0:00 Who are you? And where are [music] you going? What do you want? Hello and welcome to Trust and Estates Weekly. I'm your host, Kevin Beml, and I'm here every Monday at 10 a.m. Pacific time to talk about estate planning and trust and probate administration. uh primarily from the professional perspective, which is what my guest and I both do. Um but also for those of you
0:37 who you may find that you've been appointed the executive of your parents' will or you're, you know, this is not your profession, but somehow you've gotten pulled into a situation where uh you are acting as a trustee or a personal representative. And and this show is also designed to help you to kind of ease your concerns in that situation and and help you navigate the uh vicissitudes of administration more effectively and be able to talk to your adviserss uh in a more coherent fashion.
1:13 So today I am very pleased to introduce my guest Leo Dubash and uh Leo uh is is a a probate attorney. He'll he'll give you more of his background in a minute, but Leo and I have been working together for a couple of years now on a a very large and and interesting estate. Uh I' I've talked about aspects of it from time to time on this show. Uh but um you're you're going to see it from the other side now. And uh you know, Leo was asking me earlier, is there anything you don't want me to talk about? And I said,
1:48 you know, no, not really. I said, you know, you can even I didn't say this to him at the time, but you know, you can even tell him tell people about the mistakes that he thinks I've [laughter] made along the way, which which you know, uh
2:02 >> it's only an hour show. I don't think so.
2:04 >> So Leo, welcome to the show. Thanks for coming.
2:07 >> Thank you so much. I have to say I really like your introduction. Uh 15 seconds or so. Who are you and what do you want from life? That's a those are all very very good questions.
2:20 >> They are you know
2:21 >> we ask each other enough [snorts and clears throat] questions, right? Something we deal with our whole life. So [snorts] So Leo you first time guests. So tell us tell us a little bit about your background if if you would so you know viewers and listeners can can get to know who you are. So um I'm originally from Argentina Buenocidis um we came to my whole family came to United States uh in the 70s actually the 60s in the late 60s. Um we came because uh there was so much chaos
3:00 uh in Argentina and s South America in general but Argentina especially. Um, so, uh, we came to California and, uh, I we came to Los Angeles, California, and then I, um, when I went to school, I went to UC Berkeley. So, I moved up to Northern California.
3:20 >> Oh.
3:21 >> And, uh, I graduated Berkeley and then I went to law school in uh, what is now called UC San Francisco Law School. It used to be called Hastings. Um and then we stayed there for I think 10 or so years after and then we moved to back to Los Angeles.
3:40 >> And uh so I started practicing uh in 1992 um the best grade I got in law school was wills and trusts. But but what happened it was I met this judge uh that we we we uh related very well. So I I I did an extern with him in bankruptcy was a bankruptcy judge.
4:02 >> Oh.
4:03 >> Um uh which I loved. It was a very interesting experience. And um what I like about bankruptcy is it's very much um not the laws. The laws are very different. One is federal law of course and one is is California law or state law. But the the issue of an estate and the issue of fiduciary is they're very similar. So I g I used to represent or the firm that I was working for uh represented bankry trustees. So the idea of fiduciary and and having an estate and accountings and all that be I
4:39 became very very familiar with. Um so then uh eventually I went back to what I really wanted to do which was estate planning and and probate. Um and it actually very very uh conceptually is very similar. The the conceptually is the idea of somebody takes control of the assets and there's a there's an estate and that those assets needs to be administered and it need to be distributed eventually.
5:07 >> Um the distribution is completely different than one from the other. The state of the of bankruptcy is theoretically um distributed to creditors um not you know, the family or the the DTOR gets the last dibs and there's usually no money left for the uh for the debtors. Um as opposed to to a trust which the goal is to distribute to to the heirs and and family members in general. But it although the laws were very different, the the strategy and the concept are
5:43 very similar.
5:45 >> So um that's about it. my my uh I worked for a firm early on um and then I went on my own pretty quickly after that and I've been on practicing by myself uh on my own since then. So uh that's uh that's pretty much uh my story.
6:08 >> Yeah. [snorts] And and you've been practicing you know probate and estate planning stuff what about 25 30 years now? Uh it's I'd say let's see how much uh I would say 20 years.
6:19 >> 20 years. Okay.
6:20 >> I was so what happened when I was working in bankruptcy there was a lot I had two friends that that uh were estate planners and so I they were my mentors and I and I and I work with them in certain cases. They're both up in Northern California. And so I got the the the feel for for probate at least um early on even even while I was doing bankruptcy. So um the transition to to probate became very pretty pretty pretty simple. And and what do you see as being I guess
6:56 the the the most challenging aspects of being involved in the you know estate planning probate trust arena. I I'm tell you the truth, I'm very surprised that even even [snorts] after many years of the the probate code and the probate system being around as far as trusts that people don't really know what a trust is. U I get I get call from from people even people that financially well off that ask me I want to do a will
7:31 [snorts] and I say you know why a will? what's why uh almost assuming that they know what trusts are
7:39 >> u and they they uh we discuss it and they they really don't understand what the concept of the trust is which is you know basically transferring your assets to a different entity called the the estate right
7:54 >> um it's not separate from you but it is managed in a different way than you personally are so I I I spent a lot of time explaining what you know what the concept of trust is because nowadays to have a will and no trust if you have any any assets at all um is is really not practical [snorts] because you still would have to go to probate court. So um I mean if I can go into what I'll tell I'll give you the speech that I usually give my clients.
8:27 >> Yeah, for sure. purchase you know for example I give this example all the time is let's say you you were going to buy a house from you know and then you find a house in which the deed the per the owner of the side the scene would die had had passed away so you say okay I want to buy the house now who's going to transfer the deed to me right the deine is the only person that had titles of the house and there's nobody around to transfer the deed [clears throat]
8:56 >> so you wouldn't just say, "Okay, I'll take, you know, the son or the wife or well, the wife is different situation, but this the children of the the dean can just sign the paper over to me and you wouldn't you wouldn't accept that. The title company wouldn't accept that because they're not the title owner of the house." So, um, for that case, you need a court order to say that you are authorized to sign the deed over to me. And in order to do that, that's that's starts that's what the probate system is. You basically a probate is a petition with a court that allows a a
9:33 family member or someone else to have the authority and the power to transfer a property to you. So that's basically um why you need to go to probate. So in order to bypass all that [snorts] you you establish what's called a either either living trust or there's many other trusts but uh and you transfer the property beforehand before you pass away. You transfer it to a trust and the trust is take basically the title holder of that property and if you if you pass away the
10:08 person who is in charge of transferring the property is called a successor trustee. So there's there's no there's no issue of who owns the property because the the person doesn't own the property property. The trustee owns the property. So the trustee of the trust in a capacity of trustee. So if if the deed or the trust who created the trust passes away, then the successor trustee automatically has the authority to transfer the property to the buyer or to anybody else. So that's basically what I tell um my clients what you why you need a trust because in order for for for
10:44 your heirs or your beneficiaries to be able to do anything with your assets you need you need authority and authority is either by a probate court if you don't have a trust or you as successor trustee has authority to transfer the properties to whoever needs to be transferred including beneficiaries
11:04 >> right and and when you explain this to a client or a potential client, what do you find to be um the the the questions they have, the objections they have to what look, you and I do this all the time. So, of course, for us, it seems it's a no-brainer, right? But for people who don't do this all the time, um what what do you find to be the the questions and the um objections that are raised?
11:36 >> That one of the first uh questions I get asked is you mean I all I all I have to do is sign a piece of paper which is a trust and by the way you don't even not you don't even need notation of the trust. So you can do a trust without even notice. It's not a it's a bad idea, but um the trust is basically a contract between you and yourself or you and your and spouse and yourself. It's it's nothing more than a well it's it's sort of what a contract you do a contract with yourself saying that who you appoint to be the next person in charge. So they they they don't understand the
12:12 concept of what a bank's going to accept me as successor trustee if if I if I have to open a bank account or anything. So I I tell them yes the the system is set up so that if somebody passes away if the trust pass away then the the successor trustee has the authority and most you know most of the time it goes pretty smoothly showing a a uh a death certificate that their certificate of the trusts uh slash uh trustees um and they and usually it's accepted by there are there are some
12:47 some things in their system. But uh basically that's what that's what I need to explain to them that they they will have they have the authority to do things. Um the second thing I ask is you know can I do anything I want with the tr with the assets and I the successor trustee and I said no the successor trustee needs to follow the the terms of the trust. You don't need you shouldn't be concerned that you do a trust and then the successor trustee is going to run off the money. I mean it happens. [laughter] what happens uh I I shouldn't say often but it does happen but technically the
13:22 the the security you have as as trust when you do a trust is that the ter the the successor trustee needs to follow the terms of the trust. Mhm.
13:33 >> So you can you can tell the trustee the successor trustee what you know where you want those assets to go and what there's a whole it's a whole system to the trust system. That's a double system. Uh there's a there's a system that was a joke by the way. [laughter]
13:50 >> I told you I'd make some kind of humorous comments. [laughter] Uh the idea is that you set up a trust in a way that that u assures that the trusts. So by the way the trust is the one who sets up the trust the and the trustee is the one who manages the trust. So when when you're first uh if you do a trust for yourself or so you are the trust and trustee or trust and trustee. So um until the trustees
14:24 >> and also the beneficiaries right while you're still alive typically
14:28 >> that you can't you correct well if you're if you're the you know revocable revocable yes the revocable trust you are the beneficiary and you are the have the power to change it and things like that
14:40 >> right
14:40 >> um but you you I mean that question I ask a lot is can I be the beneficiary the trustee and the trust and I say yes that's the whole idea is you set up a trust trust
14:51 >> where you're the trustee. You set it up and then you are the trustee. You manage it and the money may go to you as you as you mentioned.
14:58 >> So it there's no conflict in that sense because it's technically your assets that were transferred into the trust. So um and [clears throat] if you have a family member that for instance that's I I often have um family members chosen as a trustee that the parents don't want to manage the assets so they allow a child or children or or somebody they trust to be the trusts and they one of the questions they ask is that a conflict if they are beneficiaries also. [snorts] So if can they be trustees and beneficiaries if they're not the trusts? In other words, can the children be beneficiaries
15:34 of the trust and be the trustee of the trust also?
15:38 >> And the answer is yes, you you can be and you and normally they are. Uh the question is uh you know are they follow the terms of the trust. So whenever I I uh they ask another question I ask who should be the successor trust excuse me the successor trustee
15:57 >> I say somebody you trust because they need to follow the trust but you know I have a I have a general concept that I tell everybody um because I've been around for a while um when it comes to money people act very strangely you know you can have the best children in the world. You're gonna have the best partner in the world. You're gonna have the best, you know, friend in the world. And you and you think they're going to act as as as they were before they were trustee and um or beneficiaries. So I
16:35 mean normally people do follow the trust but when it comes to money it becomes very very uh people kind of change either them or their spouse you know because they're protecting their own spo children their own spouse but they they I see I see hostile children uh that were very good friends before I I I actually know somebody that they were best friends the two brothers were best friends and then when the parents died they became uh very hostile with each other which was really sad. I I I uh so I tell my
17:10 clients um you know you trust people and you should trust people but set up the trust in a way that you don't tr you don't rely on their trust to follow what your instructions are. make sure their instructions are very well done so that they you know they don't you know in in Judaism we have a uh a thing called yetara which is just a little little voice in your head that says you know well maybe I should take some more money or you know maybe I you know uh so I I say you know just make sure you put down and make it as strong as you can what
17:47 your instructions are so that you know that when your mind starts working on you or your spouse starts working on you or your or your children start working on you. Whatever the reason uh that you know you you tend to uh try to get a little more than than you're entitled to that you that everything is set in in stone as much as you can uh so that you know that doesn't happen. The best trust of all is to have everything it's the same with contracts too. The best way to have a a good deal is to have everything set uh in writing
18:24 as forcefully as you can even even if you're best friends. Um
18:29 >> I had a situation one where where uh the there were two partners that were partners you know from from birth. Uh they were they they uh [snorts] they worked together, they invested together, they everything together and then uh one of them dies and the you know the spouse took over the the the saints uh and man that that trust became not the trust meaning the their relationship became crazy crazy uh hostile because the the two partners were great working together but the
19:04 spouse wasn't wasn't so wasn't so amable to the partnership. Anyways, um so I'm sorry.
19:14 >> Yeah. Yeah. No, answer your question, but that's that's
19:17 >> Yeah. No, it does. So, I I did a an episode of my show People Making Money um recently where I talked about business breakup with friends. And I think there's a tendency to uh to among people say, well, you shouldn't do business with friends. you shouldn't do business with family. And one of the things I highlighted is it's it's perfectly fine to do business with friends and family, but you have to do it in a business-like way, right? You have to have written agreements. You know, every all you you would you wouldn't go into a business with a stranger without uh you know, if it's an
19:54 LLC, the LLC properly constituted an proper operating agreement, etc. And you know when it when it's with a friend or a family member those things cannot be overlooked just because it's a friend or a family member. So I think you know those are the kinds of issues about which people need to be aware. So we're going to take a quick quick break and and come back for more with Leo. When life brings unexpected changes managing inherited property shouldn't add to your stress. Magnum Properties
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21:05 So Leo, before the break, uh we you we were talking about um trusts and and and the proper way to set them up. So, what are what are some of the other um issues with trusts that that you find um [clears throat] um people don't pay attention to them properly or you know things that people do that in one way or another maybe defeats the the benefit that they would get from from having created a trust. Um
21:40 the main thing the one of the main things is to make sure that the trust is gets funded properly that whatever assets you want distributed with a trust gets put into the trust. So a lot of people believe that you know creating a trust and that's you're you're done.
21:55 >> But the but the reality is that you have to fund the trust. You have to put those assets that you want to be administered by the trust into the trust. And basically that is a property. If you have a real estate, you you you deed the property to the trust or to to the trustee of the trust. If you have other assets, you want to uh make sure that the trust has those assets uh firmly in in in its in its hold because um a lot of times what happens is I mean there is a there is a concept called rollover trust um spillover trust sorry
22:34 >> spill over will I think
22:35 >> roll over will yes thank you um but that involves sometimes most Most of the time probate also which is idea you want to avoid the not putting tr if an asset is not in the trust the trust doesn't can't control it
22:52 >> right
22:52 >> so a lot of times what happens is people don't put it they buy a new house for instance uh and they don't put it in the name of the trust they they open a you know a huge bank account in the name of of the individual and it's uh over the the amount which uh allows somebody to just uh air which we're going to talk about in a second which um it's basically a sort a a declaration that you are the the beneficiary but we'll talk that in a second if you want. Uh so if the assets are not in the trust uh there you have to open a probate to to put those trust into those assets into
23:29 the trust so that the trustee successor trustee can manage them. I've I've literally had uh you know there have been litigation over assets that weren't in the trust uh that you we need to put in the trust and the heirs you know objected. So basically if if if you die without a will or a trust it's called intestate basically. So it means that the law specifies what where those assets go. Um, a lot of people are concerned actually about you know if they don't do a will then the government's going to get it and that's that's not necess
24:05 that's not true and by the by the time you're uh the trust I mean the assets actually go to the government a lot of things have have to have happened um so most of the time if you don't do a will or trust uh your your family will get it according to what they called this intestate loss of the taxi code.
24:28 >> So that's not my concern. Um I mean that's not as a big concern about not doing estate planning. The state the the problem with estate planning the issues are if you don't put things into the trust then you have to go to the perway court the whole purpose of which you was to avoid it. So um those that's number one issue and the the second issue is is you know co-rustees co co- successor trustees. So
24:57 >> you know naturally parents don't want to insult their children by saying oh I this child gets to be the trust the successor trustee and not so they say okay we'll put all the children as successor trustees which which sometimes uh becomes a nightmare because then you any act that the trust must take requires you know all the trust all the successor trustees to act unless you know there's exceptions to that but it creates you know more hostility among children than than than you try to avoid because if you have if you don't have the right trust successor trustee or you
25:32 have too many or you have two that are not don't don't work well together um it it it you again you go back to probate court because uh the two the successor trustees if you're going to have more than one um they have to work together
25:50 >> so I've been in litigation where that has not happened they I mean they have co-rustees but they they could not work together and so they we ended up in probate court fighting to see you know who would actually um administer the trust.
26:06 >> U so that's another issue that that people should should be think about well before they they it's not it's not a you know hypothetical it's it it when you pass away it it becomes a real issue if the co-rustees don't uh get along. You need you need a you need a successful trustee that would has the courage and the and the st the stamina to to actually follow the terms of the trust regardless of what the the other beneficiaries require or demand of you. There's often,
26:41 you know, successful trustee takes on hold and then one of the beneficiaries says, "Oh, I need the money right now. I I need to do this, you know, sell the house, sell this. I need the money now. now now and maybe that's that may not may or may not be the best strategy if the market's slow for instance or or and you don't want to sell the the properties now you want to hold on to them for a little while or something needs to be done that successor trustee needs to have the courage and the you know the strength to say no we we're not doing that right now we need to do this instead or we need to no you can't have more than your other siblings you can't
27:18 uh how that uh the beneficiaries have different demands on the successor trustees. So you a you need if you're going to have co-rustees, you need co-rustees that get along and that not get along uh socially, get along financially, meaning that they both they both make the sound decisions as opposed to, you know, emotional decisions. And you need uh the successor trustee successor trustees to to be able to have the courage to make the right decisions and not not not be influenced by the
27:54 beneficiaries uh demands. Those are the two things I see uh issues on on people that that choose who the trust successor trustees and the other one is is of course is making sure that all the assets are in the trust.
28:09 >> Right. Right. So over the course of your career um what what kind of changes have you seen uh you know in in this area? Um so I'm I'm I'm not I don't even have any thoughts. Sometimes I have a thought in mind as to you know what that could be but um but I I don't even have a thought in mind as to what that might be. But per perhaps you have ideas. you know, the the laws change as far as tax ramifications and uh exemptions and
28:45 things like that. Uh what I've seen a lot of change though is the probate court in general. Uh there used to be more uh the judges used to be longer in in in place. They used to, you know, you had a judge and then now it seems that there's a lot of turnover of judges. Not turnover because they they're no longer judges. is that they they get sent from one area of law to another. A family law attorney, a family law judge will be appointed, you know, will be assigned to a probate matter. So there's a lot of educational um as an attorney uh
29:21 educational uh duties because you have if the judge you know was not a probate attorney and was not a probate judge uh now they're in the system which is somewhat complicated and some issues and you have to basically you know the lawyers have to uh educate the judges and educate you know not in the sense of of starting from from base first base but educating in the subtleties of the probate system in the probate um uh the proceedings. So that that that I've seen uh a difference in in in how
29:59 judges [clears throat] get rotated. um as the concepts the real concepts I really have maintained um throughout the years with some you know certain exceptions like basically exemptions and things like that but mostly the changes are are are the tax exemptions and tax uh issues u those those change you know according to how the wind goes
30:26 >> right right so so going back to the the issue of of trusts um and and estate taxation. So um how how does or or I maybe does you know putting one's assets into a trust how does that affect um you know the estate the the taxable uh situation of an estate you know as opposed to going through you know probate. Um basically the trust itself unlet if it's if it creates if it has
31:03 income producing assets for instance the trust has you know uh apartment buildings and things that create income then you know it the trust will will will need to file taxes as far as uh what the income is. So, um, uh, when somebody passes away, for instance, there's there's different taxes that affect the the estate. There's there's the tax the income tax of the individual that passed away. There's the the the gift tax and there's the uh uh the taxes of the produced by
31:40 the estate. So, there there's different issues of what tax how the taxes affect the estate. Um, did I answer your question? Well, [snorts] so are are they going to be different than someone who who than someone who died without a trust in place and and maybe they have a will or maybe they died in testate? Um are are are the you know does does having the trust really change the taxable position of the estate or to a certain extent it does it not really matter? the estate
32:17 kind of is what it is from a tax standpoint and and uh you know you pay income tax or gift or estate taxes. You know
32:26 >> uh the the estate tax is is one one uh uh form and then the individual tax is one is one category. So uh it it depends upon how you set up the trust. So um putting the putting the the for a lot of people ask me you know what what about can I refinance or what happens with my property if I if I put things in this in the trust. So um the trust system doesn't really change how you deal with the assets. It only deal it it changes in the sense of you know if it creates a
33:01 income. So, um I'm not aware of the difference between uh the taxes how how the state gets taxed in a trust versus you personally other than what your income level is in income uh brackets are.
33:19 >> Okay.
33:20 >> Right.
33:20 >> So, um it's kind of complicated. Uh I I I usually say before somebody if somebody has significant assets or uh you know let's let's work with an an accountant to make sure that you're whatever move you do to into the trust or out of the trust or even a trust at all to to work with an accountant that will can give you a much better uh strategy as to how the how will affect the taxes.
33:46 >> Right. Right. Okay. Yeah. And that that certainly makes sense. So, um as you sort of look at the um overall situation um when should somebody uh start thinking about these kinds of issues? I you know um someone just out of college, first job, you know, when they get married, have children. What what what are sort of the the way points
34:21 or the life cycle points, I guess, is maybe a better way to describe it when people should start thinking about these and and engaging in these issues.
34:32 >> Uh the number one uh threshold is if you're going to own property or if you have significant assets. Um the the whole idea of the trust is to
34:42 >> define if you would I'm sorry to interrupt you but define what is what is significant.
34:47 >> So if you if you're going to buy a house a property if you own a property uh it should be put in a trust. you should set up a trust
34:54 >> um for the reasons that I told originally that that something happens to you, you want easy access to the uh to transferring that that those assets to somebody else or your or your your relatives. Um significant assets in bank accounts is somewhat of a uh more complicated issue. For instance, if people have businesses and they have uh money in bank accounts that they work with in and out. So to put that in a trust, uh maybe it's not so know so practical because then the trust is the
35:30 one making all the all the all the transfers. Um, so if it's it's money, if you have, I don't know, $50,000 in a bank account, which I'm surprised people still do, um, I would put that in a trust. Uh, because again, um, it's all about, you know, having somebody having access to those accounts with, uh, when if something happens to you. So if you're married and you have a you know if you have the property uh let's say joint joint ownership with right of survivorship then the trust is
36:06 is is not as necessary as far as your spouse.
36:10 >> Uh when you pass away the the spouse gets the property automatically. But if you have children um you that that doesn't work so much with the children. So, uh, if you're going to buy a real estate, uh, even if it's it even if it's, you know, well, nothing seems significant in California nowadays. You, you know, every property is is an in is a significant investment, but if you're going to have a property, um, you should put it in a trust. That's that's number one. The second one is when you have children for sure. um because of the same but what we've discussing so far is
36:46 that um you want somebody to take care of those assets if something happens to you. So and you want to think about you know who's going to take care of those assets. Uh you don't you don't want the children you know it's chaos. Somebody passes away it's pretty much chaos. Um there's a burial issues there's you know who's taking care of the children issues. there's there's a lot of issues that are that are make you know your decision process not so good because you're worried you know you're you're you're grieving the loss of your relative and
37:22 you're and at the same time you have to take care of assets. So um if you have children it again if you have assets because if you don't have assets it doesn't it's still a good idea to do a will. If you don't have assets for you know structures of how you want your body and your you want to have those issues written down but uh your burial and and how you should be buried and uh those issues. But as far as transferring assets, if you don't have assets, it's not so much of a uh it's not so much of
37:57 an issue because you don't have uh to worry about the transfer assets when you pass away. But those are the two two uh um and again and there's tax issues too. So, if your investments are stuffed, which which again I'm not uh I mean I'm in in in I'm informed enough to to know that you need an accountant to figure those things out and not uh
38:22 >> right
38:22 >> I mean I do mostly probate which is after you die. So I do estate planning also but when it when it the issues have become uh uh complicated I I always bring in an accountant to to uh make sure that everything gets everything is appropriate and also um there's an issue so there used to be you know what was called that's one of the changes that come around there used to be an AB trust which works in a certain way and then there's you know other trust systems have come around since Then so the issue
38:57 is when one spouse dies the the half of the trust or the or the assets that would go to the spouse that becomes irrevocable.
39:07 >> So you can't change. So most people that I see don't what you're supposed to do is when it have the trust splits into two the deen and the and the surviving spouse.
39:18 >> Um what I see very often is that the trust you're supposed to fund the deed's trust. So that it it holds a certain amount of property and then the the the survivor has their trust called the survivorship trust and then that part of the assets is is not revocable. So you so you manage those trusts. Most people don't do that. Most people after one spouse dies um they don't fund they don't split the trust into the assets of the trust. Mhm.
39:48 >> So then it becomes an issue is tax- wise and it becomes an issue of uh you know which part is irrevocable which is revokable. Um so an important uh aspect of of administering the trust is making sure that the survivor the the st if it's if one spouse dies that the fund the the the sen trust and the surviving trust gets funded. In other words, the the the the parts that should go to one or the other gets actually transferred or actually gets assigned.
40:21 >> And most people I don't don't do that. They one spouse dies, they continue as and then it becomes an issue when the second spouse dies. But um
40:31 >> okay, let's take another quick break and we'll come back for 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 Bralet, 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
41:07 practical content YouTube has to offer. Subscribe now to Probate and Trust TV. Spend more time learning, less time searching. So, um, want to sort of change direction here a little bit. Um, because you you mentioned right before the break that you do a lot of probate work as well. So um aside from the challenge of um you know judges not being you know long tenured in the probate court, the kind
41:42 of turnover and and therefore the perhaps lack of depth of knowledge uh in in you know that the judges have um what are what are some of the other reasons why um probate is is so difficult and therefore or it is it is indeed much better you know to to transfer one's assets to a trust. Um, one of the main reasons is time. Uh, the probate to probate an estate, you have to file a you have to initiate the
42:19 probate. You file a probate uh petition and then you need to publish the the petition. You have to publish the the fact of the probate and then you have to go through this whole series of events um that take time. So um you know if you go to a court and you you don't you need to do A B and C you need to to as an administrator personal representative you need to do certain things. Um the judges aren't always available uh you know immediately to do things. So
42:55 you have to file a petition and wait for a hearing for instance. So uh those kind of things delay the distribution of the assets because you have to go through the system. Um so in a trust you avoid all that because you there's nothing to uh I mean there's there are certain delays and like notice to to beneficiaries and heirs. Um but there's no there's no delay in in the court system. There's no you don't have to wait for an order from the court of the probate and the probates can take you
43:30 know anywhere for short of a year to many years depending upon the complexity of the case. uh [clears throat] the the trust system is is designed so that as soon as somebody passes away the successor trustee steps up is immediately gives authority to act without if you don't have a trust then as a as let's say if you're an executive of a trust of a will you don't have the you know that's not like people say okay you're the executive I you know I'll I'll listen to what you have to say you normally have to what's called probate the wills and
44:06 you and you get an authority. So you have to be appointed as the executive or or you know administrator if there's no will and those things take time and there's and there's subject to to oppositions and subject to you know delays and other respects. So in order this system was set up in order to avoid all that the trust system takes called and takes in effect immediately soon as a successor trustee is able to act they they need to act. So um that the time period is is uh is is crucial because a
44:43 lot of times you know you want you don't want those assets to be sitting around. You you need somebody to take hold of things that um and and when when there's no will. It's a nightmare because you know every child thinks that they're entitled to go into the house and do whatever they want to do. And so the probate system get has to appoint a an administrator or administrators to actually take control of of the property and things like that. The second thing is cost because um probate is not it's not cheap. I mean, aside from the filing
45:19 fee, which is which is not not significant, but you know, there's attorney's fees, there's there's, uh, publication costs, there's, you know, there's a lot of fees involved in probate. And the attorneys usually get a percentage of the assets in probate. So, uh, it costs a lot more than if you if you have a successor trustee start just taking action. And there's no I mean I don't want to I don't want to argue against my form of to make a living but it's it's much cheaper if you that if to
45:56 I mean you still may need a and should have an attorney to direct you in in administering a trust but it's not as it's not as uh complicated and and doesn't involve as much attorney work that than a probate does. Mhm.
46:13 >> So, yeah. I mean, in short, and and and I I see this in my work, I mean, the one of the objections I often hear about um creating a trust is, well, it's going to cost a lot of money. And in my experience, the cost for the legal work and and what other whatever other work needs to be done to create that trust and fund it is usually far far less than what it would be to administrate through probate a similar amount of assets.
46:46 >> Agreed 100%.
46:48 >> Yeah. to if if you if you look forward as to what is what will give your children the most amount of money spending a little money relative now relative to how much they're going to have to spend in order to go through probate is it's it's the the differences are are tremendous. Um, uh, and if you I hate to say this, but there's a lot of people that do trust out there that are not lawyers. Um, there's there's companies that do. I'll
47:24 give you I'll give you an example of how how careful you have to be to choose the right lawyer. I had a case years ago where the trust was created and the percentage of what people got didn't amount to 100%. So I forgot what the I forgot what the the numbers were but it was 25 25 and then 32 and I'm making these number up so I don't remember the actual numbers but if you added the percentages up it it came out to 105%.
47:58 >> [laughter]
47:59 >> And you think, okay, if it's it's not a big deal at 5%, this estate was worth millions of dollars. So 5% was uh a lot of money.
48:08 >> Mhm.
48:09 >> And how much money that the beneficiaries had to spend. I mean, I'm you again, in my interest, I I was hired to defend one of the one of the beneficiaries. So I was I I I did uh but the issue of defending uh that because of this a mistake of the percentages is is you know it seems silly. If I if I didn't see it myself, I would think that could not happen. But right, we were involved in it. And the amount of money they would have saved to gone to a to a real uh attorney or a real, you know,
48:46 person that knows what they're doing would have saved them a lot of money relative to how much was spent on attorney's fees to fight over that, you know, that 5%. Um, and you know, each one says, "No, mom's it was I get the bigger percentage because mom really thought that I should get the bigger percentage and she just didn't take away from the other person." But you know, that's those are kind of the fights we got.
49:08 >> So, it's important to do a trust, but it's important to do the trust. Well, even little details uh make a difference. Uh,
49:17 >> again, if I if I hadn't been personally involved, I would have thought that cannot happen. I mean 100% you know you have to figure out it's 100% but that's what happened. So we spent you know I don't know probably it was probably about $100,000 fighting over
49:31 >> oh my gosh
49:32 >> percent of of this this very large estate. So uh
49:37 >> you know it on the one hand you know I guess the the you know the the um the lesson is make sure whoever is drafting your trust knows basic math [laughter]
49:47 >> that they have a calculator. You want to make sure they have a calculator.
49:50 >> Yeah. Right. But on the other hand, you know, you would think, okay, you know, it totaled 105%, so just everybody reduce your prata, you know, percentage to get it to 100 and and, you know, kind of wash your hands and move on, right? Um, but but I can completely appreciate that no one would want to do that, that the extra 5% it has to come from you, not from, you know, me or whatever. Like I like I like this comment I made which is I it's emphasized with this case when it comes to money even the best of
50:25 friends get very kooky
50:27 >> they become you know I love you but you know but mom wanted me to have the extra 5%. So, uh,
50:36 >> yeah.
50:37 >> Yeah. So, when it comes to money, it expect the worst and hopefully get the best. Um, you know, I I would say the majority cases are not like that. I mean, I get being a probate litigator, I get the worst ones, right? So, it's it's not like every every estate is is that hostile, but um it does happen even among the best families. So,
51:02 >> yeah. Um
51:04 >> yeah it's it's like my work too. I mean rarely and I'm but rarely as in never have I been asked to you know be the administrator or you know successor trustee in a situation where everybody gets along fine there's no dispute and it's it's love and joy and flowers right I'm always always called when there's something going on the the heirs are fighting the you know there's been fraud by a trustee or something like that and and that's that's why they need someone like me uh to get involved otherwise uh
51:40 yeah you know one one of the children can do it or whatever and and you know uh off we go. So it's it's it it is an interesting situation. I I I do find that uh it it seems like when there's money on the table in probate, whatever slight anybody received during his upbringing, [laughter] it's going to be worked out as part of the administration of the estate. So,
52:08 >> so, so what are the issues also with with when you're choosing a trustee? I mean, one of the in the probate code, what one of the reasons you can you can get a trustee or administrator removed is when they they're in financial problems.
52:24 >> So, obviously, a person that that is administering funds and they're themselves are in financial problems, it creates somewhat of a conflict. So um you want to make sure that the person you choose again they may be the most beautiful and responsible person but you if they have financial problems and their kids need money or something you know there's a there's a tendency to to for that administrator or trustee to say I'll just borrow the money and return it right I'll you know I don't I don't have
53:00 intention to steal anything but uh I need to pay my bills today or you Yeah.
53:05 >> So, so one of the issues you need to consider when picking a trustee is uh are they financially stable? A because you want somebody that is stable financially and B is because they you know it takes away the the the inclination even even if if it's for the best purposes for them to to tap into the assets of the estate or the trust.
53:30 >> Yeah. So, um, that's that's something to consider. Um,
53:35 >> absolutely. So, we're we're we're coming up on our our time here. Just last thoughts that you want to uh share uh before we wrap things up. Um, [clears throat] as as you know, Kevin, the biggest uh even people that h have a lot of wealth and are are uh uh smart smart people, let's say, they tend to put push away the the idea of them dying. So they, you know, they say, "Oh,
54:11 estate planning, okay, but you know, I'll do it. I'll do it soon. and I'll do it soon, but I have to, you know, I have this business deal going. I got to focus on that, right? So, I often get contacted, I want to do a trust, and then I say, "Great, let's get going." And then, you know, I call them regularly and say, "Okay, let's do it." And uh and they say, "You know, no, no, I'm very busy right now. I need to uh I need to do A, B, and C, and I'll get to the trust. It's not a priority right now." So God willing you'll, you know, the client will live for a long time and not worry about, you know, to say that uh uh I
54:48 don't I don't have to worry about what happens after my death. But it happens to the best of us and it happens to the rich, the poor, the um and God willing doesn't happen. But you want to make sure that if if that you're you don't delay that pro the process because um unfortunately it happens and and there's a lot of people that that want to do it. They started doing it but they don't they don't follow through it and then unfortunately they pass away and then uh it's not done. And it's not like
55:21 >> uh people think oh you know I told somebody I wanted this this and this so that's enough. my friend will will tell the family in the court that I wanted this and this and and that's how it should be done. It it if it's not in writing uh and it's not signed, it doesn't happen unless unless you're you're one of those uh in the probate code of heirs in tested heirs, you're going to get it anyways. If if if you're not in that list, uh your parents need to have things in writing, not just to tell a
55:56 friend or or you know, I knew mom wanted me to have this. It doesn't work that way. You need to have it in the you have to have in writing for it to fit the effect. That's my my final comment.
56:10 >> Excellent. Well, and that I think that's a good comment to wrap things up on because uh you know, again, we we see it in our practices what happens when people um don't um uh don't abide by that advice. And uh it's it's often times a lot of pain, suffering, a lot of work, a lot of waste, frankly, um because uh um you know, you end up in probate. So Leo, thank you very much for coming on the show today. I really appreciate you taking the time because I I know I know how busy you are. [laughter]
56:45 >> Thank you so much. I appreciate you inviting me. That's that's it was fun. It was fun. I didn't get to tell my jokes, but it was fun.
56:52 >> Well, so that there's a reason to have you on again. So
56:55 >> Okay, good. [laughter]
56:58 >> If you'll hang tight, I'm just going to do a quick wrap up and we'll we'll talk offline for a moment. So, very good. All of you, thank you so much for joining us today. Uh, viewers and listeners, really appreciate it. Um, if you have questions for Leo, or even better, you want to engage Leo. This is the time I make my shameless plug for my guest. Uh, in in this case, I know the quality of Leo's work. It is top flight. Leo's contact information will be in the show notes after the episode posts on YouTube, so you can get in touch with him. I'm sure he'll be happy to speak with you and and
57:33 help you out with whatever you need in the estate planning and uh trust and probate administration arena. So, uh just real quickly then, tomorrow at 10:00 a.m. Pacific time is my show, Business Lessons from the Military. And on Wednesday is my show, uh Wednesday at 10 a.m. Pacific, my show, People Making Money. And then just a reminder on alternate Thursdays at 5:00 PM is my show Jiggers's Place. We'll have a cocktail and a schmoo. And I hope you'll join me uh later this week. And indeed um consider perhaps becoming a
58:08 subscriber so you don't miss any of the Way to Wow Show episodes. And if you one other thing, if you know someone or maybe your parents um are delaying um taking care of creating an estate plan, maybe send them a link to this episode so they can hear what Leo has said about the importance of doing so and and how how large the benefits are not only for uh the people doing the estate plan, but for their their uh their children, their other heirs. um you know they'd be well advised to to follow Leo's advice. So
58:45 again, thank you so much for watching, Leo. Thanks again for coming on the show.
58:49 >> Thank you so much for inviting
58:51 >> and signing. Yep. And signing off as I always do. Marie darling, you're my bell. You know you are. Courage.