The WAY to WOW Shows
Unusual Estate Planning & Administration Matters
June 29, 2026
Automatically generated from YouTube captions; names and wording may contain errors.

[0:01] [music]

[0:02] >> Who are you? And where are you going? What do you want?

[0:18] >> Hello and welcome to Trusts & Estates Weekly. I'm your host Kevin Bemel and I'm here every Monday at 10:00 a.m. Pacific time to talk about estate planning and trust and probate administration uh both from the standpoint of uh that for professionals like my guest uh Chris and I who do this for a living uh but also for those of you who this isn't what you do uh but maybe you got appointed as the executor under your parents' will or something like that and so now you're faced with this somewhat daunting uh process known as uh

[0:54] administering a trust or a probate or something and you're trying to figure it out. Hopefully this will give you some information that will make it easier and and allow you to communicate with your uh advisors in a in a more cogent fashion. So uh today um I'm very happy to welcome back to Trusts & Estates Weekly uh Chris Johnson. So Chris was on I think maybe about a year ago, something like that. And uh we we had a great conversation and so uh you know, reached out to Chris um earlier this year and said, "Hey, I

[1:30] you know, would really love to have you come on and uh you know, talk talk with me again." And and and Chris graciously uh consented to do so. So uh Chris, welcome to to the show. Thanks for uh coming on again.

[1:43] >> Uh thank you. Thanks for having me back.

[1:45] >> Yeah. So you know, um if if you wouldn't mind just taking like, you know, real short and refreshing people a little bit about your background for those especially who maybe didn't see um you know, see the show when you were on the first time. I think it's always good for people to get a feeling for who my guests are.

[2:05] >> Oh, sure. Sure. So, I'm a estate planning and probate attorney probate attorney. I've been practicing for 32 years now and uh the main office is Glendora in Southern California, but also have offices to meet with clients in Pasadena and Indian Wells. And so, we do probably half of our work is doing estate planning and mostly trust for people uh and updating those as needed. And then the other part is uh probate court and just about anything that can happen in there usually with decedents' estates or

[2:42] or fixing trusts and things like that.

[2:45] >> Right. And And Chris, you know, a lot of what you Well, first of all, because you've been doing this for quite a while now, um I think you're you're the range of your experience and the complexity with which uh the complexity of the uh issues with which you've dealt is is is pretty substantial. So, I I thought we would talk about some more kind of unusual and potentially uh difficult or complex issues than uh you know, than than you know, might typically be the case. Uh I know we were

[3:21] talking before we uh started the show and one of the things that you mentioned and I I think you're the first person to mention this on this show is something called a gun trust. And I I you know, firearm ownership has gotten um I think more extensive uh you know, especially since COVID. Um so, talk to us about what that is, uh why it it may be important and and why you know, someone would want to or might need to, you know, look into doing this.

[3:57] >> Oh, sure. Sure, cuz I I get the question asked or I I go to conferences and people would talk about a separate gun trust from separate from something you might already have in your revocable trust. And so, I asked again, you know, recently, is is it something if I'm in California, should I have a separate gun trust for my firearms? And I've uh every time I've gone to do the research, uh the answer seems to be no. Um I think it might work in other states um

[4:33] a little differently, but uh I think the issue is they're kind of sold as saying, "Well, if I've got some things that used to be legal that really aren't legal to buy now, uh maybe I can keep them under grandfather clauses or something like that in the law, but I want to pass them down to my beneficiaries or my kids. And um I don't see that having a separate gun trust allows any sort of uh uh exception for that. Um it seems like if I if it's something you have, at least what I can see, um

[5:09] you know, it might end with you. Um you know, it doesn't actually offer any extra magic uh for getting those things down if if they're already illegal. And if it is something you can pass on um to the beneficiaries uh or be sold at your death, um again, I don't see that the trust provides any extra protection there. Um part of uh what I've seen too as well it it might shield the trustee from liability. Um and again, I don't see any extra protection there. Um

[5:44] what should could done though is uh it just the regular assignment uh to your trust. We typically do saying in all all the stuff in my house, anything tangible. I'm transferring over to my trust to better avoid any probate issues. You know, the the probate exception is 208,850 and below. And so, you know, most of us the stuff in our house is not going to be worth that even if we have a gun collection. But if it is, you know, we we always do the assignment just in case

[6:20] and also to make it clear it belongs in there. The will also is going to take care of that. And then what happens with the gun collection after death, the trustee then is the person who is going to have to deal with getting those to the right people or selling them. You know, back to a licensed gun dealer. The licensed gun dealer is also the same person who's going to help you do the transfer, you know, beneficiaries want them. Usually in my experience if there is, you know, if if there's the guns, there's going to be somebody in the family who wants them

[6:56] or, you know, divide them up and so in the cases I've had it it's never really been a problem and I don't see that uh you know, the trustee if if they're handling the transfer through someone who's licensed um there's not going to be an issue there. I think the issue arises with maybe disposing of them in a way that is not uh not following the rules, you know, so giving them out to people or expecting them to transfer, you know, the trustee should take care of that themselves. But

[7:32] but I bring it up cuz you know, I'll see things online about how it does make the transfer easier or protects the trustee, the estate representative from liability. And again, I think all those things are available through the the law as it currently is by just using a trust. And so, um, I don't see any extra benefit. Now, I that may be different, uh, in other states, um, but California, it's that that seems to be the answer. So, um, yeah, if people get told, "Well, you you

[8:08] need to have a gun trust or ask your attorney about a gun trust." Um, you know, that that so far seems to be the answer I'm finding. Uh, so I would invite, uh, other opinions if they're out there, but, uh, that every time I've looked at it, that seems to be the state of the law. And so, you know, I know I've got examples and, uh, drafts I could use, but I've just not done it because I don't see that there's another need for it.

[8:36] >> Yeah. You It's It's You know, it's an interesting subject here in California. So, I know I actually administrated, um, a probate in Alabama. Um, and the It had I I don't remember exactly how many firearms were held by that estate, but a few of them. And they needed to come here to California. And, you know, before I was going to take the trouble to figure that out, I just took them to a gunsmith in Alabama and said, "Hey, are these things even, you know, serviceable?" Um, because if if if they're if they

[9:12] can't be fired and all of that, then there's just no point, right? And so, you know, the gunsmith looked them over and he said, "Yeah, you know, these are These are good. Um, you know, we'll bench fire them and all of that." And they cleaned them up and whatever. And And they And they, you know, they gave me values on them. You know, they weren't hugely valuable, but there was some value there. Um, and so I said, "Okay, how do I get them to California?"

[9:37] >> [laughter]

[9:38] >> They're like, "Why do you want to do that?" I said, "Well, that's that's where the heir is and that's where they need to go." So, you know, it had to be a transaction between you know, an Alabama based you know, federal federally licensed or whatever arms you know, dealer and to one to a federally licensed arms dealer, you know, here in Los Angeles. That's how the transaction had to happen, right? It couldn't you know, I couldn't just you know, put them in my car and you know, drive them across the border. That would have been as I understood it, you know, a

[10:13] violation of the law. So, I think you know, for fiduciaries like me, we have to be very careful about these these kinds of situations because had I not complied with the law, I think I I would have been liable and I think justifiably so. Part of my duty as a fiduciary is to see to it that the estate is handled in accordance with all relative all relevant laws, not just the ones that I don't know or convenient or obvious or whatever.

[10:43] >> Yeah, I think that's where you know, people do need to understand well, if you check with the the licensed firearms dealer first and they can tell you what to do because yeah, I know when the the question first came up in a probate I was doing, you know, and they having this gun and picking it up from the police department having no idea what to do with it to get it to someone in northern California. You know, I UPS quickly told me no, no, we can't do that. And

[11:16] >> [laughter]

[11:18] >> I called the gun dealer who handled everything and it and it worked out fine, you know, because I I am not familiar with them and so uh that was that was my lesson and like you said, yeah, I think people just kind of do it informally because they don't know what to do. Um and that's where people get in trouble. But

[11:36] >> Yeah.

[11:37] >> otherwise, if you yeah, take it take it to the like you said, the gunsmith who knows, you know, then uh that's that's discharging your duty and you'll be able to do it and you'll get those things and and transferred and off your hands and you know, no no liability for them.

[11:55] >> Yeah. I you know, I interestingly enough, I had another estate here in California. The uh decedent owned, I think, I don't know, two, maybe three firearms. I found them in his, you know, condo

[12:07] >> [laughter]

[12:08] >> when I was, you know, inventorying it and um you know, they weren't anything special. And so, you know, again, I I handed them over to, you know, someone who handles, you know, handles such things. And he said, "Yeah, and these have no value, really. I mean, they're just sort of run-of-the-mill things. They're not in good condition." Whatever. I said, "Well, okay. What do I do with them?" They said, "Well, just, you know, most police departments have a like a a program where they'll they'll take firearms and dispose of them." And that's what we did, you know. Um I there wasn't really anything else to do. The

[12:43] heir who lived on the other side of the country didn't want them. They weren't any Again, they weren't anything special.

[12:50] >> [snorts]

[12:51] >> Um and he's he was a firearms collector. But, you know, to have pieces that were had no value just because they'd been owned by his father, you know, nobody It wasn't There was no sentimental value there or anything like that. So, um I It You know, it's it I because I think California law is so particular about this issue, I I wonder if like you said, people sometimes try and skirt it so they don't have to deal with the the complexities. And And I I I

[13:27] think that's that's just a it's a big mistake, you know. There's always there's always a way to resolve these things. It may take a little more work, but they've got to be handled properly.

[13:37] >> Yeah, the the law is going to apply to, you know, the the gun and not and not like as it's it's in a trust somehow, you know, you can uh now say, well, it's not really owned by anybody or there wasn't really a transfer or something like that. It's a

[13:53] >> Yeah.

[13:55] >> You know, my reading of the California law says, yes, it's it's kind of like property. It's a there's going to be a transfer at death. And so, you know, there's not not any way to get around that that I see.

[14:09] >> Okay. So, so let let me Again, we we talked about a a number of topics. So, let's let's let's look at the next topic, which is um how here in California we have this thing called a homestead exemption um or homestead declaration, I should say. And and um how does that fit into, you know, this this realm of of estate planning and and and, you know, estate administration? Won't you kind of bring us bring us up to speed on that?

[14:40] >> Sure. Sure. Well, so it's uh it's a protection for the equity in your principal residence. Um and so, uh for a long time, you know, when I I think when I first started practicing, it was maybe 50,000 um and that kind of per owner of the house and then, you know, maybe up to 150,000 if you're a senior. And I forget what qualified you as a senior. Um but, that got expanded uh fairly recently. And so, the the amounts are much more kind of in line with what equity people might actually have or what house values

[15:16] are. And it does vary by county. It it's taken from the median values, but as of 2025, the lowest amount that would be protected is just over 361,000.

[15:32] >> Wow.

[15:32] >> And then in the highest counties, and then LA and Orange Counties qualify for this, it is 722,000. So, it's it's a lot more, you know, than it's traditionally been.

[15:46] >> Mhm.

[15:47] >> You know, like other states where uh you know, like Florida, maybe it's I want to say it was unlimited, Texas, or it was a high number, or you know, I'm not sure, but I know, you know, there are other states that were much higher than ours. And so, finally, I think people now have that protection, and what it it really is is say you you get sued, um you get to the end stage and get a judgment against you. And that judgment, um

[16:22] you know, when people are going to collect on the judgment, they go after your assets, they can ask you what you have, and then figure out, well, you know, I want to foreclose on your house and get paid on my on my judgment. And what this now does is say, well, if they did that, the first, you know, 360,000 up to 722,000 of equity in your house is protected from that judgment. So, normally then, it they're going to lay off because, you

[16:57] know, that might mean they really don't get much of anything or anything. Might take the house, so they're going to look to other assets. And so, that is significant because for a long time, you know, it was a much much lower number. You know, like I bring it up to clients because I get asked very often, and and even other attorneys, you know, who don't understand and say, "Well, I need a trust to protect my assets." And we go a little further, "Well, what do you mean by protect your assets?" And um you know, a lot of times it is, "Well, if if someone sues me, you know,

[17:33] if I get in a terrible accident and cause it, you know, I I don't want to lose my house." And you say, "Well, the the trust I can't do anything in California, you know, using a trust to protect that. However, um just know that you've got some uh built-in protections. Uh there is a little bit extra in that save for an in- voluntary creditor, maybe someone trying to uh as I understand, if you record the homestead declaration against your property instead of just not doing

[18:08] anything and getting the automatic protection, it it does afford you a little more. So, we do talk with clients about you know, [clears throat] when we do your trust, maybe uh we could do a homestead declaration as well and record that. And it's it's just a simple piece of paper and but it does need to be recorded and um that you know, that's something that gives them some peace of mind and you know, also talk to them about insurance and umbrella policies and all of that cuz most of the time, you know, the the things people worry about are what what might wipe you out and what I've seen in

[18:44] practice is not having enough insurance. Um you know, if you got if you got property, make sure, you know, the coverage is going to cover, you know, some of those catastrophic things and the coverage is not that terribly expensive. Um but you know, a lot of people just it it is a good wake-up call to go and and talk to [clears throat] their agent cuz uh we did have one one of my clients, a nice guy from the Burbank Senior Center, had lived in his house for years. Uh, and had the same insurance agent for decades. And so, he got in an accident,

[19:20] uh, caused I I want to say it was, uh, you know, I forget what they're suing for, but in the end, you know, maybe 300,000 of damages. His insurance policy on the car was the minimum $15,000 one.

[19:36] >> Oh, gosh.

[19:37] >> And he had a house and he had a rental house. And, you know, they were kind of modest, but, you know, full of equity. And, uh, you know, 300,000 would really hurt if you're a

[19:49] >> [laughter]

[19:50] >> Yeah, for sure.

[19:51] >> Not a lot. So, you know, we were able to actually negotiate and work out a a pretty good deal. Um, and in the end, you know, he was he was saved, but still had to come up with some money out of his pocket for that. And promptly up the insurance policies, cuz, you know, you want to make sure on the car, you can get several hundred thousand of coverage. And then for the the house, obviously, you know, a million, two million, something like that. Umbrella policy up to five or more, and relatively inexpensive.

[20:28] And then, sure. Separately, you know, if they've got a business or something, we go into the corporations and LLCs and ways to contain li- other ways, you know, that lawsuits might come. Um, but you know, occasionally, you know, still have people say, "Well, I want, uh, you know, I want to move my house into a trust that can't be attacked or something." And there are states that allow for that. And so, I will, uh, give them referrals to asset protection attorneys, but you know, that's that's an expensive process and you're giving up control. And so,

[21:03] for the most part, I you know, I follow up with the clients and they don't wind up doing it, but

[21:09] >> Yeah.

[21:10] >> you know, or it might cost it might cost you a 50 or 100,000 to do something like that.

[21:15] >> Yeah.

[21:15] >> And so, if you got millions of dollars maybe in our target, well, sure, but for most of us, you know, there there are other ways, you know.

[21:25] >> Right.

[21:26] >> Point out

[21:27] >> Let's take a Let's take a quick break. I want to ask some follow-up questions on this.

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[22:14] or visit magnumprops.com.

[22:20] >> So, so going back to the the homestead declaration, what you you mentioned that you can one can file a formal declaration, but it's also something that essentially statutorily one one can rely on. And and I want to make sure that, you know, viewers and listeners are clear. So, let's say, you know, someone owns a house, you know, here in LA County, which you know, that house is likely to be worth, you know, a million dollars. It it very easily could be. So, let's say you've got a house worth a million

[22:55] dollars, you're the the equity protection under a homestead declaration is $722,000. So, um in theory, there's still what? $288,000 exposed. Now, if someone has uh a million-dollar home, but a $500,000 mortgage, so then they've only got a half million dollars in equity, it would sound like that then essentially there would be no reason to sell their home because you sell the home, there's a half million dollars in

[23:30] equity, it's going to go back to the homeowner, the creditor's going to get zero. Um and so in that case, the home is is fully protected. Is is that kind of how it works?

[23:39] >> Yeah. Yeah, it is. And so, that's uh yeah, it's the obviously the the secured liens that are already on the house, you know, those if the creditor tries to take the house, you know, those guys get paid first. They were first in line, and then then you look at the rest of the equity. So, in your example, you know, if there's $500,000 left in equity, well, then that all yes goes back to the homeowner, and creditor gets nothing. So, um it does offer quite a bit of protection. Sometimes, you know, people

[24:14] will feel more comfortable maybe even if the house is paid off, they take a line of credit against it just so that lien shows up. Um there, um but uh but yeah, that's that's it. Like if there are um say the unsecured creditors are obviously behind the person who forecloses or gets to the house first, but you know, those those bank loans that were already there or maybe previous uh judgments or things that are are showing up and attaching to the house, those uh those get paid first.

[24:49] >> And um what what impact would would filing the actual homestead declaration have on on let's say the you know the mortgage lender?

[25:00] >> Um none. None. So, they're they're still protected. So, you know, they don't mind, you know, if that's done and there's no need to alert them even that it's being filed. So.

[25:12] >> Okay. And and the other question I have is um you know, here in California, of course, we have the trust deed form of we call it a mortgage, but it's a trust deed type loan, right? So, it's really a non-judicial foreclosure, right? The process happens outside of the court. If someone is executing on a judgment lien, uh what is that process? In other words, you know, are they going to have to go to court? How how does that work functionally so that the the recognition of the homestead

[25:48] declaration, even if it's informal, uh you there's an opportunity for that to take place?

[25:57] >> Uh yeah, and I've not been through it, but but yeah, it is something that would be a court process following. And so, yes, yeah, there'd be notice of the court process and then that's where the the debtor, you know, the the person the judgment is against would be able to then assert their exemptions and say, well, you know, there's no no sense in doing this because I have this exemption or even if you are going to follow through, well, I get I get this much equity back, you know,

[26:32] through my homestead exemption.

[26:34] >> Got it.

[26:35] >> So, there is cuz I I have seen in where houses aren't involved, but maybe you know, levying a bank account or something like that. There's there's notice that's given and so then uh you know, the person does have the right to say, well, you know, here are the exemptions that apply and so you know, this much of the account even is going to be exempt from the creditor.

[26:58] >> Right. Right. And and and and last question on this, and this just popped into my head, so I I hopefully I'm not I'm not causing you but um once the homeowners die, does the homestead declaration essentially cease because now you know, the residence is is it's no longer anybody's personal residence, right? It's it's now owned by the estate. Um or does the homestead declaration survive the the the death of the uh you

[27:34] know, the the owners? And so in essence, the the estate uh has the you know, protection that it would afford.

[27:45] >> Uh well, yeah, good question, but now they that would go away, you know, once it stops being their their primary residence, and so then yeah, then the creditors got the all of their remedies, and you know, for for them, they you'd hope if you are representing them, that you um recorded your judgment or the abstract, so that it's going to attach to their property, so that you know, if it is sold or even it's not sold, that you know, that's going to stay on there. Um but uh if uh say it's not, you know, then

[28:22] the creditors got to uh you know, their remedies then are through probate and filing a creditor claim and following up with that, and you know, again, if it's not been secured against the property, uh they've only got a year from date of death to do something about that.

[28:39] >> Right. Interesting. Well, so and the reason I asked that question is I I actually I'm administering a an estate where a creditor basically the only asset in the estate from which the creditor can get paid is the former personal resident of the decedent. And it didn't occur to me until we were having this conversation, oh wait a minute.

[29:01] >> [laughter]

[29:01] >> You know, with that homestead declaration survive, you know, the death of the homeowner? Oops, that creditor is is, you know, could be out of luck. But but it it it makes sense that basically it terminates once uh you know, the property is no longer the primary residence of a of a living person, so. Yeah.

[29:20] >> Yeah. Yeah, it would be nice otherwise, but now then it's just uh you know, you can come up with some good uh administrative expenses of the estate. Those are the ones, you know, they're in front of the creditor, but otherwise.

[29:35] >> Yeah. Yeah. So, okay, so um you know, we we we you started talking on this broader subject of of creditor and asset protection, and I I I, you know, kind of cut you off to to take a sponsor break, but talk about some of the other um uh ways that uh you know, through estate planning um you know, people can uh look at, you know, protecting themselves from creditors, protecting their assets.

[30:06] >> Mhm. Well, uh another one uh that I don't think people realize is uh retirement plans. Like uh the money that's in your 401k is absolutely protected, and then money that's in an IRA is I say mostly protected um because it it's it's got the same uh it you know, it's a the same exempt asset, it's just that it's subject to a judge deciding, well, how much of that do I think you need for your retirement, you know, and that

[30:41] might be based on age and ability to replenish and all that, but obviously, the older you are, the more protected it is cuz you can't uh refill it and, you know, what you need for retirement. But But those are things that I I'm not sure that people realize or think about, but that you know, that that's a good way, too, to protect assets. Uh And then uh if you've got beneficiaries named on those, uh they are that that's going to go outside of your estate, and so, you know, whatever debts your estate has, uh they're not going to

[31:16] be able to take that against the retirement plan going out to beneficiaries.

[31:21] >> Right.

[31:21] >> Um and same for life insurance. Uh same same thing. I mean, your your cash value is not protected, but the payout, if you've got beneficiaries named, uh that goes to them directly and not to any creditors, and the creditors can't go after them. So, that's that's also a good way to kind of protect at least your beneficiaries. Um and so, that's that's news that that's helpful to people. Between the house and your retirement plans, there's a lot of protection there. So, then

[31:55] >> So, if the if the retirement plan, let's say someone has a 401k, um but let's say they didn't uh designate beneficiaries. So, you know, m-m-maybe they died intestate. Um so, now um you know, the the uh retirement account is is it's going to pass to their heirs, you know, by just by, you know, function of law. Um but not having named beneficiaries, um is is that is are the funds in that retirement account, are they now subject

[32:30] to creditor claims, or does it retain kind of a protected status because it's still a retirement account?

[32:36] >> Oh, no, it is so if it comes back into the estate, you know, if then and that's what most of the plans say, well, if you don't have beneficiaries named, then the estate's going to be treated as the beneficiary. And so coming into the estate, well, now that means that, you know, if there are creditor claims against the estate, you know, those can be paid out of those out of those proceeds. So, that's the, you know, one one one of many good reasons, I guess, for checking your beneficiaries and making sure that you've got people on there, you know, in addition to being

[33:12] the right people.

[33:14] >> Right. Now, if if the plan was set up so that it was funded on a pre-tax basis, at least in theory, uh you know, Uncle Sam is going to want his cut of that money cuz he never got it, right? So, let's just take a an example. Let's say there was a 401k with a $1 million balance. Uh there were no beneficiaries named, and so now the estate is the beneficiary, and so now the estate has this asset, you know, of of a million dollars. Um it's it's still in a 401k, but it's it's now, you know, the estate is the beneficiary. So, if if a half a million

[33:49] dollars gets paid out to a creditor, um it is that half million dollars going to be now taxable? Um or is that going to fall under the, you know, estate tax uh you know, exemption, and so you know, don't really have to worry about that aspect? How do How does How does that that aspect of it work?

[34:11] >> Uh well, on expenses, you know, that's That's a good question. I'm not sure if I if I know, actually. [laughter]

[34:20] >> Didn't mean I didn't mean to jump you, but

[34:22] >> Yeah, that one um I you know, cuz I I guess the question would be is the is the creditor claim going to be deductible as an estate expense? Um and I it might be um because otherwise, you know, the the other problem with it coming into the estate is usually um the income taxes on that are all going to be due that same year that it's coming into the estate. And so, it could be another expensive problem, you know, for the estate to have. Um And you know, the they can, of course, deduct the

[34:58] administrative expenses of the estate, but otherwise, yeah, it could be a giant, you know, 50% tax bill um on those that money coming out of there, which is you know, I've had cases like that, and it's kind of sad. And you know, maybe there's some ways to fix it, but it's difficult. So, yeah, another good reason for naming beneficiaries. Um you know, they can uh they can take it out over 10 years um is what the the government says. You know, it used to be over their lifetime, but or life expectancy, but you know, I guess they want their money

[35:33] faster to build the money. So,

[35:35] >> [laughter]

[35:35] >> that was 10 years, but um yeah, that one I I will check maybe and let you know on the next show cuz um

[35:43] >> Yeah.

[35:44] >> I it would seem to me that, you know, if they uh you know, the creditor amount would be a a deduction, but otherwise, you know, if the the taxes, they've got, of course, a higher priority um for payment than the creditor. So, you know, maybe if uh if there's not enough left for the creditor, again, they're out of luck.

[36:07] >> Yeah. Yeah. I I mean, you know, as we're This is one of the reasons why I love talking to you is because these kind of complex issues come up, right? And uh you know, oftentimes when a financial institution um transfers a uh you know, a a retirement plan, it will send some kind of notification to the IRS that there has been some kind of change. So, it's not the kind of situation where, you know, an estate takes over a million-dollar, you know, 401k plan and uh, but, you know, what the IRS doesn't

[36:43] know, you know, won't hurt anybody. Well, no, the IRS may very well, you know, find out about it. Um, and so, you know, and and they may not sort of get on top of it right away and, you know, you close the estate and now, you know, 2 years later the IRS is coming after, you know, coming after the taxes it believes is owed. It's it it really, you know, could could end up being a very difficult situation. So.

[37:11] >> Oh, yeah, and I've seen, you know, people get those uh, bills. Thankfully, not in my estate, uh, but uh, but yes, people say, "Well, looks like the uh, the administrator or the trustee made a mistake and now I got to pay the IRS this amount, you know, that most people don't save for." Um, I I don't know what what your experience is, but most beneficiaries, you know, don't save that money and uh, invest it. You know, it usually [laughter] gets on fun stuff pretty quick, you know, unless they're getting a huge chunk, you know, then you know, they're they're

[37:46] saving some, but

[37:47] >> Right.

[37:48] >> those also aren't the estates where people are making a tax mistake and coming back later.

[37:54] >> Right.

[37:55] >> Well, oh, you know, and you that's a great point, right? Because okay, we, you know, a million dollars in a retirement account, it that sounds like a lot of money on the one hand, on the other hand, that's, you know, that's not an unusual balance, you know, half a million, a million dollars and and I don't know that people with that kind of balance in their 401k plans are thinking, "Gee, I need to do some kind of, you know, tax planning for my estate." I I would think they're probably just kind of is what it is.

[38:24] >> Yeah, and they most of the time they've not gone over the the distribution options with the beneficiaries or you know, maybe the advisor hasn't and they really should bring them into the conversation cuz it it would be good you know, for them to understand well, what's the best way for me to take this or if I want to make this as long as long as possible cuz most of the time you know, people just cash it out and then they might find out later. Well, I could I could have maybe saved some taxes if I didn't do it that way.

[38:56] >> Right.

[38:57] >> Exactly.

[38:59] >> I know of a situation like that and and the person is now getting done by the IRS for I think a couple hundred thousand dollars in taxes because she just started, you know, using the money. It's like well, but you know, you knew these you knew that these you know, that these distributions were taxable. So, you know, there's no there's no no free lunch when it comes to that. So

[39:26] >> Yeah, you know, maybe the withholding is usually I think the the amount they typically withhold is maybe 25% but again, if you're getting that distribution all in one year, the taxes are going to be a lot higher than 25% and people don't for sure don't realize that or don't want to think about it cuz

[39:46] >> [laughter] [laughter]

[39:53] >> All right, let's take another break and we'll come back and talk some more. Probate and Trust TV, your curated source for the most useful and insightful content on estate planning and trust and probate administration featuring standout professionals like Bill Gross, Paul Rabalais, James Cunningham and yours truly. Whether you're a lawyer, accountant, real estate professional, or working on your own succession plan, this channel helps you quickly find the clearest, most

[40:28] practical content YouTube has to offer. Subscribe now to Probate and Trust TV. Spend more time learning, less time searching.

[40:41] >> So, so you know, picking up again on on this subject of you know, protection from creditors and protection of of assets. So, you know, we we talked about like like said homes, talked about retirement accounts. What are some of the other mechanisms maybe is a good word that that you discuss with your clients that that you know, maybe don't aren't on the radar of of a lot of of people.

[41:14] >> Uh well, the uh beyond those, we do get into uh the benefits of leaving money in trust for people because what um the state does allow and this is true for most states is the money that is goes out to beneficiaries, you know, the money that you give to other people other than yourself in trust is protected from creditors while it's in the trust.

[41:45] >> Oh.

[41:46] >> So, there there are some exceptions. I think I want to say it's like maybe divorce settlements that are owed, you know, to a former spouse and child support, you know, those things can come out. Then to some extent, I believe it's up to like 25% of the trust or something. Again, in a judge's discretion, might go out for for creditors, but for the most part, you know, that money is safe in there and so again, you know, like we're saying before, you know, people have a lot of plans for that money when it

[42:21] comes in, but I do try to let clients know and their kids know or usually the beneficiaries that hey, if you're okay with this, especially if it's going to be a lot of money, is probably better to treat it like a nest egg and you know, have it be in trust and then you know, it's an irrevocable trust with some defined terms like net income and you know, the Helms provisions like health, education, maintenance and support, then a creditor it cannot force money to come

[42:59] out of that trust with some exceptions. And so you know, it's still you still get the benefit of it, you know, if the kids were doing what we'd like them to do, which is invest the money and you know, use it for the rest of their lives, well, you know, the trust kind of does what they would do in that case. It's it's invested, they they get all the income from it, they can get the principal, you know, if they don't have other sources to you know, maintain their standard of living, but the principal then is going to be

[43:35] protected if something catastrophic happens to them, you know, and they may have some terrible business setback or uh you know, some unexpected lawsuit or they're in that underinsured situation. And so that's a a great way and and then there are the others where it also happens that, you know, someone's just not great with money and parents are very fearful of them running out of money because you know, they're the kids parents have been taken care of and once the parents aren't around anymore, well, who's going to protect you know, what they have? And so I

[44:12] again, I know people don't really like getting money with strings attached, um but once you kind of explain it, a lot of people get it and say, "Oh, yeah, I really like this idea. Um cuz I I feel much safer leaving it in the trust."

[44:27] >> Mhm. [clears throat]

[44:27] >> So, I try to explain that. It's still I do have to say most of the time people are going to give it, you know, with it's going to be out of trust, you know, maybe up until a certain age, like 35 or 40 at the max, but and then it comes out and then you hope they know what to do with it.

[44:43] >> Mhm.

[44:44] >> [clears throat]

[44:44] >> But I do explain and and again, for the wealthier clients who may be leaving uh several million dollars to each beneficiary, I think they're much more open and receptive to the idea and the beneficiaries are, too.

[44:58] >> Right. And so, when a trust either from the outset is is set up as an irrevocable trust or or maybe it was revocable, but now it's irrevocable because, you know, both spouses have died, right? So, um initially, probably the grantor um may have been the trustee as well. Now, the grantor or grantors are deceased. So, what happens with respect to the trustee since that's the person who would then have the whatever discretion the trust

[45:33] allows in terms of making distributions, right? So, do you Can you appoint a a beneficiary to be a trustee? Um and which would seem to kind of um circumvent, right, what the trust may be there to protect. Um a- and or um you know, how how does that transition work, I I is is is the the larger question. And how do you [clears throat] recommend that it or or and how do you recommend that it be done?

[46:07] >> Well, as as I understand it, the having those um the kind of the typical health education, maintenance, and support standards is enough to limit the trustee. Um however, um I do think it's a better idea to have at least a co-trustee um involved maybe to make those decisions. And so that can you know, another family member or professional. Um or you know, to get the most protection I think um would be having just a a separate trustee over that. So

[46:43] kind of [clears throat] maybe depending on the amount of money in there, you know, might make sense to I I think you know, it's a lot harder to argue that someone is making um you know, or or giving out too much money, you know, if they are an independent third party interpreting the trust rather than the beneficiary themselves deciding you know, what their standard of living was before the trust.

[47:07] >> Right. Right.

[47:08] >> at all. So it it definitely is stronger I think to have uh at the very least a co-trustee who can maybe make those decisions apart from the beneficiary um or just a separate trustee. And I I do have to say I see a lot more people talking about um professional fiduciaries these days cuz uh they kind of understand or maybe they've been through the process and understand that uh maybe some people aren't really equipped or want to be trustees. So that that would be helpful in the situation.

[47:41] >> Someone who does it for a living as a professional trustee, I can tell you that this is not for the faint of heart.

[47:48] >> [laughter]

[47:49] >> Yeah, I think when you explain all of it, then people, you know, they might get a lot of anxiety about it. They're like, I don't know if I want this job.

[47:58] >> [laughter]

[47:58] >> Yeah, I mean I was recently appointed by the court as an interim trustee on a trust and you know, just looking over the bank account for the last you know, 12-14 months I'm kind of like wow.

[48:13] >> [laughter]

[48:14] >> I'm not sure you know, it kind of looks like the former trustee was using it as his personal bank account, you know, as opposed to recognizing that the trust is a separate entity and it's supposed to be administrated essentially for the benefit of all the beneficiaries, not just himself, right? So

[48:35] >> Yeah, so which is unfortunately pretty common, you know, and then and then now I imagine you're waiting for that accounting that may or may not ever explain the whole story.

[48:47] >> Yeah, yeah, exactly. You know, it's always fun to talk to somebody who's been through a few rodeos as well, right? Because yeah, that's exactly where I am is you know, so but you know, that was the past and you know, my responsibility is is going forward. I mean it it'll have to be dealt with on some level but uh but I and I think but but this is sort of a you know, a warning tale if you will to you know, to people who do have you know, significant assets and

[49:23] are trying you know, working to make these decisions, you know, when this when you have multiple beneficiaries and you make one of them the trustee um after you're gone often times the gloves kind of come off and whatever you know, childhood peaks existed now they they you know, flame up into full-blown fights. So

[49:48] >> Yeah, I've got a new one where it was the grandparents money that was a fairly significant amount and then dad has been trustee. I think it was some other family members and you know, they may I it what it sounds like I'm about to dive into all the records, but it sounds like dad may have had some money problems and dips into the into the trust and then said gets offended when the kids want to an accounting and so um you know, that can also happen quite a bit, you know, like you said, they're

[50:24] just you know, money needs come up and it's there and it's just way too tempting for some people. So having a uh licensed fiduciary, you know, does I got to say may not always solve the problem, but 99. whatever percent is going to um avoid that problem where, you know, the non-professional trustee just doesn't understand the risks or maybe even how to invest or putting it all in crypto or lending it to a friend and I just all the ways things can go

[50:59] wrong, you know, that just are not going to happen when you got a professional doing it.

[51:03] >> Yeah. And and you know, speaking not literally on behalf of my profession. Look, there are certain in every profession there are there are professionals who probably shouldn't be in that profession. Um but you know, the point is is that um you know, we have to go through a qualifying process and so you know, I hope you're right that you know, 99 plus percent of the time it solves the problem. I'm not sure to be honest, but but but I certainly hope that that you know, that that

[51:35] >> Well, I think out of the you know, the professionals I've seen over the years that get into problem, you know, it it's so rare that, you know, it's it's a big worry when it happens cuz uh it's just you know, something like like all of us, you know, we want to keep our job. So, you know, we're just not going to do it. And especially with people's money, you know, that's something most of the time they keep a pretty close eye on, you know, not always, but somebody's looking after it cuz you know, they want they want to make sure it's there whether it's the beneficiaries or like in this case a granddaughter, you know, that

[52:13] they at some point you're going to have to answer for that. So, that's why again professionals tend to be a much safer choice than Uncle Bob. Yeah. Well, and and again, for for professional fiduciaries who are licensed here in California, so we have to report every year on the size of the assets we have under administration, right? When we were and our licenses have to be renewed every year. Used to be every 2 years, now it's every year. So, at least in theory someone is keeping an

[52:49] eye on this. There are certainly records of it. And I would assume that, you know, for people who are not keeping up with those reporting requirements, so then, you know, appropriate there are appropriate consequences, you know, for that for that lapse. So,

[53:09] >> [clears throat]

[53:10] >> you know, no no system is perfect, but but but I By the way, I appreciate you raising this because I wouldn't [laughter] I don't want I don't want people to think that, you know, I prompted I said, "Hey, Chris, you know, make sure you you give a plug for the professional This was all on This was all on Chris's own. Oh, no, it's all all on me. I just mentioned it cuz I think even earlier on I in my career I I'd see the benefit, but I think there's just a lot more acceptance now. And also more clients asking me, you know,

[53:45] unprompted about it. And so, that's that's been more helpful, I I think, because again, I just we see the many ways it can go wrong, and you know, and trustees usually, you know, you'd hope they've got some assets to replenish what they've taken or squandered. But most of the time, no, you know, those aren't the kind of people who do. And so, I always tell people in in probate, you know, you you really don't want to waive a bond.

[54:20] You know, certainly, I've got clients who do it, but if I'm advising a beneficiary, I say no, cuz I've seen enough where people even people who don't think they, you know, fall prey to scams. We have had that happen to one. And there's a bond, so everyone's going to get what they're supposed to get. But or run off to Mexico, or

[54:42] >> [laughter]

[54:44] >> I I mean, it's it's funny, you were reading my mind, because one of the things I was going to say is typically a trustee is acting with under a bond waiver, cuz usually a trust will waive bond, right? But what one of the factors in a probate is the administrator has to get bonded before he can get letters of administration. And it's a good vetting process, because if he can't get bonded, that's probably a good sign that this person should not, you know, be in control of all these assets, even with limited control. You know, because the limited control, to a certain extent, is only you know, is only protective to the

[55:19] extent that the administrator abides by the limited control.

[55:23] >> Yeah. Yeah, and you know, certainly crafty people will work around that. So, uh yeah, that's I I'd say it's uh I just I don't really see a reason to waive a bond. And and yeah, it's it be kind of expensive, but not really in the big scheme of things.

[55:42] >> Yeah.

[55:43] >> So, you know, you say, "Well, your your share of that bond is going to be this tiny amount." So, I'd say go for it. You know, there's no way. And I I'd be worried, you know, if they're strongly recommending you don't, you know, have a bond. So, go ahead and take it.

[55:58] >> Yeah. Yeah, and we're talking about a fraction of 1% of the value of the assets for a bond premium. So, I I mean, I know cuz I'm I'm bonded in, I don't know, a number of case whatever the number of cases are. And uh and I track I I track what those premiums are because it it is an expense to the estate, but uh in in terms of an insurance policy, which is essentially what a bond is, it's one of the best insurance values I've ever seen. So,

[56:27] >> Oh, yeah. Yeah, I've been in enough cases where the bond's paid out and so I well, the people better be very thankful it was there.

[56:36] >> Yeah, for sure. For sure. Exactly. Well, Chris, we're we're we're coming up on our time deadline here. So much fun talking to you and it was great being able to go in depth on on the number of these issues. There there's more that we could talk about. So, you know, I'm going to have to have you back. Uh hopefully later this year we'll we'll we'll talk some more.

[56:59] >> All right. Well, thank you.

[57:01] >> Yeah. So, I'll have you hang tight while I do a quick wrap-up and then we'll talk offline for a minute. So, you know, um for those of you who are watching and listening, you know, you can you can tell the depth of the knowledge that that Chris has. And uh you know, if if if you are dealing with one of these matters, uh you know, I'll put Chris's contact information in the show notes. I'm sure he'll be happy to to talk to you about your particular situation. Um and uh you know, if you contact him, Um but but you will be in, you know,

[57:37] extraordinarily experienced, knowledgeable hands. And so, you know, I I I recommend Chris to you unreservedly. So, real quickly then, wrapping up my my slate of shows, you know, like today, 10:00 a.m. Monday is Trusts and Estates Weekly, 10:00 a.m. Tuesday is Business Lessons from the Military, 10:00 a.m. Wednesday is People Making Money, and then every other Thursday at 5:00 p.m. is my show Jiggers Is Place, where we sit back, have a cocktail, and a schmooze, talk about things unrelated to finances. So, lots

[58:14] of opportunities for us to to be together later in the week. And by the way, those are all Pacific times. So, and you can view my shows on YouTube, Spotify, and Apple Podcasts. So, if you've got a preferred viewing platform, I'm on all the major ones. So, I thank you so much for joining us today. Chris, again, thank you very, very much for being my guest. Really appreciate it. And that just leaves me to sign off as I always do. Marie darling, you are my bell.

[58:49] Courage at all times, my friends.