A Practical Guide to Estate Planning

Drew Thomas  0:00  
When, when most people hear the phrase estate planning, they probably have a mental image of somebody that is you know living in a multi-million dollar mansion and you know diving into their coin bin like Scrooge McDuck. This is this is not necessarily the case for everybody. The truth is. All right. So, morning, Jeff. Morning, Drew. How are you? I'm doing fine. How about yourself? I'm all right. You know, I, I got to be honest. I, I tend to avoid the whole good morning thing. Okay. Why? Well, because I think of unlike you, I think of our listeners more than myself. So, I don't know when our listeners are listening to this. So, if I say good morning to you, it's morning for us. Okay, but it may not be. It may not be morning for them. But I. But I said it already, and so it's my fault, and I'm going to own it.

Jeff Matevish  1:17  
Hello, Drew.

Drew Thomas  1:17  
So, we are going to have a good conversation today, I think, and this is on a topic that I don't think either one of us are particularly well versed on. No, I'm

Jeff Matevish  1:29  
I'm definitely going to learn a lot for this one. Yeah.

Drew Thomas  1:31  
And so this week is well, I'll let you explain this. Okay, so.

Jeff Matevish  1:36  
Yeah, this week is estate planning week. If you didn't know, exciting week, and so our, our guest today is Dave Finui. He is the Executive Vice President of Wealth & Capital Management. Correct, thank you, sorry.

Dave Finui  1:52  
Yeah, that's okay.

Jeff Matevish  1:54  
Hi, Dave. Welcome.

Dave Finui  1:56  
Well, thanks for having me.

Jeff Matevish  1:58  
And you are you were the first guest that we had on this podcast too, so it's been quite quite a while. But but welcome back.

Dave Finui  2:05  
Thank you very much.

Drew Thomas  2:07  
It's, it's nice to have friends of the show, even if those friends are are not necessarily frequent flyers. Sure. So, Dave, so we're so we're going to talk estate planning, but before we get into the the nitty gritty. Explain a little bit about your your your sort of credentials. Like you've you've been doing this a while, right?

Dave Finui  2:26  
Yeah, I've been I've been in the financial services business for unfortunately well over 50 years. I started very young. My father was in the industry, so I kind of followed his footsteps. Really happy to do so. He gave me a great start in the in the.

Drew Thomas  2:42  
Oh, that's awesome! I didn't know that.

Dave Finui  2:44  
And I've been a trust officer or been involved with the trust business early on. About, about 1978 is when I really started in that business.

Drew Thomas  2:54  
Okay.

Dave Finui  2:54  
Had a few stints in, in some other industries as well, but I absolutely love the trust business. I love helping people plan for their future and, and, and plan for such things as this, the estate planning portion of it.

Drew Thomas  3:08  
Absolutely. So, before we get into the into the details, we do want to make sure that, and we put a disclaimer on every episode, right? But it's usually at the end, and we know that you don't want, we know you don't listen. So, we're going to go ahead and just say this right up front that basically anything that we talk about today is not considered advice. We are well, Jeff and I are definitely not experts, but even Dave does not know your particular situation and everything about your particular financial status and so forth. So, we're, we're going to give you a. We're going to give you some, some information. Information, without it necessarily meaning that it should be advice that you specifically should take without consulting a financial advisor of your own. Is that fair?

Dave Finui  3:52  
Yeah, that's that. That's fair. A lot of the things that we talk about, I want to make sure upfront we understand this. This is not legal advice. I am not qualified to give legal advice. I'm not an attorney. We do not practice law within the trust department. That's why we hire attorneys to help us at this time. That's fair, and that's why the listeners, whenever they're doing estate planning, should also hire an attorney, in essence, to, to draft those documents. In addition, want to make sure this is not accounting advice either or tax advice. You know, can only, only receive that from a qualified accountant that does know your personal situation as well, because everybody is different.

Drew Thomas  4:31  
Yeah, that's, that's completely fair. So, so with that in mind, let's, let's start talking a little bit about. So, I would say, like when, when most people hear the phrase estate planning, they probably have a mental image of somebody that is you know living in a multi-million dollar mansion and you know diving into their coin bin like Scrooge McDuck. This is this is not necessarily the case for everybody. The truth is, if you. Something you have a bank account, or you have people who depend on you. Estate planning will apply to you, probably in some, some way at least. Correct?

Dave Finui  5:09  
Yeah, that's that is correct. You know, it goes it goes from the ultra-wealthy on down to the rest of us as we as we as we go through life. There's, there's simple estate plans that one of the things that we like to talk about sometimes is just the simple "I love you" wills. You know, it's husband and wife. They give each other everything, give everything else to the kids. They love them, and everything goes on. And even those are important to have because that way they can they can kind of ensure that their assets, their money, their property is going to go the way they want it to go. Okay, we'll talk about that a little bit more whenever things are not done.

Drew Thomas  5:50  
Yes. So, so, so let's define estate planning. So, when we when we talk about that, what does that actually mean for the average person, the, the average family? Like not like you said, not just the ultra-wealthy.

Dave Finui  6:02  
Yeah, I think I think a lot of people believe that whenever they're doing estate planning, you're really thinking about the costs of the estate. What are estate taxes? What are inheritance taxes? In Pennsylvania, we have an inheritance tax. What are probate expenses? How do I minimize all of those types of things? And they think of it as, as simply that that they want to minimize the taxes and minimize the costs. As although that's important, there's a lot of more important things or other important things that are occurring in estate planning considerations, like what happens if I become incapacitated. That's, that's a bigger problem sometimes than passing away. Who will take care of my children if my spouse and I both are deceased in a common accident? We've seen that. Who will physically take care of them? Who will handle their finances? Those are the types of things that we want to make sure of whenever we're talking to somebody about estate planning that they consider. What are their goals? Where do they want things to go?

Drew Thomas  7:05  
And, and I would imagine from, from just from a purely anecdotal standpoint, that has to be a difficult conversation for people because I don't think people like to think about the idea that they could you know pass on unexpectedly that they could be involved in a in a plane crash or an auto accident with their spouse or something and leave their kids behind like that. That's an uncomfortable topic. I mean.

Dave Finui  7:25  
It is an uncomfortable topic, but it is very, very relevant and very important to have. You know, a lot of people feel that if they get a will drawn up, that they're going to actually be a precursor to their demise. Well, will drawn up? Does that mean I'm, you know, I'm going to die soon, and, and it's you have to get past that, yeah, past that, put it down.

Drew Thomas  7:48  
That's, that's the whole like knock on wood thing. It's like if I bring it up, it's going to happen, right? Right.Or if I if I don't

Jeff Matevish  7:52  
Or if I if I don't go to the doctors, nothing's wrong, you know. Yeah. Yeah. Yeah. Same. Yeah. Similar idea. Yeah. Yeah. Yeah.

Dave Finui  7:57  
Same idea.

Drew Thomas  7:58  
Yeah. Absolutely. So, um, so you know, knowing that that people tend to tend to procrastinate a bit, like why do people put it off? Is, is it for that reason? Is it because it's just an uncomfortable topic?

Dave Finui  8:10  
That's the biggest reason. Just procrastination. I can get to it. I'm, I'm okay now. I don't have to do it right now. The problem is, you know, we can get hit by the proverbial bus.

Drew Thomas  8:22  
eah.

Jeff Matevish  8:23  
And it also seems like maybe it's a difficult or a the, the process is a difficult process. Is that is that true?

Dave Finui  8:30  
A lot of people think it's more complicated? Yeah, than it, it is. Correct. Okay. Yes. Good idea. Yeah.

Drew Thomas  8:36  
So, so I guess the, the question really becomes in, and, and I want to try to make sure that we're doing this in in as simple a terms as we can, just because not all of us. I, I I've been in banking for over 13 years, and there is still things about this that are sort of above my head. So, for the average person on the street that has never dealt with this, I'm sure a lot of these things are, are, are a little bit murky when it comes, and that's why I think it's so important to have a professional person who does know this stuff to help you through it. So, what problems, I guess, is an estate plan really trying to solve? Is it is it really just like what you sort of started to outline?

Dave Finui  9:17  
Yeah, it's it. You know, everybody has an idea where they would like their money to go whenever they pass away, where would I like my assets to go? And there's, you know, one thing I hadn't really put down before, but thinking about it, what about your philanthropic beliefs? You know, would you want to give to charities? Those types of things. The, the biggest thing though is that you want to protect your beneficiaries. You want to you want to protect them to pass your inheritance to those you wanted to, to go to. Other considerations, as we talked about, would be to reduce expenses, reduce the taxes whenever possible, and protect your family from tough decisions to and, and to avoid others. Such as the courts making those decisions for you, because if you have no estate plan, that's what happens.

Drew Thomas  10:07  
Yeah, that that I mean that's true. I mean I think a lot of people think that I don't know. I am again, correct me if I am wrong, but I think there is a lot of people that sort of make the assumption that well my family will just take care of it, or my you know everything that I have. Yeah, it's not my problem. We'll just go to my kids, or they'll just go to my wife, and I, I don't need to put that on paper. And, and then all of a sudden, you know, some weird thing happens, and there's a judge involved, and you, you just can't expect that all the time. I get you know so.

Jeff Matevish  10:40  
So, estate planning is that is that something that strictly covers you know post mortem or is you know is that covers you know situations while the person's still living?

Dave Finui  10:52  
Yeah, the other that's, that's, that's a great question because a lot of people think of that. Yes, the will is for what happens whenever you die. Okay, but as I mentioned earlier, we need to be concerned. What happens if I just become incapacitated? What happens if I'm in the hospital and somebody has to make my family has to make the decision to pull or not pull the plug?

Jeff Matevish  11:17  
Okay.

Dave Finui  11:17  
You know those are things that the difficult decisions that we don't want to lay on our family. So, the estate planning actually is about three different things in essence. Number one is the will. Yes, we want to have a will that shows where our money is going to go, what's going to happen whenever I do pass away. But you also want a power of attorney. The power of attorney names somebody that can handle the business for you, if you should become incapacitated or just for some reason unable to do the business for yourself. Okay, and then the third is a healthcare provision, a healthcare power of attorney that says this is how I want to be treated if I'm on my deathbed, if if certain things are happening to me that I I don't want my family to have to make that tough decision, you know. You imagine, and we've seen this where the the I use the husband as the example was on the deathbed, and and the wife is is charged with saying stop life support, you know that's a very difficult decision to say. My spouse, I'm going to kill my spouse. You don't want the wife to have to make that decision, so you put it down on paper, give that directive to the doctors, and the doctors can follow those instructions.

Jeff Matevish  12:37  
I got I got chills on that one.

Drew Thomas  12:39  
Yeah, yeah, that's yeah, that's well, and seen it happen. Yeah, I'm sure. And you know, I mean, the it's bad enough, I would think, if it's a, a, a wife, you know, or a spouse, you know, if it's the wife or the husband, whatever. But a spouse, but I'm imagining a situation where maybe the, the, the, the spouse has already passed on, the, the surviving spouse is elderly and in that kind of a situation, and now you have kids, and sometimes you have two or three different kids, and they all have different opinions about what should happen to mom or dad, and so now you know it's left to well who makes the decision, and a lot of I think there's a lot of families that still think well the eldest will make the decision, but sometimes the eldest isn't the one the most equipped to make that decision? Yeah. Well. Yeah. Or maybe it's not the person that the person

Jeff Matevish  13:26  
Wasn't closest to, or yeah, yeah.

Drew Thomas  13:27  
Or would have chosen, right? So, I mean, I think having that in writing ahead of time makes a big difference.

Dave Finui  13:33  
One of the other just caveat here is I like to tell people first of all, while you're alive, while you're capable, you have to understand that all of these documents are written in paper, not in stone. So, the fact is, you might make a decision today as to how you want something to go. But as life happens, you get older, the children get older, you know, medical advances happen. You can change those provisions. They're written in paper, so you can just tear those up and have new ones drawn up as matter, or, or amend the, the current documents as they are.

Drew Thomas  14:09  
Yeah. I yeah. I'm sorry. Go ahead.

Jeff Matevish  14:11  
Oh no, I, I was just going to say. So, you, you, you mentioned power of attorney, and there was a couple other terms that I think we, we should define before we get too far into this, probate, executor, and beneficiary are three other terms that are you know very common in estate planning. Can you can you go into probate and executor a little?

Jeff Matevish  14:31  
Let's just a, you know real brief discussion on it. Probate that really just refers to the expenses associated with the state settlement.

Jeff Matevish  14:39  
Okay.

Dave Finui  14:39  
You know there are some court filing fees. There are accounting fees, attorneys' fees, executor fees. Those types of things, those can all be minimized or avoid. They can they can be minimized, but they cannot be totally avoided. Okay.

Drew Thomas  14:58  
The state needs their money.

Dave Finui  15:01  
The state needs their money exactly. The executor, the executor is just a person or an organization, a corporate corporate executor, and that's how we act. We act as corporate executors through the trust department to make sure that the the state is settled the way you want to. Okay, and they have to make some difficult decisions sometimes too. If you name a child, one of your children, for instance, as executor, and there's five children, do they all get along? You know, are you sure that the you know the one is going to be fair to the other four? That has to happen. So it's very important as who who you pick your executor to be to handle those affairs should something happen to you, and finally the beneficiaries. Beneficiaries are just the whoever receives the money upon your demise. You know whether it be individuals, whether it be charities, whether it be other organizations, anything along those lines, but that's the beneficiaries of the final recipients of your assets.

Jeff Matevish  16:05  
Okay. Okay.

Drew Thomas  16:07  
Yeah, you said about the, the whether the kids get along and all this kind of stuff. I think the, the other thing that I find interesting about this, or, or maybe reassuring about this, is that we Are very as a society, we are very conscious of fulfilling the last wishes of the person, and, and I think that gives us that are surviving like some sort of reassurance that our wishes will be followed, right? Because ultimately, once we're gone, there's only the people surviving that we're relying on to carry out our final wishes, and so being this this attentive to that gives us some reassurance that when our time comes, our wishes will be followed as well. You know, so what would be some of the most important sort of estate planning documents that that just about everybody should have in place.

Dave Finui  17:05  
I and that obviously is, is the, the crux of this discussion. Yeah, you know what do we do here? So, let's just go through them real quick. The last will and testament. Now this dictates how your property is to be distributed after you die. That names the executor we just talked about, who will manage the estate, and designates guardians for the minor children. That's another part of it, because if again, if both you and your spouse would die at the same time, and you had minor children, who would take over? Who would be their guardian? If you don't name somebody in the will, if you don't name a person or, or some, some institution to take care of them at that time, the courts will have to decide that, and that's sometimes not the type of type of thing that you want to have it happen.

Drew Thomas  17:53  
Yeah.

Dave Finui  17:53  
Okay. Without a will, if you in Pennsylvania the estate effectively writes the will for you, it tells there's a specific guideline that says if you do not have a will, and that's called dying intestate. Intestate meaning without a testamentary document. Okay, will so you die intestate. It lays out how things are going to be distributed. Okay, and it's not always the way you might think. In fact, this one in particular, I like to use this example. Dying intestate, normally, we, we name our surviving spouses the beneficiary of our state. So, you know, I'm married. If I if I die, I name my wife to receive everything. Okay, that's the way it would normally be, and you would think maybe that's the way that the, the state would write the will too. If, however, there's no will, and you have children, and you pass away, Intestate law states that the spouse receives the first $30,000 plus half of the remaining balance.

Drew Thomas  18:59  
Okay.

Dave Finui  19:00  
Okay, the children have to split the rest step. So, if I have mean children, after the first 30,000 is paid, after half goes to my wife, okay, the remaining the, the children split that evenly.

Jeff Matevish  19:14  
That's oddly specific.

Dave Finui  19:16  
Yeah, yeah. And, and the fact is, if, if you don't name your wife, then it's the guard. If you don't make sure that your wife is going to be the guardian, right? They have to name the court. Will name somebody to, to manage that money for them. I've seen it happen, and, and it's definitely not what the decedent would have wanted.

Drew Thomas  19:35  
I'm curious, and, and honestly, this may be a question you can't answer. And if that's true, then that's fine, but I am curious. How often does the state amend these things to account for things like inflation? I mean, you know, I mean, like if you say like, oh, the first 30,000. I mean, for some people, the first 30,000 is like what's in their checking account. For other people, that might be their entire. State, correct. Yeah, you know. So, I'm curious if, like, how often does the state change that to, to sort of keep up with the times?

Dave Finui  20:07  
Very, very rarely. Okay, there, there have been changes to trust law over the years, and, and made a lot better over the last several years. However, most of intestate law is as it's remained probably since I've been in the business.

Drew Thomas  20:24  
Wow! So that's an even bigger reason to make sure that you're putting it on paper, right? Because

Dave Finui  20:28  
Make sure that you do this. Yeah.

Jeff Matevish  20:30  
So when you're making a will, is there you, you mentioned that the, the state, if you don't have one, will kind of fill in the blanks for you? Is there like a, a template that you should use for writing your will, or...

Dave Finui  20:40  
No. Okay. No, not really. Okay. You want you, you want to determine how you want your estate to be split. Okay. That's all. Okay. Some people, most people, are going to say, "Yeah, I want to leave my children if we both die. That type of thing, but maybe not. Okay. There could be other reasons why maybe one person is a special needs child. We have to make sure we take care of them, you know, one, one child is, is extremely successful and maybe doesn't need the money like the other one might need it. There could be children that are that are spendthrifts that you know, if they get any amount of money, it's going to be gone within 30 seconds. You know that type of thing, and you have to be ready to take care of it. In fact, we'll talk about that in just a second here. Yeah, we go straight down through it. But no, I have not seen the, the intestate law change for quite some time. Yeah, it's, it's pretty much specific.

Drew Thomas  21:32  
Gotcha. All right. Yeah, I'm sorry. I didn't mean to interrupt you. So yeah, continue. So, what else? What else do we need here? We need.

Dave Finui  21:38  
Will was number one. The second one is we talked about. It's known as a durable power of attorney. Durable meaning that if I become incapacitated, it still remains in effect. In the past, there used to be a split between durable and non-durable. Meaning, if I had a power of attorney, name somebody as an agent who was non-durable, I became incapacitated. It was no longer in effect. The durable power of attorney means that it's going to stay in effect even if I become incapacitated or named, you know, incompetent by the court. Any of those things, this power of attorney still remains in effect. So it appoints someone to handle your financial and legal business if you become incapacitated or simply unable to handle your affairs for any reason, without this, there is the possibility that the court would have to step in and name a guardian. We get involved in that all the time too. Not normally what an incapacitated person would, yeah, yeah, happen. They, they, standard type of situation. I name my wife as my power of attorney. She names me as her power of attorney. But then we have to have an alternative if something happens to both of us, and and the power of attorney laws in Pennsylvania are are allowed for that.

Drew Thomas  22:53  
Yeah, the, the durable power of attorney. I mean that that team seems like that's kind of a I I'm, I'm trying to think of a situation where that that non-durable would have even been something you. I mean, the whole point of having a power of attorney is so that if you're incapacitated, you somebody is named. The fact that that person would no longer be capable after you became incapacitated seems really strange to me. So, I guess it doesn't. I guess it makes sense that that was no longer.

Dave Finui  23:18  
That was changed.

Drew Thomas  23:19  
Yeah. Yeah. Exactly. Okay. Yep.

Dave Finui  23:23  
Hey, and we talked about this then too. The third thing is known as a living will or advance directive, and that's the healthcare directive. That's it. You know, outlines our specific preferences for end-of-life medical treatments, such as life support, feeding tubes. This relieves your survivors and, and the spouse or the children from having to authorize those things or make those tough decisions in a very stressful time, anyhow. Yeah, and it's very important to have that. Very easy to draw up. You just give your wishes, and the attorney will take care of it from there. Okay, and then lastly, we want a consideration of trusts. Trusts are a whole different topic, and we could have a whole line, you know, a whole podcast just on those living trusts. Living trusts are drawn up while you're alive and become effective while you're alive. Testamentary trusts are those that are put in the will, and they only become effective upon your demise. So, if you if you don't die right now. That, that trust has no effect whatsoever. Okay.

Jeff Matevish  24:25  
Okay.

Dave Finui  24:26  
Living trusts are done for a number of reasons. One is that it does help to avoid some probate expenses because assets that are listed in a living trust are not subject to probate. So, you don't have to file with the court, and also one of the one of the things that a lot of people get concerned about is that if you die, and you file with the court what your assets are, anybody could walk into the recorder of Will's office and look that up. Okay, trusts become very private. They also make it distribution to your final beneficiaries a little bit quicker, a little bit easier if you do a living trust. However, I do want to caution: not everybody should have a living trust because things that you put in a trust can have some effect on benefits, government benefits such as Medicaid. Oh, okay. Put your house in a trust; it becomes a non-exempt asset, so it is added into your assets for Medicaid purposes. If you have it just in your name alone, then it's an exempt asset. It does not count against your assets that you need to draw down for Medicaid the, the benefits, okay, things like that. We need to get certified elder law attorneys, estate planning attorneys that that are very familiar with that involved in that type of planning to make sure if you're doing such a thing that it, it is for your benefit. Yeah. Okay. But that's trusts are a separate animal. A trust is you name a trustee instead of an executor. Okay. And those that's the person or the organization, the corporate trustee that manages those assets and then follows the directions, especially for what are known as discretionary distributions. Discretionary distributions get involved in a trust. The standard that we all talk about is known as HEMS. H-E-M-S. It's Health, Education, Maintenance, and Support. So, the trustee can authorize a distribution to the beneficiary for health, education, maintenance, and support. Very broad standard, but still very, very important to make sure that they maintain the assets for the benefit of the beneficiary, and, and follow the wills of the person that gave that money in the first place.

Jeff Matevish  26:52  
Okay.

Drew Thomas  26:53  
So, so I am curious about one thing. You mentioned the you sort of defined an executor, and you explained their, their, their role, right? But I guess I'd like to elaborate, maybe, or get some clarification on if the will says, you know, if, if I if I have four children, I'm going to make this up. I don't. I have one, but imagine I had four, right? And I say, what's that? Yeah, I know. I'm, I'm running out of time here. You know, it's the so if I have four kids and I say, okay, I want everybody to get 25%.

Jeff Matevish  27:28  
Yes.

Drew Thomas  27:29  
You know, assuming that my everything goes to my wife, and if and if some if she's passed on, they all get 25% and I name child A as my executor, right? Well, if the will says that they all get 25% what does the executor can the executor override that, or is, or are they just there to sort of like as a figure?

Jeff Matevish  27:49  
A liaison talking to the, the you know wealth company?

Jeff Matevish  27:53  
What, what the executor gets involved with is other decisions, not just that. Okay, so the 25% yes, that's fine. There's a house involved. The executor is responsible then for maintaining the assets or maintaining that house. Okay. Okay. And they decide to sell the house. The executor has the authority to do that. Okay. Okay. So, three children think that the house is worth $250,000. One child, the executor thinks, okay, I got an offer of 200. I'm going to sell it. Okay. Okay. Make that decision. Gotcha. Well, assets that are held in kind. If I own stocks and bonds, I have a portfolio, and I pass away. How is that distributed evenly, 25% If I have stocks and bonds, do I want to hold those in kind and distribute, or do I want to sell? One child probably wants to sell; the other one wants it in kind. That becomes a decision that needs to be made by the executor then how to do that. Okay. So there can be conflicts throughout.

Jeff Matevish  28:59  
Can you write that into your will, though, too. Yes. Okay. You can. Okay.

Drew Thomas  29:04  
Does the, and it seems like seems like there's a, a lot of potential work there for an executor. That's, that's, I guess you have to have somebody that's responsible but also willing to do all of that while still basically getting the same cut as the rest of their, their, their kids, you know. I mean,

Jeff Matevish  29:23  
They do get they, they, they are entitled to executor fees.

Drew Thomas  29:27  
Ah, okay.

Jeff Matevish  29:28  
You know, there's some standards out there as to what the executor can or cannot take as far as an executor fee is concerned. That's another topic altogether. But they'd be working with the attorney on that as well. Gotcha. There is that also.

Drew Thomas  29:44  
So, so if I so if I'm, I'm not I'm not handing one of my children a whole bunch of work and then they're not being sort of compensated for doing it at that point. Okay. Well, that's the because I mean as a parent I think that you want to be fair to your kids, but that also means fairness isn't all. Always 25% across the board, if that makes sense. Like fairness is, is a sort of a fluid term in in terms of you know what's fair and what's equal.

Jeff Matevish  30:09  
So, be as detailed as you can in your will, yeah, so that you have less work for your kids.

Drew Thomas  30:13  
Yeah, yes, yeah. What do we got next?

Jeff Matevish  30:16  
So, how should parents with minor children approach estate planning and guardianship decisions.

Dave Finui  30:22  
Yeah, that's again a good question. Normally, minor children are cared for by the surviving spouse, right? You would think so, but what happens if there's no surviving spouse? That's what we really need to be concerned about in this. For instance, both parents died a common accident. Without direction in your will, the courts will probably have to step in and name a guardian for the children. Now they have to name a guardian both for the person and for their estate, for their finances. Okay, because those are two different types of decisions. Where are they going to live? What happens if decisions have to be made about a doctor? Those types of things. That's a guardian of the person who's going to finance manage their money for them. Let's say there is a pretty good size inheritance to the children. In and you know, I want my brother to be the guardian of my children, but he knows nothing about money. I think he'll take he'll take good care of my kids. Yeah, you know they, they can live with them, and all of those types of things. But who's going to take care of the money? So, the courts may name a separate guardian of the estate as well for those children. Let's see, having direction, you know, we'll make those tough decisions and make those provisions of naming the guardian, potentially handling the financial decisions, you can do that also through the financial decisions through a testamentary trust. Okay, I want my brother to take care of my children. They're going to live with them, but I'm going to set up a trust in my will that all my money goes into, and then that trustee is responsible for making the distributions. I'm going to give my brother so much money every month, in essence, so that he can take care of the children because he has to spend that time with them as well. Sure. Okay. But then we go back to, as I mentioned before, the, the you know the provisions. What is a discretionary distribution? What are we going to give for? I I like to use the example, for instance, if a child is being handled by the trust, the funds, funds are being handled by the trust. What happens when the child turns 16? Want to buy a car?

Drew Thomas  32:33  
Ah, yeah, right.

Jeff Matevish  32:34  
Okay. How expensive a car? Well, that depends also on the size of the trust. You know, if I have a couple million dollar trust, maybe we can afford a little nicer car. Yeah. If I have a $250,000 trust, and we're going to be looking for education of maintenance and support for this child up until the time they turn of age, okay, maybe we, maybe we go with a lesser type of

Drew Thomas  32:57  
Sure right yeah.

Jeff Matevish  32:58  
You know what, what is necessary. But those are tough decisions to make. Things on education. What about colleges? I have a $250,000 trust, and who want to go to an Ivy League school? Okay, probably not going to last four years, right? With that amount of money, maybe we have to make a tougher decision. Say we'd love you to go to college. We'd love you to go to a trade school. We'd love you to go to this. We're going to have to step it down a little bit because if we send you to an Ivy League school, you're going to make one or two years. How is it going to get paid for after that? Yeah, you know those types of things. So, those are very tough decisions that have to be made at the time.

Jeff Matevish  33:37  
Is it? Oh, sorry. No, I had a scenario that I don't know the answer to. So, say you had drawn up a will and your young parents, but you did not update that will for many years, and you have you have a kid and you named a guardian for your child and your, your assets. That child has now turned 18. Does, does the, the guardian still take ownership of those assets if you would pass away after your child to turn 18, or does that child get everything?

Dave Finui  34:11  
That's one of those legal questions you'd ask the attorney. Okay, yeah, gotcha. But generally speaking, no. That once the child becomes legal age, they would normally receive if something was named like that. There's just no need for a guardian anymore. Okay, correct.

Drew Thomas  34:26  
Yeah, I was I was actually thinking too when you were saying when you were giving the college example. You know, is it? I don't know how much leeway that that you have. I guess if the say the student was say they were really good student and they were getting scholarships, and they got a scholarship offer to a school. Are you able to make the decision of like, okay, well, we're only going to pay the difference between the scholarship and this, and then that gets you further down the road, you know, or is it like, no, no, no, this was this money was set aside specifically for you to go to school, and that's what it's used for, and. You know, like that could that sort of thing. Like.

Dave Finui  35:02  
The provisions of the trust can get very complicated in a situation like that. But generally speaking, now if there's you know scholarships and those types of things, and we are making a distribution for education, we would pay the difference in yeah you know what is necessary out of the trust and save the other money for the other parts of health, maintenance, and support. Sure, with that child.

Drew Thomas  35:26  
Okay, yeah, that makes sense. Okay, go ahea, Jeff.

Jeff Matevish  35:31  
So, if someone seems really overwhelmed with this whole process, what, what are the first steps they need? Yeah, me too. I know, right? Yeah, like I mentioned before, this seems like a complicated process, and you know it can be. So, what, what are the first steps if you want to start getting your estate in line, drawing up a will, and whatnot? What are the first steps you need to take?

Dave Finui  35:51  
One of the first things you want to do, obviously, is, is just do a personal financial plan. Get your get, get your assets, put them down on paper assets, or in the computer spreadsheet, yeah, and just figure out what you have. When you start doing that, a lot of times you find out that you may have more than you actually thought you did because now you're starting in adding in things such as life insurance. What happens, you know, with that type of thing as well. So, you have to have an idea of what you have. Where do you want your property to go? I have three children, but my wife and I live in the in our house. Okay, what happens if something happens to both of us? One of the children still get the house? Do all three of them get it? How do you want to do that type of thing? So, you just start thinking logically through how you want your assets to be taken care of, okay. The second part of that then is once, once you're ready, find an estate planning attorney. You know, attorneys are just like doctors. You know, there's, there's I wouldn't want my orthopedic surgeon, you know, to be handling my pneumonia.

Drew Thomas  37:01  
That's a, that's, that's fair.

Dave Finui  37:04  
On the other hand, I don't want my general practitioner to be doing surgery on my knee. You know that type of thing. So, you, you have to find somebody that's familiar with estate planning law. It, it is a specific subject. A lot of general practitioner attorneys can do the simple wills. There's no doubt about that. But as, as your estate becomes more complicated, then you want to get somebody that has more credentials than somebody in that absolutely does that. You certainly don't want a defense attorney drawing up, you know, surely drawing up your will. That's that's, that's all we say. There is just find somebody that's familiar with the state law, and then particularly since we're talking primarily in Pennsylvania, Pennsylvania law, because it's different in different states. We're dealing with a state right now that has property in California, and is very difficult to handle. Unfortunately, this person died without a will, as and so we're doing it with intestate law, both in Pennsylvania and in California. Okay, so California law is completely different when it comes to property rights than Pennsylvania.

Drew Thomas  38:14  
I think California law is completely different on a lot of things. I've seen a lot of products that are known to the state of California to be detrimental, but yeah, necessarily anybody else, right? Right. Yeah.

Jeff Matevish  38:25  
That's that's it. Yeah. Make it happen. Have a visit with the attorney. The attorney can help. Then we'll go through down through the checklist to make sure that everything's handled correctly.

Drew Thomas  38:34  
Okay. What about like and, and I mean, have you have you ever dealt with anybody? And I'm guessing you probably have, considering that you said you've been you've been doing this for, for quite a while. Have you had anybody that that sort of comes in and says, "Look, I don't even know if I need you. Like I feel almost embarrassed. Like I don't have a lot. You said that sometimes you real you don't realize how much you have until you go through it. I think maybe that's, that's an important thing is that nobody's trying to judge you for how much you have or don't have. They're just trying to help you make sure that what you have goes the way you want it to. Is that is that fair?

Dave Finui  39:09  
Absolutely. And, and yeah, another part that you just mentioned there is you know when does a corporate fiduciary, such as us either as a corporate trustee or corporate executor, get involved. A couple of specific things that you might want to think about if you think there's going to be conflict. If there's conflict within your family, a corporate representative might be a good choice because we're paid to take that kind of grief. Okay, one child's mad at us. One, in fact, many times they're all mad at us. That's what we.

Drew Thomas  39:46  
That's the mark of a good compromise, right? When everybody's mad.

Dave Finui  39:50  
Yes. So, that's, that's one thing to consider. I recently reviewed a trust document. For a family, and they had told me what they wanted to have happen. As I read down through the document, I realized that is not what is going to happen here. Okay. Now, whenever I made the suggestions, they said, "Well, how do you become involved? And I said, "Actually, in this particular case, I don't need to be involved. We don't. You don't need a corporate representative. Everything's fine with who you've named, but you may want to make sure that the provisions of that trust say what do what you want it to do. Okay, so we, we do that a lot. No, we're not. We're we, we can't be of any value to you, you have everything set up pretty well. Just want to make maybe a couple of changes to make sure that the things still go the way you want them to go.

Drew Thomas  40:48  
Yeah, yeah. That's, that's, I mean, I, I, I don't have a follow up to that. I'll let I'll let you go.

Dave Finui  40:57  
You know, one of the things you asked is what happens if you haven't looked at your will for many years.

Jeff Matevish  41:02  
Yeah, yeah, I think that's probably a common, common thing.

Dave Finui  41:04  
And that is something. How often do you want to, you know, do you want to review your plan? Well, you should review it regularly, you know, just once a year, once every two years, or something. Pull it out, but specifically if there are some lifestyle changes, you know, what happens? I, you know a will for a young family, two young children is not going to be the same for whenever that fam, whenever the husband and wife get older, and the children are now of age. Right, want to change that will because you don't need the same provisions for the that you did whenever they were younger, Marriage, I get married. That's a lifestyle change. I get divorced. That's a lifestyle change. You know, one of sure things. Whenever you're talking about estate planning, and we see this in divorce, what happens if you don't change the beneficiary on your life insurance policy?

Drew Thomas  41:58  
And the ex, the ex-spouse is now, yeah.

Dave Finui  42:00  
They, they, they get it because that's that goes outside the will. When you name beneficiaries, such as for your individual retirement account or life insurance, those assets pass outside the will. Okay, okay, they go into that beneficiary. If you want the life insurance to go to the estate and be evenly split, you can do two couple of different things. One, make that evenly split right there in the document. Name those beneficiaries individually, or have it go to the estate. In Pennsylvania, assets that go to the assets from life insurance are not subject to Pennsylvania inheritance. Okay, let's follow through with that. Assets going to between husband and wife are not subject to Pennsylvania inheritance tax. Assets going to your children are subject right now. It's four and a half percent. Okay, of those assets that go to your children, that's the Pennsylvania inheritance tax. Assets going to siblings, your brothers, sisters, are 12 and a half percent. Assets going to anybody else is 15% Okay, want to make, make provision for that as you go along too. By the way, let's, let's mention the state taxes here while we're talking about sure too. Yeah, the state taxes, federal estate tax, used to be a very onerous thing for most of us because the limits were very small. Anything over those limits was subject to a tax up to as much as 40% 4440, or 45, 40% I think is what it is right now, but there are limits now. Assets under $15 million are not subject to federal estate tax. Okay, and if you're married, it's under $30 million. So, assets under $30 million not subject to federal estate tax.

Jeff Matevish  43:58  
I'm good. Yeah, I was going to say I didn't win the lottery, so yeah.

Dave Finui  44:02  
If, if in fact, if in fact you do have those types of assets, though, then you do have to get some planning done. Okay, and, and such strategies as gifting, lifetime gifting, irrevocable trusts, those types of things that can get involved in reducing federal or state taxes, and we want to. You know, we can help with that as well. And and having those discussions, a lot of people ask, "How do I get around Pennsylvania inheritance tax? That's the difficult part. It's very difficult to get around Pennsylvania inheritance tax because all assets are subject Pennsylvania inheritance tax. All the net assets, after all the expenses of the estate, then they go away. You know, all the expenses are taken care of, and money is going to somebody. Then they are subject to Pennsylvania inheritance tax. The only way to get around it is to give it away. Now, okay, okay. So, and and that of course then reduces your estate. And are you sure you want to do that and still survive? Do you have enough to give away? That's that's that's the big thing there. And then one last little provision there: you can't just give it away on your deathbed and say, okay, I give everything away. I know I'm gonna when I'm gonna die. You know, I have an illness. I'm terminal. I'm gonna die, so I'm gonna give everything to my kids now. The state has a one year look back. Okay, gifts. So primarily, anything you gift today can be called back into the estate if it's within one year of death.

Drew Thomas  45:41  
Okay.

Jeff Matevish  45:42  
Now does that count as in? So, if you if you give your, your child you know $50,000 tomorrow, does that count as income for them? Are they taxed on that, or is that is that gift tax free?

Jeff Matevish  45:54  
Depends what else you've done with gifting. Okay, it can technically speaking, it can get down to as far as Christmas gifts and all of those types of things too, but it normally doesn't come to that. Yeah, and that is that is a question for your tax attorney. Well, I mean, or account. Yeah, yeah.

Drew Thomas  46:13  
The um, you, you had mentioned actually, um, Jeff, the, the concept of you. I know you were making a joke, but like, oh, we hit the lottery. Yeah, yeah. So, what happens when you? But I can imagine that there are probably people who out there because I tend to believe that if you are if you are affluent enough to have $30 million, you know that you probably also have a financial planner, an attorney, and people that are helping to manage the that sort of thing. However, I'm sure there are also probably people out there who come into large amounts of money who have no experience dealing with that amount of money and don't realize that the rules change the more money you have.

Jeff Matevish  46:53  
That can be a complicated question because the only way that you could be get the exemption of that 15 or $30 million is if somebody, when they pass away, that you do file a federal state tax return and claim the exemption. There have been some changes in that law as well, and I, I at that point, I would definitely say you want to talk to your attorney.

Drew Thomas  47:16  
Yeah, yeah, yeah. I don't want to. I don't want to put words in anybody's mouth. It's just you know something to think about that you know sort of struck me there. Okay, where I where are we next?

Jeff Matevish  47:27  
I think we're actually pretty close to being done. Okay, I think we I think we jumped down to, to review frequency and, and life event triggers, but I think we covered pretty much everything in in some degree above that too. So.

Drew Thomas  47:40  
Yeah, yeah. These it's always it's always great to have an outline, but sometimes it's you get into a conversation and then things yeah, and you jump around naturally occur yeah. Dave, did, did you run into anything? Are you was there anything that we that we did skip over that we wanted to make sure that we touched on?

Dave Finui  48:00  
We could down through, and I'm looking at my notes right now too. I, I don't think that I think we've covered pretty much everything. We let's looking down here non probate assets, you know, home retirement accounts, life insurance policies, and that type of thing. We did cover life insurance policies, naming beneficiaries for your, your retirement plans, your 401k plan and IRA plan, is, is normally a very good idea because then that that passes outside of probate and goes directly to the beneficiaries. Generally, those assets are not subject to probate, and as such, are not open to public scrutiny and, and kind of lower the final expenses then of settling the estate.

Drew Thomas  48:44  
I never I never really gave it a thought that your retirement plan would be. See again that goes back to that you think you, you probably have more money than you think you do because you're, you're, you're putting money away ideally if you're not putting money away for retirement you should be yeah but if you're you know and but because especially if you're younger, if you're 30, you know 40 years old, whatever, and you still have most likely 30 or 20 years to go before you retire, you're, you're most likely not thinking of what's in that account on a daily basis. And when you go to create your will, you may not necessarily think to yourself, "Oh, I have to account for the fact that my retire my retirement account is going to have money in it that goes to someone because it's not something that I see in my bank accounts every day when I'm you know just bringing up my online banking. Yeah, you know.

Jeff Matevish  49:31  
Yeah, if you don't have a will, how, how do how do this may be a weird question? How do you how do you find the money in accounts? Like if I don't have a will. How would you know that I had three life insurance policies and a 401k here, a 401k there?

Drew Thomas  49:46  
That the I had a question about the life insurance policies too. I want to go back to that, but yeah, let's answer that first, and then

Dave Finui  49:51  
Generally speaking, it's, it's it can be difficult. It can be difficult, and, and we run into situations that we've found at. Said well after somebody has passed away, you know that that we didn't know existed, but the executor has some specific duties to do. Whenever we're acting as a corporate executor, you know we send a team basically if there's a house that's left now uno you know unoccupied, in particular because both spouses are now dead, children are gone, or whatever. We do have to go through the house inch by inch, round for clues as to where things are. The mail. Where do you find? You know, there are statements that you get. Bank sends statements. Sure. So, you look at bank statements. Oh, we found out, and they haven't accounted another bank. Oh, here's a mutual fund statement. So, contact the mutual fund company. Going through the mail is a big thing about that as well. But there are dues that the executor has to do. For instance, people know that that house might be empty now. Yeah, and you know you have to make sure that that it's secure somehow. The insurance policy, making sure that the, the liability insurance policy covers an unoccupied house because some don't. So, we have to make sure of all of those types of things too.

Drew Thomas  51:13  
Okay, so that I still want to put a pin in my.

Jeff Matevish  51:16  
It's a it if it's an it's you almost become a detective.

Drew Thomas  51:20  
Yeah, it's got to be even harder and harder now that everything's going paperless. You know, that's I was just about to say I wanted to put a pin in my life insurance question, but come back, but I wanted to say like going through a house, but in today's world where everything is online, is there provisions in people's will that says like here's all my passwords, like here's how you access my accounts, yeah, true.

Dave Finui  51:41  
Digital assets, and there are seminars on all of that. And yes, it is a good idea that somebody that somebody has an idea of how to get into digital assets, your computer, yeah, those types of things. Yes.

Drew Thomas  51:55  
Because I mean, even your bank statement. You were saying like you go through the mail, the bank statements, but if the bank statements are electronic and they're coming into your email, or they're coming, or they're just you know getting a notification on their phone that says, hey, your bank statement's available, or something, and then you have to go. How would you even know that it's there?

Jeff Matevish  52:12  
Yeah, you don't have the password to their email. You don't have the your their you know face recognition for to unlock their phone. I mean, yeah, I'm sure it's really difficult now.

Drew Thomas  52:20  
And that's it. And that's got to be a really difficult balancing act between privacy while you're alive and the need to access that information by somebody after you've passed on. You know, so that's crazy. Life insurance. So, I was going to say, like a lot of times people have a life insurance policy, and sometimes they get one when they're younger. It's just a small policy to sort of tide them over so their parents don't get stuck with something if they're if they're young and they something happens. But a lot of times your employer will offer a life insurance policy and then you might have one that's accidental only and all this stuff. I think it's important to try to remember that you know if you're going to make a change, you were saying about making changes as life events happen. That you're making the changes to all of your policies. That making a change to one isn't necessarily going to affect the others.

Dave Finui  53:13  
Absolutely, it's, it's specific. Yeah.

Drew Thomas  53:16  
And that's, that's true even if it's with the same company, correct?

Dave Finui  53:19  
Absolutely.

Drew Thomas  53:20  
Okay.

Dave Finui  53:20  
The policy is its own.

Drew Thomas  53:22  
Yeah, so just because you know, if all three of your policies are with a national insurance provider, and you call them and say, hey, I need to make this change to this policy, they're not going to make the changes to the other ones too. Yeah, yeah, you got to specify that.

Jeff Matevish  53:35  
Yeah.

Drew Thomas  53:36  
This has been very informative for me, anyway. Oh yes, and, and hope, and I'm sure to the people that are watching and listening as well. But.

Dave Finui  53:47  
Yeah, I'm going to throw in a last comment. Yeah, a specific planning thing that that people need to think about if they have a special needs individual as a beneficiary, because this is something that has become more important. Government benefits. There are government benefits that that people with special needs can get, and sometimes based on their need, such as Medicaid, such as SS Supplemental Security income, those types of things, and if you, for instance, leave money to a special needs child directly, it could knock them off of those government benefits because now they have assets that are above the limits. Oh wow! Okay, yeah. And what happens is then the that particular child or the planner for that child they can shield those assets in a special needs trust, okay? But that is is now known as a payback trust, which means that if they are receiving Medicaid, okay. And those assets are shielded from they can continue to receive the Medicaid whenever that special needs child passes away. The state needs paid back for their Medicaid as a payback. Okay. However, if you do a first party trust, meaning that rather than giving that child that special needs individual money directly, you place it in a special needs trust for their benefit. Then it is not subject to that payback, and it can still shield the assets from their, you know, from being counted to receive those types of benefits. It's a very specific, detailed process now in special needs trust to make sure that it's taken care of in that way, so that whenever something does happen to the special needs child in that type of a trust, hands to the beneficiaries. It's not subject to the payback to the government. Gotcha. Okay. Wow. So, those, those are very. If you do have a special needs individual child, you want to definitely get with an estate planning attorney to make sure that it's taken care of for us.

Drew Thomas  56:08  
Yeah, I, I can I can only imagine the, the, the legal loopholes that that are jumped through when it comes to this sort of thing, and it I think it, it that alone just it behooves you to, to have somebody that knows what you're doing. You know, you, you I wouldn't want to try to do this myself, and I and you know and, and I would imagine that technically speaking, I mean, you know, you read about people that say like, oh, I have a I have a, an online legal document creator, and I can just make my own will, and I can you know whatever, and you know I guess potentially better than nothing. Yeah, maybe I don't even know. It's better than nothing. That's the thing.

Dave Finui  56:48  
Like may complicate things. Okay. Yeah. Worse because the the different laws, like I said, different states have different, different laws. So, if you're doing something like that, you want to make sure, of course, that it's written for Pennsylvania law. If you're a Pennsylvania resident, we've seen many problems in things like that. That that pulling stuff offline without knowing what you're doing.

Jeff Matevish  57:13  
Okay.

Drew Thomas  57:14  
Yeah. So, yeah, that's definitely something to keep in mind. I think too. I mean, it's, it's easy to see these things get an ad on your phone, whatever. All you know, easy legal advice, and you know, after you watch this episode, chances are you'll probably get one because some algorithm will, will feed you, you know, some something like this. But you know, even like you said, you know, there, there are situations where you think that you're acting in the best interest of a special needs child, or something like that, and then all of a sudden you don't realize the, the unintentional ramifications of well, I gave you this, and now you no longer qualify for this assistance or that or whatever. So, having a,a financial planner, an, an estate planning attorney, very, very important, I would say, especially if you have a some of these situations.

Jeff Matevish  58:03  
Yeah, and, and just the story that you had mentioned earlier, with you know you, you, you reviewed someone's will and you know what they're explaining is different than what it says on paper, correct? Yeah.

Drew Thomas  58:12  
Yeah. Dave, thank you very much. I really appreciate it.

Dave Finui  58:17  
Well, one correction, I did say 12 and a half percent Pennsylvania inheritance tax sibling, it's 12% I, I think I misspoke on that.

Drew Thomas  58:24  
Okay, well the siblings will be happy to get their extra half. Yes, yes. No, but but really, I mean, I appreciate you making that correction. Um, thank you very much for being here. This has been very very interesting, and.

Dave Finui  58:35  
I've enjoyed it.

Drew Thomas  58:36  
Yeah, and, and honestly, if you ever want to come back and talk about any of these other things, special needs trust or any of the other. You said we could do a whole a whole episode on just on trust. Yeah, on trusts themselves. You're more than welcome. We'd love to have you back. So.

Dave Finui  58:47  
Thank you both.

Jeff Matevish  58:48  
Thanks Dave.

Dave Finui  58:49  
Thank you to the audience.

Jeff Matevish  58:54  
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