Hello, and welcome to Estate Planning Basics.

When many people hear the phrase 'Estate Planning', they tend to think no, this isn't something that applies to me. I'm not wealthy enough to have an estate.

But the truth is most adults have some sort of an estate, even if it's not a larger complex  one. Hi, my name is Jennifer Rivera.

And I'm a Senior Employee Education Consultant with PNC Institutional Asset Management. Over the next 25 minutes, I'd like to share with you what most everyone should know about estate planning, regardless of the size of your income or your assets.

And I'll begin by helping you understand the basics. I'll move beyond the basics, introducing you to some more advanced concepts that may or may not apply to your specific situation. And if they do, then you'll know where to go next.

Because I'll then summarize some potential next steps for you that include a helpful checklist on what action steps you could potentially take to either establish or complete your own estate plan.

So, let's begin with understanding the basics. The dictionary describes the word estate as all the money and property owned by a particular person, especially at death.

An estate plan, allows you to plan for your disability or death, pass assets on to people who matter the most, and it allows you to preserve as much of the value of your estate for your heirs as possible, which of course, leads to the next likely questions. And that is what is in an estate plan and who should have one?

An estate plan is a variety of documents that will provide details about your wishes, in the event of your disability or death. Who needs an estate plan?

Well, practically everyone. No matter what the size of your situation, having a plan for the unexpected is important. It also helps your loved ones by alleviating any burdens or confusion about your wishes. Some of the things to consider.

Are you married? Do you own a home? Do you have a child or children?

Generally, everyone should have an estate plan, but it is especially important for those who have real property independence.

An estate plan, gives you the opportunity to plan for the expected and the unexpected events of your life.

As you begin to review, or maybe even begin your estate planning, you'll first want to determine what estate planning documents that you need. Now many people assume that having a will is sufficient.

Estate planning may be more than simply just preparing a will, as a variety of situations could arise during your lifetime. Keep in mind that wills serve their primary purpose in your estate plan after death. Some other legal documents to have in place that are effective, while you are alive and only while you are alive, by the way, is the financial power of attorney, the health care power of attorney, and a HIPPA a waiver.

Now, I'll explain more about each of these documents in a moment, but for now, let's talk about the foundation that is essential for most, estate plans and that is a will. A will is a legal document

that allows you to direct the distribution of your assets at the time of your death. Assets are anything of value like bank accounts, investments, and real estate.

This goes to the person or the people that you name and your will that would be your beneficiaries or beneficiary.

Having a will in place helps you avoid having distribution decisions made for you by your state, or your court. A will does need to be notarized and witnessed.

That is in order to keep it valid, but it does not require an attorney to prepare one. You can, and in some cases probably should, but it will does not require an attorney to draft it.

The will is also the document that states recognize for the appointment of guardianship of minor children.

Having a will is important for custodial parents, because it allows parents to a point who the legal guardian of their minor children should be, in the event of their deaths.

If custodial parents do not have a will that gives instructions for guardianship, guess who decides.

The state. Now, states will follow their per stirpes chain of beneficiaries that they have in place where generally it's next of kin that's appointed, but you can visit your home state's probate court website for specific details on their process.

The key message here is that if you are a custodial parent of minor children, you will want guardianship appointment to be documented in your will so that your wishes will be recognized by your state. And once you have your will in place, you'll also want to make sure that you appoint an executor. An executor is also called an administrator in some states, and this is the person or even a financial institution who oversees the distribution of your assets in the event of your death.

And while it's not required that you have an executor chosen before you die, it is a good idea. And it's also a good idea that whomever that person or financial institution is knows, and agrees to the role, as well.

Because if you do not choose your own executor. Then your state will appoint someone, and usually it's the surviving spouse or next of kin. Now you may be okay with that but consider this is typically an emotional time for your family members. So, appointing an executor who is further removed, like a financial institution may be a good idea.

In either case, the executor you've chosen should have readily available access to your will so that they can effectively begin handling your estate, in the event of your death.

Now, in the event that your estate doesn't have a will, and you die intestate, which is a legal term, that means without a will.

The executor, or the administrator, will handle the distribution of your assets following a state's legal procedure that's called probate.

Let me talk a little more about probate. What is probate? Probate is the legal process of settling a person's estate after they pass away. All of the assets, debt, and taxes that are owed are reviewed.

The executor will oversee the settlement of the estate, which includes the tasks of filing the will with the local court, identifying and taking inventory of the deceased's property, having that property appraised, paying off any outstanding debts owned by the estate, having the will proved valid to the court, and then eventually, distributing what's left in accordance to the deceased's wishes. So a written will really makes the process easier.

And it provides details about how you would like your wishes to be carried out. Something else to consider, is that not all of your assets and investments may need to be included in your will, or even go through the probate legal process. For example, jointly held assets that are titled joint with right of survivorship, spousal tenancy by the entirety, direct beneficiary assets like your IRAs, 401(k)s, 403(b)s, life insurance accounts.

Those don't need to go through probate because they have direct beneficiaries assigned. Or, at least they should be assigned when the account is established. So technically there's no need to put those types of assets in your will. Unless, however, in the case of those direct beneficiary accounts, you are forgetful in designating or updating your beneficiaries in which case the will can serve as a catch all in that respect.

But the beneficiary designation on file supersedes all. Also recall, if you are legally married, in all 50 states, your surviving spouse must be your sole and primary beneficiary for retirement assets unless there is signed notarized consent from your spouse on file saying otherwise.

So, for probate it is possible that you or a loved one's the estate may not even need to go through the entire probate legal process. Each state has their own asset minimums on what triggers probate. It is based on the size of your estate. For example, some states will say if you have assets of less than $10,000 or $15,000, and you don't own real estate property,  well then your state doesn't need to go through their full probate court process.

They may offer an abbreviated process where your executor or administrator doesn't need to go through the probate court, unless it's just to file the will, but only to file the will.

You'll want to check with your own home state's probate website for specifics. Keep in mind, when you do go to look up your state minimum, probate minimums, those jointly titled survivorship assets like your IRAs, 401(k)s, retirement accounts. Those are not included in the state minimum.

Some people think that they are, but those types of assets are not. That said, if you own individual real estate property, that's not jointly held, then your state will likely need to go through the probate process in the state where the property is located. So, again, for details on what may or may not apply for you, go to your state's probate website.

And you can do a specific search and the state's website will give you details, but also consult with estate planning attorney. Now, there's another estate planning vehicle that you may also want to consider that goes beyond a will. It is called a trust.

A trust is a legal entity holds, manages, and distributes assets. It is a form of property ownership that separates the grantor's beneficial ownership from legal ownership. So, the person that creates the trust and transfers ownership of the assets into the trust, that's known as the grantor or the settler. Now, whether or not you decide to set up a trust will depend on the size, maybe the complexity of your estate. For most people, a will is enough.

But for those who have more complex estates, like, in the event of blended families or for those who wish to have privacy of their assets, or maybe protection from creditors.

Well, then a living revocable trust is the most commonly used trust in estate planning. Another way to explain how this trust works is to use what I call the container example. If you have a container full of valuable items that are important to you, your assets, your property.

And you want to make sure that if anything happens to you, your property goes to exactly who you want it to go to upon your death with a living revocable trust, the grantor can move items in and out of the container.

As often as they would like, while they are alive. That is what's meant by the term revocable. The grantor retains beneficial ownership and control over their property, at all times. Even though the legal ownership of the property is now in its own container, which is the trust.

The grantor also typically is the trustee. The trustee is responsible for managing the assets inside the trust. As long as the grantor is alive, they can move assets in and out whenever they want, change who the beneficiaries are whenever they want, but when the grantor dies, your revocable living trust becomes automatically an irrevocable trust.

Which means nothing else can be moved into it and nothing can come out unless it is being paid to the beneficiaries under the rules that use the grantor previously set up for disbursement.

The assets will go to whomever you last named as the beneficiary. And that cannot be changed, no matter what. That's why it's called irrevocable trust, meaning not able to be revoked.

So why would someone want to set up a trust? Instead of just having a will. Well, there's a few reasons. First, trusts provide privacy; wills do not. A will is a public document. This means that anyone can view it after your death, including your state, your family, whether they were included in the will or not, and your creditors.

So that leads to the second reason. Assets that are held in trust are protected from the claims of creditors. Just like your retirement assets are in your 401(k), and the third reason, and this is a good one:

Trust assets are not subject to probate. Remember, trusts are no longer in the same container as the grantor's personal assets so there's no requirement for any trust assets to go through the probate legal process.

A trust can also work well for blended families. For example, there may be children from a previous marriage where one spouse wants their individually titled assets that are not jointly held to go to his or her biological children only, not their current spouse.

Remember, typically, states will award a surviving spouse their deceased spouse's assets in both common law and community property estates.

If you don't want that to happen, then a trust allows the state's per stirpes chain of beneficiaries to be bypassed because there's no state involvement in the distribution of your trust assets. So, what are some reasons why people don't set up trusts?

Really, just a couple. A couple of big ones. First, trusts can be relatively expensive to have created, and they do require an attorney. Second, trust can be cumbersome to maintain.

Remember when I said they are their own container? Well, this means that they had their own tax ID number, which means they also have their own tax returns that need to be filed. And lastly, trusts are taxed at the highest tax rate brackets.

So, it's for those reasons that many people may not use trust as part of their estate plan. But there are a couple other less costly and cumbersome legal documents that should be a part of every adult's estate plan. These documents are only valid while you are live, not after death.

And one is a financial power of attorney. Now, if you own property or assets in your name, the financial power of attorney is important. This type of power of attorney allows a person you appoint to become your attorney. In fact, they can basically act in your place as your agent for financial purposes. For example, they can pay your bills, make investment decisions, file your taxes for you; those types of things.

A general durable financial power of attorney is a legal document. It needs only to be witnessed and notarized to be considered valid.

Some financial institutions will have these attached to account signature cards, when you open the account. And if you want to only apply it to that specific individual account, then you can attach it, just for that account.

There's also a general financial power of attorney in terms of when it's valid. Most general financial power of attorneys are current, which means that it is valid right away. And it stays that way until you void it, or it can be changed to what's called springing and this means that it's only valid during a specific timeframe from, say, April 1st to April 30th, because maybe you're traveling out of the country and you want someone to handle your financial affairs while you're gone that type of thing.

It's important to note, however, that if a financial power of attorney does not have the word durable in the document's language, then it is only valid until you become legally incapacitated or declared legally incompetent. For example. if you're just helping grandma, and she's healthy, she's fine. Then the general power of attorney is valid.

But if she becomes legally incapacitated or declared legally incompetent, then the power of attorney is no longer valid. Without a durable power of attorney, no one can represent you during your legal incapacity unless a court appoints someone to act on your behalf. So, while it's not required, consider seeking legal help when you're drafting your power of attorney documents to ensure that the document really does what you want it to.

And speaking of incapacity, another important piece of your estate plan. You'll want to have in place while you are alive is the healthcare power of attorney also known as the health care proxy.

Now, this is not to be confused with the financial power of attorney, though they are similar. And as you would guess, a health care power of attorney allows someone you designate to make healthcare decisions for you in the event that you cannot yourself, whether you're in a coma in surgery or otherwise medically incapacitated in some way.

Like a financial power of attorney, advanced directives can encompass a number of different documents, including the health care power of attorney, health care proxy. These documents allow you to delegate who will make healthcare decisions for you if you cannot make them for yourself.

Now, if you're over 18, and you do not have a health care power of attorney, and you're unable to make decisions, then a judge will appoint a guardian. The health care power of attorney allows someone you choose to act on your behalf if you become incapacitated. Similar to this, is a living will. A living will allows you to state whether you want your life prolonged if you will die soon from a terminal illness or if you're permanently unconscious.

If you do not have this in place, even after a consultation with your family, the decision for further future treatment ultimately falls on the physician. And even if your family could decide, how do you know they would choose what you would have chosen? This is why it's better to have advanced directives in place as these are the documents that state your wishes, and that medical institutions will follow.

Each of those documents that I just described are legal documents, but in most cases, an attorney is not required to draft them. That said, states differ widely on what types of advanced directive they will officially recognize. Some states will also require that you use their specific form or the format and content of what that state's advanced directive is.

And if you have questions, certainly contact an attorney, who's familiar with the home state statutes regarding health care, advanced directives in your state, or you can even find more details on your home state's website by using a specific search for the document that you are seeking to create. If you have already executed a living will or health care, power of attorney or proxy your health care provider may ask you for a copy before surgery or before a scheduled medical procedure. You can actually provide it to them at any time.

This way they have it on file, should they need to refer to it quickly. Advanced directives should be part of your basic estate planning, regardless of your age and your health status and here's one more.

It's called a HIPAA waiver. It came as a result of the Health Insurance

Portability and Accountability Act of 1996. A HIPAA A HIPPA waiver authorization allows doctors to provide information on a patient's health to third parties, which includes family members.

And even if you have a health care power of attorney, the HIPPA waiver will make sure that your agent will have access to your medical records.

So this is a backup document, this allows your family members, or any other designated persons to speak freely with your healthcare providers in case of a medical emergency.

This type of waiver is especially useful for parents of adult children. Maybe they just turned 18 or they're younger adults, or even aging family members. You can get a HIPAA waiver form directly from your health care provider. Shown here is a reminder of the types of accounts.

That I mentioned earlier that typically don't need to be included in your will unless. You want the will to serve as a backup and recall these accounts can also skip probate because the designated beneficiaries are already on file.

At least they should be. Are they? This slide is your reminder to check. Alright, so what I've discussed at this point, are the basic estate planning documents that most everyone will want to have in place. Moving beyond the basics, let's take a look at some of the key benefits of estate planning.

Just like trusts have their own tax rate, which are the highest currently at 40%, so also do estate, which are the same at 40%. However, there are a state tax exclusion limits in place that allow taxpayers to potentially minimize their federal and state taxes. So they do not have to pay tax at the highest rate for their estate.

When the value of an estate's assets, assets and property is added up - combined - as long as that total value does not exceed $12,060,000 for a single taxpayer or $24,120,000 for married taxpayers, then there is no estate tax.

Now, those figures that I just gave you are the 2022 Federal Exclusion Limits. These exclusion limits are subject to change every year. In fact, they have changed over the years. The exclusion limit was as low is $675,000 in 2000 and 2001, which means if you owned a home and had some savings with a limit that low, many, many more taxpayers were exposed to potential estate tax at that time. And at that time, the rate was 55%.

So, while surpassing the exclusion limit of the 12 million, or the 24 million may not apply to many of us today, just know that in future years, it may. So as part of your estate planning, be aware that it exists. States also have exclusion limits and these limits vary by state, as you would expect. They are lower than the federal limit with most state exclusion limits hovering around the 5 million dollar mark for a single filer in 2022 and nearly double that amount from married filers.

There's another way that you can reduce estate taxes if and when they may apply to you. And that is to give your money away through gifting. Gifting or giving money away while you are alive can be another way to reduce the size of your taxable estate in the event of your death.

Some people gift to qualified charities, which in that case, there is no gift tax that applies whatsoever. You can also avoid gift tax when you gift money to individuals while you are alive. The 2022 Federal Gift Tax Top Rate is 40%. Same as trust and estates; however, if you keep your gift under $16,000, if you're a single tax return filer or under $32,000, if you're married and agree to gift splitting, then you will not be subject to the annual gift tax.

It's important to remember that this limit is per donee, per year. So, what that means is that you can give to as many people as you want each year. But if you want to avoid gift tax, you cannot give one person more than $16,000 this year. If you're a single filer or if you're married doing gift splitting no more than $32,000. With that said, there is unlimited gifting between spouses. So if your spouse is a U.S. citizen, then you can give your spouse as much as you want gift tax free.

Okay, so we've covered a lot of ground at this point and you may be wondering, okay, what do I do with all of this information? Where do I start? Well, start right here. Create an in case of emergency ICE pack or ICE packet. Even the most carefully drafted documents will be of no value to your loved ones.

If you don't know, or they don't know rather where they are located, make sure that these instructions are easily accessible to whomever you designate to handle your affairs for you in the event of your incapacity or your death.

Your ICE pack explains things like where the safe deposit box keys are located, if you have one, where the will is. It can also express preferences. For example, maybe who you'd like to look after your pet.

Now that's not a legal document. It's just a guide for your loved ones to kind of navigate immediately and easily, should they need to and typically it's happening during a very emotional time and so having an ICE pack in place certainly helps.

Now, shown here is a list of some of the things to consider, including in your ICE packet. Now, when you have all of your documents created,you have your ICE packet in place, loved ones know where everything is, now you've got the foundation of your estate plan built. Now, you'll want to maintain it, and you'll want to keep it updated. Experts recommend reviewing your will, or estate plan, every three to five years.

But in addition to that shown here is a list of potential life changing events that indicate when you'll need to review or possibly update your estate plan. Alright, now as you move through your estate planning steps, be sure to review your current account beneficiaries also consider talking to a professional, like an estate planning attorney, or a tax advisor about creating or updating your estate planning documents and of course, keep your documents in a safe place and consider having multiple copies as a backup. should the originals get lost or possibly damaged.

Thank you all for joining me today for the presentation on Estate Planning Basics. Be well.