Episode Transcript
[00:00:00] Speaker A: Any examples used are for illustrative purposes only and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.
[00:00:18] Speaker B: This is another Money Show. Get set for another hour of the latest financial information and economic news affecting your bottom line. J.R. and Anthony are committed to helping more Americans like you optimize their income, reduce their tax risk, and reach financial freedom. So let's start the show. Here are your hosts, Anthony Correo and J.R. rochford.
[00:00:42] Speaker C: Here I am your host, Anthony Correo. Today we are missing JR Rochford. He's on a break, enjoying a little vacation time. But we've got a special guest today. Today we've got Mike McGreevey, the estate planning attorney and our neighbor next door to us on 98th Avenue in Bell. You're listening to another Money show and as you know, try not to do it just as a, you know, sales pitch for finances. There's enough those shows out there. We try to give you news and good information, but we get a lot of questions about estate planning. We get a lot of people that have come in and have quite a mess or they haven't taken care of their estate or they've inherited something and their parents didn't take care of it. And it is a, it's a huge mess for everybody. So we've said on the show multiple times there's a ton of stuff you can do for free out there, but you should see an estate planning attorney. And seeing as I know most of you have not gone out there to see an estate planning attorney, I've brought one to you.
[00:01:45] Speaker A: So.
[00:01:46] Speaker C: So we're going to try to give you some good information today. So Mike is also a family practice. His dad used to work with Junior and my grandfather, and I think you were in the office, too. You got to work with Stuart, didn't you?
[00:02:01] Speaker A: No, I think Stu had, you know, retired at that, at that time, but obviously worked with Junior and now herself.
[00:02:09] Speaker C: Yeah, it's nice to work with me. Face of the office now.
[00:02:13] Speaker A: Right.
Well, thank you for having me on. I really appreciate it. I'm excited to, you know, just kind of, you know, have a chat, you know, give some people some insight. Obviously, being an attorney, the first thing I need to do is, is, you know, provide a little bit of a disclaimer. So anything that I'm, I'm talking about today is not intended as Legal advice, it's just information. If things that I say that are, are inconsistent with what you have or different than what you have, you know, it may be time or a good idea then to meet with your attorney or see an attorney to kind of discuss that. Because everyone's estate plan and circumstances are just so different.
And so I first kind of just wanted to put that out there as obviously a legal disclaimer.
[00:03:00] Speaker C: Oh, that's hilarious. Because we have to do that too. Except for Matt's pre recorded it so his voice sounds much better going through that at the end of the show. But.
But yeah, what I mean, I would say I don't even really know where to start. And it's not just me. I think most people don't even really know where to start.
So. And. And at what age too should people start? Because I know I've reached out to you because I'm a hypochondriac and convinced I'm gonna die and have, you know, everything a mess for my parents and whoever my beneficiaries are. So is it too young to be starting in your 30s? Is there a perfect time to wait? Or what kind of things trigger when people should be reaching out to you or even thinking about their estate planning?
[00:03:47] Speaker A: So really it's whenever there's a big life change. So a death, birth, marriage, divorce, those are the things that kind of should either trigger getting an estate plan in place or at least reviewing your current estate plan. And so sometimes, you know, using yourself as an example where you're a young man, not married, no children, make sometimes throwing that out there, sometimes, sometimes you don't need that complexity. And so I know, you know, when we first talked about setting up an estate plan for yourself, you know, you were interested in setting up a trust and you've got the warrants to, you know, set up a trust, etc. That's not really my concern. I think what I try to do and set you up is for the future because we know things are going to change. Hopefully you find somebody, get married, maybe have some little Anthony running around, and at that point you'd be completely overhauling your estate plan.
And especially if you have a trust, there's some complexity with the trust. You've got to make sure your assets are funded in the trust, you're continuing to gain assets, etc. That's just kind of more complexity, especially considering there's a good possibility that, you know, get married and have kids. You probably almost nearly start over from scratch getting a new estate plan. In place incorporating your spouse and your kids into it. And so sometimes, you know, it's, it's really just important to get something in place. Any plans better than nothing at all. And so, you know, sometimes just a simple will have some powers of attorney is really all that somebody needs, I would say, you know, kind of the triggering event is, you know, if, if you've got assets and you want them distributed, that's what, 80 to start seeing, you know, in estate planning attorney, you can use beneficiary designations for some assets, you know, some of your larger assets, if that's where your concern.
But that's really kind of the triggering of that in terms of powers of attorney. I mean, really nearly anyone should have powers of maturing. I have quite a few clients that when they send their kids off to college, they're 18, they're grown adults now, but maybe they need a little bit of hand holding, some guidance, some help. And those powers of attorney could really assist with that.
If the parent needs to gain access to finances, et cetera, that power of attorney will allow them to do so, make medical decisions, if there's a medical emergency, etc. So, you know, even right at age 18, you know, it may be important to, to, you know, get a young person in and get those powers of attorney. They're really just.
[00:06:37] Speaker C: Are there different types of powers of attorney? Because I think durable is the one I hear all the time. But I think in my discussion with you, you said you really need to be careful with the durable because that really does grant somebody access to your accounts, like right now. So if they're give it to the wrong person, they can, you know, do nefarious things with that power of attorney. And how do you protect yourself? So what are, what are the types and in what circumstances do you use? Which.
[00:07:05] Speaker A: So there's, there's really kind of two types of powers of attorney that typically attorneys draft.
And the, the first one is that general durable power of attorney, the, the that you just talked about or referred to. And then the second type is a springing power of attorney. So let's talk about durable first and then I'll kind of explain what a springing power of attorney does. So a durable power of attorney, it's effective when signed. So as soon as you sign that document, you don't have to be incapacitated, et cetera. Your agent, the person you've appointed, can act on your behalf. So let's just say hypothetically, you appoint JR as your agent in a durable power of attorney. He can Immediately act on your behalf. So hypothetically, you're, you know, traveling, you're out, you know, doing races, etc. And you forgot to pay a bill. Hypothetically, you could call up jr, have him grab your checkbook, and pay a bill on your behalf, or really handle any sort of financial transaction so you don't have to to be incapacitated. And really, the advantage for that is that Junior, as long as, again, you trust him, he can act immediately. You don't have to wait for a triggering event. As long as you trust him, you shouldn't have any concerns. But the issue is, because it is durable, it's effective when signed. You ever have a following app with Junior? You no longer trust him. Hypothetically, Junior could get his hands in the cookie jar. So you do really have to be careful with a durable power of attorney. If that trust changes with the people that you have appointed, you really need to, you know, shore it up and have a discussion with the estate planning attorney, you know, to kind of get that wrapped up.
[00:08:45] Speaker C: And how do they know? Is there, like, a timeline?
I'm trying to figure out the best way to word this because I think I've seen this happen before where there's people change their powers of attorney over time. So how, you know, using Jer as a hypothetical, Say I had him at one point, and I change it to somebody else. And I'm assuming, you know, using the bank as an example, he could go to the bank and say, well, I need to sign this on Anthony's behalf and give him the power of attorney. But how do I cancel? Or can you cancel an old one if you reissue a new one? Or does he kind of understand what I'm trying to get at?
[00:09:27] Speaker A: Yeah, sure. So it really could be dependent on the document. Sometimes when you execute a new power of attorney, the language will say that you revoke all the prior powers of attorney.
And that's really to prevent having a situation where you have dueling powers of attorney. If you didn't revoke the previous power of attorney, there could be a question as to who really has authority. Is it the first power of attorney? Is it the second power of attorney? So it is important that you know, if you do have those issues where you no longer trust your agent, it's important that you probably revoke that power of attorney. Let the financial institutions know that that person was no longer your agent, and providing them with copies of the new updated doc.
[00:10:11] Speaker C: Do you file with the state at all with those?
[00:10:15] Speaker A: You can record powers of attorney with the state? Kind of the advantage is, is that it becomes public record. People know who your agents are.
Some of the disadvantages, though, is that it does make it a little bit more complicated. If you want to make changes, you've got to file or record that revocation with the state. So it does make it a little bit more complicated, I guess, to revoke. There's definitely different schools of thoughts how to proceed with recording those documents and whether you should or shouldn't, that's probably for kind of a different conversation.
And in terms of the kind of. The other power of attorney that I was talking about was a springing power of attorney. The springing power of attorney that only comes into play once the agent has a doctor's note saying that you're incapacitated, and then that person can start acting on your behalf.
Obviously, the advantage there is that there's some security, there's some privacy concerns. Especially.
I've got some clients that are extremely private people. You know, they. They want to maintain control as long as they possibly can, and that's sometimes why they have those documents. But the downside is, is that in the event of emergency, it's a lot more rigorable, a lot more hoops to jump through, et cetera, just because, you know, they've got to get that doctor's note, et cetera. I've also found that some financial institutions don't particularly care for springing powers of maturing. Like, for instance, there was a credit union that a client had some accounts with, and the credit union just refused to acknowledge the springing power of attorney. Luckily, there was another way we could kind of, you know, handle the situation for the client. But that was definitely, you know, frustrating. The client was relying on those documents, and we can't really force the financial institution to abide by it. You know, it's. It's their turn. So.
[00:12:14] Speaker C: Yeah, okay. I was gonna ask. The follow up to that is like, how can they deny that, though? Like, that just. That doesn't make any sense.
[00:12:22] Speaker A: It's, it's frankly, it's their term. So sometimes, you know, even if it's wrong, I mean, it's like David fighting against Goliath, you know, to, to try to get that accomplished. When you're working with like a major financial institution like bank of America or something, they're just. They go. They're going to be steadfast in their decision and say no.
So that can be sometimes quite frustrating.
[00:12:48] Speaker C: Yeah. And of course, you know, from listening to all of these past and then their money show episodes how much we love these massive financial institutions and credit unions and banks. So of course, of course they make up their own rules with the durable and the springing. Does that.
Is that kind of like the overall umbrella and then under that becomes medical, financial, or are those all separate? Completely separate as well.
[00:13:16] Speaker A: So the general durable and the springing, those are the financial powers of attorney. Basically what also kind of comprises of these types of documents are a medical and mental health care power of attorney and also a living will.
So to kind of briefly explain those medical and mental health care power of attorney allows somebody to make medical decisions if you couldn't. Generally, when it comes to a medical power of attorney, there's going to be a triggering event. So similar to the springing power of attorney for your agent to make medical decisions for you, they're going to have to have a doctor's note, one, perhaps two, depending on the circumstances to make those decisions for.
And that's really just to, you know, protect your own interests. If you've got the ability to make your own medical decisions, it should be you making those decisions.
[00:14:10] Speaker C: That makes sense.
[00:14:12] Speaker A: And then the, the living will, it kind of works hand in glove with the medical power of attorney. So it would be the agent in your medical power of attorney enforcing the living will. The living will is the document that says that you don't be kept alive artificially.
Oftentimes clients refer to it as the pull the plug document, essentially. And it's your time. It's your time.
[00:14:33] Speaker C: Yeah.
So what does that make it? Total. So you've got a financial power of attorney you have to deal with. And then you decide whether it's general, durable or springing. The medical and mental. Are those two separate ones or is that one combined?
[00:14:49] Speaker A: Sometimes attorneys will split them up into two separate documents. Sometimes you want, you know, certain people doing certain things, you know, making certain decisions. And sometimes attorneys will combine them. So like for instance, I combine both medical and mental together, but these are seeing that separated as well.
[00:15:08] Speaker C: Deploying the plug one though, that is totally separate. That's its own document.
[00:15:13] Speaker A: Yep. That's its own separate document.
[00:15:15] Speaker C: Okay, I'm pretty sure. So I think we talked a while back because I mentioned it on here, we've sent it to clients, but I made a blog because again, we thank everybody. Just like everybody should probably consult a financial advisor. Everybody should consult a financ or a estate planning attorney. But it's a big step. People get intimidated. They don't know what to do. They don't want to make a mistake. So we put that blog together of, here's all the steps that you can do before then that are free, that it's stuff that you can do. So the financial, the medical, mental, living, will, these are all state forms that people can download too. Is that correct or is. And what's the difference between going the state route direction versus having an attorney do it for you?
[00:16:02] Speaker A: Good question. Yes, the state does provide kind of standard forms. Really, it's just a matter of filling out the forms, getting them notarized and executed properly. And they're pretty thorough in giving you directions to get that done relatively easily.
So if costs are a concern or. Yeah, oftentimes people are nervous to see me. I mean, they shouldn't. I'm pretty, you know, agreeable, nice guy.
So sometimes people are stressed out, they don't want to see me. They. They're worried that if they get these documents in place, you know, they're putting the nail in the coffin, so to speak.
So, you know, like I say, any plan is better than nothing at all. And so, you know, getting those documents in place, reviewing those, you know, state provider documents, it's absolutely better than nothing.
You know, kind of the differences between what I draft and what the state provides.
You know, the adage that my father would often use is you get what you pay for. Those are free documents. It's probably going to be effective, but we don't know what kind of circumstances you're going to be in in the future. So I'd say, you know, generally my documents are going to be a little bit more thorough than what the state provides. But in the grand scheme of things, when it comes to powers of attorney in general, you know, they, they are chock full of boilerplate. And that is, you know, and that's by, you know, there's a reason for that, so to speak, in the sense that we want to throw in everything but the kitchen sink to allow your agents to do whatever it is they need to do. As long as you trust your agents, you really shouldn't have any concerns. So. So, you know, I'm certainly not going to criticize somebody for, you know, using the state documents, et cetera. You know, certainly that's better than nothing, but I would still recommend, you know, having an attorney at least kind of review your circumstances and kind of figure out what's most appropriate for you.
[00:18:08] Speaker C: And I feel like I already kind of know the answer to this one too, in the sense of, you know, you get what you pay for kind of thing. But we get a lot of people Asking about like Legal Shield and Legal Zoom or whatever, those. But those types of companies, what, what are those, how are those different than doing state forms versus, you know, going directly to you as an attorney? Because I think they pair you up with an attorney, but I just kind of want your opinion on those.
[00:18:38] Speaker A: It's been a while since I've kind of looked into, you know, what their process and procedures are for, you know, Legal Zoom. And I think there's another one like mytrustandwill.com or something like that.
And it really kind of depends on how they structure things. Sometimes you do meet with an attorney.
The issues that I've seen with those documents is that sometimes they're not thorough enough or they're not asking the right questions to ensure that your estate gets distributed the way that you want to. So that's kind of the first issue that I see with them, and I'll kind of give you an illustration of that in a second here. The other issue that I see, especially with getting those documents in place from an online entity, generally has to do with a trust and funding a trust. So when you have a trust, really one of the most important things that you do is make sure that your assets get titled properly in the trust. And oftentimes that's something that's kind of overlooked when it comes to kind of creating these documents yourself. You're not generally meeting with somebody who's reviewing your assets and making very specific recommendations on how you should structure things. So like, for instance, using tax deferred accounts as an example, you generally don't want to include them or name the trust as beneficiary of your tax deferred accounts just because there could be tax implications, just because the trust is an entity would be all taxed in one year. Whereas if you name individuals, they can stretch out those tax consequences over a period of years. So that's just kind of an example where those entities don't review those assets, don't give you the recommendation. I generally just see. I generally see clients that while they have a trust and it's set up, the assets aren't titled properly in the trust. In terms of that kind of other example that I was using, this is a real life example where a client had used one of those services to create a will.
And for the most part the will looked good, it was validly executed, et cetera, but the provisions were not applicable. And it ended up actually her estate was distributed probably, although I never met her, probably not the way that she wanted. And what the Circumstance was, is that the client had one living child and one deceased child and that that deceased child had passed away a number of years ago and that deceased child had a child of their own. So there was essentially a child and a grandchild, that grandchild was estranged from the grandmother, hadn't spoken to her in years, etc. And so this client had created this last will and testament that just used some generic language that said, I want my assets divided equally between my then living children. If a child predeceases, their share shall be distributed equally to their then children.
And when she read that, she was just thinking about her one child that was alive, she failed to kind of put two and two together and acknowledge that deceased child. And so essentially, upon passing, her estate was split 50, 50% to the living child and 50% to the estranged grandchild. And you know, given my conversation, even with the grandchild and the living child, they both kind of acknowledged that that's probably not what she wanted. But we were stuck with the documents. There's not really much we could do. Obviously the grandchild wasn't going to give up that 50% share, but it knows that he is entitled to it legally. So there's an example where, you know, the client really thought that she had gotten her ducks in a row and things in place. It was just the language that that service provided just didn't work under those circumstances.
[00:22:42] Speaker C: How often do you see stuff like that happen?
[00:22:46] Speaker A: It's rare.
It just, it again, it just really kind of depends on those, you know, the circumstances. Blended families have, you know, made things a lot more complicated. People just don't realize, you know, that they need to be, you know, aware of deceased children and adopted children and how that impacts their estate plan.
[00:23:10] Speaker C: It makes sense. And you know, because they're not experts in it, so they're going off the guidance of others and just hoping for the best.
[00:23:18] Speaker A: There's just a lot of, there's just a lot of misconceptions in estate planning, just like there is in, you know, in, in your row, you know, and I think, you know, the, the Internet is a great tool, but oftentimes the information that you find on the Internet, it may be state, state specific. So it's not applicable to the state of Arizona or, or it just may not be applicable to your circumstances.
[00:23:46] Speaker C: That's. I remember Junior tells a story about talking with his dad and I think he was worried, you know, with computers and everything coming out, it's like, well, there's no, there's no reason for people to need advisers anymore. They can get all the information online. He's like, well, there's a difference between information and advice. So it's good to have all of this information, but if you don't know how to use it correctly, what. What good does it do you? And I think, yeah, there because there's nuances to all of these things. Like, again, I'm sure you see it in your industry. It's people come to us and like, I heard this, I heard that, you know, my second third cousin's nephew, who is this financial expert, and he told me I should do this. I was like, well, yes and no. He's got some bits of truth and good, good advice in there, but it doesn't fit to your circumstances and here's why. Kind of thing are there's like miscon. Are there certain misconceptions that you think you see more often than not, people come in with a certain certainty of something where they expect estate planning to work a certain way, and then they sit with you and they're like, oh, I was way off on that. It was like a main thing or a few. Like that.
[00:25:02] Speaker A: Absolutely. The one main thing is oftentimes clients believe that a trust protects their assets from litigation.
[00:25:11] Speaker C: And I thought that even so, now I'm 99. Way more.
[00:25:17] Speaker A: 90% of the time, 99.9% of the time. Your trust does not do that. It's really just a mechanism to transfer assets when you pass away. There are other types of trusts, like irrevocable trusts, et cetera, that. That do offer some asset protection. But you are really getting into some real extreme complexity at that point. And so oftentimes clients think that, well, hey, if I put my ass into the trust, if there's an accident, if I get sued, et cetera, I'm taken care of. And that is just not the case. It's not the case.
Truly, if that was the case, why wouldn't everyone just stick everything into a trust? Right?
[00:26:01] Speaker C: Yeah, Makes sense. Yeah. Keep you from lawsuit. We bring up on the show all the time umbrella policies have. Umbrella policy that can protect you from these things. But yeah, no, they can definitely go after assets in a trust. And maybe I misheard you because I thought you were saying that trust. Everybody thinks trust keep them from, like probate and those kind of.
So, yeah, they should for the most part. But okay. But yeah, no, I didn't realize people thought that if it's in a trust, it just keeps them out of a lawsuit. Period.
[00:26:30] Speaker A: Yep. They think that it's out of a lawsuit, period.
And that's just not the case really. It's, it's just designed to avoid probate and, and we can kind of touch on probate a little bit more probably later in, in the show.
Probably just isn't the monster that many people credit at. To me it's just nice.
[00:26:51] Speaker C: Well, yeah, let's definitely touch on that and get more information from you and take a quick break. Break. You are listening to another Money show.
We've got Mike McGreevey on estate planning attorney and we're going to teach you more about estate planning. We'll be right back.
[00:27:08] Speaker B: Thanks for listening to another Money Show. If you like what you're hearing, be sure to leave us a rating and subscribe to the show. Wherever you listen to podcasts at Rochford and Associates, we know you've worked hard to earn your money and you've worked even harder to save it. When it comes to wealth management and planning for retirement. JR Rochford and his team of specialists have been helping individuals, families and business owners find financial freedom at their veteran owned firm for more, more than 25 years. Give us a call now at 623-523-0444. That's 623-52-30444.
[00:27:59] Speaker A: Remember, all of JR and Anthony's listeners receive a free financial consultation just for listening to the show. Visit anothermoneyshow.com to learn more and schedule an appointment. Thanks for listening to another Money show and subscribing. Wherever you listen to podcasts, you are.
[00:28:15] Speaker C: Listening to another Money show. Thanks for coming back. We got Mike McGreevey of McGreevy Law Office on 98th and Bell.
If you want more of his information you can reach out to us at 623-523-0444. Contact us at team@Another Money Show.com the contact box on the website. Another Money Show.com find us. We will give you all of Mike's information or you just come hang out with us and then we'll send you next door. Mean hang out with Debbie the assistant. She's a sweetheart. Anyway, so we, we're talking about estate planning, talking about misconceptions and a lot of those just like in finances, same concept. But where, where were we at? I can't even remember. It was so definitely a trust can't save you from being sued and losing all your stuff. So you probably need an umbrella policy for that.
But what else? Probate, taxes? What are some other things that probably.
[00:29:13] Speaker A: So let's focus, let's Focus a little bit on taxes. I, I get a lot of questions about taxes. I'm certainly not a CPA or you know, a specialist when it comes to taxes, but at least when closure. Right.
But when it comes to, to, you know, taxes, again, a lot of people have just misconceptions. They think that, you know, setting up a trust was going to save them from taxes, et cetera. And that's generally not the case. I would say when the vast majority of people pass away, the only taxes that are owed are final income taxes. And that's just because people don't convenely die on tax day.
So that's generally the only taxes that are owed.
You know, there are some other tax issues to take into account. Like again, clients oftentimes don't really understand tax deferred accounts in that yes, their kids have to pay taxes when they pull that money out. And that's just because they never pay taxes themselves on those funds.
So that's always good to review. And I'm sure, you know, if you had a dollar for every tying you had to explain that to your clients, you probably wouldn't even need to be.
[00:30:27] Speaker C: Oh, at this point, especially in the inheritance part too, it's like, well, it's all free money. Like yes, you've got to pay taxes, but it's like, well, I could give you 60,000 and no taxes or I could give you 90,000. That's going to become 60,000 after taxes. But they freak out about the taxes. Like if I just gave them the same amount of money, no taxes be like, yes, but the fact that that extra step.
So yeah, you mentioned not making the trust, the account or the beneficiary in deferred. So like IRA stuff. And what was the reason behind that? Because I, I guess I don't think twice about it. We've never really had or advised clients against that mostly unless it's a spouse. Like we like when we talk about beneficiary designations and perfect world, it's spouse is next and then the contingent is the trust. But for like kids and things like that, I guess they don't think twice about it. What, what's the reason behind not wanting the trust necessarily the best fisher on an ira and not in all cases obviously, but just like from what you were meant.
[00:31:39] Speaker A: Yeah, from like a general kind of standpoint. Because there may be reasons that you would name your, your trust as beneficiary in your ira, but I would say generally you want to name individuals and that's because the individuals like if you've got four children, instead of naming the trust as beneficiary and have the trust distributed four ways, if you name the children as beneficiaries, Those children have 10 years to basically extend those tax or those tax consequences over a period of 10 years. Whereas if you were to name the trust as a beneficiary, it would be all taxed in one year. So there's a tax advantage in doing so. And just by naming your children and that kind of hypothetical individually, it does give them some flexibility. So let's just say, you know, one child needs the money immediately, they can pull all that money out immediately, they are going to get taxed more just because they are pulling it out immediately. But let's say the other child doesn't need those assets, they can extend that those tax consequences over a period of time. So really that's the purpose is just from a taxation standpoint and it is going to be, you know, dependent on the value of that ira.
I'm seeing more younger clients with some, you know, substantial IRAs. That's kind of bound up, that's kind of locked in. You know some of my older clients don't have as large of IRAs. They're not distributing nearly as much money through their IRA as other clients. So it really kind of depends on your circumstances.
[00:33:12] Speaker C: Okay. And that does make sense because yeah we've, they can't, you know, an inherited IRA you can't do for life anymore after they change the rules. And I think 2020, theoretically though, can't they do that as an entity if the trustee holds the trust for 10 years and distribute out or is it they forced to?
[00:33:33] Speaker A: I, I believe they're forced to, to take it all in that one year.
[00:33:37] Speaker C: And I've never run into that situation. So I was curious honestly and we big fans of I get the tax deferral but create an inherited IRA, especially after the post 2020 rules, it's such a hassle. I'm a big fan of just saying screw it, pay the taxes now, make it your own money. But obviously everybody's got their own opinions on what's best for that. For taxes on the trust though, who typically how is that? Is the, the trustee taking care of those first or are they sending everything out and then it becomes the person who inheritance tax tax issue and that's in general not just IRAs but non qualified whatever or can it go either way? Is there a certain procedure for that?
[00:34:18] Speaker A: Generally it's going to be the trustee that pays those final income taxes. The the only time that there would be death or inheritance taxes is for estates that are extremely large, like in the $30 million threshold. That's the threshold to trigger debt or estate taxes right now is $30 million. It used to be significantly lower than that in the 90s, early 2000s. So the vast majority of people, they don't have to worry about debt or estate taxes. Only the uber wealthy, you know, really have to worry about that.
[00:34:54] Speaker C: So I would say should be thankful to be so poor. Good.
[00:34:58] Speaker A: Well, sometimes, you know, you're just born good looking, not rich, you know, that's just.
[00:35:05] Speaker C: Well, yeah, everybody is afraid of taxes. We've had to have that conversation before where people wanted to sell some stocks because they, they thought there was going to be turmoil in the market, but they were, they didn't want to sell them because they wanted, didn't want to pay the taxes. Like, well, you, I've got good news for you. If you wait and you lose money, then you won't have to worry about paying taxes.
[00:35:26] Speaker A: Yep. And at least in, in the state of Arizona, there's no inheritance tax.
There are, there is state inheritance tax in other states. Like for instance, I met with some clients just yesterday who moved from Illinois and there is state inheritance tax in Illinois. And so you're going to structure your estate plan differently. And in that situation it just, it's not applicable. In Arizona they had some complexity. That's basically when they moved to Arizona, it's just no longer applicable anymore. And we could really simplify their speed.
[00:35:57] Speaker C: But yeah, and trusts. So trusts are by state, so that's important for everybody to know. So if you've moved to Arizona from another state, your old trust doesn't necessarily apply anymore, correct?
[00:36:10] Speaker A: No, that's not true. I would say, you know, generally it's, if that document was validly executed in the state you were living in, it's going to be valid in the new state.
But you're living in a new state, there's different, there's different, you know, laws and regulations, etc. So it's always good to have those documents updated, especially if those documents are older, just because they could be taking, you know, they could be making reference to those estate taxes that were, say, from the, the 90s and early 2000s. So if you have an old trust, you know, and you haven't looked at it for 20 years, now's the time to take a look at it, take it to an attorney and have them review it.
[00:36:54] Speaker C: And what about like snowbirds? What about people living in multiple States, or even if you're not living in multiple states, because we've got clients who own land in multiple states, but they live primarily here or almost even exclusively here. But I've heard that they've had issues with trying to put some of those assets into a trust because of different jurisdictions. What's. How do that, how does that get handled or resolved?
[00:37:22] Speaker A: So they're oftentimes those difficulties that you're encountering are just, you know, sometimes it can even just be verbiage. You know, the verbiage that we use in Arizona may be different in Wyoming, etc. So sometimes it's just a matter of kind of communicating with an attorney up in Wyoming and just trying to kind of make sense of what. What the try the. The client is kind of truly trying to accomplish. But that's actually a great example of where a trust would be necessary or where I would recommend putting a trust in place is because when you have a trust, like I said, the primary advantage is to avoid probate. And if you have assets, real estate, say in Arizona, Colorado, Wyoming, et cetera, when you have a trust and you properly incorporate those properties into the trust, you can avoid probate in all those various states. So if you didn't have a trust, you just had a simple will and it triggered a probate, you may be triggering a probate on all those various. Various states and those legal fees could certainly.
But again, you know, that's definitely for, you know, a client that has, you know, pretty substantial wealth to have properties in other states, etc. You know, if you're in that position, that's really. When you do definitely want to meet with an attorney and try to handle it on your own.
[00:38:44] Speaker C: Do you. So like in that Wyoming example, if we've got a client here with property in Wyoming, you're saying the verbiage, do you reach out, you know, if they've hired you to be their attorney to put something together here, do you reach out to someone in Wyoming or how do you figure out what that verbiage is? How do you settle that?
[00:39:02] Speaker A: So it just kind of depends on the, on the circumstances.
You know, oftentimes I can, you know, just kind of give my client the information and say, hey, you've got property in Wyoming, you need to meet with a Wyoming attorney and have this property conveyed from you to. Into. Into the name of the trust. And sometimes they're able to do that just with my direction and the documents that I've given to them. But if there's some questions, etcetera, the attorney in Wyoming can always reach out to me to kind of, you know, figure out what the circumstances are. Oftentimes if I do know of an attorney in that other state, you know, I'll make that referral and say, hey, I've worked with this attorney before. They know my work, I know their work, use them to get these assets filed.
[00:39:48] Speaker C: But they do have to touch base with an attorney in every single state. It's not like they can just go to you and you can, I mean, you can kind of manage and oversee how everything else gets done, but there's no way to necessarily do it without involving someone in each state.
[00:40:05] Speaker A: Yeah, to a certain degree. I mean, I'm only licensed in the state of Arizona, so I can't be drafting deeds, you know, Wyoming deeds for Wyoming property, etc.
[00:40:15] Speaker C: Okay.
[00:40:16] Speaker A: I, I can, I just should.
[00:40:19] Speaker C: That's.
Yeah. As a, as an attorney, probably have to stick, you know, within the boundaries of the law. What assets? Because you mentioned when I've always kind of been confused when people talk about funding a trust. What exactly does funding trust mean?
[00:40:38] Speaker A: So funding a trust means incorporating your assets into the trust. And so like, for instance, for real estate, what that looks like is, you know, transferring the deed from yourself to the trust.
When it comes to bank accounts, how you can incorporate your bank accounts is either retitling the assets in the name of the trust or naming the trust as a beneficiary. And let me kind of give you an example where you may choose one route over another.
Whether you title the asset in the name of the trust or name the trust as a beneficiary, they're both going to get to the same end goal, and that is the assets in the trust and having the trust distribute those assets pursuant to its terms. But the example that I would use is oftentimes, say, when I'm setting up a new trust for clients, and let's say they've got a checking account with a bunch of auto, bill pay, automatic deposits, et cetera. Oftentimes they recommend just naming the trust of the beneficiary because if you were to retitle that account in the name of the trust, you'd have to reset. You'd have to set up all those auto, bill pays, auto deposits, et cetera. So as you know, that's a pain. So sometimes you may just want to name the trust as the beneficiary. And again, upon your passing, then those assets get funneled into the trust and it really achieves kind of the same goal.
[00:42:01] Speaker C: Okay. Because that's good to hear because I've heard different inputs from attorneys. We're a big fan of, you know, at least what we see on our end of things is it's easier for people to own things individually, especially with the, you know, we do a lot of the pension planning and annuities. So when we do that, it's usually the owner is the individual, if there's a spouse that becomes a primary. But otherwise it's the, the trust as the beneficiary. So that way if they ever need to make changes, instead of updating every single account that they have with who they want their beneficiary changes to be, they can update their trust. It's a one stop shop. But like you said, everything goes at passing from that into the trust anyways. But I always think it's just kind of an added step. If the trust owns the account, then every time you have to access it, you have to prove that you're part of the trust. So I think people have different ways of handling that.
Are there any assets that make more sense though to be owned by a trust? Like I, I think you had mentioned real estate, like a home, like should, I mean, you can own as an individual, but are there any protections or reasonings to have like real estate under a trust name as opposed to an individual?
[00:43:21] Speaker A: Nope. Like I said, there's no asset protection by the trust, so that isn't providing a benefit. That's just a common misconception.
[00:43:32] Speaker C: Okay, that's good to know. Yeah, I don't know why I thought having a home in a trust was probably a smarter idea than I think.
[00:43:41] Speaker A: Part of that is just that generally a residence, oftentimes that's a client's largest asset. You know, everybody wants a place to hang their hat at the end of the night, you know, that's near and dear to their heart. They want to protect that at all costs and you can't blame them.
So I think, you know, the trust isn't the mechanism to do that. You know, if you're worried about litigation, if you're in a, you know, an industry or you've got hobbies, et cetera, that you know, kind of put you in a situation where you're open to more, you know, litigation and potentially being sued, you really should, you know, explore getting an umbrella policy in place.
[00:44:23] Speaker C: Nice. And so probate being everybody's number one fear and the reason for a trust.
What kind of instances have you seen where people put a trust together? Mentally, they're all good to go. And then something Gets screwed up down the line and you've triggered probate. Anyways, how often does that happen and what is it that triggers that?
[00:44:46] Speaker A: That happens pretty regularly. You know, clients will have, you know, nearly all their ducks in a row, their assets, you know, most of them titled in the name of the trust. But sometimes there's just kind of an outlying asset. Maybe it's an asset you forgot about. But I would say generally where I see sometimes those hiccups is when clients refinance. So oftentimes if I set up a trust, I get their real estate title in the name of the trust and then they refinance. Oftentimes when you're working with a lender, they want to pull the property out of the trust refinance because really the lender wants to, they want the liability to be an individual, not the entity. At least that's kind of my understanding. And so they'll pull the property out of the trust refinance, and then oftentimes that lender, frankly, they don't care. And so they don't put the property back in the trust. The client thinks everything's set in the way it should be. They subsequently pass away. And now that property is out of the trust because it's over $75,000, which is a threshold to trigger a probate. It triggers a probate, but their will pushes that asset into the trust. So the will really, when you have a trust, the will acts as a safety net. It basically clutches those assets that are not in the trust into the trust. But it can sometimes for their probate to do.
[00:46:10] Speaker C: So does a pour over will prevent that or does that even including a pour over will, anything over 75 grand is going to, so what I, what.
[00:46:21] Speaker A: I refer to is a pour over will. So when you have a trust, you have a pour over will. And so that's that mechanism that says that any assets you forgot to put in the trust, the will pours them into the trust, so to speak.
[00:46:34] Speaker C: Okay, so explain the, Just want to make sure I follow on the housing thing. So you own a house and can you put a house in a trust if you don't own it flat out? Like if the bank still owns it, if you've got a mortgage. Yep. Okay, so it's just, what is that? Is that a deed or title or how does that work?
[00:46:56] Speaker A: Yep, it's just a matter of drafting a deed, conveying it from you as an individual to you as trustee of the trust.
[00:47:04] Speaker C: Gotcha. So that the trust owns them. Okay, so you take it out you refinance, you own the house as an individual. Does the trust not say, this home, even just like as a beneficiary, does that not cover it?
[00:47:20] Speaker A: What do you mean exactly?
[00:47:21] Speaker C: I guess because there's, you know, you can have the trust own something or you can have the trust be the beneficiary. So in that example, the trust is owned or the home is owned by the trust, then it's owned by the individual. But is there nothing in that trust that says this address is a beneficiary to the trust, or is it not like that because it's owned by the trust? Can you do both?
[00:47:49] Speaker A: I mean, I guess hypothetically, you could do both. You could do what's called a beneficiary deed, essentially conveying property to a trust.
I would say generally you would just title it, you know, directly in the trust. But I would say oftentimes what, what clients and, and just people in general kind of don't necessarily realize is that your trust doesn't necessarily list your assets.
It generally is drafted generic. And so, like, for instance, if you've got four children, your trust document often says that all of your assets, all of the trust assets get split four ways. The way that we tell what assets are in the trust is how are they tired, Are they titled in the name of the trust, or is the trust named as a beneficiary? So you can have provisions in your trust or in your will that say, you know, I want account number 1234 to go to Anthony, and I want account number 5678 to go to JR et cetera, so you can have that. And that will kind of give you some insight as to what assets are probably in the trust. But the way that you determine that is actually how is the asset titled? So oftentimes, clients, sometimes if I've set up an estate plan years ago, and they come in and they say, well, it doesn't say my house is in the trust. And the, well, it doesn't say that in the trust. It says that on your deed.
[00:49:14] Speaker C: Interesting. Okay. I guess that makes sense.
[00:49:20] Speaker A: Because obviously, obviously your, your assets can change. You know, you, you change financial institutions, et cetera. You know, if, if we listed all of that in the trust, you have to come back to the attorney and make changes all the time as like, changes.
[00:49:36] Speaker C: No, that makes a lot of sense. It makes sense to make it generic. So, and then kind of back to when we started, you said any unexpected or maybe even expected life changes, any big things. That's when you Want to make sure that everything is up to date. So how. Because I know probate's kind of a bad, scary word, and we talked about what it is that could cause you go in that. But for those that do get stuck in probate, what does that really look like? It. Is it. Is it as terrifying as people say? In my understanding, too, again, this is. Who knows if it's right or not. That's why we've got you here to be the expert. My understanding is that if things do go to probate, if they go to the state, there's a large chunk of the assets that go to the state.
[00:50:22] Speaker A: That's, again, a very common misconception, really. Probate is just the process the law prescribes transfer assets. When somebody passes away, um, the.
There's not a portion that goes to the state. Um, basically the fees for probate are court fees and attorneys. Um, so assets aren't going to the state. Again, that's a very common misconception through probate.
[00:50:47] Speaker C: Um, do you know where that came from?
[00:50:51] Speaker A: So it could be, I think, in. In other states, like I want to say, Pennsylvania maybe, as an example, where I believe that when you trigger a probate in some states, that the attorney is able to take or charge a percentage of the estate as their fee, like a 10%, basically fee. And so, I mean, that could certainly eat into an estate, and that can be a substantial amount of money. So in other states, that may be applicable. It's just not in Arizona.
You know, when I. When it comes to probate, I would say, you know, I would say most attorneys charge an hourly fee for their services. Some attorneys will charge a flat fee for their services to handle the probate from start to finish. It just kind of depends on, you know, that attorney's philosophy. But. But I would say just in general, you know, when I try to equate probate, you know, it's. It's like when you have a good day at work and JR Listens to you, et cetera, and you walk in the door, it's not like you see Buddy and you say, man, today was great. It was just swell.
When you have a bad day and JR doesn't listen to you, and you walk through the door and you say, Buddy Jr. Was terrible. I need to grab a beer from the refrigerator right now. And I use that to really equate that you only hear the negatives, not the positives. You're never going to find somebody that says, meaning that probate was such a swell process. You're Just not. You're only. You're only going to hear those negatives and those horror stories. I would say oftentimes the.
The issues that you hear with probate oftentimes have to do with the players involved and not the process itself.
[00:52:42] Speaker C: I can definitely see that.
[00:52:44] Speaker A: And, you know, sometimes to a certain degree, a probate to.
To a degree can be an advantage because there's some oversight. The court is essentially overseeing the executor or personal representative making sure that they're doing what they're supposed to. So if there is a disagreement, if there's a conflict, or if that person's not doing what they're supposed to, the court is already kind of apprised of the circumstances, know the parties involved, and, you know, you can get relief. You can petition the court, have them removed, et cetera, and the court already has an idea as to what's going on. Whereas with the trust, it's in the name of the document itself. That's called a trust for a reason. You're trusting that person to do what the terms of the trust say. So, I mean, there is an element of trust, and you've got to trust that person that they're going to do what they're going to. What they. What the document says they should be doing.
[00:53:42] Speaker C: And I'm sure that you've probably seen some instances where they can't. So that is, unfortunately, it for this show. Thank you so much for being on here. We covered a ton.
Definitely would love to have you on again and kind of dig deeper into some of those. I wanted to hear your stories. That's what I was like. I bet you got wild stories, happen to do probate.
[00:54:05] Speaker A: You got to get me back on again, and we can do that. I would say the most important thing, what Junior always says, be proactive, not reactive.
[00:54:14] Speaker C: Oh, my God. You do listen to this show. So thank you so much. This was Mike McGreevey. Was it Mike Law Office.com is his website. You can find him. His office is right on 98th Avenue in Bell, right next to ours. That's it for today's show. If you have any questions, if you need help getting in touch with Mike, reach out to us at team another money show.com find us on the web. Anothermoneyshow.com give us a call. 623-523-0444. The number again, 623-523-0444. Thank you for listening and thank you again, Mike, for being here.
[00:54:53] Speaker A: Thank you.
[00:54:55] Speaker B: Thanks for listening to another money show. You deserve to work with a private wealth management firm that will strategically work to protect your hard earned assets. To schedule your free no obligation contract consultation, visit anothermoneyshow.com Investment advisory services offer through Brookstone Capital Management LLC BCM, a registered investment advisor. BCM and Rochford Financial are independent of each other. Insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents. Investments involve risk and unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results.
[00:55:31] Speaker A: Information provided is not intended as tax or legal advice and should not be relied on as such. You are encouraged to seek tax or legal advice from an independent professional.
[00:55:40] Speaker B: Investment Advisory services offer through Brookstone Capital Management llc, a registered investment advisor. BCM and Rochford Financial are independent of each other. Insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents. Investments involve risk and unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results.
