You’ve worked hard your entire life to ensure that you have the means to enjoy and live your retirement. But your goal is not just to fund your retirement. Your goal is to provide for your children, your grandchildren, even your great grandchildren. your goal is to create a legacy that will last for generations to come.
Setting a goal to provide for your children, your grandchildren, even your great grandchildren is an admiral goal to have. But is that all it takes? Do you just need to make sure the funds are there? What is to guarantee the legacy you have worked so hard to create will be there for your great grandchildren? Or even your grandchildren and children for that matter? You cannot sit idly by and hope all will turn out for the best. You need to plan.
There are strategies you can implement to grow your wealth, but all the wealth in the world will mean little if you do not have the basics of estate planning in place. Knowing that you have covered all the basics is the basis for The Legacy Minded Estate Plan.
During this presentation, Kami Elhert – one of our Relationship Managers – and Kevin Taylor, ATFA – one of our Tax and Financial Strategists – will walk you through the first steps you need to take to create your Legacy Minded Estate Plan including:
Transcript (edited for clarity)
Kami Elhert: Hello and thank you all for joining the webinar today. We will be reviewing what is involved and how to create a legacy minded estate plan. During the webinar, we will be discussing the documents you need to have in place for your estate plan, how your team and the documents work together to ensure that your wishes are fulfilled, and the ramifications of not having a thorough estate plan in place. Now just keep in mind, Tax Saving Professionals and Kevin Taylor are not licensed attorneys. We do not give legal advice and offer the contents of this webinar only as an educational resource for our clients. For those of you who don’t know me, I’m Kami Elhert, Senior Client Relationship Manager. Today I’m joined by Kevin Taylor, Accredited Trust Financial Advisor. Good morning, Kevin.
Kevin Taylor: Good morning, Kami. I hope you’re doing well. Everyone, good morning. Thank you for joining us.
Elhert: Thank you, Kevin. Can you tell us exactly what an Accredited Trust Financial Advisor is?
Taylor: An Accredited Trust Financial Advisor certification is one that’s granted only after you’ve met the most stringent educational and experiential requirements. In most cases, it’s held by the upper echelons of the wealth management and fiduciary business. We’re very much honored to have that after our names.
Elhert: That’s wonderful. We’re glad to have you as part of the team. Now, Kevin, I know that we’re going to be talking about legacy minded estate planning. Can you tell us a little bit about what legacy minded estate planning is?
Taylor: Legacy minded estate planning is quite simple for us because everything that we do revolves around legacy here at Tax Saving Professionals. When we help you save money on your taxes, the idea behind it is to help you build your legacy a little bit more efficiently and quickly than you might be able to otherwise. With the legacy minded estate planning, we’ve taken that one step further. To sum it up, it’s the ability to take the wealth that you’ve built and you’ve grown over a lifetime of hard work and use that to not only provide for yourself and your spouse, but your children and the next generation beyond them, and hopefully, in some cases, even beyond that.
Elhert: I know that at Tax Saving Professionals we do talk a lot about legacy minded estate planning. Can you discuss a little bit about what our philosophy here is on estate planning?
Taylor: Certainly. We really have two main components to our philosophy, Kami.
First, we want it to fit our clients’ lives. Sometimes you’ll find a situation where you get a set of documents, the professional that prepares them says, “Hey, these are the documents. Live your life within the bounds of these, and everything will be fine. Your estate will go well.” We recognize and appreciate that our clients have very unique situations, very unique lives. Their families are all individuals. We want to make sure that we’ve done our job to help them understand that there is a better way to do it, that we can plan to meet each and every situation, for the most part, that somebody in their family may be presented with.
But to the mechanics of our philosophy, we take a team approach. We find that this makes a lot of sense with the way that we do business. If you have a good financial adviser, you have a good CPA, and you have a good trust attorney around the table speaking of one mind about the same common set of facts, it really serves the client very well because no decision is made without the input of the others. Whether it be legal, tax, or financial, everything’s holistically covered.
Elhert: Thankfully, here at Tax Saving Professionals, you have two of the three of those so you’re already one step ahead at that point. Can you tell us a little bit about the school of thought behind legacy planning?
Taylor: Sure. Our school of thought is, no matter how good of a job you do planning, the most important thing that you need to do is actually execute your plan, follow through with it, and live it. Use your plan, right? You would be shocked by the number of documents that we get on a monthly basis that are good documents for the most part, and well drafted. But they’re not signed. They’re not notarized. Or maybe they are signed, and maybe they’re notarized, but maybe the assets aren’t titled to them. We’ve run across this instance in several cases. It’s simply that when the client did their estate plan, the attorney obviously kept the signed, sealed originals in their will vault. The client may have one in a very nice binder that they don’t want to mess up. And we get copies that are the executable drafts. That’s okay. But they’re unsigned so it’s hard for us to really give good advice from a tax planning perspective.
One of the main points that we continue to make to our clients is if you spend the time and the money to create a good estate plan, make sure that everything’s executed and that you’ve retitled your assets in accordance with your attorney’s directions. If your attorney doesn’t give you directions, ask. They’re very much open to chatting with you and walking you through everything.
Elhert: I know some of our clients don’t have wills or trusts or anything of that sort. What do you think of some of the websites that can create those kinds of documents in five minutes or less for 19.99?
Taylor: We see those fairly often, believe it or not. And I’ve seen one or two that aren’t that bad. But generally, for the complexity and the net worth that our clients tend to have, we shy away from those. There obviously is a place for them. You may hear me refer to these in our private meetings or even on this call as a doc in the box. You check the box then you get a document, right? You go through it; you ask questions; you put in your name, your address, your kids’ names, all that good stuff. And then you pay the money, press the button, print it out, and sign it. But the place for those is really when a client doesn’t have a good, well thought out estate plan. Maybe you have to travel at the end of the week. Maybe you have to do something unexpected. Maybe Monday, you have to go on a trip overseas. A doc in a box website will give you the opportunity to at least get something in place. And something is always better than nothing, especially when nothing results in the use of the intestacy statutes of your state. We’ll talk about that in a bit.
Elhert: Would you suggest them if there was a situation where they did have to travel and didn’t have anything in place? Would you suggest that be kind of the be-all and end-all? Or do you think it should be reviewed once they return?
Taylor: Definitely, from my point of view, a placeholder and a band aid at best. I keep going back to the complexity of our clients and our approach to the legacy minded estate plan, which is simply that your life is too important, too complex. The futures of your family are too important to leave to a general vanilla document. We like to see those custom-tailored solutions.
Elhert: Can you talk about a little bit of on what the documents are that are needed for a good estate plan?
Taylor: There are six documents that are really of consequence to a lot of estate planning. If you get these six documents or a combination thereof as your attorney sees fit, that’ll put you in a good spot for the most part. But obviously, every situation is unique. And there are many ways that you can accomplish the same goal. But it’s long been held, and I think it’s common knowledge, that the will is going to be the cornerstone of an estate plan.
Wills come in all different shapes and sizes. There are several types. There’s the handwritten will. There’s the verbal will. Sometimes that’s referred to as a soldier’s will because on a battlefield, they’ll relay their last wishes to a trusted companion. But the most important – or the one most often used by our clients who have sat down with their team here at Tax Saving Professionals and a trust and estate planning attorney from their state – is going to be what we call a self-proving will. That’s a will that has been drafted by counsel, thoroughly reviewed, and you’ve had the opportunity to sign it and have it notarized in the presence of third-party uninterested witnesses. That’s really a self-proving well.
I think this is a good point to bring up probate. Probate is the process by which a will is proven. In other words, the will is proven to be the last wishes of X person. It is simply a judicial process by which the assets of a decedent, which is the person who’s moved on, are transferred to the next of kin in accordance with either the intestacy statutes, the will, or any other operation of law up to and including a court order.
We try to get around probate for our clients and there’s a couple of main reasons for this. Just to highlight them, it’s time-consuming. It’s expensive. And it is extremely public. I’ve had the opportunity to speak with a vast cross-section of our clients and we share a similar set of values in terms of privacy. I think we all do a good job of being private citizens. The fact is, said another way, we don’t walk up and down the street and tell people what we have, what we don’t have, and who we owe money. Probate is exactly that in a little bit different form. We like to see you go around probate as much as we can because, once you’ve lost a loved one, the last thing you want to be doing is engaging attorneys, spending time, and going through a judicial process if it can be avoided.
Again, the will is that cornerstone. We’ve chatted about probate. Let’s talk about the other three big players here: a financial power-of-attorney, a healthcare power-of-attorney, and an advance directive. I’m going to talk about the financial power-of-attorney first and then play back and forth between it and the healthcare power-of-attorney because they’re very similar in terms of structure and mechanics. But they do very different things.
The financial or healthcare power-of-attorney is simply such that if you give your spouse your financial power-of-attorney, and they reciprocate and give you one, if you should be incapacitated, 9 out of 10 times your spouse will be able to act for you in most cases. But let’s say you have a real estate closing that’s not part of what your wife does, or your husband does, you’re in a car wreck, and you can’t be at the closing. They can utilize that power-of-attorney to close your real estate deal for you, sell a boat, that type of thing.
But what about a situation of a common calamity? We need continuity there. Two words that you hear from your family office services are continuity and simplicity. Those are two of the big value adds that we bring to the table for our clients. We want to keep continuity and simplicity and, in accordance with that, we want to see two or three options as contingencies within your powers-of-attorney. Let’s say that you and your wife are in a car wreck. You’re going to be fine, but you have to have somebody to make your mortgage payment. That’s where having redundancy within your powers-of-attorney is really going to come in and be of great effect.
The other document I want to chat about in terms of power-of-attorney is your healthcare power-of-attorney. It works very much like a financial power-of-attorney in terms of mechanics. For the most part, we see spouses reciprocate what we call seat one. Two and three are going to be your back ups and that offers another layer of continuity. The good thing about the healthcare power-of-attorney is that it gives somebody the ability to speak for you in a situation where you may be incapacitated. You may be going into surgery.
Again, that common calamity comes up. What if you and your wife and your kids are in the car? You’re going down the road. You wind up in a wreck. Your kids are in great shape, but you and your wife are going to be fine, but today, you need a surgery. The doctor needs to know from somebody, “Do I have consent to do this? It’s not life-threatening, but I need consent. Do I have consent?” That secondary and third power-of-attorney, if needed, can step in and say, “Yes, we need this done.” Or “We don’t need it done. It is in accordance with their wishes.”
That brings us to the advanced healthcare directive. This is something that we think a lot of folks ought to have. Again, in underscoring everything about the legacy minded estate planner, in any estate plan for that matter, this is your opportunity to have your wishes be known in your absence, whether that be absence of mind or absence of body. It gives you the ability to have that one last chance to direct what happens instead of somebody else doing so. With the advanced healthcare directive, let’s say that you’re in a car accident. The options in the absence of an advanced healthcare directive may be that a spouse might have to make a very difficult decision about taking you off life-support, for instance. But with an advanced directive, you do that for your loved ones. You go ahead, and you make that decision. Over years of practice, we find that it really helps eliminate a lot of guilt, a lot of concern, a lot of angst. So go ahead, get one of those in place and make those decisions so your family don’t have to. We find that to be very helpful.
I’ve saved what I consider the biggest and the best for last. Obviously, the will is a cornerstone. And I wouldn’t necessarily call this last because we haven’t talked about trusts yet. We’re going to talk about trust in the September webinar. But let me touch on the guardianship of minor children. If you have minor children, you need to have a guardianship of minor child document. That could be called one of various things in your estate. The crux of it is if you don’t have a document that is signed, executed, and appoints with redundancy somebody to care for your children in the event of that common claim that we talked about, the state’s going to wind up helping you do that. For all of our clients, I know that they trust us to advise them a little bit better than they might trust the statutes. And that’s understandable. That’s why there are provisions here. But that’s really a very important document that you need to have in place if you have minor children.
And, Kami, there are instances when somebody says, “Well I’ve only got one minor child, and that child’s going to be 18 in three months.” That’s a business decision that you can make between yourself and your attorney. But there are those nuances that all leads back to the unique situations for our clients.
Moving on, let’s chat about trusts for a moment. A trust is a really wonderful thing. And being an Accredited Trust Financial Adviser, I have a sweet spot for trusts. Just about anything that you need to do in terms of disposing of your assets or providing for maybe a child that has special needs or maybe laboring under some illness you can do a pretty good job of accomplishing with the trust. But trusts also do some other things that are wonderful. They help mitigate estate taxes in the right usage. They provide asset protection in the right usage.
A lot of folks say, “Well, Kevin, I’ve read on Google, and there are all kinds of trust. There are CRATS. There are CRUTS. There are GRATS. There are CLATS. How do I make sense of this?” A trust is one of the oldest legal concepts out there. The concept of trusts that we have today is rooted in Anglo-Saxon law and English common law at this point. But trusts go back to the first concepts in Rome and Greece. The idea of entrusting your property to an uninterested third party to benefit someone else, that’s been around for a while.
At a high level is there are two categories of trusts for the most part. There’s an irrevocable trust and there’s a revocable trust. The revocable trust is essentially one that’s extremely flexible. You can put assets into it. You can take assets out of it as you like. You can be your own trustee. You can grant the trust. You can be the trustee. You can also be the beneficiary. There are extreme amounts of flexibility. But, for that flexibility, you do sacrifice asset protection in most if not all cases, and the assets are still deemed to be in your estate. For those with a high level of net worth, that’s something we want to take a good look at and we want to keep a thumb on the pulse of because, if you’ve got assets in a revocable trust and you’re looking at a taxable estate, there are other tactics we can use. And one of those may be an irrevocable trust.
An irrevocable trust, in contrast to revocable trust, is quite complex, much more rigid, but it provides some things that the revocable trust does not. With the irrevocable trust, you can put assets into it. You can be your own trustee. You can be your own beneficiary. You can do all those things. But you can’t move assets out of it as readily as you can with a revocable trust because you’d move these assets out of your estate. There’s a process to go through. But make no mistake, that is not a total loss of control. If you put assets into an irrevocable trust, there’s just a different process. But there are ways to structure it so it’s not a loss of true control. We’ll drive that point a bit further down the road in September. But going back to the irrevocable and the two big things that we like about it, it provides asset protection, and it provides us the opportunity to get assets out of your estate and let them grow within that structure. Then, at the point of your demise, those assets are not subject to estate or gift tax. They just move by operation of the trust to the next generation.
That’s a high-level background of trusts, what they do, how they’re used, how we see them fitting into our client’s estate plan. And there are all varieties. Quite a few of our clients may have a will that has a trust or a series of trust language in it. That’s okay too. But it really comes down to the unique nature of your situation.
Elhert: Kevin, going back to the healthcare power-of-attorney and guardianship of a minor child, do those necessarily have to be the same person? Are you looking for seats two and three or four to be all your sister or your best friend or something of that sort? Do they all necessarily have to be the same person?
Taylor: Absolutely not. We’re of the mindset that you want to put people where they’re comfortable, they’re confident, and they’re competent. We want to make sure that the right folks are in the right places. And going back to the trust, you may not want your family member who has had some issues with money being the trustee of a trust. You may not want your sister, the banker, to be your healthcare power-of-attorney. You may choose your brother, the doctor, to do that. And likewise with the financial power-of-attorney, you may want your sister, the banker, to do that. So again, put people where they’re confident, and they’re comfortable, and they’re competent. That usually works out best for the client based on my experience.
Elhert: And as far as the wills are concerned, if our clients do not have one in place at this point, are there any thoughts that you can think of that they should be thinking about prior to meeting with the attorney?
Taylor: By all means, we encourage our clients to get started and have a conversation with us. As Kami brought up on the front end of the call, two of the three parties that we would recommend for estate planning are already at the table here with your family office service. Let’s sit down. Let’s have a conversation, be that in person or in Zoom, and just talk about where you want to go. But the things that I would ask you to give some thought to are who would be those trusted persons that you would put in seat two and three. Obviously, in some cases, you may need to consider who to put in seat one. Give thought to who they are, and make sure that you really trust those people, and that they understand you, how you think, and what your values are. That’s the biggest thing I would lead people to think about.
One of the other big points that we hear quite often is, “This is very difficult. I don’t want to think about my mortality.” And that’s common. That’s the human in us. We aren’t built that way. It is a difficult conversation. It does require thought. And we’re here to walk you through that. That’s what we’re here for. We do that. We’ve done this for years in our varying capacities. In some cases, we may bring up points that you hadn’t thought about. And what we find is the more that you have to think about, that’s the more that you have to decision and that in turn translates to giving you more input as opposed to taking that first approach we talked about and just getting a set of documents and trying to live with them. We want that tailored approach. And we work very hard to make sure our clients have that.
Elhert: You had mentioned probate earlier. Where does that lie if certain laws have passed, and they’re not addressed in the will? Would that then move over to the probate area? How does that play out?
Taylor: I think it’s best to address intestacy a little bit. We’ve already talked about probate. And our clients, for the most part, have a good understanding of what probate is, either from their conversations with the family office or from some prior experience with their family. But we’ve got two routes into probate and there’s probably several more we could discuss. One is you have a will. The other is you don’t have a will. We’ve already talked about probate if you have a will. Essentially, that will is taken down to the courthouse, you meet the clerk, and you start filing the will. They’ll move you through a judicial process that’s unique in your state and, in some cases, your county.
Intestacy is a little bit different. We refer to somebody as intestate if they don’t have a will. Now, there are a set of statutes in every state that I’m aware of that are called the intestacy statutes. Said another way, that is the state providing you a will in the absence of a will. There are also statutes out there to help the state, by judicial process, figure out who is the right person to take care of your child if you have a minor and you can’t care for him or her. With intestacy, very much like the will, the clerk’s notified of your passing and an attorney is hired. The judicial process starts, and, in place of a will, the state statutes are used to determine which members of your family, which next of kin, are going to wind up with your estate. And again, probate is probate. No matter how you get there, probate is probate. And it’s public. It’s expensive and it takes a long time. I’ve heard stories of probate lasting 40, 50, 60 years. One notable story that comes to mind, one of my professors in school, when he got out of law school, his first case he worked on was an estate. That estate opened on his desk very shortly after he went to work. That estate was nowhere even close to settling when he was teaching me in college.
Elhert: Wow. Just thinking about probate, I know that there are some big cases in the news with celebrities not having a will in place. And then, if you read about it in the paper, you could technically join that probate and say you were related to X, and you’re entitled to X, Y and Z.
Taylor: Just about! Obviously, you’d want to be careful doing that; there could be some ramifications. But that’s a real concern that you have. And for our clients, with the level of net worth and complexity that you already have with your business, your life, your family – you have college, you have dance class, you have businesses and employees – you don’t need to worry about if you pass away and don’t have a will, how many people are going to come out of the woodwork and claim to be your long lost son from a prior relationship or a third cousin twice-removed. You just never know. And it’s very difficult for the family.
I think that’s the point that I’d like to impress upon the most. It’s just difficult for your family. And as you can tell, a lot of what we’re talking about here helps your family and keeps that continuity, makes things simpler for them so that they actually have the time to be humans and grieve and heal as opposed to immediately hopping into some type of judicial process where they may be facing the fight of their lives. In the news, there are some good folks that are going through some rough times with that. And it could have all been avoided. Very large estates, the means are there. But there’s just no will in place.
Elhert: Wow! Once you do have a good estate plan in place, how often do you think that plan should be reviewed? With changes in federal laws and all of that is happening, like the SECURE Act, for instance, I am not sure if everybody really addressed that or if the attorneys would contact them for those kinds of big changes if they happened.
Taylor: A lot of really good boutique estate planning attorneys have a list of their clients that they prepared wills for. When major changes in law comes out, they’re great about contacting you proactively because, let’s face it, unless you’re in the business, you’re not keeping up with what the SECURE Act really means, what it actually does to about 30 years’ worth of estate planning thought leadership. For the last 30 years, the industry has marched in a certain direction. The SECURE Act came along and single-handedly ploughed that up.
I’ll give you a good example. All of our clients have heard us at one point or another talking about the benefits of a tax-advantaged retirement. One of the big drivers in that, Kami, is that we want to get your qualified money, your pre-tax money, and your 401(k)s, your traditional IRAs, we want to see that in a Roth environment. Obviously, we can help you effect a Roth conversion. But no matter how we do this, we want it in a Roth environment. I’ll give you a shining example of why that’s beneficial. With the SECURE Act, at the time that you pass away, you’ve got a set amount of time – or rather your executor or your beneficiary or your trustee, whomever it may be, has a set amount of time – to pull those assets out of that pre-tax account. That’s going to generate taxes every year. Now, with a Roth, you still have, for the most part, the same set amount of time to get those assets out of that plan. But here’s the good part; there’s no annual distribution out of the Roth environment.
I’ll give you an example. The most prevalent timeline on it seems to be about 10 years. With a Roth, the benefit you have is you can wait until the 9th year, the 11th month, and pick a day, the 15th day, and you can pull everything out. With the traditional IRA, you’re going to be pulling a piece of that out every year, every single year of that 10 years. If you compare and contrast from a standpoint of tax advantage, the money that sat in a traditional IRA came out, was taxed, came out, and was taxed 10 different times. With the Roth, it sat there from the time of death until our fictitious date of the 9th year, the 11th month, and the 15th day, and not a dime has been paid in taxes. It’s been growing tax deferred. Pull it out all out at once and there’s no tax consequences. That’s a no-brainer to me. I think that’s really something that works out well for our clients. And while the SECURE Act made it a little more difficult for the planning, it is something that you need to take into account. If your attorney has not contacted you, and you have qualified money, which is the 401(k), the traditional IRAs, that pre-tax money that you hear us talk about, it is definitely time for an update.
Elhert: What about life events? I know that I’ve heard clients say, “We got our will created right after our first child was born.” And the language in it says, “Any proceeding children afterwards.” But now the children are in high school. Would you say that will is long overdue for a review? Or would that language be sufficient?
Taylor: I’m going to give you the law school answer. It depends. In most cases, I think you need to get it updated as soon as you can. An update should happen every time you have a major life event – a divorce, a birth, a death, you sell a business, you buy a business – and, in the absence of those, with major changes in law. Again, we talked about that. Most of the time, if you have a good reputable attorney, he or she is going to reach out to you and let you know, “We need to update your will. There’s been a change that’s material.” That’s a great thing to have. A doc in a box website is not going to do that for you. If you haven’t reviewed your will in five years, it’s time to take a look at it.
Elhert: A lot can change in five years, even just as far as jobs or location. That was another question I had. We have a lot of clients who get married in a certain state and have their will created, but then moved. Say they moved to California and have been there for 11 years. If their will was created in New York, would it go back to New York? Or would it switch over to the state of residency?
Taylor: The state of residency seems to drive just about everything, but there’s a caveat to that. Let’s say you’re a California resident but you have a house in Nevada. Let’s say you wind up in probate. All you have is a will, but it’s a California will. Everything’s fine. You pass away. You’re in probate in California. You’re going to have to open probate in Nevada to deal with the house you have in Nevada. That’s called ancillary probate or ancillary administration. You may hear me use the words probate and administration interchangeably. But back to your question now that we have that groundwork. If you made your will in New York and you moved to California, you have a legal conundrum because in California that New York will is probably not worth much. That’s something you really need to take into account. And residency is key. If you did your will in New York – anywhere else, we’re picking on New York – and then you move to a different state, you need to get it updated because the will that you have from the other state is probably not going to have the nuances of law in your state.
We’re down here in Vero Beach. We love where we are. There are many reasons that Florida is just the best place on Earth in our opinion. But they have some very favorable laws, especially as it relates to estate planning and administration and asset protection. There are other states that may not be so favorable. If you happen to have lived in one of those, and you moved down here, obviously you need to get an update.
Elhert: Does the same apply with trust as well? Or is that a more universal way to utilize some of that legacy planning?
Taylor: That’s one of the things I really like about the flexibility of a trust. The law that governs a trust is called situs and you’ll hear us say that from time to time. Situs of a trust can be just about anywhere. If you’re a resident of Florida, there’s no reason you can’t set up an Alaska trust or a Utah asset protection trust. There are other types of trusts that you can use in other jurisdictions throughout the country and the world that have favorable laws. But it depends on what you want to do. Delaware, for instance, has one of the longest abilities to keep assets in a trust and that’s limited in other states. Again, we’ll hop into that in September. And here’s the great thing that I like about trusts. Going back to that flexibility, you can change states. If you’re in the midst of administering a trust that may be an Alaska trust and you need to change it for some reason to Nevada, that’s doable. Is it going to be easy? Maybe not so much, but it’s doable.
Elhert: Can’t wait to hear next month’s webinar on it in more detail. All right. Here’s another question: “How do I start the conversation about the need to have an estate plan with my parents?”
Taylor: That is a topic that can be very difficult. And we’ve seen it. Again, I’ll go back to a prior comment. That’s the human in all of us. We don’t want to have the conversation. We don’t want to recognize our mortality. And we’re good at it. Of all the things we’re good at innately, not recognizing our mortality is probably one of our greatest strengths across the board. The answer is, quite simply, be honest with them and say, “This is going to be hard for me when I lose you guys. That in and of itself is going to be very difficult. But if I’m having to go through a judicial process and I don’t know where our assets are, I’m not privy to any of the accounts, I can’t do anything. I can’t pay your house payment. I don’t know where your spare keys are. That’s going to be much more difficult on me.” That’s generally a way that gets folks thinking about, “Okay. This is not really for me. Then I’m doing this. I may be doing it for my spouse.”
I think the part that’s the most difficult is to really understand the impact of not having that taken care of. Let’s go back to that example we used earlier. The folks that are in the news. I’m sure their families are in an extremely uncomfortable position and a lot of it could have been avoided. Again, it all goes back to continuity. That’s what all this is about: that continuity that having a proper estate plan will provide for when you’re gone. That’s where we need to start. And in most cases, that’s good enough to kick the conversation off. But I can’t stress honesty enough. And it’s not selfish. Don’t think of it as being selfish. You’re trying to do the right thing for your parents because you know they’d want to do the right thing for you. They’re in denial of where they’re going and what they’re doing sometimes.
Elhert: I know that those can be awkward conversations. How do you actually bring it up? Are you going to bring it up at Christmas? But another way to think about it, as I’m thinking this through, is that while you’re doing your estate planning, it might be a good idea to involve your parents and talk more about theirs. It opens up the forum in a way that, I believe, maybe seems less aggressive in nature because you’re joining with them, going through the process with them. It could be a nice way to create a foundation to begin those conversations.
Taylor: I couldn’t agree with you more. One of the things that we always ask is what does your parents’ estate plan look like? Are there any inheritances that you’re going to be seeing? Are there any trusts? Because, as you’re building your estate plan, it’s good to know how assets are going to flow to you in order to take a really good cross-section of what your financial picture is going to look like. If you have a trust from mom and dad that’s going to distribute out to you with no questions asked at the age of 65, you may have the best estate plan possible. Everything’s out of your estate. You have nothing in your estate. Mom and dad pass away. Those assets come into your estate because you’re 67. And then, a week later, you pass away. Those assets are now in your estate. Those are really good points to bring up. I can’t stress enough. It adds continuity.
Some of you may have adult children who think, ” I don’t need a will. I’m young.” A very wise gentleman named Mr. Gibson always says that estate planning is really your ticket to adulthood. When you turn 18, at least get some kind of will in place. And for the parents out there who have adult children, if you’re working on your estate plan, it is never a bad idea to talk to your children and say, ” I’m doing my estate plan. Do you have one?” And when the child says – “No, I don’t. We’re working. The practice is doing great. We’re happy. We’re not worried about it.” – that’s the opportunity for you to get involved and say, “Let’s do this in unison. We can dovetail them together so that what flows from my estate works well with your estate. We’re going to make sure that the guardianship of your minor children, my grandchildren, are in place.”
Just as much as it is important to say to parents, “How do we do this? What do you need to understand from me to know that this is important, to get some estate planning done,” I think it’s really incumbent upon parents to help get their kids’ house in order. I don’t think any grandparent on this call here today would want to know that something happened to their child, who is an adult with minor children, and that they’re going to have to go through a judicial process to make sure that child doesn’t spend one night outside the family home.
Elhert: Good point. We do have one more question, “How does a trust relate to a family foundation?”
Taylor: That’s a wonderful question. Like a CRUT, a CRUT is a charitable remainder unitrust. Quite often a CRUT will marry up to a family foundation. Again, we’re going to get into this in September, but they work together. The bottom line is a family foundation is charitable in nature. Not all trusts are charitable. We can have a family foundation that’s attached to a trust as I gave you in the example, but, generally, a family foundation is something that’s going to act a little bit differently. With the trust, you have the ability to go out and buy a car or a house or pay for education out of the trust in most cases. You’re not going to be doing that out of the family foundation, at least not and still be walking around free and not seeing the judge at some point when somebody figures it out. A private foundation is very stringently controlled. There are very strict laws around them. I can’t stress enough, once you put that money in there, it is for a charitable purpose. You can have members of a board on a foundation and those members, in certain instances, can be compensated to a degree. You can compensate professionals. But you cannot go out and buy your nephew’s new car when he turns 16. You have to be very careful with them. That’s a great question.
Elhert: That concludes all of the questions that we have. Just to review all that we’ve talked about, we discussed the intestate, knowing that if you passed away without a valid will, state laws will determine who receives your assets. Trusts are a legal entity created to hold, protect, and distribute your assets without going to probate. Powers-of-attorney legally give another person the authority to handle either your financial affairs or your healthcare directives. The will, probably the most important of all estate planning documents, is the legal document that states who you want to receive your assets and where you’d like everything to go when you do pass away. Probate is turning into one of those four-letter words. It is the process by which the court determines the validity of your will, or the estate is settled according to the laws of residence. And beneficiary designation, always important as well, gives the
I want to thank everybody for joining us. Kevin, thank you for all of the knowledge and helping me understand the process of legacy minded estate planning. I do look forward to hearing more about trusts on part two of our legacy minded trust webinar.
If you have questions about estate planning, call us at (772) 257-7888.