Estate Planning: Legal Disasters vs Practical Advice

Steve Campbell: 00:00:07

Welcome to Ditch the Suits podcast where we share insights nobody in the financial services industry wants you to know about. We're here to help you get the most from your money in life. So buckle up and welcome to Ditch the Suits.

Travis Maus: 00:00:21

So this is episode three with Jess Blake, our resident certified trust fiduciary advisor. Say that five times fast. But Jess is joining us today to help talk about how to avoid making critical estate planning mistakes.

And this is an area that she specializes in.

She's a senior wealth manager at Seed Planning Group and we've talked a lot about who Jess is, kind of giving you her background and why you should listen to her. That was two episodes ago.

Last episode what we did is we talked about really a lot of just the financial planning process and how Jess works with clients, what type of clients she works with and things people overlooking in the financial planning, stuff like that.

So we really talked about unleashing clients basically how to, how to set them free from anything that's holding them back so that they can go live their best life. Today we're going to do a deeper dive into actual estate planning.

So we're going to get much more specific today about the advisor and their role in the estate planning and kind of what all that looks like. And so Jess, we're just super excited to have you here for go number three at this.

Steve Campbell: 00:01:35

And welcome to Ditch the Suits. If you're brand new, I'm Steve Campbell, senior marketing director at Seed Planning Group.

And Travis, who you just heard from is our co host but also our CEO at Seed Planning Group. And Seed is a fee only financial planning firm. And so this show is all about us bringing the things that we do on an everyday basis.

Jess has alluded to it quite a bit in the last two episodes, but how do we really help people get the most from their money in life?

And so we want to share ideas back with you to take these ideas, do them with whoever you want, but this is how you are going to get the things in life that I think are really important to you. And in this series it's been revealing. But to really talk about estate planning. I'm excited for this one, Travis.

Travis Maus: 00:02:15

So Jess, my experience with clients. There are two definitions for estate planning really.

There's what a client might think it's supposed to be or a prospect might think estate planning is. And then there's kind of what we think estate planning is. Which one do you want to tackle first?

Jessica Blake: 00:02:34

Whatever one. I, I'm. We're going to probably talk about both.

Travis Maus: 00:02:38

So all right, well, then let's start with where clients are or prospects are coming from. Somebody hasn't gone through our estate planning. Steve, you might have input on this too. They. They're showing up and they're like, okay, I've.

I've got my estate plan already done. Or I need estate planning. What generally do they mean when they are talking about their estate plan?

Jessica Blake: 00:02:56

Clients think that an estate plan is a will. Period.

Travis Maus: 00:03:02

Okay.

Jessica Blake: 00:03:03

I've gone online, I've downloaded a basic will, and I. Yes. And I have my estate plan done. Period.

Travis Maus: 00:03:17

Okay. Or I've got a friend who's an attorney. I went down there, I got my will put together correct. 25 years ago. We're fine.

Jessica Blake: 00:03:24

Yep.

Travis Maus: 00:03:26

Or it could be. I told my kids this is what's going to happen. They're gonna. My oldest is taking care of it.

Jessica Blake: 00:03:32

Yes.

Travis Maus: 00:03:34

Okay. Any other kind of craziness.

Steve Campbell: 00:03:36

Yeah, I would even allude to Travis. When we do get call ins or people we meet with. Jess and I have done openers with people. They'll say, do I need a trust?

And so just mixing words and what they think. But you also get people that have accumulated those high net worth individuals who have never done a thing.

And so, Jess, you can, you can talk about this. You and I have been in meetings when you talk about estate planning, and you ask them, paint a picture for us what's going on with the estate plan.

And the people kind of sit back and they get very quiet and they're like, we don't have one. And so to, to you, if you're out there today and you don't have one, you're just like everybody else.

Or maybe you had one from 20 years ago, but are there people that are named in it that you don't want? And so these are things that when you talk about estate planning, you really do see the full gamut.

Even those that would say, I got a bulletproof estate plan. And then you start to unpack it. And a lot of holes in that thing. And so you kind of run across everybody in between. Some, none.

Travis Maus: 00:04:31

So I would go back to one of the things that Jess was talking about two episodes ago. And I really don't think that the estate plan, that a client or prospect's idea of what estate planning is is their fault.

They would fault it more on the industry.

Because what happens is, is you go and you talk to any advisor, any so called financial advisor out there, and they're going to say, well, go talk to your attorney about your estate plan. Or if They're a life insurance agent. They're going to say, will you buy some life insurance? There's your estate plan. Right.

That's the conditioning of that. Most financial advisors will not get involved with your estate plan. They'll say, you need to go talk to an attorney, get some things done.

I've literally had clients that have shown up and said, oh yeah, I went and talked to an attorney. I got a trust. I'm like, what kind of trust? What do you mean what kind of trust? Jess, how many kinds of trusts are there?

Jessica Blake: 00:05:27

A lot. There is a laundry list.

Travis Maus: 00:05:31

That'S like Santa's list right there. That is a big list. Right.

It's just like, okay, so I think it's not the client or the prospect's fault that they don't understand what estate planning means. They're kind of being preconditioned or pre programmed.

There's also this idea that some, somebody can just come in after the fact and take care of things. And it's like, that's not how the laws actually work. Like there's, there's rules.

And even though you might not want to follow the rules, it doesn't mean that your heirs won't have to follow the rules.

So, Jess, that's kind of what it feels like when we're talking to people for the first time about trying to explain them why they need to go through estate planning. So what actually, like when you think about, okay, so pretend I'm the prospect.

What do I need to know about estate planning as far as what you're going to do with what estate planning is?

Jessica Blake: 00:06:27

Estate planning, in a nutshell is organizing your finances and assets to ensure your wishes are carried out after you pass. All of that includes, it is managing your assets, that is, and who's going to inherit those assets.

A lot of it comes down to it is money and property. So there's different types of assets that you have. Tangible, non tangible. Right.

Minimizing taxes for your heirs and the planning that goes into that is huge. And mo, no one typically thinks about that or very few. Appointing guardians for your kids. That is part of an estate plan. Setting up this dogs, right?

Oh, yes. Well, for me and you, that is huge. So. Absolutely.

So pet trusts, but just planning for all the people and all the things and making sure that your stuff is set up. One of, I'm telling you, this is a hotspot and we're going to be talking about this again later.

Funeral arrangements and just making sure what that you have your funeral arrangements covered. This comes I mean this has come up very recently for us as well.

So just making sure that people are planning for themselves in funeral arrangements, whether it's through their will, whether it's a pre arranged funeral, but just making sure that the costs are covered for that so that you actually, you know, get it right. So just things like that. So it is more encompassing as far as estate planning than just having a will of a document that says who gets what.

Travis Maus: 00:08:06

You said an interesting thing that you said, organizing your assets, right?

Jessica Blake: 00:08:10

Yes.

Travis Maus: 00:08:11

So a lot of people say, well, I have a spreadsheet my assets on. I'm organized. That's not really what you're talking about.

Jessica Blake: 00:08:18

That's a good clarification. Organizing assets in a way for tax efficiencies is huge. I mean, I love taxes, so I talk about taxes a lot.

But organizing your assets in a way where you're making sure. I mean, one way that I view organizing assets is where you have. And we'll come in.

I mean, we're going to talk about this a little bit later when you talk about the good, bad, the ugly.

But one of the things where you have, you have multiple kids, but say you've already, you have parents that want to not necessarily equalize an estate through their estate. I'm always trying to encourage people to have the estate itself equalize.

But if you can set up beneficiary designations that accomplish what your intention is for non equalizing so that people don't really have the full purview. So it's organizing your assets and splitting them up with a proper beneficiaries and charitable beneficiaries.

And that's what I mean by organizing assets.

Travis Maus: 00:09:15

And there can be legal registration things there, they can be beneficiary designations, there can be references to wills and trusts. It's not just when we say organizing, we're not just saying you have a good comprehensive list. That's the start, but that's not the end.

And then taxes, when we talk about taxes, people are like, well, I'll just go talk to my tax advisor.

The person doing your tax return probably is not the best person to talk about your future tax situation because they'd have to build a projection to understand all of your assets and everything that's happening in your life. How you spend money, who you're giving money to. You know, they'd have to really have a broader comprehensive view on your priorities.

Lots of different types of taxes, which isn't the case for all tax preparers. So even when you say taxes, you're not just saying, hey, go talk to a tax person and see if you owe estate taxes.

It can be much more complicated than that.

Jessica Blake: 00:10:19

Correct.

Just from a, a simple thought of if you have kids and you're trying to manage how your estate is distributed to your kids and you know, one of them is in a low income tax bracket and one of them is in a really high structuring roth accounts, regular IRAs, so that the, just the tax implication to the kids is going to be in their best interest and the overall tax cost to your family is going to be lower.

Travis Maus: 00:10:46

I see people all the time that want to blow that off. No, no, no, no. I just need to split every account equally. It's like you have one kid that works and one kid that doesn't work.

The one kid that does work is very successful. They're in 24, 32% tax bracket. The kid that doesn't work is in the 0% tax bracket. You can leave them each a half a million dollars.

One of them is going to pay $200,000 in income taxes. One isn't, what have you done?

Or you could split the accounts differently, leave them each half a million dollars and nobody's going to pay income taxes. And it's just like, yes, it is complicated, but it's $200,000. And this is just an example. Everybody's situation is different.

But it's so funny that people won't do things sometimes.

They care enough that they don't want to spend money on help, but they'll give money to the government in taxes because they don't understand how the rules work or they just want to pretend, you know. No, no, I didn't hear that. I didn't. It's not real, you know, it's just like, wow, you know, it's fine, it's your money, it's your kids, whatever.

Like, like you're the government's biggest fan.

Jessica Blake: 00:11:54

One of the great tools that we have, the ability to show them in cash flow tax reports.

And it, it is really wild to be able to have something visual, to be able to show clients where you can say, this is what it looks like if you do this.

But if we change this, this is the, you know, the overall tax savings for your family that's so much more impactful when you have the visual behind it as well.

Travis Maus: 00:12:16

And sometimes people are trying to save money on taxes and they shouldn't. I've seen that too. Whether they're trying to save money on taxes or trying to protect money from the dreaded Nursing home.

And they're making these very, very destructive financial decisions. It's like they bite off their nose to spite their face.

I don't want to pay this inheritance tax over here, so I create this capital gains monster over there.

Or I don't want to pay these income taxes over here, so I create these estate taxes over there, you know, and it's like, listen, there's a cause and effect to almost every decision that you make. Like, something's going to happen with that decision. Let's make sure that we're clear on exactly what it is.

Especially as the numbers get bigger, the cost gets bigger, you know, the oopsies turn from, you know, so what, it cost me a couple grand to. Okay, it cost me a couple hundred thousand. Yeah, you know, that's a big difference. So your role as a planner, let's talk about.

Because we have a unique way that we stick our big noses into estate planning. Well, you, you have, you don't. I have a big nose.

Jessica Blake: 00:13:16

I do too.

Travis Maus: 00:13:17

I think it's an Italian thing. So you and Steve have good noses. I have a big nose, but.

But we stick our, you know, figurative big noses into estate planning, but we do it in a different way. So what is the role if you were, if somebody was going to work with you, your. What's that experience?

Like, start to finish working with Jess through the estate planning process.

Jessica Blake: 00:13:42

So I want to know for, you know, we go through these questions and have these conversations about what is important to you, what do you, what do you want to have happen and who, who does get what and what's important to you, et cetera, et ceter. For people who have charitable intentions and want to leave legacy related things, just understanding who it is to the extent of what they do.

I mean, it's different if you're like, you know, I just want to, I like sending my 50amonth over to this thing versus I want my, I want a scholarship built in my name at this school. And okay, great. Like, how do we best go about doing that?

Which accounts are going to be the most tax efficient ways to be able to accomplish those charitable things? So, I mean, that's a big part of it. And I think that people don't realize the extent of how everything holistically, really, truly ties in.

So, you know, understanding what is the goal? Do you have a family home that you want to keep in the family?

Do you have, you know, there's just all these different things and that goes to use cases of trusts and what state does it reside in and like all the different, like problem child things that come along with estate administration in various states.

Travis Maus: 00:14:58

Yeah, I think a little bit more.

What I was getting into was just the explanation too is so when we have a client that's going to go through estate planning, first of all, estate planning comes after financial planning, right?

Because you can't do an estate plan what you're going to have when you check out, if you don't understand what you do have now and how that's going to grow over time, you know, where is that going to be in 10, 15, 20 years? You know, with the exception of somebody who's got a terminal illness right now, that could very much change that calculus.

But in general, the type of clientele you're working with is you're starting with the financial planning.

You kind of got to do a little bit of investment planning, whether you're managing the investments or just understanding what the client's doing with the investments. Because it's hard to do that financial projection if you can't match it up to the investment management thesis. Right.

So if you say, look, this projection is based on you making 8% a year and they're invested to make 4% a year, the projections are going to work out.

So the estate planning might be off a little bit because let's say that they think they're going to have X amount for certain situations and they're just not likely to have it because the growth rates are way off or something like that.

Jessica Blake: 00:16:04

Right.

Travis Maus: 00:16:04

So you go through that process, then you go through an estate process where you.

It's really a lot of what you would think an attorney would do where we kind of do the deep dive and ask all the what if questions and what happens if something happens to that person? And stuff supposed to go over there and what happens if something happens in that situation? What are all the fallback plans?

Who's in charge if you're not that kind of thing. And we outline all of that, we kind of draft all that out and then we make sure that they're paired up with credible attorney.

And then we connect with the attorney, we get them the outline, we get them the financial outline. We say, hey, attorney, this is the client situation. This is where we see they're going.

This is the advice that we've given them regarding kind of what these next steps are going to look like. We do think they need a trust or blah, blah, blah. Attorney, what's your feedback? What do you think? Right. So there's unity there.

And then the client goes and meets with the attorney and they go over all the legally. And this is a big point here.

Before we get into the next steps, talk a little bit about the difference between legal, like, attorneys will do things that. Well, you can legally do that will do it versus practical. Yes, you can do that. But holy crap. Like, that's going to.

Cause, you know, you're stepping on a hornet's nest.

Jessica Blake: 00:17:20

Mm. I had a client one time, they were trying to build out this trust.

And because again, having had the experience with the state and trust administration. So what. Yes. What's legal versus, like, what is reasonable?

These individuals were very, very against their kids living with anyone before they got married. And so they wanted to ensure. And so they were building kind of a trust. Well, this is, I think it was for, like, grandkids or something down the road.

But they said that they were going to leave $10,000 to these individuals as long as they did not move in with their, you know, significant other before they were legally married. And so legally you could do that. And I was like, do I go check the bed and make sure they're not a warm spot on the bed?

Like, how do you make sure that that is actually, like, reason? So there are so many things that people do that they. And it's wonder. I love trust estates. Whatever.

You can build out whatever you want to build out in the things that are important to you, but you have to be reasonable. And that's one thing with attorneys sometimes.

And I think a huge benefit of financial planners who are able to help you with financial or with the drafting of your estate documents, where you can be like, okay, I understand that you feel that way, but that's not really going to be something that is reasonable to expect somebody to be able to verify.

Steve Campbell: 00:18:54

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Steve Campbell: 00:19:21

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Steve Campbell: 00:19:22

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Travis Maus: 00:19:26

That'S nqrmedia.com let's talk about the after effect part, right?

It's like, okay, you can legally do that, but let's talk about you're gone and we're marching into that room and we're going to administer, per your wishes, what's likely to happen to your family and your family members. You know, and that's one example.

Another example could be, I had a client that wanted to give an opportunity for any of their grandkids to buy their house. And what the attorney had created was exactly that.

But it was something that would have been extremely disruptive to the, to the relationships within the family. It would have just pitted family member against family member.

And I'm like, you can do that, but somebody from your family may buy this house and the rest of the people won't like each other. And why would you want that scenario? Is that really what you want? They're like, no, we just want our house celebrated because it's a family house.

And it's like, okay, let's think of other ways to do that from a practical standpoint. And that's the huge thing that the planner brings, is to make sure that we don't get unpractical listing things in the will.

A client will go in and they'll say, hey, I want to leave $50,000 to the Boys and Girls Club and $50,000 to the United Way. I put it in my will. So they put it in the will and then the money goes through the will.

So I literally had a client who had to cash out a 529 plan to give money to the United Way because they shouldn't have put the United Way in the will. They should have put it on an IRA because the IRA is taxed anyway. So give them some tax free money. Right?

Like get out of the taxes and don't use the GrandKids 529 account. So the planner's goal is to keep it practical and to articulate attorneys saying this.

And legally, client, these are your wishes and your goals and your dreams. This is part of the reason why you said that you want to know everything about that client, like what's important to them and whatnot.

Because you need to be able to say, look, you can do it that way, but that's not going to jive with one of these things that you said was really important to you and your relationship with so and so. So how do we reconcile that? Okay, attorney. Yes, you can do it like that, but what if we went that way? Right.

So attorney gets the documents done, the client goes in and signs all the documents. Then there's one more step. Right? There is beneficiaries.

Jessica Blake: 00:21:45

Yes.

Travis Maus: 00:21:46

And nine times out of 10 people screw up beneficiaries like, well, I got my will done, I got my trust done, I'm done. And it's like, do you realize that your beneficiary designations on your account supersede that will?

So if the beneficiaries say, give it to my kids, and the will says, put it in trust for my kids, it's going to the kids, not in the trust, Correct? Yes. Screwed up.

So the good planners will come back and address those beneficiaries and they will say, hey, that trust that was referenced in the will, if that trust is real, put it in that. And if it's not real, then give it to the kids. And that's the role of a good financial planner all the way through the system.

And then there's one more step. The next step is the review process. We review it.

I don't know if there's necessarily an internal standard, but somewhere between one and every one to three years, we review the estate plans because clients have grandkids and sometimes kids pass away. Had that happen before, you know, and there's just stuff that changes and you want to change. Charitable inclinations change.

Are there, in your opinion, differentiators, when you get to financial professionals in this space, Talk about us for a second and then we can talk about attorneys. Do you think with financial planners that there's differentiators between planners and who's going to be able to take you through that process?

Jessica Blake: 00:23:16

We just said, oh, exactly.

So if you are not working with somebody that has a purview of everything that you have going on, whether, you know, both with investment accounts, life insurance policies, everything, just understanding properties you own, etc. Etc. And what your goals and true intentions are, there's not going to be solid advice behind that.

If you're working with a financial professional that is just managing one or two accounts, they're going to be like, oh, yeah, you totally need an insurance policy. You need to make sure that you have this. They're going to keep. They're just going to give you advice on what they have purview to.

So it's not going to be really effective for you. So you really need to make sure you're working with somebody that actually knows what's going on with the whole picture.

Travis Maus: 00:24:08

Yeah.

In the insurance industry, I mean, there was lots of trainings we went through that was about the insurance agent getting the attorneys to team up with them to help them sell huge life insurance policies to clients.

And I know a lot of good attorneys that became very put off by any Time an agent would walk in the door, or even a financial advisor, because it was like all you're doing is trying to get us to help you sell stuff to the client. We don't want to do that. But then there's also a differentiator with, let's just say attorneys or practitioner. Legal practitioners. Right. With.

In your experience, is there, you know, an attorney's an attorney. Is there any difference between the attorneys?

Jessica Blake: 00:24:47

Oh, there's a huge difference in the attorneys.

And I think to kind of go into what you were just saying a little bit about, you know, you rub my background, yours, a lot of the attorneys, I think if you're a financial professional that are recommending over clients to them, they feel that you're looking for the same thing. So that there's like a, an unknown. Oh, oh, you know, you're sending business my way because you're expecting me to send business your way.

And that's a huge thing that. I mean, we do not drive for that. That is not the reason we do it.

We recommend clients to attorneys because we understand that whatever they're able to provide is what our clients need. That is a huge, huge piece of the attorney.

There are a lot of clients that do not realize the difference between an attorney that focuses on real estate and an attorney that focuses on estate planning. And to whatever degree, everybody, it's like here I have a background in a specialization with estate planning.

There are a lot of attorneys that specialize in different things. So you want to make sure you're giving a really good match for what their expertise is as well.

Steve Campbell: 00:26:00

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Travis Maus: 00:26:21

Yeah, I think that that's, that's huge because I've seen really good and, and, you know, not.

We're not attorneys, but one of the things that we can help with a client is we can see when something doesn't look right because we've seen so many different estate plans and all the documents that come with them. And we can say, first of all, you know, you're missing a. I, I literally caught a will one time that was missing a paragraph.

Jessica Blake: 00:26:48

A lot of Them are. I mean, they take them because the.

Travis Maus: 00:26:50

Templates are cut and paste. Yeah, yeah. But I mean, you can just. I've seen one page wills before and I'm like, I'm sorry.

It's nice that it's one page, but it doesn't cover what you needed to cover, you know. Well, I just want it to be simple. It doesn't matter if you want it to be simple.

You're talking about the state government when you're talking about your will. Because it's a document that dictates what's going to happen. And if the document isn't clear, it goes to the state to deal with. Right.

So it needs to be done a certain way and it needs to be done well. And I think that that just gets us to. We're just going to hammer this home.

Why is it so darn important to work with a fiduciary when you're talking about estate planning?

Jessica Blake: 00:27:34

Because we are trying to make sure that everything is being done in your best interest. Period. That is it. And. Oh, gosh. Yeah, Exclamation point, underline.

Travis Maus: 00:27:47

Yeah. Well, I think it goes back to what you said about the attorneys when we go to.

Because I've, I've, I've done plenty of intro discussions with attorneys when we go to them. I think they're always taken aback by it.

We say, look, we need someplace to send our clients that we can trust, that you're going to communicate with us. You're going to read the material that we send you ahead of time.

The client's not going to come back with some weird kind of completely different thing than we sent them to you for, which can happen a lot.

Jessica Blake: 00:28:16

It does.

Travis Maus: 00:28:17

I'm not here attorney to send you business. So that. And concerned with whether or not you're sending me business back. Right. You're going to do that if you think I do a good job.

What I need is somebody to do and to execute what we're sending them. This is what we need done. And I think that's the same thing with the client.

When you're in an environment where it doesn't matter if the client buys life insurance, it doesn't matter if they invest with you or anything like that. Your goal, like, we've done enough estate plan administration now.

My goal is when you pass away and I connect with your family, that that's a good experience because I've had the bad experiences.

I can tell you how it feels on this end to have that emotional kind of cannonball that's being thrown around when the family is at each other's throats and that kind of stuff. And there's a lot of fear and anxiety in the family. And I've been on the other end too, where, okay, we know we got this. We know what your role is.

We know what our role is. We know that, you know, where everything is. Everything has been properly addressed.

There might be a mistake or two, but those things can be fixed because the. The bulk of everything is where it's supposed to be type of stuff. When you go through something like that, everybody just has. It's.

It's more of an enlightening. It's.

It's a partnership to get through a grieving process versus a horrible wall that you have to climb when you're dealing with the fact that you just lost somebody that you really care about.

And so that's my goal, is to always have it so that when that client's family calls me up, we can talk about the memories and the great things and how they set things up for them and what they really wanted. You know, that's really that experience that you want.

Jessica Blake: 00:30:09

And the other thing that I also think is important to note is that just because they are an attorney does not mean that they are perfect or that they do everything correctly either. So this actually happened recently where we were reviewing a will internally, and this is where having enough estate administration has come in.

Very, very useful because I'm reading through the will, and I'm like, It created a circle, and there literally was no end. And so. And I've actually administered or been involved with a lot of.

You have to take it back to court, and you have to get the judge to basically come up with a decree for what the final. You know, where are these assets ultimately going to. Because when the attorney drafted the document, they did not do it properly.

So it created a whole circle. And clearly that's a problem. So people have to also remember that just because they're an attorney, it does.

Mistakes can happen, which is another reason why having a fiduciary involved, having a financial planner that is helping you review those documents and can help you identify those problems in advance so that you can get them fixed is really important. Important.