Transcript

Intro: [00:00:00] Welcome to Retirement Unlocked with Larry Heller, your life, your way, unlimited possibilities. Join us as we explore how tailored financial planning and investments can help you navigate life transitions with confidence. Let’s dive into this week’s episode

Bill Tucker: And welcome back to Retirement Unlocked with your host, Larry Heller. Joining Larry today is Dom Pirillo, attorney, certified financial planner, and director of wealth transfer at Savant Wealth Management in our Manassas, Virginia office. Estate planning is about much more than simply having a will or a trust in place.

An effective plan requires thoughtful implementation, regular updates, and careful decisions that can help you protect your legacy and make things easier for the people that you leave behind. In today’s episode, Larry and Dom discuss some of the most common estate planning [00:01:00] mistakes, why estate taxes may still be a concern despite today’s historically high federal exemption, what to consider when selecting the right trustee, and strategies that parents can use to help protect the assets they leave to the next generation Larry, it is good to see you, my friend

Larry Heller: Great to see you, Bill

Bill Tucker: I’m excited here.

You’ve got a guest from, from Savant, which is great. We’ve been talking about Savant for, for a while now on the podcast. It’s good to see somebody from Savant join you.

Larry Heller: Yeah. So Dom, you’re our first guest from Savant, so welcome. Excited about talking about today’s topic. We should have some interesting tidbits for our listeners out there.

So welcome.

Don Parillo: Thanks for having me. I’m honored to, to join you in our inaugural Savant guest, uh, podcast, Larry. Uh, you know, we… Obviously a big fan of yours as well. Excited to share some wisdom with our listeners.

Larry Heller: Yeah. So we’ve both kind of been around the, you know, a little bit here to see some of the pitfalls, you maybe [00:02:00] more than me, ’cause you do this every day.

But, um, in, in my years of experience, I’ve seen some of the, some of the things that we may talk about today. So I thought it would be great for our audience, for us to tell them what we see as some of our pitfalls, and so they can avoid them. So, uh, so let’s, we’ll talk about a few. When, I’m, we’re not gonna get to every one of them, but let’s talk about a few.

So Dom, why don’t you kind of start us off with, you know, the first kind of pitfall that you see?

Don Parillo: Yeah. And you know what? It’s, it’s nothing major. It’s, sometimes it’s the basics that people overlook. Uh, you know, the, the, the biggest pitfall is just not even having a formal estate plan, right? Uh, a lot of people think that, uh, you know, “I, I don’t need a trust or a, a complicated will, right?

I’ve got beneficiary designations. I don’t have, you know, a, a level of wealth to, to justify working with an attorney.” And really, everybody can benefit from an estate plan, even a really [00:03:00] basic set of documents. I think that a lot of people overlook incapacity planning, Larry, which, you know, in our- Mm-hmm

line of work is critically important when you work with, uh, you know, el- elderly individuals and families. Uh, many people when they think about estate planning, they say, “Well, boy, if I die, what happens to my wealth? Uh, you know, dollars and cents, how do things get distributed?” But incapacity planning, huge pitfall.

Uh, uh, you know, for power of attorney for property and healthcare are two documents that, that people can put in place, um, to a- allow them to nominate agents who can act on their behalf to make financial decisions and healthcare decisions. In absence of those basic documents, if you become incapacitated, a court actually has to appoint a guardian or conservator over you.

It’s, it’s an embarrassing, a time-consuming process. Really should be avoided. So even if you don’t think you have the level of wealth that justifies formal documents, like, you really wanna have those core [00:04:00] documents in place. Basic power of attorney, you know, basic last will, trust for probate avoidance.

You’ve probably seen this- You know, come up where people are surprised and there’s some unexpected health emergency or something and, and then they have to deal with it later.

Larry Heller: Yeah. So, you know, I haven’t really seen that, but I’ve seen one thing that I want to avoid again in, in my lifetime. It’s kind of the same thing, you know, a simple, simple thing, but a couple that had children and had no wills, and, um, unfortunately they were killed in a car accident, and both the grandparents were fighting to become guardians of the children, so, and that w- that went to court over, over that, so which is really sad to, sad to see.

So you’re right, some of the basic, simple things that you, that you need. On the flip side, I’ve also seen people, sophisticated attorneys, um, out there, very, very successful, who for whatever reason don’t go ahead and put the, put their documents in place, from [00:05:00] wills to simple documents, even late, late in life, and that’s one of the things that, you know, I do is try to get them to, you know, to, to get down and to get these documents in place.

Don Parillo: Yeah, it’s the shoemaker’s children syndrome. Uh- Absolutely … right, right? Uh, it’s, v- and that’s, um, that’s, that’s often important is that, you know, people don’t understand the risks and the danger and the pitfall. You know, they, it’s hard to contemplate your own death, uh, and that, that’s the whole point of having an estate plan is that l- life is uncertain.

I guess one of the only certainties is that you don’t get out alive, right? Yep. That and paying taxes. Um, but, uh, you know, another pitfall, you, you, you were talking about some common things that we identify when we’re working with families is y- you know, you’ve gotten your estate planning documents in place.

They’re good. They, they meet the needs of your family for the time being. But implementation is a big miss, and what I mean by that is there’s, there’s misconceptions when you actually put your written estate planning documents in place. Let’s say you have a revocable living trust. A, uh, a [00:06:00] revocable living trust is a legal document.

It works somewhat similar to a will, but the, in essence, this, this revocable living trust can allow you to avoid probate when you pass away, uh, w- when there’s assets titled to the trust. Uh, probates the court-supervised process of proving someone’s will who’s passed away, noticing their beneficiaries, their creditors.

It, it’s a formal process, and it can add expense, time, delay, you know, attorney’s fees. So revocable living trusts are really popular, uh, probate avoidance vehicles, and there’s some other benefits. But, you know, you got your trust in place, and then you don’t title your assets to your trust, and now you have probate.

I mean, you go from, uh, you know, like an A-minus or A p- you know, A-level s- estate plan down to a C+ plan in execution. I mean, we, we encounter this pretty regularly, right? You just, you think, “I’ve got my plan in place. It covers everything. I don’t have to do anything.” It’s just simply not true.

Larry Heller: Yeah, no, it, it, it reminds me, at that time a, a [00:07:00] potential client who became a client who came in and we, we started to ask those questions.

“Oh, I don’t need… I don’t, we don’t need to talk about that. Let’s just talk about the investment stuff.” And it, I pressed him on it, and we ended up looking at the documents, and sure enough, he had a revocable trust. And he was real proud that he went to this high-powered attorney, did all this trust, and I basically said to him, after looking over the title of all the assets, “Do you realize nothing’s going through that trust?”

Um, because none of the assets were retitled. I think he, y- you could see his head explode.

Don Parillo: Oh,

Larry Heller: yeah. That the attorney never, you know, told him that he had to go back to his advisor and cha- retitle all the assets into, i- into his name. So yeah, so that’s definitely a common pitfall that I have definitely seen.

Don Parillo: Yeah, and, and especially when you’re dealing with, uh, let’s say you have a married couple, surviving spouse, there’s no reason there should be any probate procedure needed, you know, when you’re dealing with a survivor. Uh, I know th- things do happen. You know, people have complicated balance [00:08:00] sheets. They have complicated lives.

So you know, it’s, when you get your documents in place, you gotta, you gotta do your net worth statement, you gotta really verify title. Uh, it, it just, it helps you avoid surprises, headaches later on that are just really, really annoyances even if the, the money does end up going to the right people at the end of the day.

Just, you know, you wanna, you wanna streamline things if you can. Another misconception, Larry, is beneficiary designations. You had a good example when you sit down with somebody, and it’s sort of like this aha, you know, or enlightening moment, but a lot of people don’t r- don’t realize Uh, that beneficiary designations actually trump the written terms of your documents, right?

That it’s an independent transfer outside of your legal documents. Uh, a beneficiary designation applies to an asset like an IRA or individual retirement account, a 401with your employer, life insurance, uh, policies. In essence, whatever name you write in in that beneficiary form, [00:09:00] that’s the person that receives that, that account or that asset when you pass away, even if that’s not what your will and trust says.

So a lot of times, uh, outside of just neglecting to title assets properly, there’s also, uh, an oversight in, in reviewing those beneficiary designations, making updates, aligning the beneficiary designations with the person’s overall estate plan.

Larry Heller: Yeah, let’s go back to something. You, you, you said that beneficiaries trump wills, and I think there’s even one other thing that comes into play there that also trumps w- wills sometimes.

And clients don’t really understand. They think they get, they get their will, they think everything, including their IRAs and insurance, goes through their wills, but they also don’t realize that account titling can trump a will, correct? So why don’t you talk about that for a second.

Don Parillo: Oh, that, that’s right.

That’s another… You know, when you think about how assets pass, uh, assets pass by beneficiary designation, right? They can pass through your estate plan when you pass away if it’s in your name [00:10:00] individually All right, part of your estate or title to a trust like we spoke about, but joint assets. Mm-hmm. A lot of people, um, forget that if you own an asset with another person, bank account is a big example, or a, or a primary residence.

Let’s say you’re married. When one owner dies, the title automatically transfers to the surviving owner by right of survivorship, operation of law. And again, that happens independently just because of titling, uh, outside of your estate plan. So …

Larry Heller: And talking of title, ’cause I always have these conversations with people who have like, “Oh, I don’t need that.

I have a P- you know, a, a POD account,” and try to explain, you know, if there’s a minor child, yeah, may- you know, first of all some of the old PODs you can’t put what’s called per stirpes in it. So, you know, so people have these saying, “Well, I don’t need the wills ’cause I have everything as a POD account.” So another pitfall that, you know, is kind of a simple thing that can trip people up.

Don Parillo: Yeah. And you know what? A POD, a simple transfer beneficiary [00:11:00] structure, um, I mean, that, that might work in, in a lot of situations, but where there’s a huge fail is for contingency planning. Mm-hmm. Like, like what if that person you named passes away before you? You know, you mentioned per stirpes. That, that’s a, a Latin term that means by the roots.

That means that that named person’s descendants receive that asset if they predecease you. Uh, y- y- you know, where it gets really complicated is when you’re working with blended families.

Intro: Mm-hmm.

Don Parillo: Right? And you’re, you’re bringing, um, two households together and, and you might, you know, want the spouse to have, uh, benefit of the assets, but you, y- you know, if that spouse passes away or at that spouse’s death you want the remainder to go to your own biological children, you know, you can’t just

You can’t do that with, with plain old beneficiary designations or POD instructions. You, you really have to address those, those issues, those contingencies in your own written estate plan and, and really coordinate all the assets. You know, retitle, update beneficiary [00:12:00] designations. Uh, there’s a lot of pieces to the puzzle, Larry.

Larry Heller: Yeah, absolutely. You, you just kind of jigged my memory also- … for another pitfall that we saw that, you know, talking about blended families and, you know, w- we always ask to make sure we see with who the beneficiaries are on all their accounts and out there on all the insurance policies in there. And, uh, so I recall we, we did this and we had the meeting with them, and the ex-wife was still named the beneficiary on- Yeah

one of the accounts.

Don Parillo: Yeah.

Larry Heller: So, so it- Oops. Yeah. It doesn’t move it. So it’s real important that you check all that, or a missing child sometimes.

Don Parillo: Right.

Larry Heller: So I’ve, we’ve seen it, we’ve seen it all. So why don’t you talk about some of the other kind of … I mean, we talk about s- you know, those are kind of the basics that could really trip people up- Yeah

and cause a lotta, a lotta headaches. But why don’t we kinda delve into some of the financial things that could, you know, could trip people up, or the pitfalls of estate taxes?

Don Parillo: Yeah, and, um, you know, the [00:13:00] estate tax environment, I would say it, from a, you know, a modern standpoint in the last, uh, 15 years, there’s been tremendous changes.

Uh, you know, if you, if you think back to the late ’90s, early 2000s, uh, we had a $600,000 per person federal estate tax exemption. Seems hard to believe. Um, in the, the beginning of the 2000s that that exemption was, was slowly moved up, you know, to a million then two million. We were on our, a path to repeal, uh, in 2010, and then we had a $5 million per person, uh, estate tax exemption.

Fast-forward to 2026, as part of the One Big Beautiful Bill Act, um, that became effective earlier this year, we have a $15 million per person estate tax exemption. So, you know, not a lotta families, when you think about normal Americans, have federal estate tax problems. And, and they might say, “Well, great. I don’t have to worry about it.

Why are we even talking about this topic?” [00:14:00] Uh, a pitfall is that that’s just one part of the tax system, the federal estate tax system. States, the state that you live in can also have independent estate or transfer, or even inheritance taxes that apply. Larry, you, uh, work with a lot of clients in New York, where you’re based.

Mm-hmm. New York has a $7.35 million per person estate tax exemption. And, and, and one unique thing about New York, and this is true of some other states, too, is that there’s no portability of that election. And then what, what the heck does that mean, portability? Uh, well, when you, when you think about the federal system, uh, if you pass away and you don’t use up your $15 million exemption, your surviving spouse, if you’re married, can actually take your unused exemption, right, port it over to you via a portability election, and add it to his or her own estate tax exemption number at, uh, at the second death, so there’s no loss.

So, so

Larry Heller: federally you’re [00:15:00] basically getting a $30 million- Fe-

Don Parillo: federally you get 30, right, if you’re married. Yeah. Um, now, now states, um, like, like New York for example, there’s a, a $7.35 million exemption, but there’s no portability. Mm-hmm. So you have to do special planning in your written estate documents, your trust or even your will, to capture that, that exemption or that credit at the first death.

Larry Heller: Right.

Don Parillo: Um, that gets missed. And again-

Larry Heller: Just to clarify-

Don Parillo: Yeah …

Larry Heller: with federal, you don’t have to worry about putting assets in each one of the spouse’s name- Right … but in New York, you really wanna have the 7.35 at least in each one of those names, correct?

Don Parillo: Yeah, you wanna, you wanna make sure you’re utilizing as much of that exemption at the first death as you possibly can, so that’s exactly what you’re saying.

And, and what we find is that, well, wealth is often unbalanced, right? Mm-hmm. Even with married couples. Um, you have one high-income earning spouse that tends to have and accumulate assets from, you know, in a 401plan, you know, employer stock options plan. You know, maybe they had- there’s some joint assets, but again, [00:16:00] joint assets pass to that surviving spouse.

They bypass the written terms of the trust and, and we’re, you know, that credit shelter trust or that, that special provision to, to, to make util- utilization of that New York exemption is, is lost if that first-to-die spouse doesn’t have enough assets in their name or their trust to utilize it. Um, so the, a lot of times, um, you know, it’s, it’s the structure of assets, ownership title that, that really influences whether there’s gonna be an estate tax at the second death.

Very, very common. We see this all the time.

Larry Heller: Yeah. And New York has another surprise for you. The, the, the, the, the cliff tax.

Don Parillo: The cliff. Let’s talk about the cliff a little bit. And it- this is pretty unique to New York, but, um, I, like I mentioned before, there’s a $7.35 million basic threshold. Now, uh, when, when your estate exceeds The $7.35 million threshold by more than 5%, so you get to about $7.7 million in, in estate value, you lose the benefit of the [00:17:00] entire New York exemption.

Kinda wild. Um, so, so even if you have, you know, as a, as a couple, you’re just above that, you have to really be careful, um, because, uh, you, you might think, “Oh, we don’t have to worry about estate tax, you know, we’re, we’re less than 15 million. Yeah, you know, we…” But again, if you, if you inadvertently cause that survivor to be over, you know, the, the 7.35 million and you, you get to 7.7, you know, it’s, it’s a lot of tax that you could have otherwise avoided.

Larry Heller: Yeah, it could be, yeah, a significant amount of taxes. Uh-

Don Parillo: Yeah …

Larry Heller: you know, and we were talking earlier today that, you know, New York’s losing a lot of residents to the no estate tax states such as Florida. So now the, the word on the street is they’re thinking about some type of exit tax when you leave New York, so that’ll be interesting-

Don Parillo: Yeah,

Larry Heller: you know the-

if that ever comes to … comes. Hopefully not, but, uh,

Don Parillo: so. Yeah. I mean, there, it, California had a similar proposal, uh, recently. Um, yeah, [00:18:00] and some of our listeners, you know, they might not be in New York. It, it just… It’s good to understand the system in the state that you live in. I, uh, you know, you, for, you know, the extreme example, uh, Oregon State has a $1 million estate tax exemption per person.

Very, very low. No portability. Um, where I’m from, originally, Illinois, um, I, I was born and raised there, we have a $4 million per person state estate tax exemption. No portability again. Mm. So very, very unique. Uh, it’s good to understand your particular circumstances, right, your, your, your level of wealth.

What can you do to minimize estate tax exposure?

Larry Heller: Yeah. So n- n- the pitfalls, and you don’t want to worry about the estate tax, not just federally, but, um, make sure that you have y- the estate tax kind of minimized where you can.

Don Parillo: Exactly.

Larry Heller: Um, so let’s just, you know, just ex- you know, some of the other kind of pitfalls that you’ve, uh, seen, Dom.

Don Parillo: Another one is, uh, just outgrowing the terms of your estate [00:19:00] plan. So estate planning is a little bit daunting, right? You, you have to make these decisions, think about the future, contemplate your death. You, you gotta work with an attorney. You’re paying legal fees. You know, it’s a, it’s like a triumph when you get it done, and you just wanna put that, you know, your, your, your book that you get, your binder with your documents up on the shelf and just sort of forget about it, right?

Oof.

Larry Heller: Mm-hmm.

Don Parillo: But, um, but we f- what we find, uh, is that people’s families change over time. Their, their assets grow, right? There’s changes in values. There’s, um, there, there’s marriages, there’s deaths. Mm. And, uh, you, you might have had an estate plan that made sense at the time you wrote it, but now your, your children are much over- older.

Your, your, your net worth has, has doubled or tripled from when you first started working, right? With young family and, and you may have outgrown some of the, the, uh, the provisions. Uh, uh, very commonly, you know, we, uh, would be the, the, the tax issue we just spoke about, state to state tax. But, um, I, I guess, y- you know, another big one [00:20:00] is, uh, protections for children.

You know, God forbid, you know, you and your, your spouse or maybe just you, um, you know, y- you pass away. Um, are, are your documents set up to provide a windfall inheritance to your, your, your children who might be young, right? Might not be mature enough to actually manage these assets, uh, you know, and, uh, and, and steward them, right?

So, so what, what families can do, they can create continuing sub-trusts, we’ll call them, in their estate planning documents. A testamentary trust is another term where, uh, wh- when you’re, when you’re gone, a trustee can continue managing these assets for, for your loved ones, right? If you have young children, nieces and nephews, uh, because, uh, it could be disastrous, Larry.

Mm-hmm. You know, if, if, if a young person You know, 21 years old, 25, you know, receives a $2 or $3 million inheritance unencumbered. I mean, it can, it can, can really cause a lot of problems.

Larry Heller: Yeah. And, and we get asked, you know, [00:21:00] sometimes too is, like, ’cause they realize they’re leaving a lot of money to their children, but, you know, what happens if my child gets divorced, or what happens if there are creditors after, you know, after them?

So, you know, those are some of the other questions that we, we, we s- we see, uh, occasionally.

Don Parillo: Yeah, those issues can be addressed with a, with a trust structure. Again, the idea is that, uh, there’s a, a trustee who, who manages the, the assets for the beneficiary. The beneficiary is the person who can receive distributions from the trust, but there’s oversight, independent oversight, uh, by this trustee that actually has to approve the distributions before they go out to that young beneficiary.

Uh, so that can, that can help, um, protect the, the beneficiary from themself, right? But, um, a lot of times, you know, families instill good values in their children, and they, you know, they… they’re mature, but they wanna protect those children from outsiders, right? Creditors, known and unknown, uh, preserve assets from divorce.

[00:22:00] So, and, and the devil’s in the details. Every state is different- Mm-hmm … as, as to how the, the law, uh, is applied. But, but generally, you ta- you spoke about divorce. When, uh, when you inherit an asset from a parent, for example, even if you’re married Uh, if you keep that asset separate, let’s just say it’s in a trust account and it’s not co-mingled with, with joint or marital funds, it can, it can stay separate.

And if there is- Right … you know, God forbid, a divorce, it’s not included in that, that marital estate for asset division. So those trust structures are a way to keep the assets separate. Right. And, and mom and dad do that in their estate plan.

Larry Heller: Right. And you mentioned, we started talking about trustees before and, you know, some of the pitfalls that we see, that we see even

You, you’ve done the, you’ve done the wills, you’ve done everything, and you think everything’s the same, but you know, some of the trustees may need to be updated. As you said, people get older- Mm … people pass away, and- Right … not seeing, you know, going through, “Oh, Uncle George is still the second [00:23:00] trustee. Well, he’s 86 in a nursing home.

I think it may be time to change that.” So, uh, so yeah, so that’s another pitfall is, you know, not having the appropriate trust- Yeah … or even a, or even backup trustees.

Don Parillo: Yeah. Yeah. I, I see that quite often is there’s a deficiency in the fiduciary appointments in the documents, right? That’s, that’s a fancy term for, for trustee in a trust.

And, uh, when you, when, when, when people are putting their documents together originally, they, they don’t know. Mm-hmm. Right? Who, who should be the trustee in the future. They’re sort of planning for the right now, like the next three years. So oftentimes there is no successor named after husband and wife ’cause they, they didn’t know who, who would be in a good position.

Um, or, or the person that they named is, has passed away or, you know, they’re in advanced age and they’re not in a, in a place to, uh, to actually, uh, serve if, if needed. So- This is another, this, this trustee selection, uh, question. I mean, th- this honestly is one of the major roadblocks for, for, for people actually getting their documents done or making [00:24:00] updates.

And I think trustee selection is of critical importance, right? Because this trustee is gonna have an ongoing relationship with your loved ones, managing these funds for their benefit for as long as the trust continues, right? That could be until the beneficiary dies in the future, right, their entire lifetime, or it could be a number of years.

It just depends on what the trust says.

Larry Heller: Yeah. So this has been great, Dom, with some of the common pitfalls that we’ve seen in estate planning and wealth transfer. So if hopefully you’ve learned a little bit to avoid some of these pitfalls out there, and if you’re kind of thinking about them, maybe it’s a good time to, to review your estate plan.

Any final words, Dom?

Don Parillo: No, there, there’s a lot here. Uh, but, uh, don’t forget the basics, right? Just dust off, as I say, those documents, understand what you put in place, think about your values, think about your assets, think about your, your children or other loved ones. It’ll help you really determine whether you need to make updates or, or not.

And, and just know that, you know, [00:25:00] estate planning doesn’t end. It’s an ongoing process for the rest of your life.

Larry Heller: Uh, absolutely. Dom, thanks so much. This has been terrific. Hope everyone out there enjoyed this episode.

Bill Tucker: I know I enjoy listening to you guys, so… So Dom, thanks from me and for sharing your expertise with us on Retirement Unlocked.

Don Parillo: Thanks for having me. It’s my, been my pleasure.

Bill Tucker: It’s been great. And listeners, if you learned about estate planning and what things to look out for, share this episode with someone you may think could benefit from this information. And you wanna make sure your estate plan is on the right track, check the episode description for a link to Heller Wealth Management, where you will find additional resources and the option to schedule a complimentary 20-minute call with our team.

And for those listeners who don’t know and aren’t aware, Heller Wealth Management is now a proud member of Savant Wealth Management. We’ll catch you next time on Retirement [00:26:00] Unlocked.

And remember, please note that Heller Wealth Management is now a part of Savant Wealth Management. Savant is a registered investment advisor. This content is provided for informational and educational purposes only, and should not be construed as personalized investment advice. We will catch you next time