have children, your property is going to get split between your spouse and your children.

Either one half goes to your spouse, or one third, depending on if you have more than one child.

If you have more than one child, it's a third.

Plus, your spouse gets $60,000 of personal property off the top.

So it's half or a third plus $60,000 of personal property.

That is not what a lot of people would want.

A lot of people would say, look, when I die, I want everything to go to, or at least for the benefit of my spouse.

My spouse can use it for children, but I want my spouse to have control over it and not for it to go to kids as well.

There's public policy behind this statute.

Not everybody's kids are kids of their spouse.

And so it makes sense to make sure all parties are looked after, particularly when there are minor children involved.

But this Intestate Succession Act isn't ideal for a lot of people.

So if you have a spouse and no children, but your parents are living, your spouse is going to get the first $100,000 of personal property plus half of the rest.

And the remaining property goes to your parents, which is usually not what people would want.

Most people don't want to share property with their in-laws.

So a will can avoid that situation as well.

If you don't have a spouse, but you do have children, your children are your intestate beneficiaries.

And if you don't have a spouse or children, but your parents or lineal descendants of your parents are living, so like your siblings or nieces and nephews, then your parents are your beneficiaries if they're living, then your siblings, then nieces and nephews, and so forth.

But in any event, most of the time, the Intestate Succession Act gives property in a way that would not necessarily be what you want.

So the way to fix that is to have a will.

What if you have minor beneficiaries?

You usually want a will or a trust, which we'll talk about in a little bit, to deal with the disposition to that minor.

So until someone is 18 or older or has reached the age of majority in the state where they live, they can't legally inherit property without some structure for them.

So if there's no other structure around, a legal guardian would be appointed to manage that property for them.

We've talked about that process already.

That is a process you want to avoid if you can, because they have to account to the clerk every year.

And legal guardians have less-- they're more limited in what they can do with the property that they are controlling.

You can also leave some amounts in custodial accounts for a beneficiary.

You can do that by gift or via a will or trust.

These are called UTMA accounts, Uniform Transfers to Minors Act accounts, UTMA.

And these are great vehicles for smaller gifts to minor children.

You appoint someone to be the custodian, like their parent, and they manage that property for them until they're 21 or some age between 18 and 21.

And then that child gets the money.

Obviously, a lot of 21-year-olds are not yet ready to receive a large amount of money.

If you're going to give more than a relatively small amount to someone like that, you probably don't want to use an UTMA account.

You can also make gifts to minors in 529 plans.

You can set up a college education savings plan, call it a 529 plan, and contribute to that on their behalf.

That's a great way to make gifts to young people.

The best way, we think, to leave property, particularly if it's a substantial amount, is to leave it in a trust for their benefit, where you appoint someone as the trustee to be the manager of that property.

And they use it for the benefit of that young person until they reach an age that you think that would be more appropriate for them to receive that property outright.

Or it can last for a lifetime if you want that to happen.

But in any event, you have this trust that is privately managed by the trustee for the benefit of the child until they reach a more appropriate age.

We think that's usually the best option in most cases for substantial amounts going to a minor.

So the next document on the list is a trust.

I just talked a little bit about a trust for a minor person.

There are tons of types of trusts.

We'll hit on some of them today.

The main one we're going to talk about is called a revocable trust.

And we'll get to that on a later slide.

But that's a trust that is used somewhat like a will substitute.

You still have a will, but you have a revocable trust as well.

And that helps to-- it gives you some benefits that we'll talk about as a part of your state plan.

Not everybody needs one of these, but they can be useful in a lot of scenarios.

The other documents that people usually forget about when they're thinking about their state plan are beneficiary designations.

So life insurance, retirement accounts like 401(k)s, 403(b)s, IRAs, some investment and bank accounts that are either POD, pay on death, or transfer on death, TOD, those assets pass to a named beneficiary at your death.

It is vitally important to review those beneficiary designations and update them if need be.

As a part of your state plan, you could have a perfectly drafted will and/or trust.

But if you've left a substantial amount of assets directly to beneficiaries via beneficiary designations that you would want to actually go to a trust for their benefit, the beneficiary designation is going to control that.

And so it might go directly to, say, a minor child.

This is really important as well because lots of people have their larger assets are their retirement account through work.

That's the case for a lot of people.

So one of their largest assets is their 401(k).

And since that passes via a beneficiary designation, that's one of the most important estate planning documents that we need to worry about when we are doing an estate plan.

And it has nothing to do with your will.

So keep that in mind as you are working through your state plan with an estate planning lawyer.

Some other documents that aren't listed on this slide that just are worth mentioning-- sometimes people will have what's called a HIPAA authorization document.

This is a document that allows named individuals to receive your protected health information.

HIPAA is a federal law that protects the disclosure of your protected health information.

But you may have situations where you want someone, particularly someone other than your health care agent, who's already going to have access to that, you want, like your other children, to be able to ask your doctor about your treatment.

So you can do a HIPAA authorization to allow that.

There's a document called a standby guardian.

So I mentioned earlier that you can nominate guardians for your minor children in your will.

You can do a separate standalone document that's called a standby guardian document that will do that as well.

If you do this standby guardian document, it's also going to apply if you become incapacitated.

So that can be useful if you have minor children.

As you recall, your will is only applicable when you die.

So if you become incapacitated and have minor children, it's a good idea to have designated guardians for them as well.

And you can also do what's called a digital asset authorization form that allows someone else to have access to your digital assets, which will include your social media accounts, some cryptocurrency wallets, Google accounts, things like your Gmail account, things like that.

That can be helpful.

A lot of those tech companies like Google and Facebook and all that, they also have ways that you can designate an authorized person through their platform.

And so it's worth investigating that as well to give your family easier access to those things after you pass away, particularly if you store photos of your family in a Google Drive.

You're going to want somebody to have access to that so that they can access those family pictures.

OK, next slide, please.

All right, so those were the main documents.

And I alluded to the fact that your will is only applicable after your death.

And so your executor gets appointed and they manage your estate.

That process is called the probate process.

This is the process where your assets are collected by your executor and then distributed to the beneficiaries.

This gets a bad reputation.

You hear this word probate and lots of people shudder.

It is not an inherently bad process.

There are some good things that come out of it.

It is a good idea to consider avoiding it on certain assets because it can make it a little bit more efficient after your death.

So certainly, it's a good idea to consider avoiding it.

But it's very difficult to fully avoid it.

And there are some good things that come out of it.

So if you recall from what I said earlier, probate only controls assets that are in your individual name that are not in a joint account with a survivorship or not payable on death to someone else.

The way this process works is the person that you've named is your executor.

Or if you don't have a will, someone, like your spouse or child, applies at the clerk of court to become your executor to open your estate.

So they file what's called an application for probate.

That gives them the authority to act on behalf of the estate once they are appointed.

And then they proceed to wind up your affairs.

So they run a notice in the newspaper.

You've probably seen these before that says, this person has died.

Anybody that has claims against them should submit them to the executor.

They collect your assets.

They file an inventory with the clerk three months after the estate's open saying, hey, here's what the deceased person had.

They do other things to wind up your affairs.

So they pay your creditor claims that come in.

So if you get a credit card bill that comes in, they make sure that gets paid.

They pay the expenses of your last illness.

There is a statutory order of those things to get paid if there's not enough assets to pay them all.

But assuming there are enough assets to pay those, they will pay all those bills.

They'll file your final income tax return.

They will maybe file an income tax return for the estate if it generates income.

They may file an estate tax return, which we'll talk about a little bit later, if one is required or if it would be prudent to do that.

They make distributions to beneficiaries once all that stuff has been done.

And they file accountings with the clerk of court at least annually that say what they did on behalf of the estate.

It is not uncommon for the probate process to last for a long time.

It has to last at least three months, because that's the notice to creditors period.

Creditors have three months to submit creditor claims generally.

But it usually lasts a lot longer than that.

It's not uncommon for it to last over a year.

If you have to file a final income tax return for a year and you die early in that year, you can't file that return until the following year.

If you have to file an estate tax return for an estate, it's usually-- and if there's a likelihood that that estate will pay estate tax, you probably don't want to close the estate with the probate court until the estate tax return has been cleared by the IRS.

And so it can take a while to get through this.

This process is supervised by the clerk of court.

Filings at the probate court are public.

It can take some time, like I said.

It can be expensive.

You're likely having a lawyer help you with this.

You're paying fees to the clerk on assets listed that are probate assets.

The maximum fee is $6,000.

So it's not huge at the end of the day, but it is $6,000 that if you could avoid it, it would be great.

All that being said, there's likely some amount of probate that is going to have to happen when you pass away.

So it's very difficult to fully avoid it.

And it's not always prudent to fully avoid it.

For instance, that notice to creditors I mentioned, that flushes out creditor claims at your death.

It gives creditors a three-month period to come forward.

If that notice is not run by an executor, creditors will have a much longer period to come after your assets.

So it's just a good way-- that's a benefit of the probate process, is shortening that period.

So if anybody unknown has a claim against the decedent, they have a much shorter period of time to come forward.

Some assets are much easier to get through probate than others.

So like cash accounts, like your checking account, that's easy to get through.

North Carolina real estate, I'll talk about that in a second.

That's usually pretty easy to get through probate.

And then other-- just assets that don't generally have a lot of activity.

So one of the pains of doing probate is having to account to the clerk for everything that comes into the estate and everything that goes out of the estate.

If you have an investment account or a brokerage account, so not a retirement account, but just a traditional investment account, and that account likely has interest, dividends, reinvestments of those things, maybe some stock splits, things like that that happen without really your control.

So they just happen.

You see them on your statement, but you're not telling the broker to make these sales or whatever.

All of that stuff has to be reported to the clerk.

So it can get tedious.

Those are great assets to avoid probate on, so like brokerage accounts.

Large cash accounts can be good to avoid probate on.

Really, that's just because the larger the account, the larger probate fee they generate.

Cash accounts, again, are easy to get through probate because they usually don't have much activity.

And then anything that you want to keep private, you don't want someone to know about an asset, there are ways to avoid having that listed on a probate account.

And certainly, you have to have it in some structure that is not just you owning it.

And a trust is a good way to solve that issue.

We'll get to that in a second.

I mentioned real estate earlier.

So real estate that is outside of North Carolina is likely going to need a probate proceeding in that other state, unless you own it in a trust or in a limited liability company or something like that at your desk.

Real estate owned by an LLC is not owned by the decedent.

It's owned by the LLC.

And the LLC is personal property.

Personal property always lives where the decedent lives.

So if you have an LLC and you live in North Carolina, it is North Carolina personal property for probate purposes.

So that's not that difficult to get through probate.

But if you own a beach home in South Carolina, just by yourself, and it's not in a trust or an LLC, you're likely going to need a South Carolina probate proceeding to pass that at your desk.

So it can be a good idea to consider how we can avoid having that second probate proceeding.

North Carolina real estate, on the other hand, though, passes through probate very easily.

It's not really a typical probate asset.

You do not pay fees on North Carolina real estate unless the real estate is given to the executor to be administered as a part of the estate.

Usually, that's not the case.

If your will says, I give all my property at my death to my two kids equally, when your will gets declared as your last will and testament, your two kids, as of your date of death, will be the owners of that real estate.

No separate deed is needed, and you don't pay fees on the real estate.

So it gets through probate pretty easily.

So you don't need to think about necessarily gifting your real estate.

And you probably shouldn't do that to a beneficiary to avoid probate at your death.

You really will talk about that in a little bit.

But just know real estate in North Carolina typically gets through probate fairly easily.

OK, next slide, please.

So while we're waiting for that next slide to come up, it is on assets that the will doesn't control.

So I've mentioned this before.

There are assets that are payable on death or in joint accounts that are not going to be a part of a will.

So these avoid probate because the contract with the institution that issued the asset or the deed says so.

There are three main categories of assets like this.

They are joint accounts with a rising survivorship, accounts that have a beneficiary designation associated with them, and trusts.

Again, we're going to get to trusts on a later slide.

Life insurance, so we'll talk about this first.

As long as you name a beneficiary on your life insurance policies that is not your estate, you're going to avoid probate on the fund, the life insurance proceeds at your death.

Typically, you do not want to name your estate as the beneficiary of your life insurance.

So make sure you have a beneficiary that is not your estate.

So you want to be careful with your beneficiary designations on this, though.

Like I mentioned before, you likely don't want minors to receive property outright.

So if you have minor kids and you want them to be the beneficiary of your life insurance, you probably want to name a trust for their benefit as the beneficiary and not your children directly.

So you need to be careful with naming beneficiaries.

So it's great to avoid probate, but if you do that in a way that is not efficient for your beneficiaries, it's not going to work the way you want it to.

Retirement accounts, these are IRAs, 401(k)s, 403(b)s, other assets like that that have what we call qualified money in it.

So the assets have been contributed to the account on a pre-tax basis, or they are growing tax deferred or tax free in the case of a Roth account.

So these you name a beneficiary as well.

There are different ways that you can name beneficiaries.

And different categories of beneficiaries of these accounts have different rights as to how long they have to take out the remaining money in the account.

We could spend an entire day on retirement accounts and how to name beneficiaries of those.

We just don't have time for that, but I'll go over some general rules.

So from a purely tax perspective, naming your spouse as the outright beneficiary of these accounts is the most tax efficient thing to do.

Your spouse is allowed to roll those accounts into their own and treat them as if they are their own.

So as you may know, when you have retirement accounts like this, you get to a required date where you have to start taking minimum distributions from them.

If you name your spouse as your beneficiary, they get to roll this money into their own account.

And if they're not yet to the age where they have to start taking distributions, they don't have to start taking distributions.

You can also name your spouse as a beneficiary and have them begin taking distributions over their life expectancy at that time, at your death, if they would need the money.

So if they don't want to roll it into their own account and wait until their required date to start taking distributions, they can go ahead and start taking them in an inherited IRA account.

And they get to use their life expectancy to do that based on an IRS table.

So it's still a pretty good deal.

[CLEARS THROAT] All other-- most all other beneficiaries are going to have a 10-year withdrawal period after your death.

And the rules about, do they need to take annual distributions in that 10-year period, or can they wait until the end of the 10th year?

They're very complicated.

I'm happy to advise you on all these issues that other lawyers would be as well.

But the general rule is they've got a 10-year period to withdraw it.

There are some special categories of beneficiaries that get either a life expectancy payout or some modified version of that.

But for the most part, if you name your adult children as your beneficiary of an IRA, they're going to have 10 years to take it out.

If you name a non-individual beneficiary, like you name a charity or you name a trust that isn't quote, unquote "qualified," that beneficiary is going to have a five-year period.

Or if you name your estate or forget to name a beneficiary and your estate becomes your default beneficiary, they're going to have a five-year period to withdraw all of the funds.

The benefit of leaving these assets to beneficiaries that qualify for this longer withdrawal period is that those assets continue to grow tax-deferred or tax-free, in the case of Roth accounts, while they are still in the account.

So the longer you get to defer taking distributions out, the bigger benefit to your beneficiary.

So to the extent you can, you want to avoid having this five-year rule apply.

Certain trusts are able to be looked through to the beneficiaries of the trust to determine if those beneficiaries would get a 10-year rule or some modified life expectancy rule.

And so a lot of trusts in the estate planning process are drafted in a way that allow them to be qualified, quote unquote, as beneficiaries of IRAs to get the benefit of that 10-year rule instead of a five-year rule or some other favorable withdrawal period.

OK, so the other category, assets held jointly with arrived survivorship.

This is real estate.

You can own real estate with arrived survivorship.

A lot of married couples own their home as a husband and wife.

When you do that in North Carolina, you own it by what's called tenancy by entirety.

That is a special type of joint with arrived of survivorship ownership here in North Carolina.

Some other states have it as well.

In North Carolina, it's only available to real estate.

But when you own property like that, there is arrived survivorship that comes with it.

And the creditors of just one spouse cannot force you to sell your home to pay that debt.

And so they'd have to be a creditor of both spouses in order for that to be the case.

And so this is a good benefit for married individuals in North Carolina.

If you own a-- let's say I owned a parcel of real estate with my sister jointly with arrived of survivorship.

If I had creditors coming after me, they could force a partition action and get that property sold to pay off my debt to them, which my sister would not appreciate because she wouldn't want the property sold.

So this tenancy by entirety for married couples avoids that issue unless it's a joint creditor.

You can also own bank accounts and other financial accounts jointly with arrived of survivorship.

That's very common.

Lots of married couples own their checking account, savings account, sometimes their investment accounts as well, jointly with arrived of survivorship.

With respect to accounts like that, we generally think it is not a good idea.

I alluded to this earlier, but we don't think it's a good idea to have joint owners that are not your spouse.

So just be careful with doing that.

It exposes the account to liabilities and potentially will accidentally disinherit other beneficiaries.

And sometimes it's not a good idea to own assets jointly with your spouse.

If it's a second marriage and you both have children from a prior marriage and you're going to want assets to benefit your children partially and not all go to your spouse, having them in a joint account might mean that your spouse gets all of them to the exclusion of your children who are not your spouse's children.

So these are all things that we need to think about in this process when we're helping craft your estate plan.

So again, just be careful with joint accounts or pay on death accounts that-- I skipped over this.

Pay on death and transfer on death, these are just accounts, just like retirement accounts, that say, at my death, the balance goes to x beneficiary.

With those accounts and with joint accounts, we need to be careful about naming beneficiaries.

You have minors.

You don't want them to be outright beneficiaries of things.

You might unintentionally disinherit someone.

That's going to just generally disrupt your estate plan.

If you have this perfectly drafted trust and then you've used beneficiary designations directly to beneficiaries, you would have wanted those beneficiaries to have a trust for their benefit for however long.

You've just disrupted that plan if you've named them directly as a beneficiary.

Pay on death, transfer on death, and joint accounts can be useful tools as a part of your estate plan.

You just need to use them intentionally.

OK, assets owned by a trust, they also avoid probate.

We will get to that in a second.

I mentioned gifted assets earlier.

Another way to avoid probate is to give it away before you die because it's not your asset at death at that time.

You should proceed doing that with extreme caution, though.

The main reason for that is not necessarily for gift tax purposes.

So we do have a federal gift tax, just like we have a federal estate tax.

They are tied together, essentially.

You can give away during life or at death a certain amount of property before you're subject to the estate tax or the gift tax.

I'll get to that on a later slide.

But most people are not subject to the gift tax.

So making gifts aren't going to generate tax payable by anybody in most circumstances.

However, if you give property away that is a capital asset, like a piece of real estate or stocks or bonds, something like that, if you gift it to someone else, you have a tax basis in that asset.

That's what you paid for it, essentially.

And if you were to hold onto it and sell it, you would pay capital gains based on the sales price less that your tax basis.

If you gift property that's a capital asset to someone else and they sell it, they have inherited your income tax basis, so they will pay tax on the sales price less your basis in the property.

If you hold onto those assets until your death, your beneficiaries will receive that with a stepped up basis to its fair market value.

So they can then sell it the next day.

And assuming it hasn't changed value in that one day, they will pay zero capital gains tax.

So it is a huge benefit to hold on to capital assets to the extent we're not going to create an estate tax problem from doing this.

But if that's the case, holding onto an asset is much better than gifting it to a beneficiary.

If the sole purpose of gifting it to them is to avoid probate, you are giving them a huge income tax problem or maybe giving them that just to avoid a process that isn't all that bad anyways.

So just be very careful about gifting assets.

OK, next slide, please.

All right, so I've mentioned this a bunch today.

But revocable trusts are another type of document that helps you avoid probate.

There's all kinds of trusts.

We'll talk about other ones in a little bit.

But the revocable trust is the main one used as a part of an estate plan.

It is used to avoid probate.

The way you avoid probate on an asset with a revocable trust is you retitle it into the name of the revocable trust during your lifetime.

That way, when you pass away, you don't technically own it, your trust does.

And so it doesn't have to use probate to pass it on to your beneficiaries.

Another benefit of this trust, which is related to the probate avoidance issue, is that it maintains privacy.

So if you have an asset owned by your trust at your death, that asset isn't disclosed on probate forms.

And your trust, because it's usually a private document that doesn't get filed in court, no one's going to know who your beneficiaries are.

So through the probate process, anybody can go to the courthouse and see who your beneficiaries of your will are.

They can call them and say, hey, look, I know your mom just died.

I'd love to buy the house.

I'll give you a cash offer for whatever, 70% of its fair market value.

That happens sometimes.

Sometimes people just want to get rid of property, but that's not always a good deal for beneficiaries.

And so if all that's contained within your trust and not your will, no one will be able to know who owns that property at your death and who your beneficiaries are.

So that's another huge benefit of a revocable trust.

It can also be a good beneficiary designation for life insurance and sometimes for retirement accounts.

You have to be more careful with retirement accounts because of all the rules about time periods for withdrawing property.

But it can be a good beneficiary for those.

A trust really is just a relationship between three parties.

So the person who sets it up, we call that person the grantor.

Sometimes we call them the settlor or the trustor, but all those things mean the same thing.

The grantor of the trust is the one who puts the property in the trust.

The trustee is the second party in this relationship.

They are the person who receives the property from the grantor.

They hold the keys.

They manage the property.

And they do all of that for the third party in this relationship, the beneficiary.

So the trustee manages property for the benefit of the beneficiary.

When you have a revocable trust, you serve in all of those roles while you're living.

So you're the grantor.

You're the one that puts the property in the trust.

You're giving it to yourself as trustee.

And you are the primary beneficiary while you're living.

These trusts are pretty much you by another name while you're living.

They do not exist for tax purposes.

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

And you can do what you want with this property.

There's no restrictions on what you can use it for, if it's revocable by you.

You can change it whenever you want to, hence the name revocable.

Sometimes people say revocable.

I usually use the term revocable.

Either will work.

But it's your property to do with as you wish.

The main benefit is that when you die, technically you do not own it, so that you don't have to use probate to pass it on to your beneficiaries.

Because it allows some assets to pass outside of the probate process, it can avoid some of the expense and publicity that comes with that.

And they can be passed on a little bit more, sometimes more quickly than through probate.

So that's helpful.

If you have a revocable trust, you will also still have a will.

Your will will be simpler, though.

Usually, if you have a revocable trust, your will is what we call a pour-over will.

And it says, when I die, my beneficiary is my trust.

So if anybody goes to the courthouse and they're trying to look to see who your beneficiaries are, they will just see this trust that is not public.

We call this a pour-over will because it essentially sweeps property that is in your individual name at your death into your trust.

Anything that didn't get there before you died gets there via your will.

If you let your will put all of your property in your trust, then you're not getting the benefit of privacy and probate avoidance, at least with respect to what those assets are.

Your trust still usually is not going to be disclosed.

So someone might not be able to see who your beneficiaries are, but they will see what your assets are.

OK, so next slide, please.

So the next slide talks about advantages of a revocable trust.

We've mentioned this a few times already.

So probate avoidance, we've talked about that.

You avoid probate on assets that are in a trust.

There's no court supervision of a trust typically, revocable trust.

So that also means you don't pay court fees on the value of assets.

So we're on the advantages of a revocable trust slide, if you can move on to that one.

Oftentimes, administering a revocable trust after death can be less time consuming than if you do it all through probate, because you don't have this court oversight that you're having to worry about.

Again, it's private.

And it can simplify your estate plan.

So one of the things we like to think of with a revocable trust is it sort of serves as a funnel, so that your assets all get distributed through this one document.

So you've got assets in your trust at your death.

Assets get there via your will, or they may get there via beneficiary designation.

At the end of the day, they all sort of funnel through this revocable trust.

And that trust says who gets what.

So it's all sort of contained within one place.

If you've named your trust as a beneficiary of certain assets, you likely don't have to worry as much about updating your beneficiaries if you update your trust later, because your trust is already the beneficiary.

One thing to remember, though, there is no one size fits all plan.

Everybody's going to have a different plan.

Not everybody needs a revocable trust.

So trust can be great tools.

Some people would benefit greatly from a revocable trust.

Others would only get marginal benefit from it.

It's a decision that you need to make after consultation with your lawyer as to whether or not it makes sense to have this or not.

I think a lot of people would benefit from it, but not everybody needs one.

And not everybody wants one, even if they might benefit from it.

So it's all a personal decision.

You just need to make an informed decision with your lawyer.

OK, next slide, please.

We're going to the advanced planning slide, please.

The next one after that, after advantages of revocable trust.

Perfect, thank you.

OK, so these are other topics that we can cover in an estate plan that go beyond just these documents that we've talked about.

So one thing that a lot of people are worried about, and I've alluded to this or mentioned this a few times already, but incapacity planning.

So your powers of attorney will help with this.

So with those documents, you're planning for your own incapacity.

You are naming people to help make decisions financially or for your health care.

Hopefully, you are lucky enough to not have a long period of incapacity at the end of your life.

But lots of people aren't so lucky, particularly nowadays.

Modern medicine has gotten to a point where it's able to keep people alive for a very long period of time.

Lots of people have dementia at the end of life, and so they may be physically healthy for a very long time, but need a lot of help during that period.

So you want to plan for that in the event you are in that situation at some point in time.

Again, your financial power of attorney, your health care power of attorney are important.

If you have a trust, a revocable trust, having successor trustees listed will also be very important.

If you have assets in your trust at your death, the successor trust-- or sorry, during your lifetime, the successor trustee is the one who's going to manage those assets if you become incapacitated.

So you need a succession in that document.

You can also, if you are getting close to the point where you might become incapacitated, if you have the ability to have the forethought about this, you get a diagnosis and it's still early, you can update your trust to provide that you have a co-trustee that serves with you.

That can help make the transition to a new trustee seamless.

So thinking about these issues as you're planning within various stages of life is very important.

Planning for incapacity of minors, right?

So a minor is legally incapacitated until they reach the age of majority, which is age 18 here in North Carolina.

So you need to be thinking about, how is this minor going to inherit property from me?

And who's going to take care of them?

That's the guardianship question.

On the inheritance question, I've mentioned this before.

We really think the best idea is to consider a trust if they're going to receive a substantial amount.

And you then need to think about, well, when would you want to consider allowing that child to have outright access to the property in their trust?

What age is that?

That age is not the same for everybody.

Sometimes people say, look, I want this property to be in trust for the lifetime of my child, because I just don't think they're ever going to be ready to inherit.

That's a fine solution sometimes, particularly if we're talking about a more substantial sum of money or property going into this trust.

Others might say, look, I think I remember how I was as a 30-year-old or whatever age it is, and I thought I was responsible enough at that time.

So maybe we'll have this trust last until they're 30 or 35.

And then when they get beyond that age, the trust can go away, and they should have at that point in time the skills and tools necessary to manage it responsibly by themselves.

We usually don't advise ages less than 25 for trusts like this.

Again, the majority is 18, but most 18-year-olds and for a few years after that are probably not ready to inherit a substantial amount of money and manage it well.

Even the most responsible 18-year-olds just probably don't have that skill set yet.

So age 25 gets a kid-- they've graduated from high school.

If they're going to college, they've likely graduated from college.

Hopefully, they've worked for a few years so that they can learn what it's like to have to budget and manage their own money and pay for their own expenses.

I think all of these are, again, specific decisions to be made with respect to your own family and your own situation.

But these are things to think about with minors and their incapacity.

OK, so estate tax planning.

So lots of people say, look, I don't want to pay any more money to the government than I have to, and I don't want to get hit with this estate tax.

So what can we do to avoid it?

The double-edged sword here is that most people don't have to plan to avoid it because most people don't have enough money to be subject to the estate tax.

It would be a wonderful problem to have to have enough assets to be subject to the estate tax.

So currently, while you're alive or at death, you can give away up to right at-- it's just under $14 million before you are subject to the gift or the estate tax, depending on when you give that property away.

Married couples have the ability with a concept that we call portability in my world to combine their estate tax exemptions.

And so married couples, that number is about $28 million.

So it's very large before you're subject to the estate tax.

These numbers really are-- they're adjusted for inflation each year.

The statute says they're $10 million, and they've been adjusted for inflation up to that $14 million number every year.

So at the end of this year, those exemptions, so the $14 million per person, they are scheduled to get cut in half as of January 1, 2026.

I'm not sure if that will actually happen.

If no law is passed between now and the end of the year, or maybe even early next year, the exemptions will get cut in half.

So at that point in time, they'd be like $7 and change, maybe $8 million, depending on an inflationary adjustment per person.

So it's a huge drop in exemptions.

But at the same time, most people still don't have that amount of property, particularly when you combine married couples together.

So at that time, it would be, say, $14 to $16 million in 2026 and later, unless Congress does something to change that law.

There is discussion-- it's been in the news recently about having a large reconciliation bill in Congress that would include many tax provisions.

And I think the expectation in the trust and estates world is that whatever bill gets passed is likely going to address this issue in the estate tax and is likely going to result in exemptions being around what they-- staying where they are or being higher than $7 million a person in some form or fashion.

Again, we need a bill from Congress to actually make that happen.

But that's probably what's going to happen.

But again, most people are not subject to this.

If you are lucky enough to be close to or above these exemption amounts, either the ones that exist today at $14 million approximately or the ones that may exist next year at $7 million a person approximately, you will want to consider strategies to reduce or avoid the estate tax.

And part of that is getting assets that may appreciate going forward out of your estate so that you can get those-- the appreciation on those assets out.

So in that way, that appreciation passes to your beneficiaries free of estate and gift tax.

The estate tax is 40%.

And so you want to avoid that to the extent you can.

I mentioned earlier about holding on to assets and not gifting them so that you get an income tax basis step up at death for your beneficiaries.

If you do that, that asset is a part of your taxable estate for estate tax purposes.

For most people, not a problem.

They're not going to pay a state tax anyway, so give me all the free tax basis I can get.

If you are going to be subject to the estate tax, you want to avoid a 40% tax above a 20% capital gains tax.

So all else being equal, avoiding the estate tax is the better tax to avoid if you're going to be subject to both.

One way we do this to avoid the estate tax is to make gifts, usually in trust, to your beneficiaries so that we can get that appreciation out.

We do this at death sometimes too with what we call credit shelter planning.

This is where you leave an amount up to your remaining estate tax exemption in a trust that is not then included in the beneficiary's estate.

So again, the appreciation gets out and is never taxed.

There's lots of things we can do.

If you're in that position, you really ought to give me or another estate planning lawyer a call to make sure we're setting you up to pass your assets on efficiently and reduce your tax burden.

If you don't have an estate tax issue, the best thing to do is think about how can we avoid the income tax on assets at my death.

That's the tax that's going to apply to everybody.

So what can we do to structure things in a way that passes assets on efficiently?

OK.

So the next item on this list is creditor protection planning.

So regardless of whether you are going to be subject to the estate tax or not, a lot of people are concerned about making sure their beneficiaries will be able to keep their inheritance and not have it go to a creditor.

There's lots of ways to do creditor protection planning.

The first-- so for yourself, the best first line of defense is making sure you are adequately insured.

So that's one thing that we might talk about in an estate planning conference.

What kind of liability insurance do you have?

If you have your home in auto, you have insurance on those.

If you have a vacation home, that obviously would also need insurance.

It is a good idea in those scenarios to also have an umbrella insurance policy that would cover liability above and beyond that.

So adequate insurance is the first line of defense.

I mentioned tenancy by entirety property earlier.

That's that special type of ownership for married couples.

That's a great way for married couples to have creditor protection planning.

Retirement accounts-- here in North Carolina, your IRAs and 401(k)s, including IRAs inherited by you, are protected from creditors.

So that is very helpful.

Now, you might have to start taking withdrawals from those accounts.

And when you do that, the assets that you withdraw are no longer protected.

But the accounts themselves, while they maintain their existence, are protected.

LLCs can offer creditor protection for you.

So if you have, let's say, a vacation home that you rent to third parties, it can be a good idea to consider owning that in a LLC, a limited liability company, or some other entity that has its own bank account.

It manages the property for you and rents it out to people.

If it is treated as if it's a real separate entity, that LLC will allow you to silo off your liability associated with that vacation property from your other assets.

So that can be a good structure.

Certain trusts can also offer creditor protection to you.

The important thing, though, particularly here in North Carolina and many other states, you're not allowed to set up a trust that you still benefit from and have that trust be protected from your own creditors.

That's just against public policy here in North Carolina.

If you put it in a trust and then are still the beneficiary, creditors are still going to be able to reach it.

There are some other states that will let you set up trusts to an extent that do that, but North Carolina doesn't yet have the ability to do that.

You can set up trusts, though, for your own beneficiaries that are protected from their creditors.

So you can do that during your lifetime or at death.

This is very common.

We call these spendthrift trusts.

And most trusts are going to be drafted that way.

And so you set this trust up.

Your beneficiary, who is your spouse maybe or your children, they receive the benefit of the property, but it's technically not theirs.

So if they get sued, the property in that trust is not subject to those creditors.

One thing that people don't think about is that the biggest creditor that someone may ever have in their life is likely to be a spouse, because half of marriages end in divorce.

So if you are concerned that your children have a rocky marriage or it might not last, it can be a good idea to consider a trust for their inheritance, because again, that trust is not their property.

And so they can't just put it in a joint account with their spouse that would then get subject to equitable distribution upon a divorce.

So again, when you think creditor protection planning, think spouses in addition to other more traditional types of creditors.

There also can be protection for your own spouse getting remarried after your death.

So if you pass away young, you might say, look, I want my spouse to live a full life.

And if that involves getting remarried, that's great.

But the assets that I have worked for, I want those to go to my own children and not to a new spouse that I don't know or any new children that might come from the subsequent marriage.

So there are ways to protect against that.

The next item on this list, "keep it in the family," quote unquote, that's just another way to say creditor protection planning.

A lot of people say, look, I want to make sure that my property stays in my bloodline and doesn't go to spouses and things like that.

So that's just another way to frame a creditor protection planning.

OK.

I've mentioned some irrevocable trusts here where you set things up for the benefit of another beneficiary that get creditor protection.

Those are great.

Just know that when you set those up, they come with administrative costs.

So they're not just all sunshine and rainbows.

They are great, but there are costs to them.

So you need to know about those when you set them up.

They have to file tax returns every year, so there's that cost.

Sometimes trusts pay taxes at a higher rate than individuals do.

The trustee that you appoint may charge a fee.

They may have to provide accountings to the beneficiaries, which would cost money if someone prepares that on behalf of the trustee.

And so you just have to make sure you know what you're getting into if you leave a trust for a beneficiary.

If you're leaving $50,000 and you want to leave it in a trust, it may not be worth the cost to do that.

Most of the time, we want to see a much larger sum going into a trust for a beneficiary.

There are other ways to leave $50,000 to someone, like if it's a minor in a UTMA account, like I mentioned earlier.

The next type of trust on here is called a supplemental needs trust.

And this is a special type of trust for a disabled beneficiary, a beneficiary with disabilities.

These are also called special needs trusts, supplemental or special.

That word's interchangeable in these.

They mean the exact same thing.

These trusts are really important when you have beneficiaries that have a disability, because usually an inheritance is going to kick a beneficiary off of whatever government benefit they may be receiving.

And so a beneficiary with disability is likely to be on Medicaid or SSI or some other government benefit that helps provide the services that they need to thrive.

And so you don't want to leave a large inheritance to those people, because they would lose their ability to access these government benefits.

The solution is this supplemental needs trust.

So you leave property to this trust that is designed to allow them to maintain their eligibility.

And this trust provides for things above and beyond what the government benefit might provide for.

And so it is really, really important if you have a beneficiary with a disability that you engage a lawyer to help with this type of planning, because you really want to make sure they're going to be able to thrive and not be put in a worse position because they got some money.

So the last thing on this slide is listed as incentive trust.

You can use trusts for all kinds of things.

And so sometimes people will use trusts to incentivize behavior and get your beneficiaries to do what you think is the right thing for them to do.

I think you want to be very careful about doing this.

You don't want to limit their ability to benefit from the trust in a way that would be useful to them.

But for instance, sometimes people will say, look, I value higher education.

And so I want the trust to provide that if my child or grandchild, whoever it's for, graduates from college, they'll get this lump sum benefit upon graduation.

So it gives them something to look forward to and to strive to achieve by graduating from college.

Sometimes people have beneficiaries that they love a whole lot.

They just don't think they're very motivated to be productive members of society.

And that is disheartening to them.

They want to find ways to make that person want to do good in the world.

And so they'll say, look, OK, I'm going to set this trust up for you.

It's going to have limited distributions for your health care, things like that.

But if you want more, you have to earn income.

And the trust will match your earned income.

So that can be a way to help motivate someone to earn a living.

Again, you want to be careful with these things because you want to still be able to benefit your beneficiaries and allow them to live a good life.

So anyways, you just want to be very careful about doing these things.

Sometimes trust will say, look, I value that my child or grandchild wants a job that's in public service, like working at a charity or being a teacher or a firefighter or something like that.

Professions that society relies on, but unfortunately, just does not pay very well in a lot of circumstances.

So you can have a trust that says, look, I want the trustee to consider if my child is going into these professions, I want them to still be able to live a life that they're accustomed to.

And so allow the trust to supplement this income so they don't feel like they need to leave that profession to do something else that would allow them to have more money, but maybe a less fulfilling profession.

OK, next slide, please.

So this will be the last slide that we talk about before we get to some questions.

But there's lots of things that you can do.

If you're terribly inclined, which my guess is many of you are, if you're attending this webinar put on by PBS North Carolina, I think there's lots of things we can do in your plan and during your lifetime that can help benefit charity in a way that will benefit them after you pass away and then also maybe during life so that you can see the fruits of your labor.

You can see what's happening with your contributions.

So anybody can make a contribution of cash or property to charity.

Cash is usually the better option, but property can be a very, very good asset to gift as well.

If you make a lifetime gift to charity, you get an income tax deduction.

If it's a cash gift, you're limited to 60% of your adjusted gross income in any one year for the deduction.

If it's non-cash, that limitation is 30%.

If you've held that asset for longer than a year, and if you've held it for less than a year, you're limited generally to your basis in that property or for the fair market value if it's lower.

So you don't get as much benefit for property that you haven't owned for a very long period of time.

Cash gifts to charity, you can get a pretty big income tax deduction for those, and you can see your dollars at work.

If you make a charitable gift at death, you get a 100% deduction for estate tax purposes and for income tax purposes from your estate's income.

So that can be a huge, huge benefit.

There's another type of distribution from an IRA.

It's called a direct charitable rollover from an IRA.

That can be very, very useful.

So you're able to give $100,000 a year directly from your IRA.

Not a 401(k).

This has to be an IRA.

But you can give directly from your IRA $100,000 a year if you're over 70 and 1/2.

You have to start taking required distributions from your IRAs when you're 73.

And so this can be a good way to use your RMD, your required minimum distribution.

You don't recognize income when you do this on that $100,000.

You also don't get a charitable deduction because you didn't recognize income.

But it's a way to just get income off of your balance sheet so that you don't have to pay tax on that.

So to the extent you don't need that required distribution, you can give up to $100,000 of it and not recognize that income.

So you can also set up various types of structures that give you income during life that will benefit a charity at death.

The first of these is called-- well, I skipped over one.

Beneficiaries of retirement accounts, life insurance, and other assets at death.

That's an easy way to get into charity.

Name the charity as your beneficiary of these accounts.

If you are charitably inclined, the best asset to do this with is your retirement accounts, a 401(k) IRA.

Those assets are taxable to individual beneficiaries upon receipt, unless it's a Roth account.

And so if you have an asset like that that's going to be taxable to the beneficiary, you can give more bang for your buck to your beneficiaries.

And if you were going to leave assets to charity anyways, you'll get more dollars to your beneficiary if you leave the IRA to charity and other assets to your beneficiaries.

Because the charity doesn't pay tax on an IRA.

They receive it and don't pay any income tax on it.

Now, that allows you to give more assets that don't have an income tax burden to your individual beneficiaries.

OK, so back to these charitable gifts that allow you to retain some income stream.

So the first is a charitable gift annuity.

This is where you give property to a charity, and they promise to pay you over your life a set amount every year.

These can be great options if you want to retain some right to income, but you ultimately want to see your dollars go to a charity.

A more complex version of this is called a charitable remainder trust.

This trust does the same thing as a charitable gift annuity.

It gives you an annuity during life.

So you get to retain income, and the remainder goes to charity.

A charitable remainder trust can hold more complex assets than a charitable gift annuity would be able to do.

And really, one of the main benefits of a charitable remainder trust is avoiding an inherent income tax liability.

So if you have a low basis stock-- so let's say you bought Apple stock when it was initially offered to the public.

It's worth a lot more now than it was then.

If you were to sell that today, you would pay a large amount of capital gains tax.

If you give that to a charitable remainder trust and let that trust sell the asset, you don't pay tax immediately on that sale.

You only pay taxes you receive the annuity payments, and the trust does not pay tax when they sell it because they're a charitable entity.

So it's a great way to both benefit charity and also defer some capital gains.

You can set up endowments with charities that are there for particular causes that are important to you.

If you're interested in doing that, you should speak with the charity and their gift officer about how you should go about setting something like that up.

You can also set up what are called private foundations and donor advised funds.

These are like setting up essentially your own mini charity or maybe large charity that you make gifts from every year.

Private foundations are complex and really should be reserved for very large gifts.

They have lots of rules about-- they're just subject to a lot of regulation because they can potentially be abused because they have less oversight.

But if you have a large amount of money and you are very charitable in kind, a private foundation might be a good way to get your future generations involved with charitable giving.

If you like the idea of a private foundation but don't want the administrative cost that comes with it or the headache that comes with it, a donor advised fund is a great option.

This is where you give money to a charity, like a 511(c)(3) charity, like various community foundations around or a lot of large financial institutions have donor advised funds as well.

And you agree with the fund that you will advise them about how you want to make gifts from that fund every year.

So it can sort of serve like a private foundation.

You have less control.

Ultimately, the charity that you've given money to has the right to do what they want with the money for charitable purposes.

But you are the named advisor, and they're going to listen to you.

And usually, they're going to do what you want with those funds.

So that can be a way to get the benefit of a private foundation without all of the administrative hassle that comes with that, particularly if you're not giving millions of dollars in any one year to a private foundation.

OK, so that's it for the slides.

We'll move on to some questions.

I think Warren's going to come back up to the screen.

Thank you, Charlie.

I'll give you a moment to catch your breath.

I don't know if you need a sip of water or something, but we do have some great questions.

And we'll take as many as we can.

You can just be thinking about this for a moment.

But I believe there's some interest in understanding even better why one would have a revocable trust as opposed to just a will.

So in other words, if you have a revocable trust with the poor over will, and then why do some people-- I think that's becoming a thing.

I'm hearing it here in my business and charitable giving.

More and more people think, hey, I need to go do that.

But they aren't really sure why.

And I know there's more expense involved if you create a revocable trust as far as the legal side of it and maybe other things.

And so who do you think needs a revocable trust?

Why do you really want that in some cases?

And in other cases, why is it better just to stick with a traditional will?

Sure, yeah.

This is a great question.

And so we did hit on a lot of these, even though the slide was only up there for a period of time.

We did hit on these issues.

But so trusts offer this probate avoidance.

So people that have assets that might be difficult to get through probate, the main one to think about is a large investment account, like a brokerage account.

Not an IRA, but just a traditional investment account that has all kinds of activity all the time.

That's a great asset to avoid probate on.

You avoid paying fees on it at your desk.

You don't pay up to that $6,000 fee.

The assets in that account, if it's in the trust at your death, would not be subject to that fee.

And you just avoid having to tell the clerk what all these line item expenses that happen all the time in those accounts are in an accounting.

So that's a great reason to have one.

Another is privacy.

So if keeping your beneficiaries and how you're leaving property to them private is important to you, you can't keep it private if you do that through a will.

Your will is going to be public when you die.

Because anybody can go to the courthouse and see anybody's will that's been probated.

And you can see that stuff online now, too.

Most counties here in North Carolina have online filing now.

And so you can find that information online.

So if it's in a trust, usually that doesn't get disclosed publicly.

So you can maintain that privacy as well.

OK.

Thank you, Charlie.

AI.

Of course, we have to talk about AI today.

So someone was asking about the use of AI to create some of these documents that you discussed early in the presentation or even a will.

And do-it-yourself wills in general in North Carolina.

If you just comment about your feelings.

We know you're a professional.

But just what is your general counsel there?

What if someone has just a real simple situation in their life and few errors?

And just give that a thought.

Yeah, so I think just from a do-it-yourself perspective, not really thinking about AI, just from a do-it-yourself perspective-- I'll get to AI in a second.

But I think it's important to realize that you don't know what you don't know.

I think having a professional help you with making sure what you think your document says actually will do what you think it says at your death is very important.

And unfortunately, you just don't know that if you do it by yourself.

So I think it's important to get a professional involved.

For instance, if I am sick, I am not going to rely on my internet searches to diagnose the medical issue that I'm having.

I'm going to go to the doctor.

And they're going to help me figure that out and get me well.

Your estate plan is likely not as vitally important as making sure you go to the doctor when you're sick.

But it's the same idea applies.

Lawyers are well-trained in this area.

They know all the issues that can come up.

And so having a lawyer make sure you address all those issues is very important.

With AI specifically, I think you can't ignore the fact that AI is becoming a part of our world.

It is here to stay.

And it will continue to grow, I think, in its use.

I think the same idea applies there.

You don't know what you don't know.

AI isn't going to know all of the issues that are very important to you and the nuances of those issues.

And so at least not yet, AI is not going to be able to be guaranteed to address all of those issues in a way that you want them to be addressed in your document.

I'm sure AI can produce a document that looks like a really well-drafted will now.

AI is great at document production.

But that doesn't answer or help you ensure that that document is going to do exactly what you want it to do at your death and address the family-specific issues, estate tax issues, things like that.

So AI tools are being used by lawyers all the time now.

My law firm has tools that implement AI at times as well.

It is the way of the world.

We're all going to have to adapt to that.

But again, I just think you need to be careful about relying on something other than a lawyer to help you make sure-- this is an important thing.

You want to make sure that your beneficiaries are going to benefit from your property.

It seems like one that you ought to spend some time and effort in making sure you get it right.

OK, well, people do care about a lot of things in their estate.

And pets are included in some cases, and hopefully most cases.

And so someone was asking about how to go about designating a guardian for a pet.

Is that a practical thing?

How would you do that, Charlie?

Yeah, that's a great question.

There are different ways to do it.

So the most informal way to deal with this is just talk to someone and say, hey, look, if something happens to me, I want you to take my dog or cat or whatever other pet you might have.

That works just fine for some people.

It's not very formal, though.

I think your pets would be considered your personal property at your death.

And so you can certainly address this in your will.

Sometimes we will have wills or in a trust that says, when I die, I want my animal to go to this person if they're willing to take them.

And maybe you have a succession of people as well.

Sometimes people will want to give a gift to those people as well, some sum of money, just knowing that they appreciate that they're taking on their pets, the care of their pets.

And that care might cost money.

So they might give a gift of appreciation to help with that.

So the informal option is one way.

The more formal, let's address it in your will option is the second.

And then the third is to create a trust for your pet, which is allowed.

It is not real common, but it is allowed.

And so you can do that.

And you just have to be real careful about drafting it and make sure it's going to do what you want it to do.

And there's oversight of the person who's in charge of the pet and any money that goes into the trust for that pet.

But for some people, your pets are your children.

And it's important that they're taken care of.

So there's lots of ways to do it.

We can talk about how to go about doing that.

Or you can do that with another lawyer as well.

OK.

Someone's asking about the transfer of real estate.

They use the phrase transfer of deed for a house.

But do you need one if the house is already included in your will?

Yeah, that's a good question.

Yeah, so you do not need to do a separate deed at death if your home passes via your will.

Your will serves as the deed.

Now, your will has to be quote unquote probated.

It has to be declared as your last will and testament to the probate process.

But assuming that happens, the beneficiary of that real estate listed in your will will become the owner of that property as of your date of death.

So yeah, no separate deed needed in that case.

Do you have any thoughts on special things to be aware of or to be thinking about for unmarried couples who hold some assets together, including a house?

Yeah.

These are important.

This is a very important thing for people who aren't married to think about.

You may have other family members that you want to benefit from your property.

And you may also want to ensure that this jointly owned property goes to the correct person.

And likely, that's your partner or other unmarried person who you own this property with.

And so at the very least, you need a will or trust to address this.

Because if you don't have that, then your interest in that property is going to go likely to someone other than your co-owner.

And that may not be what you want.

Other things to think about here are what type of property it is and how it ought to be managed after you pass away.

So sometimes, if this is like a vacation home that you own with siblings, you might have one or two siblings.

So let's say there's three people that own it now.

It's easy enough to manage.

You all get along.

Well, if you all have three kids, when you all are gone, there's nine owners of that property at that time.

And they may not all get along.

And so how do you deal with that?

You can have that property owned by an entity like an LLC that has an operating agreement that talks about, look, if somebody doesn't want to be a part of this anymore, there's a way for them to get out.

So those are great things to be thinking about.

There's not a one size fits all answer to it.

But there are strategies to address these issues.

Sounds like it needs to be carefully considered.

So thank you for that.

Charlie, we have so many newcomers to North Carolina.

So this is a very relevant question, I think.

Is a will drawn up in a previous state of residence effective in North Carolina, where I have now retired?

Great question.

The short answer is yes.

North Carolina is going to recognize wills that were validly executed in the state at that time are valid in North Carolina.

I think it's a good idea to have those reviewed just to make sure there are no issues that are North Carolina specific that would need to be addressed.

This is a smaller issue, but it is an issue.

If you have an out-of-state will that needs to be probated in North Carolina, there's some extra documentation you have to submit to prove that it was executed in compliance with the law of the state at that time.

It's easy enough to do, but that's just another thing to deal with.

But there might be state-specific issues, like this real estate issue we've talked about, where that goes to your beneficiaries as of date of death in North Carolina.

That might not be the case in the state where the will was drafted, so it might not necessarily address that issue.

OK. Life insurance, we know you aren't really a professional in that, but you're probably going to know this answer.

So if the intended beneficiary of a life insurance policy at your death had pre-deceased you and you hadn't designated a contingency beneficiary, what happens to those proceeds when you die and there is no real beneficiary?

Yeah, the answer is it depends.

It depends on what the life insurance company's policy is.

It likely goes to your estate.

That is common for-- if the policy says, look, if you don't name a beneficiary, we're going to pay it to your state.

But sometimes it may say, we're going to pay it to your heirs at law outside of your state.

So the most important thing is make sure you have beneficiaries designated, but it likely would end up in your state if that happened.

OK. Can someone be the executor of your will as well as a beneficiary of your will, or should it always be two separate people?

And I'll add to that question because I've seen this come up here in my work.

Is it OK to compensate the executor of your will or estate?

So put all that in the hopper, and what's the answer?

Yeah, sure.

So your executor most definitely can be a beneficiary and frequently is.

A lot of times, people name their spouse as their executor, and their spouse is oftentimes the primary beneficiary, if not the sole beneficiary at death.

A child oftentimes serves as well, and usually, particularly when a married couple, the second of them passes away, their beneficiaries are their children.

And so it's very common for that to be the case.

There are certainly conflicts of interest that could come up there.

Executors are what are called fiduciaries.

They're required to do things in the best interest of all persons interested in the estate, and that includes all beneficiaries, which includes themselves, but also their co-beneficiaries.

So they can't do things that are self-dealing.

They can't give themselves sweetheart deals on buying assets.

So if that's a concern, thinking about someone who's not a beneficiary is a good option.

Most people usually name a family member as an executor, but sometimes people name corporate entities and things like that as well, or a friend.

Your executor can get paid.

They are allowed to be compensated by statute.

Being an executor can be a lot of work, and so they can certainly earn their fee.

The important thing to think about here is that executor compensation is compensation.

It's taxable income to the executor.

And so if the executor is also a beneficiary, they need to determine if it makes sense to take compensation.

So for example, if your spouse is your executor and they're the sole beneficiary, you don't want them to take compensation because they're getting it all anyways, and inheritances are income tax free with the exception of IRAs and 401(k)s. So why turn an income tax free asset into a taxable one if you're-- let's say you have three kids and one of them is serving as your executor, and there are three equal beneficiaries.

That one child who does all the work would certainly earn a fee.

They just then have to decide if it's worth it.

If they take a fee, they're going to pay tax on that, and it's going to reduce the ultimate pot that gets split three ways between them and their sibling.

So they will come out ahead.

They will get more money if they did that, but it's not going to be dollar for dollar their compensation amount because tax is going to come out of that too.

Charlie, what happens if your designated executor had pre-deceased you and you'd not gotten around to having a contingency or citing anyone else to handle it?

What happens to that estate?

Yeah, so your executor and your will that you've named is just a nomination to the clerk.

So the clerk can choose whoever they want.

There's a statutory order of who they're supposed to give preference to, and the first one in that line is who you name in your will.

But there are reasons that someone could be disqualified as well, even if you've named them.

So first off, the clerk doesn't have to choose who you pick, although in almost all cases, they appoint whoever you've picked as your executor.

So don't take that as the clerk might just decide that your spouse can't serve, unless there's a really good reason for that to happen.

That's not going to happen.

So if you don't have someone named, someone else can apply.

Usually, this would be a family member, a beneficiary, someone who's going to get this property anyways.

They need to administer the estate to get it.

They're the most likely ones to serve.

There is a statutory order.

It's first your beneficiary's name, then your next of kin.

At the end of the list, it's anybody that the clerk deems to be fit to serve.

So someone would get appointed.

When someone is appointed as the executor of your estate, but there isn't a will, or if there is a will, but they're not named in the will, that person is called either an administrator or an administrator CTA.

They are the exact same role as an executor, but they just have a different title.

OK. Now we're going to move to motor vehicles.

Someone was asking about-- apparently, it sounds as if the decedents had already given, or very elderly folks have already given motor vehicles over to adult grandchildren, but they didn't change the title.

So the grandchildren are out driving around, and it's still titled to granddad or grandmother, and maybe one is in poor health or expected to pass, or they have passed.

What should be considered there?

The answer probably is it makes sense to go ahead and change those titles quickly, but what do you think?

Yeah, that could be-- that is an option for sure.

If you wanted to make a gift of that, you need to make sure that you've actually done the gift.

So I don't think the gift has really happened until you've retitled it.

So if this is a situation where you still own the car, but your grandchild is using it, it's really still your property.

And so until you go to the DMV and transfer the title, it's not the grandchild's.

So one way to deal with this is if you just, in your will, say my car goes to this grandchild, this car that they're driving.

That'll deal with it.

If you don't do that, there could be issues where your beneficiaries listed in your will, or if you don't have one, your intestate beneficiaries are not the person driving that car.

And so then it could complicate things because the beneficiaries would have to be nice enough to transfer it at that time to the grandchild because they would be entitled to that car that your beneficiaries would not the grandchild.

So either go ahead and transfer it now if that's what your goal is, or just address it in your will if not.

OK, and finally, someone was asking if you can speak to a general cost of doing an estate plan, anywhere from just the simplest one, and then maybe speak to what it might take to do, say, a revocable trust.

If you're offering-- Yeah, I'll tell you, it's a difficult question to answer.

And I'm not just trying to be a lawyer here and evade the question.

But the way we charge fees is we charge hourly and we give you a quote.

And we decide what-- together we decide what you want.

We will quote that to you, what we think it'll cost.

And I think plans can run anywhere from $1,000 to-- sometimes you can get it done for less than that.

We typically cannot up to many thousands of dollars.

It is not uncommon for plans to be somewhere in the $3,000 to $6,000 range.

At least at my law firm, it's not uncommon for that to be the case.

I think many other law firms have similar fees.

There are certainly lawyers who have lower fees than us and are still really, really, really good lawyers.

So you can get it done for less.

I know there's-- obviously, going back to the AI question, if you're doing wills online or some other service that's not really a lawyer, they come at a much lower cost than that.

You can get them for a few hundred dollars.

But I would just caution you that you don't know what you don't know.

And you get what you pay for.

So it may work just fine, but it may not.

OK.

Understood.

I do advocate the use of professionals to prepare your estate plan because we see a lot of them, the plans pass through our world too.

And sometimes the better the legal advice, the smoother things go for sure for everyone involved.

So kudos to you for the kind of professionalism that you offer at your firm.

But as you say, there are many, many great law firms and lawyers available all around North Carolina and beyond.

We appreciate you so much, Charlie.

Thank you for your time and expertise and giving it so freely today.

And we're always grateful to you for that.

And thank you to the audience for being here today.

Thank you for your support and interest in PBS North Carolina.

And as I mentioned at the start, somewhere in a couple of weeks or so, you will get an email if you are a registrant of this event that will give you access to today's recording and some additional information and how to contact us here at PBS North Carolina and also how to contact Charlie.

So thanks so much.

As I always say, stay tuned.

And we hope to see you somewhere in North Carolina.

Thank you.