How to Serve as an Executor | On Demand Webinar

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Good afternoon. Welcome to Savant’s live webinar. I’m joining you today, Joel Cundick from our Vienna, Virginia office. I’m a financial adviser here and with me is estate attorney extraordinaire Alaina Davalos from our Atlanta office. Welcome Alaina. Thanks Joel. I’m so glad to be here. I’ve seen a lot of clients have questions lately about what it means to be the executor of an estate. So today we are going to try to answer some questions and provide some information around that topic. One reminder before we get started. While we will not be sending out copies of today’s slides, you will receive a copy of this webinar in your email in the next couple of days so you have that to reference. Let’s take a look at the agenda today. I want to give a little bit of a road map of the places we’re going to go. We’re going to start out talking about what is an executor and a trustee. two very important terms in the world of estate planning and very fundamental to get on the same page about what each involves. Then we’re going to talk about some of the essential documents to have when we draft an estate plan. All right? It’s not just about a will. That’s what one thing we want to make sure we talk about. There’s a lot more and actually some of the documents depending on the stage you’re at can be more important than the will. Then we’ll go into the different decisions that you make on beneficiary and asset titling. This looks a little bit in advance as we’re thinking about how to design our estate plan to be the best able to make things straightforward for our executor or our trustee. All right. And then we’ll talk a little bit about the important tax filing dates. Never want to miss those. and we’ll wrap up talking about now this will be my slide and we’ll see if I get there but we want to talk about promoting family harmony that that’s probably the area most fraught with difficulty but I  think once we’ve talked through a lot of these principles what will emerge from it is some good ideas for how to make sure that we minimize the risks of family discord. And we will end today’s webinar with some questions so, please feel free to add your questions to the chat box at the bottom of your screen. We won’t have time to get through everyone’s questions, but somebody will reach out to you to answer those questions. And so, with that, let’s talk about the different roles of an executor and a trustee. Now, before we dive into the details about serving as an executor, I do want to give you a reminder that estate planning, probate, trust, you know, these are all topics that are subject to state law. So, while we’re going to talk generally about these topics, please know that you should also consult a local attorney before engaging in any of these activities. So, now let’s start with the basics. What exactly is an executor and what is their role? I have found throughout my time in private practice that most people’s perception of an executor and the probate process generally comes from TV. On TV, there’s usually a gathering of the family in the lawyer’s office. Everyone is waiting with baited breath to see what they’re going to inherit. The executor is announced. It’s not who the family expected. And it’s all very dramatic. In reality, there’s usually not a spectacular event. A person who passes away is called a decedent. The decedent either had a last will in testament or they didn’t. If they did have a will, it most likely named someone as the executor. The will may also refer to that person as a personal representative or an administrator. For our talk today, as the theme of this webinar suggests, I’m going to use the term executor. So, for the family to first find that will, you know, it’s usually with the decedent’s personal effects in a safety deposit box or it’s with a drafting attorney. Most wills today are written in modern English and are relatively easy to understand. Sometimes there is a lot of language in that document. You know, I myself was known to draft a 50-page will on occasion, but identifying the nominated executor is usually pretty easy. The executor though, they are not automatically in power. Let me repeat that. Just because someone is named in the will as the executor does not mean that they immediately have the authority to act on behalf of the decedent’s estate. Why? Well, for starters, the decedent, that person that passed away, may not have a probate estate, meaning that there are no assets that the will controls. A will and hence the executor only has authority over assets that were in the decedent’s name alone at their time of death or directed to the estate via a beneficiary designation. The will does not control assets that had a joint owner or a beneficiary designation naming someone other than the estate. Common probate assets, meaning assets that will pass under the will that the executor will control, include real estate owned in the decedent’s name alone, checking and savings accounts with no pods, which stands for payable on death, and brokerage accounts that were in the decedent’s name. This is not a complete list by any means, but these are the most common. So let’s say that the decedent had at least one of those probate assets in their name at their death. They also had a last will in testament. How does the executor gain their legal power? As I mentioned, this area of law is very state specific. So each state has their own rules and regulations about going through the probate process. The American Bar Association defines the probate process as the formal legal process that gives recognition to a will and appoints the executor or personal representative who will administer the estate and distribute assets to the intended beneficiaries. That is a mouthful. Generally the decedent’s heirs at laws and the beneficiaries under the will have to be notified and given an opportunity to object to the validity of the will. If there are no objections, everyone agrees, the court will issue the executor legal documents authorizing them to act. The court though they may also require the executor to postpone based on the projected value of the assets in the estate file an initial inventory and provide an annual accounting every year that the estate is open. So do keep that in mind. Once the executor has those legal documents though you can see here on the screen the usual process. Once the executor has filed the will with the court, they’ve got to administer the probate estate, they’ve got to collect the bank accounts, get appraisals on real estate or list it, notify business partners of the death. The executor also must notify any of the decedents creditors of the decedent’s death, and pay final expenses. that includes funeral bills, costs of administration, such as legal and CPA fees, and taxes. The executor is legally responsible for filing any final tax returns that are due, which I’m going to talk about more in a minute. And then they’ve also got to pay any of those outstanding debts. So once the creditors come forward, they say the decedent owed so much on this credit card or this hospital bill. Pay off those debts. Once that’s all been done, the executor will then be able to distribute any remaining assets according to the terms of the will to the beneficiaries.

Once that whole process has been completed, which can take anywhere from 6 months to six years, depending on how complicated things are, the executor can formally close the estate. Closing the estate generally releases the executor from any further liability related to that role as executor. They’re hanging up their hat saying, “That’s it. I’m done. Don’t spend your inheritance all at once.” You know, I’m kidding, but you get the gist. So, while this sounds relatively simple, and it can be, there are also aspects of being an executor that make it an undesirable job. Family conflict can make this a very difficult job. Taxes and unusual assets like business interests, oil and mineral rights, and out-of-state real estate can make this a very difficult job. With good planning though, the executor can be a short-term role that keeps the family harmony and sufficiently and succinctly distributes the decedents assets. Alaina, inevitably on these kinds of calls, we’re going to have multiple lenses that people are looking at. So, some people have joined us today thinking that they’re they or maybe they are currently an executor, or they might be an executor. Some people are thinking, how do I make things easier for my heirs someday? Is there something that you would say about who would make a good executor ideally as if somebody’s building their estate plan and they’re contemplating who should I name as my executor? What are they looking for? Yeah, for sure. So, the executor again, because this is a short-term role, you know, it doesn’t have to be the most financially savvy person that you’ve ever met. The advice I give most often because picking an executor can be a very difficult decision for some people, especially if you don’t have, you know, someone you can name off the top of your head. But the best choice for an executor is somebody that knows when to ask for help and can generally stay organized. You know, someone that’s not going to get overwhelmed by this process. Someone that is going to know, hey, I can’t figure this out by myself. I need to call an attorney. Someone that’s just pretty that’s with it and can figure things out. Makes sense.

On the flip side of that, you know, the opposite of an executor, which is a generally short-term role, we do also have a trustee. And this can be a short or a long-term role. Same thing though, just to answer your question, Joel, about choosing a trustee who can be the same person as your executor and typically is. You know, it just has to be someone that you trust, someone that knows how to take care of things, and someone that again knows when to ask for help. Great. And I want to, take some time to clarify the differences between the role of an executor and a trustee because I have a lot of clients, you know, I’ve met a lot of people that use these terms interchangeably even though they do have a separate meaning. And so a trustee is someone who holds assets in trust for the benefit of a beneficiary. A trustee is not nominated by a will and then appointed by a court. A trustee is named under a trust agreement, typically a revocable trust agreement. However, we can have trustees that are appointed under a will as well. So, that gets a little bit tricky. I’m going to go into that in a second. But for our chat today, I’m just going to refer to a revocable living trust, not an irrevocable trust. Those two terms again are used interchangeably when they shouldn’t be. A revocable living trust is a tool that is created by a person called the grantor or the trust to hold assets in trust. Generally the grantor is the initial trustee, the initial beneficiary and the trust uses the grantor’s social security number. The primary purpose of the revocable living trust is to avoid probate at the grantor’s death. So that whole process that I just described that the executor has to go through to be appointed, that’s what we’re trying to avoid with a revocable living trust because unlike the grantor, a human, the revocable living trust does not die. So the assets that it holds do not need to go through probate. Typically, a revocable living trust is funded in two ways. either during lifetime by the grantor them self or at the grantor’s death via the probate process. That’s right. Sometimes an executor will have to go through the probate process in order to transfer assets to a trustee. A lot of times the executor of the will, which when combined with a revocable living trust is called a pour over will. and the trustee of the revocable living trust are like I said earlier the same person and that makes for a really smooth transaction of assets if the pour over will does need to go through probate. The trustees role is very similar to the executors. The trustee is responsible for administering the trust and collecting the trust assets, whether that’s from the probate estate or assets that named the trust as a beneficiary. The trustee then pays any taxes, debts, or any of those other administration fees that were not paid by the executor if there was one. Sometimes though, a revocable living trust will not end. Instead, it will morph into an irrevocable trust. And in this graphic on your screen, you can see that we’ve got a revocable living trust that changes into a trust for the survivor, which in this case means the surviving spouse. At that surviving spouse’s death, the trust changes again into sub trust for the children. those children’s sub trusts are generally irrevocable. If that is the case, if the trust fund is not just simply paid out to the trust beneficiaries, then the trustee has additional duties. They will continue to manage and invest the trust assets on behalf of the beneficiaries, approve any distribution requests, and they’ll file any and all annual trust income tax returns that are required. They’ll also make any mandatory distributions that the trust agreement dictates such as one-third of the trust goes outright to the beneficiary when they reach age 25 and the balance goes out right at age 30. Whatever the trust says the trustee must do. And one thing to note, these irrevocable sub trusts that you see here, for example, for children, those can also be created under a will. And if that is the case, if the will creates these irrevocable trusts, then the will also name a trustee. So it is very possible that if you are the executor of an estate, you may see your role as the executor, you may also see your role as trustee. You can be both. If you are named as the executor and someone else is named as the trustee of these trusts are created, then your job as the executor will end when you transfer assets to that final trustee to manage as the will says. So as opposed to being the executor, being the trustee can be a long-term duty. So make sure you’re aware of that if you’re nominated as a trustee. And it’s also it’s very important though to differentiate between these roles because they may be controlled by different documents or different sections of the same document. So the trustee is subject to the terms of the trust agreement or any trust terms under a will whereas the executor is subject to the rules of the court and solely the terms of the will.

So Joel to make this easier for your executor can you tell us about some necessary estate planning documents? Absolutely. Yeah thank you Alaina. So, I think you know we are we are important to point out we are transitioning here to kind of the pre-death phase because some of these important documents I’m going to talk about are really only effective during someone’s life. So, if you’re stepping in now to the role of executor or trustee after someone’s death, then a couple of these documents are going to be kind of irrelevant. So, one of them though go to the next slide, Alaina. We’ve got the power of attorney for property. Okay, a power of attorney for property is a document during someone’s life that allows someone else to transact financially on their behalf. It’s a very powerful document and as a result, it’s really important when someone’s contemplating who they name as their power of attorney for property that it be someone they have implicit trust in. The person who has is the power of attorney has the ability to enter into loans to buy or sell property potentially to change beneficiaries on accounts. There’s many things that someone with a power of attorney can do. So when you’ve drafted that document and signed it, very important that you keep the copy in the place that you want it. You notify only the people that you want notified about what’s going on. All right? But this document is going to become either effective upon signature or effective upon physician certification. In many cases, the estate attorney who drafts the document may make it what’s called a general durable power of attorney, which means that it’s going to persist beyond incapacitation and it’s going to be oftentimes something that is live upon signature that it names a power of attorney who can currently transact. It also may though there could be a clause in the power of attorney says this document will be effective only upon a physician certifying that I’m incapacitated very different you know that what we’re trading flexibility for making sure that our wishes are met right adding in a provision that says it’s only good once a physician certifies me to be incompetent means that there’s going to be some hoops that the power of attorney is going to have to jump through in order to transact on your behalf. And then those documents are going to be important to present together to any institution that you’re trying to transact on behalf of the individual. The bank or the co custodian, the brokerage is going to want to see a document naming you as power of attorney. It’s also going to want to see the document saying that a physician certified that you’re incapacitated. Okay? You can name multiple successor agents. In fact, we typically suggest naming multiple successor agents. And what’s the thought process here? The thought process, we want this document to be as effective for as many potential circumstances as possible. If I’ve named one individual as my power of attorney and when I become incapacitated, they happen to be on a trip to Korea, we could be in a little bit of a difficult circumstance because the only person that can take any action with me, the only person I have authorized to act on my behalf currently cannot act. If I have named multiple successor agents, then if someone’s out of the country, if someone says, “Oh, I’m sorry. I don’t want to do that. Actually, I’m not feeling up to that right now.” or you know any other issue occurs the next agent is triggered. So it ideally you name three agents in succession that typically is going to cover the majority of circumstances that you might face. The question sometimes becomes then well do I name multiple individuals? Now you can name multiple individuals. Again this is a tradeoff. There’s simplicity complexity. When you name multiple individuals for any of these roles, you need to contemplate the potential for there to be disagreement. And if there is disagreement, what is to be done there? So often times the simp the simple answer can be the better one where you’re naming an individual to because then that’s going to be their decision about what should happen in in in case something needs to happen on your behalf. All right. If you name multiple people in tandem, the other thing that could happen is that we need multiple signatures every time some kind of transaction needs to be taken. So, it can slow things down substantially. But if you have other reasons why for you it’s going to make more sense to name multiple, totally understood. Consult an attorney to make sure you’re doing it the right way. We want to have digital asset authority in there. That is a modern provision of estate planning documents that if you have a power of attorney that is 10, 15, 20 years old, it’s probably going to be missing from there. Digital asset authority is going to give individuals the ability to go on to things like social media accounts, other locations to transact on your behalf because the document specifically states that they have a control over my digital assets. All right. The other thing you want to make sure that a power of attorney for property mentions is a retirement plan or in individual retirement account IRA. If you have a 401k, IRA, 403b, different kinds of retirement accounts, oftentimes the institution is only going to accept that document to transact on that account when the power of attorney specifically names that function as a valid one for the power of attorney to act on a retirement plan or retirement account. So then we have one other important document, the power of attorney for health care and advanced directive. This is a document that really it’s a different role. It does not have to be the same individual. You can name it to be the same individual, but this individual you’re naming is going to make decisions regarding your physical care in the event of your incapacitation. And so it can be helpful to have it be somebody who is proximate to you, right? Who can more easily transact if you have some kind of emergent event. They’re more likely to be close. You also want to make sure that that individual is aware of what your wishes are in advance. We don’t want any lack of clarity here. We don’t want to put also the person who’s making important health care decisions on our behalf in a situation where they’re not sure what our wishes would be. Now in included in that oftentimes power of attorney for health care is this advanced directive which indicates hey in these listed circumstances this is what I would like to have take place. For example, if I need life sustaining treatment in order to remain alive, what do I want to have done in that situation? A best practice here is to make sure that your primary physician has a copy of those documents, the power of attorney for healthcare, because again, we want to make sure that they’re accessible in the moment we need them. Okay, these are two pretty critical documents to have in estate plans and they often get overlooked. Now, the other important documents we already covered a little bit earlier. We’ve got a last will and testament. As Alaina said, this is not necessarily as prominent a document in estate planning as you might think it is. You might think it’s the only document. It’s one of many. Anything that is owned by me personally is going to go through my will. Anything that is titled to an IRA in my name is going to have a beneficiary. It’s not going to transfer that way. So my executor we may have that executor serve a function there in reaching out to the IRA custodian saying hey so and so passed away. Here is a copy of the death certificate. But from that point forward it operates on the institution. The institution has a responsibility to distribute asset assets to the heirs, the beneficiaries named there. Life insurance policies act very similarly to that. Annuities act very similarly to that. We’re looking at documents that have named beneficiaries. If I update my will in life and I think that I’ve updated my wishes in all those other locations, I haven’t. I need to go. In fact, I typically say when I’m  sitting down with a couple, hey, the most important of any of the estate planning transactions I’d like you to do after today is to print up your beneficiaries, right? Print a copy of your beneficiaries. I’d love for a copy of that to be with the critical estate planning documents because hopefully then now you’re if you’re stepping into the role of executor, you can see where all the accounts are. You can see how they’re named to pass even though they’re not mentioned in the will. But do not think that if you’ve made changes in your will that those will trump whatever beneficiaries you’ve named. The beneficiaries are going to take precedent as well as a trust. Anybody that you’ve named in a trust is going to take precedent over what happens in a will. So the will and testament is essential for two things. There’s it’s the only document that can name an executor for our estate. That makes it pretty important. And it’s the only document that can name a guardian for minor or incapacitated children. That’s why a will is so essential. So even when someone is a young married couple and they’ve just had their first child, do they need a will? They don’t think that they’re likely to die at all. They need a will. It’s an essential document because it’s the best way to make sure that the person you intend to care for your child if you’re not there can serve in that capacity. It can coordinate a will can coordinate with a revocable living trust. Alaina referred to a pour over will. The idea in a pour over will is that I say in my will anything that has is not owned by my revocable trust currently I transfer into my revocable trust. So that is just kind of the cleanup procedure that that can be helpful. If we look at a revocable living trust, what is happening there? All right, that is a document I’m creating during my lifetime. Revocable means it may be changed once you are functioning in the role of an executor. You are not dealing in many cases with a revocable trust. It may have been revocable in the past. it has now become irrevocable because the person has passed away. The only exception to that is if you’ve got two spouses and they’ve both been named as trustees and the trust indicates that at the first death all assets remain in the revocable living trust, then you still have something that is revokable. But in many cases, at least a portion of the assets after the first death are going to become irrevocable because of the intentions stated by the decedent. Okay, it does avoid probate. We do not need to look to the state to transfer these document the assets. We do not need to report them to the state. They are assets that are transferring according to instructions we’ve previously given and they bypass the probate process. All right. One of the powers of this revokable living trust is it acts before death and after death. So, it’s one of those that is actually providing continuity through the process. I can’t name my IRA to my revocable living trust. So I always need to have a power of attorney pretty much. But in many cases, my trustee of my revocable living trust can have a pretty broad impact on my finances if something happens to me during my life. Obviously after my death they have a very substantial role in that I’ve either indicated I want all my trans assets to be distributed to charities to individuals at my death in which case the trust is going to have a pretty short role or I’ve given plan planning indications of ongoing assistance and ongoing guardianship trusteeship and in that case the trustee is going to serve an ongoing role that persists potentially years decades after my Yes. Is there anything you’d add there, Alaina? I know you’re the resident expert here. Joel, I know just as much as you do, sir. One of the things that I would just like to reiterate again because I hear this being mixed up a lot of the time is you mentioned when talking about the powers of attorney that there is a living will and then we also have a last will and testament. So those two terms I hear intimately used when they shouldn’t be. You know, people generally get pretty confused about when does a living will come into effect and when does the last will and testament. So one thing that I want to emphasize is that that living will portion which may either be a separate document or it may be a part of your advanced directive for healthcare. That living will section says what you want to have happen if you are in a state of no medical return. You know, let’s say you are in a coma or your health has deteriorated to a point where there is nothing more that modern medicine can do to save you. Do you want to stay on life support? Do you want to be removed from life support? That is a living will. That is a different document than your last will and testament. Your last will and testament only comes into effect once you have passed away and you can change it so long as you have your mental capacity. And one thing to note is typically no one can make or amend your last will and testament other than you. So even if you have a named financial power of attorney, they typically cannot change your last will and testament. It is set in stone once you’ve lost your mental capacity. That’s great clarification. Thank you, Alaina. So let let’s figure out what do we do because we referring to beneficiary earlier. What in decisions are involved in in naming beneficiaries and titling assets? So, that is such a loaded question, Joel, because it is actually what keeps the wealth transfer team at Savant busy every day. Because there is so much that goes into estate planning. You know, I normally spend my time here at the office reviewing documents and preparing graphics to see how their estate plan is going to flow. You know, in this example, we have a joint revocable living trust. Threw you a curveball there. We didn’t mention you could have one trust for two people. It has been funded with some of these assets, the trust brokerage and the home. But then there are still some assets that are passing by beneficiary designation and some by joint ownership. So this is also where I see a lot of family disconnect happen because of poor planning. So for example, family members will blame the executor could be you for how the IAS are passing. You know, unless the estate or the trust is named as a beneficiary of those accounts, the executor or trustee has no control over them. Any issue that arises in those circumstances is because of poor planning on the decedent’s behalf. And well, their concerns are over at this point because they’re dead. So going back to this graph, this is a relatively complicated trust with spousal sub trust and lifetime trusts for the children. If you’ve worked with your attorney to come up with this plan, you know, that’s step one, getting those documents in place, making you sure you have your financial and healthcare powers of attorney. Then you’ve got your will and your trust. On the next slide, you’re going to see step two, which is trying to figure out beneficiary designations, which especially with qualified retirement accounts can get tricky. And it’s just something to realize that if you are acting as the executor of an estate, your power over certain assets will be limited. And that is definitely not your fault. Again, that is most likely something that went wrong with the decedents estate plan. So, here you can see those IRA accounts which typically make up a significant portion of most Americans estates have several options for beneficiaries. Joel, can you tell us a little bit about how and why we make certain beneficiary designation choices? Sure, absolutely. I think when we’re when we’re considering what to do on beneficiaries, we’re I’ve spoken earlier about a spectrum, but hopefully you’re going to notice this like there’s simple approaches, complex approaches, there’s advantages and disadvantages to each, right? We’d love everything to be simple. an outright beneficiary is very simple right I say at my death I’m giving it to this individual done right all that all that has to happen is we have to track down that individual if I’m naming multiple children all that has to be done is we track down the children when we say no asset protection here what that means is that when those heirs receive those funds there are no guardrails no limitations to what they can do with that money. There’s multiple reasons why we may want protection. One is the simple circumstance that we have someone who is incapable of making good financial decisions on their own. They are a minor or they are an adult with some form of special needs. Now, not only do we want to have in that situation someone who can best steward those assets on behalf of someone else, but we also have potential issues with state benefits that are being received by that individual if they receive assets outright. They can be disqualified from receiving that that help from the state because we’ve done what was simplest. Okay? Okay. So, especially in those instances, we want to have greater asset protection. Now, the outright beneficiaries, it lists that it’s potentially more income tax efficient. Very true. Why would this be? If we route assets through a trust and we have not done it in the right way, we may be subject to what’s called the five-year rule. meaning assets that have transferred from an IRA into a trust which is not deemed to be an individual all assets must be distributed from that trust in 5 years. Now if it’s a very large IRA that I moved into that and we have to distribute everything in five years we could have very substantial consequences on taxes to the ultimate heirs. If I name individuals, if those individuals are less than 10 years younger than me and a family member, then they can take what’s called a stretch provision. They can even though it’s an inherited IRA, they can use it over the rest of their lifetime with very small required annual distributions. If however, I’ve left it to a child, which is very common as an outright beneficiary. It is more favorable than the trust. It doesn’t have to all come out in 5 years, but as of a few years ago, the estate planning laws in this country changed as a part of a tax bill and those beneficiaries will have to take all assets out in 10 years. So again, what we want to make sure of is that we are doing not just what is going to be easiest, but is going to be what is most beneficial to the people we’re leaving assets to. There are reasons why we may want asset protection that go beyond the fact that my a child or other beneficiary is a minor or has special needs. We may be concerned about a potential divorce. We may be cons concerned about potential creditors that could come and sue an individual for assets. When we’ve left assets in trust, we have a lot more security in that they do they have not entered the estate of the recipient. they are discrete separate assets. So those are the some of some of the factors that play in the way that we decide beneficiaries and titling. So, I’m not going to steal Joel’s time to advertise our other webinars, but if you are interested in learning more about trust, you can check out our preserving generational wealth webinar, which you can find on Savant’s YouTube website or YouTube site, and that goes into a lot greater detail about why you would use trust and the benefits and problems with them. Yeah, Alaina, I just as we circle back to that that image for a second on the map and the flowchart, I’d just like to point out that this is not generally what is generated by the estate attorney who’s drafting, right? They’re going to make a complex set of documents that are written in legal ease and are going to satisfy the provisions of law in the state that we’re in. That said, they can be very difficult for us to understand as a lay user what is actually going on. So, this is one of those strategies that I would suggest both to people preparing to make things as simple as possible for an executor or trustee someday and those who have stepped into the executor or trustee role. Mapping out on a page how everything is set to transfer, who the beneficiaries are, can be a very helpful tool in getting you a clearer picture about what is actually happening. And they can, this process can even actually lead you to make different decisions. I will say in some instances, we’re all human here. We’re trying to understand what each other is trying to say. I’ve encountered situations where an attorney has drafted documents thinking it was what the individual wanted and then when we map it all on a page, we realize, oh my goodness, that is not what I intended at all. So I would this is a kind of sending of a plug back to Alaina and her team at Savant play a critical role at Savant in helping draft these kinds of images of what is going on behind the scenes both for those who are preparing someday for people to step into an executor trustee role or for people who have stepped into that role and are trying to understand what’s next. That’s a great way to look at it Joel. Thank you for appreciating the services of the wealth transfer team. Absolutely. I can’t say enough.

So then we have a question of all right when to leave in trust. Some of this we’ve covered if it’s a very large IRA potentially we want that to be left in trust. If it’s a very young beneficiary, if it’s somebody who has special needs, right? Or if we want asset protection and we’re not concerned so much about the tax cost. We just want those assets to stay protected. There’s two important words that are going to come into play at that point. One is a conduit trust and another is an accumulation trust. This is another area where we want to make sure that our estate plan has been looked at recently because there were reasons why we would use one or the other up until a few years ago and our motivation would have completely changed now given the updates to estate law. A conduit trust just says that IRA withdrawals are going to come in to a trust account when they come out and immediately will transfer out to beneficiaries of the trust. It makes sure that whatever income is generated by the trust is going to be taxed at the beneficiary’s tax rate. We’re not holding it in the trust. We’re sending the income out from the trust. So, it is a conduit. It receives the IRA withdrawals and immediately distributes to the beneficiaries. An accumulation trust is the exact opposite. IRA withdrawals can be accumulated inside the trust and not distributed to beneficiaries. That gives the trustee a whole lot more control over when to give money to beneficiaries. The really big disadvantage of it is trust tax law is very different from individual income tax law in this country. It reaches the 37% top bracket of income taxes at the federal level once you’ve crossed about $20,000 of income. Not very hard for a trust to do if it is accumulating income inside it. So, we need to contemplate which of these is best. There are situations that up until 5 years ago, we totally would have used an accumulation trust and now because the evolution of laws, we actually say, “Oh, I don’t really want that in an accumulation trust anymore. The income tax consequences outweigh what I was trying to accomplish.”

Any more you’d add to that, Alaina? No. No. I don’t actually like income tax planning, Joel. It’s probably my least favorite. I stick with estate taxes more. I’d love to say that I love income taxes. I’m not always a fan, but it’s a necessary evil that I’ve learned to handle extensively. Luckily, that’s true. Savant also has a tax wing. So, you know, I have other professionals that I bring to bear in in those situations. We are very blessed. We are. So, speaking of taxes, let’s talk about some important tax filings. if you are the executor of the estate. So whether your role is as the executor as or as a trustee, there are a few very important deadlines when it comes to administering a decedent’s estate. The first is going to be when the decedent’s final income tax return is due. As I’m sure most of you know, that’s April 15th of the year following the decedent’s death. And that deadline can be extended to October 15th. That’s that personal income tax return.

The same deadline or possibly a later one depending on certain elections you can make is for the estate income tax return. And that has to be filed for any income earned by the decedent’s assets after that decedent’s death, but before they’re distributed to the final beneficiaries, so long as it exceeds a certain threshold, which is currently $600. So if the estate has more than $600 of taxable income, the executor or trustee also has to file an estate income tax return. Same rules apply for a trust income tax return. If you’re the trustee, if a previously revocable living trust, now irrevocable, the grantor passes away and the trust’s assets earn more than $600 in one year. The trustee will need to file a trust income tax return. One final return that the executor or trustee may also need to file is the federal estate tax return which is a form 706. This return is due 9 months after the student’s death and has an available sixth month extension. So unlike returns with a calendar year, this return is based off the date of the decedent’s death. And that’s important to remember. Generally, an estate tax return is required when the decedent’s assets at death combined with the value of any taxable gifts they made during lifetime exceed the decedent’s available estate tax exemption. And that amount is determined in the year of the decedent’s death. That amount is also subject to change with Congress. For example, it was $13.99 million in 2025 and is $15 million in 2026. The estate tax itself is 40% of all wealth over that exemption amount. A 706 may also be required if the estate needs to make a portability election. Portability is when the decedent’s available estate tax exemption is ported over to their surviving spouse. This can be beneficial because it can allow the surviving spouse to give more assets to beneficiaries at their death without having to pay additional estate taxes. If the decedent’s estate only needs to make a portability election and the estate does not owe any estate taxes, there is a new five-year rule to make that portability election. So, this has been a great recent change to the law. So, if you or someone you know, if their spouse died within the last 5 years, seriously consider consulting with your professionals about whether filing a 706 to make a portability election would be a good idea. You may also have to file a state estate tax return. So, make sure that if you’re acting as the executor or trustee of an estate that you confirm with your attorney or CPA when, if any, the state estate tax is due. There’s a lot there. Stay there for just a second, Alaina, because I want to make sure everybody’s got there’s a lot of language there. Okay. We have an estate income tax return. That’s income received by the state, the estate after someone’s death. We have an estate tax return, completely discreet documents. And I what I wanted to point out here is this is one of the places that you want your executor to be someone who, as Alaina referred to ear earlier, is willing to consult with professionals, right? This is not something that you want to try and handle on your own in Turboax. This is something that it’s good when you have adopted the trust the executor role on behalf of someone else and you’re going to have to do a personal return for them and an estate income tax return potentially a trust income tax return. You want to make sure that you’re covering all bases. All right? That you understand the complexity of documents involved. And so at minimum talking with an accountant could be beneficial and as Alaina said on an estate tax return consulting with an estate attorney. There’s just really good ideas that can come out of that conversation. I like to tell people this is your first time seeing this movie. This is not our first time seeing this movie, right? And that’s true with many professionals that you can bring in who can kind of give you hints about what is to come and best practices for how to handle what’s next. Now, it’s my job to bring us together and try and have family harmony at the end of this whole process. And I’d love to say that this is simple. I think it’s that many movies and television shows and even financial articles would point out there’s pitfalls galore in this process. Let me just say that what we’ve learned from many years of doing this is the best solution for promoting family harmony as best as possible is to communicate intergenerationally. This is not natural in particularly in the United States. It is not natural for in many cases to feel like, oh, let me open up and show my estate plan to my potential heirs. Or if I’m the adult child contemplating being executor someday, asking parents, would you be willing to share with me what the estate plan says? But that can be very important in reducing the potential for misunderstanding and for properly framing decisions that we’ve made that may otherwise lead to hurt feelings. when we’re no longer there to explain what happened. A classic example is when we are leaving assets in trust for heirs and our intent is to protect them to make sure that credit assets are not available to creditors or assets would not be available in a potential divorce proceeding someday or assets would not be available by a pro potential other spouse that we’re not aware of that may join the picture in some future date. If the document stands on its own, there is the chance that the adult child can come away thinking, “Mom and dad didn’t trust me. What’s up with that?” Right? Why did they not just trust me? And the simple answer could have been, “We did trust you. There were other reasons we were doing this. They were hoping this was going to be for your benefit.” But if all you’ve done is left a document, that document is going to stand on its own and is open to many kinds of interpretation. So,  what documents can we use here in addition to kind of communicate intergenerationally and make sure we’re prepared? Savant has an estate and trust administrators guide. I refer to this as the catchall place where every time we figured out someone said, “Oh, I wish that I had known.” We’ve added that into this guide. And so pretty much everything that you can think of that that you might want to communicate to the next generation about where things are, about what wishes are, about what accounts are where is included in that guide. And feel free to reach out to us to ask for a copy of that. That is an important document to get our affairs in order. We want to make sure that we have if we want to make funeral and burial arrangements in advance, we have done that and we have communicated to our heirs what that is. We want to be cognizant of the tools available to us in giving perspective when we’re no longer there. So for example, a personal property me memorandum, we have in many wills that can just say my personal property will be handled according to the memorandum that I’m going to attach to this document. And then you know grandma Judy’s wedding ring that I intended to go to my granddaughter. There’s no doubt in the family about where that was to go and I can even include a note if I’d like about what that meant to me and why I’m giving it to that individual or you know uncle John’s cuckoo clock that he bought many years ago over in Germany and wanted his nephew who was an aficionado of German culture right we can make sure that we have made those specific wishes known in a personal property memorandum one thing I I’d just note here is if you have one of those memorandums and it’s referred to in your estate documents and you’ve always said, “Yeah, I’m going to get to that at some point.” I’d suggest you get to it now. This is one of those things that oftentimes can end up blank because someone intended always, “Oh, I’ll think about that someday.” And now what could have been a vehicle for reducing misunderstanding is has been lost. Ethical will statements very important when families are considering leaving unequal amounts to different children, grandchildren, nieces and nephews, what have you. It’s important to outline here is what our intent is with our estate plan, what we’re trying to accomplish and then to give some clarity some structure, context to the recipients who otherwise in certain situations are sitting around that estate attorney’s table and wondering what did mom and dad mean by that? All right, we want to be careful when we’re choosing fiduciaries. Okay, we want to be careful. Are we giving the role of trustee to someone in our family or a trusted friend or are we giving that role to a corporate trustee? As with many other things that we’ve talked about today, there’s a spectrum from simple to complex reasons why you do either. But I will say naming a corporate trustee, the advantage is all of your wishes are going to be followed to the tea and there’s never going to be a situation where they’re not there. The bank will have a successor that it names if the current person functioning as trustee is no longer with the bank. The difficulty is they’re only going to follow your instructions to the tea. And in certain se situations where you would rather have had flexibility, there’s not going to be that flexibility with a corporate trustee. With an individual, there’s a great deal for flexibility. And there’s also a great deal of potential for hurt feelings as maybe you’ve named one sibling as a trustee for another sibling. Be careful about that. Think about how that is going to be received and if possible, communicate about this in advance. As a family, you may want to consider having a trust protector to an estate plan. If you are administering an estate plan, you might want to look to whether a trust protector has been named in the documents. This is an individual who can make a very limited set of change changes to a trust that has now become irrevocable simply to accomplish adapting the trust for tax laws and estate law evolution where otherwise we don’t have that potential. Okay. So our goal today has been to get you a broad view of the role of the executor and the trustee, the in important estate documents involved, the potential pitfalls and roadblocks that can step in. Hopefully we’ve accomplished that. We’re going to give some time for cute questions and answers, but I’d also encourage you if you are interested and if you feel like you could benefit to schedule a 15-minute complimentary call with somebody on the on Savant’s team. We’re happy to have a conversation about this. This is what we love. We do this day in out, day in and day out. Hopefully, you’ve noticed that with Alaina and me. I enjoy a lot more of kind of the retirement-planning side. Alaina, I know, loves this estate-planning side and we’d be more than happy to talk.

So, we will be taking some questions today. We just have time for a couple. Like I said earlier, if we can’t get to your question, someone will reach out to talk to you about it, but I am going to pull one right now. Oh, this is a good one. What concerns are there related to legal documents when the person has property located in multiple states? So, multi-state planning is very dependent on the assets. If the asset is real estate, for example, you know, let’s say you live in Georgia and you have a vacation home in Florida, real estate passes according to state law. And with poor planning, you know, if that real estate is left in the decedent’s name in both states, the executor may have to go through probate in the state of domicile and in the state of the secondary real estate. So if it was a Georgian, you would do your regular probate in Georgia, but then you would also have to do something called an ancillary pro probate in Florida. And two-state real estate is a very common headache for executors. That’s when real estate, you know, that’s when the cost of the probate can really add up. And that’s when a lot of times you hopefully see a revocable living trust used as part of the plan as opposed to a will to avoid that tedious probate. Other assets, you know, things like LLC interests or brokerage accounts, those are all typically considered located in the state of domicile. So, just because you own a stock in Apple, for example, does not mean that you have to go through probate in California. Here’s one question. I think you touched on this, Joel, but can you have more than one executor? Oh, yeah. I’m glad to go a little bit further into that. Yes, you can. I was talking about I think in the context of power of attorney, but yeah, you can have more than one executor. The question is, should you, right? This is always a question of like all right well I want to make sure that all of my children are involved in the in the executor role that can be something that has positive intent and ends up creating family disharmony. Right? So what we’re thinking of with this executor role is making things as simple and straightforward as the individual as possible to have thought through things well in advance to simplify where possible and then to have the function of the executor be limited and temporary. And in those circumstances, what we found is typically it’s better to name one individual. If you’ve named multiple individuals as executors, multiple individuals are going to have to sign documents pertaining to the estate and they’re going to have to agree about what has to happen. That sounds like a headache. Yes, definitely. All right. Well, that is all the time we have for questions today. Thank you so much, Joel, for joining me. It’s been an absolute pleasure, Alaina. And thank you all for joining us. We’ve been glad to share an hour with you today. If you have additional questions, please do don’t hesitate to reach out. Bye. If you enjoyed this webinar, visit savantwealth.com/guides and download our complimentary guidebooks, checklists, and other useful financial resources.