The WAY to WOW Shows
Have Dedicated Advisors
August 19, 2024
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[0:03] hello and welcome to trust and Estates weekly I'm your host Kevin bemel and we're here every Monday at 10: a.m. Pacific time to talk about estate planning trust in estate Administration both from the standpoint of your own personal situation as well as for professionals or people who are looking to potentially get into the business of helping people with estate planning Administration so today my topic is uh who should be on your estate planning

[0:38] team now if if you're a regular Watcher of the show so I've talked about these various people to a greater or lesser extent um over the you know months that I've been doing this show actually it's going on two years now and I thought it would be a good idea to talk about it as a comprehensive subject because I see this coming up quite often in my practice and that is um people who really need the advice of competent

[1:15] professionals um but they they don't have someone on their team in a particular area and so I'm going to talk about five professionals that you may want to have or you may need to have on your team I shouldn't say want you may need to have on your team and it's it will depend primarily on how complex an estate you have and also how large an estate you have so just to review for a minute when I say you know when you when you hear the word

[1:50] estate I think most of us think of you know gon Abbey right big this big you know essentially castle and all these lands and all that's an estate right in in in the United States and and this is true in Britain as well by the way uh an estate is merely just the all of the property that you own essentially so if you own a car and have a bank account and some you know clothes and other personal property that is your estate I mean you you have an estate if you own

[2:25] anything you essentially have an estate now again some estat are much larger so if you you know you consider somebody who has a huge real estate portfolio or someone who has extensive stockholding so you know their their estate could be worth millions even tens of millions of dollars or more so for someone at that level their their estate planning is going to be much more complex uh and especially if at least right now the value of your estate exceeds $13 million

[3:02] it means you're going to be paying estate taxes okay which on the federal level top out at 40% and they go up to that 40% level pretty pretty quickly so um and and there are uh other states that have estate taxes for example Minnesota still has an estate tax there's I think 17 States if I remember correctly to have an estate tax so if you have an estate of 13 of over 13 Mill ion dollar you're most likely going to be subject to estate taxes and as of the end of next year

[3:37] 2025 that limit is going to drop to $5 million or thereabouts and so many more people who over the last number of years have been exempt from estate taxes are now going to have to pay estate taxes so if you live here in California or in another uh High um High housing cost state New York um I mean even States like Florida now and and Texas are are getting ever more expensive properties uh if you own a

[4:14] house that already could easily mean you have an estate over a million dollars now that all by itself won't be enough to qualify to to force you into a situation where you would owe a state taxes but if you've got a retirement plan um let's say you have a an IRA and that IRA has you know a million dollars in it and and maybe you own some stocks you know pretty quickly you could have three or four million do worth of of value in your estate and so you're

[4:51] you're coming up on that $5 million limit pretty quickly and so you you you you may need some estate plan to make sure that you don't get walloped by estate taxes and so having the right people on your team will be crucial to that so like I said I've got I've got five categories is probably a better word because some of them are distinct but others of them are are broader and and could involve more than one issue so off first of all number one on your list

[5:28] is having a lawyer and not just any lawyer but a lawyer who is involved in estate planning okay because someone who does let's say family law or does civil litigation or business law those are different fields of practice than Estate Planning and so they will not necessarily have the background the experience the knowledge to put together a proper estate plan for you that's

[6:03] number one number two most of the documents used in estate planning are actually fairly repetitive so to hire an attorney who doesn't do estate planning essentially every day means you're likely to get someone who's going to be much more costly because they're going to have to draft documents from scratch and and drafting documents from scratch is very very problematic these days so I can tell you in in my practice if I'm dealing with real estate

[6:41] if I can avoid it I don't want to have to draft a lease from scratch I would much rather use a form lease because those leases over the years have been refined they've been tailored to deal with specific problems that that occur and protect landlord and tenant in a way that's that's as just as as can be for both sides and there's been lots of expert uh expertise put into those leases so you know given my choice of drafting a lease from scratch or using a

[7:18] form lease with perhaps an addendum attached to it I will go with the ladder every single time and the same is true in a estate planning documents so if you uh if you're going to have a trust created or a will so you're much better off dealing with an estate planning attorney who has those documents in form and then just makes the modifications that are necessary for your specific situation rather than have one correct um not correct create those documents

[7:54] from scratch okay aside from the likelihood that that the the documents that are essentially formed documents will provide you with a much better product it will also be much less expensive than to have the documents created from scratch because it can be done much more quickly and I I've talked to um some estate planning lawyers who are even looking into augmenting augmenting their forms using AI so that they can do the the the the

[8:31] document drafting part of their work very very quickly and so they can spend the bulk of their time talking with their clients meeting with their clients understanding better what their clients's needs are so that when it gets to the drafting of the documents that can be that can be done very efficiently but also highly tailored to the client now will a an estate planning lawyer be the only lawyer you need not necessarily so estate planning lawyers can deal with wills and trusts

[9:08] they can deal with things like durable powers of attorney guardianship documents those kinds of things however if you have a complex business and you need to do a buy sell agreement in your business or you need to do uh let's say you have an LLC and for whatever reason you never did an operating agreement so an estate planning attorney would not necessarily be the best person to do those kind of business planning documents I talked about this I think it was last week or the week before so in

[9:44] that case you would want a business attorney who like the estate planning attorney does these kinds of business documents all the time because again you really don't want to be drafting an LLC operating agreement from scratch more likely to have mistakes leave things out and also it's much more expensive so go with a lawyer who does this all the time has these documents already drafted in form and then all he has to do is tailor them for your specific situation also

[10:23] that lawyer is more likely to have experience with how these things actually work so if you're going to do for example a buy sell agreement while an estate planning attorney may have some experience with them a business attorney is more likely to have actual experience with the Buy cell agreement being used being executed and how that worked out what are the benefits what are the pitfalls those are the kinds of things that you're going to want to know as you put this Buy sell agreement

[10:58] together so in short you may need more than one type of attorney if you have a large or complex estate and and if so make sure you're getting that expert advice now another situation where you may need more than one lawyer would be if you you live in one state but you have assets for example real estate in another state so now you've got a cross state situation and the real estate might

[11:33] might well be handled under the state of the law in which it it it is as opposed to the law of the state in which you live so in that case you may need an estate planning attorney in each of those jurisdictions to make sure that your estate plan works the way that you want it to work okay so all of those go into what you may need in terms of a lawyer or lawyers next an accountant okay especially if you have a larger estate

[12:10] and you may need to deal with paying estate taxes right that has to be dealt with and the the lawyer I'm sorry the the accountant that you choose is going will most likely be the one who's going to file the tax return for the EST State and so they're the one that's going to be determining in the in the end the estate tax liability so you want them in from the beginning to make sure that you are optimizing your tax planning now just because you're not going to pay

[12:45] estate taxes doesn't mean that you don't need accounting advice in your estate plan so again if you own a business and you have a buy you're going to have a buy sell agreement or you have multiple heirs and there's issues of who should get what so having an accountant to advise you on the res potential results of various decisions can be very useful it's also good to have someone who as an accountant who was in at the planning because then they

[13:22] can know your intentions and and as they do their work at the time when they're actually you know doing the return for the estate so they're doing that with the background knowledge they got by being a part of the estate planning process now by the way you may be thinking at this point oh my gosh I need maybe two lawyers and an account this is going to cost me a bloody Fortune not not necessarily so for the accountant it may only take him a couple of hours to give you the advice that you need you'll you maybe you're

[13:58] just gonna deal with him uh at you know at for certain you know specific questions and so you know you may only be spending a few hundred dollars there it is it will be money well spent in order to potentially avoid problems down the road now like with like with the attorney choose an accountant who has estate ex Administration and estate planning experience so the typical accountant who who prepares your tax

[14:33] return may not have the experience to do the the level of estate planning that you need okay Most accountants these days use programs in order to prepare tax returns those programs provide a lot of support in terms of appropriate questions and all of that and it helps an accountant be much better at his job than and having to know all of those questions to ask you know in his head however that is not a substitute for an

[15:09] accountant who has dealt with estate planning issues and estate Administration issues multiple times have seen situations have helped work through problems and they can bring that knowledge and experience to your estate planning and so so again you want someone who specializes in that okay and that may not be your current accountant who's you know doing your your tax returns and you know maybe helping you with some some real estate transactions okay so accountant that's number two number

[15:46] three is Financial Service professionals now this is a category more so than an individual and that's because Financial Services comp compr is comprised of several parts so first of all is insurance so any sound estate plan well let me let me rephrase that most sound estate plans are probably going to have some insurance in in them

[16:22] okay it may just be health insurance but you may need disability insurance you may need long-term care Insurance you may need life insurance especially if you have an estate large enough where you may be paying estate taxes life insurance is one of the best ways of potentially dealing with that that U estate tax liability and so in doing your estate planning you're going to want to have a financial services professional who is very experienced in

[17:00] Insurance not just insurance though Insurance specifically in aate planning so that's not to say that you can't work with someone who's maybe newer to the business they don't have broad experience but if you are dealing with someone who's newer to the business make sure that whoever is supervising them is very experienced in estate planning because there there are specific issues to deal with for example if you're going to set up a life insurance trust in order to pay your estate taxes there are

[17:35] very specific rules about that how that has to be done and you really don't want your lawyer and or accountant to have to educate your life insurance agent from you know the ground up they should have a knowledge of how these things are done so that it it can all be done efficiently and and uh cost efficiently okay okay so uh okay so insurance is number one and and again the this professional should be someone who who understands the various potential insurance needs

[18:12] depending on where you are in in your life in your yeah in your life now the the generally speaking there are two types of financial Professionals in terms of how they're compensa ated okay one is a a fee based compensation where you pay them a fee for their services for their advice and they shop among the various in this case let's take life insurance they shop among the various life

[18:48] insurance providers to find the life insurance policy that will be best for you but they are but they're they're being paid by you to do that work the other is a commission based or a product based Financial Services professional they may work for a specific company so for example Primera trans Amer and in that case they are selling that company's products and that company is compensating them by giving them what amounts to a commission on

[19:25] those product sales okay so you you don't pay anything for the advice that you get now some people say you should never work with a product oriented Financial Service professional I I don't I don't agree with that philosophy it really depends on what your situation is so if you're just starting out and you don't have money to pay for a fee based Financial Service Services professional it may make a lot of sense to go with a

[20:01] product Bas based professional like I said Primerica trans Amica all these New York Life okay just because they're being compensated by a commissions paid by their company does not mean that you're getting bad advice and a good Financial Services professional even if they're company based if they don't have a pro a product that works for you within their company they'll tell you that that's the case Okay so that's one of the things to look for is is is look

[20:36] for someone no matter what that they're they're absolutely client focused okay and then how they're getting paid is is perhaps less important as long as they're very client service focused okay but that is something to know about so again if you're just starting out and you're concerned like how am I going to pay for all of this well you may decide that to deal with uh you know a product based financial service representative in which case it's it won't cost you anything UPF front the premiums you pay for the insurance policies include

[21:11] compensation to to the the the agent the financial services professional and so it's kind of a essentially a pay as you go situation okay so so number one in financial services is insurance number two is retirement savings okay now these days a lot of employers have employer sponsored plans 401ks and in that case you may not need to have a financial services uh

[21:46] professional to help you with your retirement planning per se that may be a service that's offered by the plan um administrator for your company okay so take uh uh Voya for example okay Voya is one of the largest plan administrators in in the country so while the employer is the sponsor of the plan and Voya essentially runs the plan on their behalf okay Voya Voya provides very very

[22:24] robust tra uh training and and and learn learning resources for plan participants which as as the employee you would be a plan participant they provide access to customer service people who can answer questions give investment advice okay and and although your company is paying for that or it could be a hybrid where some your company covers some of the cost and and and you cover some of the cost that doesn't really matter because you still are getting the advice you need from a company I'm just using Voya

[23:01] because I'm I'm looking at a plan for a client right now that that Voya is is the administrator so I just have them on their mind uh although I will say I I I think they have an incredible amount of resources in terms of helping people with their retirement planning so in that case if your primary retirement plan is a 401k sponsored by the company you work for that may be all all you need okay however if you have your own company or if you are self-employed in the sense of

[23:37] you do you know contract work okay so then you have maybe you have something like a SEP IRA or something like that so then you may need to have a financial services professional who helps you with that and works as part of your estate planning team to to understand how this aspect of your finances fits into the overall picture okay now you know if if you if you have an employee employer sponsored plan and you're getting your retirement advice

[24:15] from from the plans administrator so you may have difficulty in trying to you know coordinate a meeting with that person and the other members of your estate planning team okay they may not have the flexibility to to do a meeting like that but they but they might okay and if not you can get a list of questions from your other team members what they need to know about your retirement plan and you know give it to the person that you're dealing with there get the answers and then bring it back okay it's maybe not quite as

[24:50] efficient but it it will still work on the other hand if you have a financial services professional who you know who who works with you for your own for your own retirement planning so then that person could attend a meeting of your estate planning team and so hey you know they're they're right there to you know chime in on issues that that either the retirement plan affects or is affected by okay and then the the third Financial Services

[25:28] professional would be someone who is dealing with just wealth building more broadly so while insurance and retirement plans are two pillars of wealth building beyond that you may have brokerage accounts you may have investments in other types of properties you may have investments in Commodities you may own some bonds you whatever kind of Investments you have you may have some crypto Investments whatever those are so you may want an advis a financial

[26:04] services advisor who deals with that as well now um in this CA we used to call these people by the way stock Brokers and when I when I was you know young you know you Smith Barney and all you know they but stock Brokers have really morphed into Financial Service professional who are really wealth building advisors okay so whereas if you if you see movies especially from the 50s and early 60s where they portray stock

[26:39] Brokers and they're they're calling up getting you to you know buy an individual stock or whatever uh you know even for you know smaller retail clients that's really not they they don't really do that anymore um I mean some do but but but but most don't most have a you know you they're probably going to help you invest in things like mutual funds ETFs that sort of thing okay and if you and if you are if you do have money to invest so you would be well advised to get some expert guidance now if you are in the

[27:17] financial services realm so you may not need an advis a separate advisor but if you're not markets today are very complicated and I'll I'll to give you an example I I'm I am and handling a situation where uh the decedent very successful in real estate he also had a large portfolio of Securities that he self-managed and I think I think that was a mistake on his part because he he managed it in a way that really did not maximize his return nor did it really

[27:52] reduce his risk he just kind of bought stocks that he had heard about that that that he had heard were good and that's not really a proper way to to manage a stock portfolio now if it had been just a little portfolio that he was playing around with for fun okay so no big deal um I used to do that myself just to kind of you know I try out a an investment Theory and see how it worked out I have another friend who does that that that's one thing that's what I'm that's not what I'm talking about here where where we're talking about the the real development of your wealth so there are

[28:29] principles that you would be well advised to at least know about if not follow and if you're not involved in it on a very regular basis you you you're probably much better served by having someone else who does do it on on on an you know constant basis handling it for you these Services can be very inexpensive nowadays and even for a small investor so the well first of all it may be that you don't pay anything at all because um for example the mutual funds

[29:04] will pay a commission to someone who brings funds in and so like the insurance agent I was talking about you're not paying any fee upfront now kind of a a subset although I put it in a separate category um because just just I just just because is something called a wealth advisor okay so a wealth advisor now this is for typically for higher net worth individuals however more and more retail financial services

[29:40] companies are offering Wealth Management Services to an to an Ever lower um amount of of um money basically so whereas it's you know your wealth oh I must I got to have what at least $10 million no that clearly not the case uh a million dollar is is the minimum for most and a lot of wealth advisors will handle accounts even significantly lower than that in fact I think I'm going by memory now I think Primerica the minimum

[30:17] is only $25,000 to get into a wealth advisory program and the fees are very very reasonable and what that when you're in a wealth advisory program and what that means is you have people who spend their whole day their whole week their whole month their whole year managing money and making sure that it's handled as appropriately as possible okay so if you have now um that by the way some Wealth Advisors will handle retirement funds as well as non-retirement funds it it varies so it

[30:55] it it really depends okay and and by the way a wealth advisor usually they hire they hire I'm sorry they have what's called an investment representative advisor I'm sorry um investment advisor representative license okay that's a it's a Securities license and they either work for or they have an investment advisory firm okay and I I'm seeing more and more of these and more and more of them are tailored to more middle class people because wealth is

[31:30] growing in this country and a a lot of it of course is in retirement plans but you know once you have even $100,000 okay uh you really want to consider um engaging a wealth advisor because that person can really help you through good times and bad maximize the opportunity that may be present okay and again they're fees can be very very reasonable so uh you know typical wealth advisory fee is you know around 1% of uh

[32:08] assets under uh Administration so if you've got a million dollars you're going to pay roughly $110,000 a year typically that'll be paid monthly so you're going to pay about $800 a month right and and 1% so you know they should be able to at least enhance your return by the amount of the fee okay and and as you as your portfolio gets larger the fee tends to decline so it it it varies of course depending on the wealth advisor um and that's some obviously something you want to look into but but

[32:44] again take a look at that it m and and that and and and if you have especially if you have significant liquid Investments stocks bonds mutual funds ET TFS those kind of things you probably want a a either a wealth advisor or at least a financial services professional who deals with that all the time to be a member of your estate planning team to make sure everything is set up the best way it possibly can all right the last category the fifth category is real

[33:20] estate professionals or real estate advisors so obviously if you have no real estate so then you don't need someone to advise you on it okay but if you own a house okay and and these days what the the median home price in the United States is over $400,000 that's that's double what it was I think what 1015 years ago it's really astonishing how quickly home prices have have increased so if you own a home and and even if that's all you own you'd be well advised to find a real

[33:57] EST state agent who is specifically who has specific knowledge about prob about dealing with real estate in Probate Andor trust situations okay this is very very different than the typical real estate transaction and and just as an aside on September 9th I believe it is my my very good long-standing friend Bill gross who's one of the top probate real estate agents certainly in California probably in the country he's going to be on the show talking about

[34:32] changes in the way that real estate agents can get compensated but you'll see that this is someone who is deeply deeply deeply knowledgeable not just about real estate but about all the special issues related to probates Estates you know trust Administration all those issues okay now the reason you want someone who has that specific knowledge is not just for the knowledge itself although obviously that's critically important you also want someone who's used to dealing with

[35:09] other estate planning professionals who understands their language who can help them understand the specific nature of real estate questions okay so using my friend Bill gross as an example I know Bill he's he helps out lawyers he helps out accountants uh because each each member of your team has their area of expertise okay and they don't always they I should say they rarely know the

[35:45] details of somebody else's area of expertise that's why you need want these other team members and so when you you know looks like any team right a football team whatever you have your specialist but when they come together they they they will be very very powerful on your behalf so again if if if what you have is a home or a condo something like that so you may only need a broker but a broker who specializes in Probate and estate real estate however if you have other real estate Investments and and when I say other real estate Investments I mean direct property Investments as opposed

[36:22] to for example owning a share in a in a Reit which is really that's a that's a a a financial services product really so if you own's an apartment building a retail strip center whatever it is so you may be managing that property on your own okay and and and that may be fine okay however just because you manage the property on your own doesn't mean that you are familiar with the property and asset management aspect

[36:58] well enough to be able to know how to handle these things in an estate planning context and so if you don't have that knowledge you would be very well advised to have a property manager and or an estate an asset manager on real estate asset manager on the on your estate planning team so that they can see to it that you know various issues are are brought up and and built into your estate plan okay so so Ju Just for

[37:34] example if you have multiple properties okay generally speaking you're going to want to have each property in its own entity now an estate planning lawyer would hopefully bring that up but they're probably they're probably not going to have that as top of Mind as a real estate asset manager is going to have because they're dealing with the results of that all the time they're dealing with the liability aspects and and the the various management aspects of that all the time and but by the way you you in the case

[38:10] of real estate professionals oftentimes you won't necessarily have to pay them they'll be happy to consult essentially graus for free and in order to establish a relationship and so and just because they're not charging for it doesn't mean the the information is invaluable okay it really it really depends on the situation but um you you definitely want to get that expert real estate advice now if you live in a state like California and you are still managing your own property okay if you have maybe

[38:49] if you're doing that full-time that's one thing you're ve if you're very knowledgeable fine okay but if you have another job and your job is not you know related to real estate it may be the situation that you would be much better off with a property manager and let me give you an example of of a situation from my own career this is going back to before I joined the Navy and I was I I had a property management company and second or third client management client I I I took on it was a married

[39:27] couple the husband was a lawyer and the wife was a screenwriter and they owned a a quite beautiful building that had originally been built in the I think it was late 1920s the building was gorgeous and it was it was really kind of their baby so but but life was getting too busy for them and so they decided to try hiring a property manager okay and they and they I did a presentation they hired my company over over the next three or four years I showed them that their rents

[40:04] were anywhere from a half to twoth thirds of market value and that they were able to get these higher rents by actually spending less money renovating the units and still ending up with a superior product from the Market's perspective Okay so for example these units because they were built in the 20s had these beautiful ceramic tile kitchens okay and the you know a lot of the units were occupied by by elderly

[40:40] people who had lived there for a long long time one of them would you know be too get too sick to live on their own they'd move into a nursing home and so now they'd have a vacant unit and before they could rent it out they had to renovate it okay they'd have to sand down the hardwood floors and re recat them and that kind of thing so they would go in and they would gut the kitchen and put in a kitchen with sort of you know formica countertops and and and white uh you know cabinets or whatever and I mean they look fine don't get me wrong but the people who were coming to that neighborhood loved the

[41:17] 1920s look of the ceramic tile and the glass fronted kitchen cabinets and that kind of thing and so I I had someone who was able to go in and renovate these existing kitchens in a way that made them more functional without losing the aesthetic quality of them and that was less expensive than gutting the kitchen and putting in a brand new kitchen and and so how did that work out for them well number one their renovation costs went down two the desirability of their

[41:54] units went up three they were able to get higher rents so for their building value increased even more right so that's something to consider as you're building your estate planning team and and building you know building your wealth is do you really have the time the resources the expertise to maximize your Investments whether it's your your uh financial investments stocks bonds mutual funds Etc or whether it's real estate these are all ever more specialized

[42:30] fields and so you know just because you've been doing them for a while doesn't mean that you you necessarily should continue handling them it may be much much better for you to focus your energies on what you know best your professional Endeavors and bring in the experts to handle these Investments for you and then also have access to them as members of your estate planning team okay so just real quickly the the five categories lawyers accountants Financial Services professionals wealth advisor

[43:06] Wealth Advisors real estate professionals those are the five areas that I would encourage you to think about as you put together your estate planning team and again that you know which of those you're going to have is really going to depend on your individual circumstances where do you find these people so so ask around talk to friends family members who have already done their estate planning did did they like the person they dealt with did they not like the person they dealt with in which case you want to stay away from them okay there are professional associations

[43:42] so most bar associations for example have an estate planning or an estate planning administrative section you can go there if you have a business attorney you can ask for a referral to an estate planning attorney same with accountants same with fin Cal Services professionals and you know if as as your uh refer of Last Resort you can also uh ask me for a referral I'm happy to do so I I maintain relationships with people across the country and would be happy to make intro introductions to people who

[44:18] who I know who I've vetted and and and you know would would would vouch for in terms of they would I think they would do a good job for you so you can post a comment in social media if you want a referral um if for whatever reason you want to keep that private so send me an email all of those links will be in the show notes after this episode posts on YouTube so uh if you also obviously if you have any questions comments good bad whatever as always th those are welcome as well so I thank you very much for joining me

[44:53] today and tomorrow at 10 10: a.m. Pacific time is my show business lessons from the military and I'm going to be talking about the subject when compromise is best so compromise seems to be it seems to have become kind of a dirty word these days but sometimes compromising is the best thing that you can do I'm going to use some and you may say the military compromises oh yes they do certainly I did as a Chaplain so join me tomorrow 10: a.m. Pacific time for a

[45:29] couple of uh I think at least somewhat humorous if not outright funny uh incidents that I'm going to relate to you to emphasize my point and then on Wednesday at 10: am is economic Echoes this is our monthly time to look at economic factors and see how do they affect each one of us as individuals so I invite you to join me Wednesday at 10: a.m Pacific time again for economic Echo so again thanks so much for joining me wishing you a wonderful rest of the day and signing off Marie darling you are my

[46:05] bell at