0:09 all right we are live and uh there we go now we're recording awesome hello everyone and welcome to trusts and Estates weekly I'm your host Kevin bemle and we are here every Monday at 10 A.M Pacific Time 1 p.m eastern time and we go an hour in then to get to Mountain and Central and we talk about all things related to trusts and probate and Estates and both from the perspective of your own um personal finances as well as people
0:46 who are interested in working in that Arena and helping people with their succession planning with dealing with trusts and estate matters helping other people deal with trust in estate matters and uh and and on all of the attendant things that go with that so it's a it's kind of a a dual uh purpose that we're here for each Monday and I am very pleased to introduce uh my guests today Paul Hilton so Paul is a military veteran
1:22 and after a a career in the Marine Corps right absolutely yes after uh after retiring from the Marine Corps um Paul eventually went to law school and got involved in the trust and Estates area of law here in California he and his wife lived down in the San Diego area Rancho Cucamonga I believe well we live yeah we live in San Bruno County but we've been in San Diego for many years yes yeah and um so I'm I'm really pleased to bring
1:59 Paul's expertise to you um he we were we were talking um I believe it was last week or the week before and he was telling me stories of some of the cases that he's been involved with and we we were actually swapping stories um but uh you know as you as those of you who have seen my other shows know my intention is to talk as little as possible when I have a guest and really kind of give them the floor to to share their thoughts about our topic with you
2:34 but first of all Paul welcome thanks for coming on trust in Estates weekly thank you Kevin it's great to be here so tell me um just to get started um why did you end up getting involved in this particular area of law as opposed to say you know corporate law or you know personal injury or or you know some other you know some other area of law what what Drew you to this one or criminal law or anything like that yeah a good question and I S and I still
3:10 struggle with how that came and became about myself so uh like you said I came into law later in life uh I I was in my 50s before I went to law school and uh went to went to Watson and thought I was going to do personal injury uh or criminal I thought I was going to go down that road and in fact when I was in last year law school and I was about to go to uh retire from I was working for the Department of Navy as a federal employee
3:46 I've been doing that for 12 years and going to law school at night and at the end of that I um I was able to take a Hiatus or some you know as I was retiring and I was able to get an internship my last year of law school and I went to a an estate planning firm to do personal injury that sounds a little strange so this this attorney had been working for many he had had a solo practice for many many years
4:22 and as he he did estate plans he did trusts and wills and things that's what he did but over the years he had so many clients and they got in car accidents and they had slips and falls and they would come to him with how do I how do I Susan how do I get paid off for this so I went to him as an intern just to help him with the doing the demand letters doing the things the personal injury things and uh so I spent quite a bit of time with that but I became fascinated with
4:58 the whole estate the states and the probate and the probate code and all the things that we're involved with Estate Planning and wills trusts Estates and probate that part of his business it excited me interested me more than the personal injury so uh graduated from law school took the bar exam passed the bar uh first time California in uh geez that was 2018 license at the end of 2018 and in 2019 I started went
5:34 to another estate planning firm come and learn some of the systems how to do it there's two or three systems as an attorney that manager to help you manage the clients and then systems that help you do estate plans better trusts and stuff I've learned those and then I did a lot of pro bono work in Probate Court found figured out how to get to the probate court in San Diego where how to get parking and how
6:09 to do all those those little things and um no small tasks by the way exactly so that's why what's that's what got me into it yeah so so then talking you you mentioned a couple of things and and you know so being a lawyer I think you can speak to these more uh precisely than I can so when we talk about doing an estate plan um how how does then um a trust or a will or you know how do those various
6:45 um things fit into an estate plan and and let me ask kind of a pre-question um who should be or when who should be and when should they be looking into doing an estate plan so you know a kid just getting out of college does he need to worry about an estate plan or you know who is that that person or that that you know group that couple I guess and and when should they be concerned and then what goes into that good question so we should always be State uh planning
7:22 our estate um you should be building in a state too so I say should I I don't like to use the word should should as a uh one of those words you ought to do but you don't have to so those are rough for me right so you know in the Marine Corps we um when you were 18 years old before you deployed they made every Marine we made every Marine get you have to get a power of attorney and a well done before you deployed and and these
7:57 young marines are 18 19 years old they don't have anything but but it helped there's so many things that assets that have to pass bank accounts cars things are anything that's titled in your name it as a minimum you need to have a will so that somebody after you're gone somebody can take title of that and it just it it doesn't just sit there uh and you don't have to go to Probate Court potentially to have a to see the joke
8:34 I just filed a probate petition last week the neck the hearing for that thing is in November I filed it in June of the hearing so probate really is slow it it's the the the judges here in San Diego are great the Probate Court here is great but it is so backed up so you start you start with a will if you're a young person get a will get your will done things will pass if you have but then the next thing if you have any asset any group of assets that your
9:11 gross estate is over 166 000 in California other state the the threshold is different in other states but if you have a house for instance in California you have a hundred and sixty six thousand dollar estate the only way that house passes to anybody else is through a probate tradition so what's the best so so you have a house or any estate asset you want to put that in a trust so we talk about things that I talked about a
9:47 will just a minute ago but we just we want to talk about things that pass without probate if they're a small asset and you have a will they can pass without probing if it's a large asset and it it potentially the only way you really can get through probate without probate is to be in our trust Assets in trust for instance and you'll hear this revocable living trust a lot assets that are that are named into a trust they pass without probate assuming you
10:24 did them right an attorney you'd work with didn't right now there's other assets that passed without going through probate life insurance doesn't go through probate okay unless you unless the beneficiary is a minor don't do that don't name the benefits or he's your nine-year-old son you're gonna have to you're somebody's gonna have to go to probate court and get a guardianship of the estate to get that money for your your nine-year-old son that you decided to name in Probate all right or in your
11:00 life insurance another thing that passes without probation are most of those qualified retirement accounts 401ks IRAs things like that so but so you you got to think about those um those types of assets and and so we talk a lot about revocal in estate planning lyric okay well I have a revocable trust revocable living trust all belong what is it well a trust a revocable trust just means that you have you can revoke it during your life
11:38 and anything you put in it you can take out of it irrevocable trusts you'll hear that term a lot that's a different animal so talk about that we in general you want that revocable trust and and think of a trust as a purse it's just or a bucket it's just a a device a legal device that you can put stuff into and instructions so that when you pass or become incapacitated
12:13 whoever's takes out those instructions those instructions tell you tell him or her the successor trustee how to distribute the stuff that's in the bucket or in the purse so that's one part of estate planning that the trust that's you know so you you want as much as you can to get as much stuff into a trust as you can or some vehicle that does not require probate to pass to pass on to somebody
12:48 when you're gone so you oh I'm sorry yeah you mentioned in California there's a a threshold of a hundred and sixty six thousand dollars so does that mean any asset below that amount no matter what it is can pass to an error without probate or is it still only certain assets like a life insurance policy to an adult or or a a qualified a retirement account that that passes good question assets actually
13:24 um if the gross estate the combined gross estate is 100 below 166 000. those pieces of the estate can pass through something um a small State uh affidavit essentially where you can go in either one show this is why I said you have a will so you go to that that bank that has that money or has that asset or a brokerage firm who has that asset in the name of the decedent
14:00 you felt you break his ring certificate the death certificate and the uh a small estate affidavit and you go and the will if you've got a will that really helps and you go to the bank and say look I'm named in the will here's the will here's the affidavit this person is dead this estate is this asset is fairly cheap and I I'm named the will it should pass to me and you you notarize that thing is notarized you're attesting that you're the person that should be getting there
14:36 now if you don't have a will then you have to demonstrate that there's an intestate uh succession that should go to you and you know if you're a son or a daughter of the seed and you could show that that's fairly simple a problem comes into if you have a state's larger than that larger than a person stays larger 166 000 and anytime you have a house in California you've got you've definitely got that then you can't just do that you have to
15:13 go through the through the probate process seek out letters Administration and a process of notifying anybody who could be a predator to uh the decedent anybody that the decision may have owed money to because they get the first kick at the at that uh estate so now other other states and I I can't speak from but that threshold is much lower in other states oh okay so now when you say the the amount of the gross estate that's the total value
15:49 of assets minus liabilities is that correct or just no it's gross okay so it's before the liabilities are subtracted and does that include the value of any life insurance policy well so there's two there's a couple different things here to think about there's what's the gross estate for probate and what's the gross estate for estate tax okay so for the IRS the gross estate for the IRS will they account for estate tax planning
16:26 um they count all that your your 401ks all your IRAs life insurance the value of any property all that counts towards the the gross estate for estate tax gotcha okay probate to get through probate most of that stuff doesn't passes outside of probate and doesn't count towards a gross estate for a probate oh okay so so it's kind of two different things and when you talk about estate tax and IRS
17:02 then they they throw all that in life insurance everything you've got to be so and there's techniques to make sure that your life insurance does not get counted towards your estate now remember the estate tax exclusion amount right now is really high there's not that many people that are gonna that pay a state tax state tax exclusion individuals over six million dollars so you've got to have you got to be fairly wealthy and if you're a couple if you're
17:37 married uh there's the lifetime [Music] what's it called the the spousal exclusion so anything if you die if you're deceeded anything that your wife or husband or your surviving spouse inherits from you there's a there's a unlimited exclusion they don't they don't have to pay estate tax so you can you can you can be quick 12 million dollars if you want to your spouse when you pass
18:12 because IRS knows well the the second the surviving spouse is going to die pretty soon too then we'll take our cut so there's and there and there's techniques to use all that exclusion across the two the two spouses so you pay limit of the estate taxes as much as you possibly can and um I I did a show on this um in the last couple of weeks I believe in a couple of years um the exclusion amount is going to drop um that I don't remember I don't recall
18:49 now what the lower amount was but I I my understanding is that's going to change have you heard anything about Congress potentially extending the higher exclusion is that being talked about in in legal circles these days well I think it's what December December 31st 2025. I believe the date yeah or you could actually count the number of days to let it it will go down to I believe it's three and a half million is the exclusion amount
19:25 um that will put a lot of people in California into a state tax planning problem um I doubt give given our current political situation um I'll find it very hard to believe that our Congress can actually do something and actually agree on they've been taught not saying bad about anybody or any political party it's just it the the current situation happened because of um
20:00 you know it was a it was a anomaly that they got that through uh at the time and it set and it's only and long years I got through because it was set to expire and go back in 2025. I doubt very much that um Congress will change that we we talked about that there was actually some talk uh uh when the bite Administration started that and the Democrats controlled both houses that it was going to shrink they were going to
20:36 bring that back down um Bernie Sanders and some others had some proposals to do that to eliminate a lot of that exclusion uh but it was just so painful it's so uh politically painful for those those people to to put through that it never and so I think I think it will expire I think it will expire on 2025 and people I mean me I I need to start thinking about that like 3.5 million dollars can you know if you buy it if you're in California you you live in or in a
21:13 residential property in anywhere in LA County San Diego County anywhere in those counties and and say you decide to put an Adu uh auxiliary dwelling unit or you have one rental property or something you're very likely into that estate tax exclusion amount and you're going to have to figure out what it what to do to to get it to to as much as you can to avoid a statement estate tax is really I think it's 37 right I think that's pretty high and plus um well is there a state estate
21:51 tax as well um it depends on the state um I don't so we have to worry about this so little because it's so hot California has an estate tax that probably will change right right so um so so there's there's two different issues that we're we're kind of tracking here one is the size of your estate with respect to probate and how to deal with
22:27 that the other is the size of your estate with respect to to taxation which is kind of on a track that's going to take a big turn in about a year and a half so as you work with your clients how do you deal with that that uncertainty on on the tax uh you know on the estate tax issue um especially for someone who maybe is is very elderly and you know they may die let's say in the next year um but on the US and so it may make
23:03 sense for them to you know act as if they're going to get the larger exemption and yet you know if they live you know kind of 18 months plus one day the whole regime is going to change and and get redo an estate plan on a dime right so how are you dealing with that particular issue well some imagine estate planning um the process or the thought the basic thought goes back way back a long time ago from 90s 80s want I'm here and in
23:41 those years the estate tax exclusion amount was like five hundred thousand dollars in the 90s so everybody was dealing with this problem and so the the the the pro the the idea was and what what developed out of that is what you hear is a b trusts marital trust marital shares non-maritalship and what should what we what we try to do is so when when the state uh so you have an estate a married couple
24:18 together say they have a uh 12 million dollars or you know together in that first and in California it's all community property possible or but when that first spouse dies and there's you end up with really with two separate shares you have a a deceased spouse and share and the surviving spouse this year and you always remember you think about those things so what you do is you take that deceased you use all of the exclusion
24:53 amount of a deceased spouse as much as you need anyway and you put that in a share called a non-marital share that's the DC spouse's share if it's the deceased spouse's exclusion amount and then you put the other other part into what's called a marital share and that gets counted towards the surviving spouse's estate oh okay okay so when the surviving spouse passes the surviving spouse is half of the community property and this marital share all get counted
25:30 against the surviving spouses a state that makes sense it's hard three different parts that you combined together well so the challenge is to take so you have the they have put enough into the non-metal the deceased spouses share so that deceased spouse doesn't pay a state tax and then you want to have but then you got you put this other chunk into the marital share and the surviving spouse so when the surviving spouse passes away you
26:06 don't want the surviving spouse to have to pay a state tax either once when I say she because the fact of matters most of the time the guys we died oh I say she the surviving spouse okay it might be the guy but anyway when she she passes um you don't want her to pay a state tax either so then what you do you so you there's a portability so the there's a portability of the exclusion so if you don't use all of the deceased
26:42 spouses estate tax exclusion that can be ported to the surviving spouse okay so the Sovereign but if you only use if this if the deceased spouse only use three million dollars and you put three million dollars so he's got six there's three million dollars of exclusion still we import that get your CPA to do the right um forms to to qualify for that
27:20 and then the surviving spouse so so now the surviving spouse's estate can be up to nine million dollars because you ported three million dollars and she had six million so now she can die within a state of as big as nine million dollars without paying estate tax so those are the kind of planning factors you you come into McDonald's it's those shares and the portability and the um lifetime exclusion amount of spousal inheritance that each spouse can end so which you
27:58 play with all those things now in California so that's just so you got that that's a state tax you've got the other problem you have is so capital gains tax you don't think about that too because as a married couple there's a five five hundred thousand dollar exclusion and really this this is CPA world you need to get us to get CPA in here but there's a lifetime uh uh there's a 500 000 uh exclusion for capital gains
28:34 so as a as a married couple 250 is a as a single so the year you buy a house and it grows and for 15 years it's gonna grow it's gonna appreciate in California now some there are places and things where it depreciates that it does happen most of the time in California you'll appreciate right and you know 15 years it'll appreciate probably if you're a single oil probably appreciate 250 and if you're American I mean it's going to appreciate them right and so when you sell it
29:10 you've got to pay the capital gains tasks on anything over that to fit that that uh exclusion amount so you got to think about that too when you die there is a Step Up in basis to the date of your death you've got to remember that too so you get that so your heirs do not have to pay that capital gains on that now there's a community property aspect of that too because
29:45 you know the way it's titled so you got to think about that so that's so you got capital gains now you gotta stay text to worry about uh your last income tax you think through about last year and then lastly in California is the property tax and how that passes and and when does that property get reassessed as you've got to be really careful about that too because California is trying now they're they're lots of exclusions
30:20 of that Proposition 13 um is has been just amazing for homeowners who can grow their their Estates and the value of their home over time without constantly getting um a tax a tax increase um you know a lot of people don't like that and think that they should you know it helps you know Pace their schools and stuff like that I'm not getting into that but it but the point is you've got to be really careful that
30:57 that's the other one you every you got to think about the reassessment for property tax and a lot of people in California what they would do if they built Estates by passing uh passing their their property and their property to family members to their sons and daughters and and Sons and Daughters um you know inherited these these properties for years well Prop 19 really put a limit to that
31:33 go now really really put a kibosh on a lot of that uh so but you have to think so when you do when you do a state plan you got to be thinking about all that stuff and then so that's part of it but then you've also got to think about um disability what happens you know when you start as you get older you get you get dementia Parkinson's things like that we all hope that doesn't happen but you
32:09 we don't know you know those are that's the thing that how do you want you've got to be so the trust and the will and all that stuff takes control when you pass when you die but what happens if you don't die and you can't start making decisions who how do you keep things going I mean you've got a house you got to have it repaired there's a leaky roofs there's you know well the you know you have income tax to pay who's gonna pay Who's
32:44 Gonna Fill do you do your income well look that's all disability planning who's going to tell the doctors whether you should have surgery or not when you're you're not struggling with one thing or another um who's gonna be there to make sure you take the medicines that you need to take when you're not like with it anymore um and that's that's also that's a very big part of estate planning as well that's the power of attorney the you know in the Marine Corps as a young person we used to make people
33:20 make uh Marines do uh a power of attorney with on their first deployment a will and a power of attorney well a few things will if you if if they passed because Marines you do dangerous stuff and and lots of uh weird places in the world and lots of very uh complex equipment and stuff goes wrong so you have a will that make sure that whatever it is you have passes easily to Mom and Dad if you're not married or if
33:55 you're married to your wife well well what happens if you're not dead and they can't find you or you're missing an action or we know you know uh or uh prisoner of war or something like that who's going to keep your stuff going well we don't have a death certificate you're not dead but you can't do anything you're incapacity well all this stuff can happen to any of us at any in any right go travel travel uh worldwide or something like that something bad can happen and that's the
34:30 that's the power of attorney named but you've got to name somebody and you need to think about this people who are you going to name and that's people struggle one they struggle with thinking about those two things they're deaf or they're incapacity people don't like to think about that at all that's they struggle that and then when they kind of come to grips with hey I do need to think about that because I got stuff and I have loved ones that I want to make sure my stuff goes to those loved ones easily
35:06 the next question is who do I trust to make sure my stuff after I'm gone my stuff goes to the people I wanted to in the way I wanted to and that's a a lot of people struggle with that I you know it's hard to wow if I was gone who would I give who would I trust to make sure and what you know and a lot of people if they're married hopefully either they they're they're they're comfortable with their spouse but if you and and they name their
35:41 spouse well what if you and your spouse are on the same airplane that goes down are you and your spouse or in the same car crash you know um who's next that's the challenge who's who's next after that right well gosh this was the fastest 30 minutes actually we've gone over time as a matter of fact uh for the show but I I wanted to let you keep keep going with your explanation because everything that you were saying was was so good and it's so important for people to understand this so but unfortunately we're gonna
36:17 have to wrap up here so I just want to thank you Paul for for coming on the show and sharing your thoughts we're gonna have to have you come back there's obviously much more we can talk about on these subjects I've got a half a dozen questions stacked up um so uh so we'll definitely have you back but thank you very very much for coming on and sharing your expertise with us thank you Kevin I really appreciate it so before I sign off just want to remind you again we're here with trust and Estates weekly every Monday 10 a.m Pacific time tomorrow is our is my show business lessons from the military
36:53 my guest is Captain Mark Brooker United States Navy return hired he's a an expert on leadership and also a published author so I invite you to join us tomorrow at 11 A.M Pacific Time 2 p.m eastern time for business lessons from the military and then on Wednesday is my show people making money and that is at 12 30 PM Pacific 3 30 p.m uh eastern time and my guest on people making money is Laurie Israel she's a lawyer who has
37:30 specialized in family law for her whole career and she's going to be talking about another very difficult subject which is marriage and money not not necessarily the part but what happens when you're you're dead but what you know how you handle that whole situation Laura has been a mediator she's worked with prenuptial agreements Etc so I invite you to tune in all week long and then of course next week uh we're going to do it again we're going to have some some special shows for the week of Fourth of July so thank you all
38:05 very much for joining me again Paul Hilton thank you so much for coming on the show today and I just want to wrap up as I always do by mentioning my dear dear friend who has passed on Marie darling you are and ever will be my belt thank you so much folks all the best