Joel 

Hey, everybody, welcome to the Senior Reset podcast. We are talking resources, education solutions, entertainment, and training for the senior community and their families. I have with me today Nicole Farmer as my co-host. She’s joining us from Dogwood Terrace, a senior living community in Richmond, Indiana, and Lynn Shelton from Shelton Law Associates and she is going to be joining us today to talk about a very interesting topic. That I don’t think could ever be more relevant. It’s important for everybody, regardless of age. We are talking about estate planning, and for those of you who don’t know what state planning is, it is you deciding what happens to anything associated with you instead of the government deciding what happens to anything associated with you. Should the worst occur, I’m going to turn this over to Lynn and, you know, ask her, can you go over just what is most important about estate planning? You know, kind of what? What is it, and who qualifies for it? Is it only for rich people? You know, how about we start there?

Lynn 

Thanks, Joel. Estate planning is not for everyone. So, no matter the amount of estate, if you will, that you have, everybody has some belongings: family heirlooms, clothing, household items, and memoirs. All of that is part of your estate. And estate planning is just setting forth a guideline that you want to be followed in case anything happens to you, whether you are incapacitated and still alive or eventually pass. What would you like to have happen? All of the tangible and intangible items in your estate.

Joel 

So, I imagine one of the hardest things when it comes to estate planning isn’t the actual planning. It’s how to approach communication on the issue. I mean, I know I’ve had family members try to approach this with me. What does communication look like between family members? Who needs to be talking to whom when it comes to estate planning?

Lynn 

Yeah, it is the hardest part. No matter which side of communication you’re on, whether you’re a kid talking to your parents or you’re the parent trying to have an honest conversation with the kids, you know, nobody wants to have this conversation. 

So, it’s not comfortable. Nobody wants to think about it. Losing someone that you love and care about. But it’s a requirement to just plan for it—you know, set aside a time just like you would calendar a doctor’s appointment, schedule appointments with your loved ones, whomever they may be to say, OK, we’re just going to talk about what your wishes are. And that means everything from financial aspects to knowing whether you want to be buried, cremated, or put into a living forest when you pass away. I mean, there are all kinds of options in our day and age, and really, it’s about what you want so that your loved ones can honor your wishes.

Joel 

When we talk about who should be looking at state planning. You know, when I think about it, you know. Something could happen to me tomorrow. You know, I’m only in my early 40s at the moment. It’s not generally something that’s on my mind when it comes to estate planning, but you know, as we talked about this before, you know, we jumped on to record this. And one of the things I was thinking about is, this is something that everyone should be talking about when you look at it holistically; this isn’t an end-of-life conversation. This should be, at any point in life, a conversation that needs to be had.

Nicole 

Yeah, I’m right there with you at the same age, Joel. And with the traveling that we’ve done recently, my mom is big on You need to figure it out with the kids. You know, you need to figure it out. Something out before you’re out of state all the time.

Joel 

Yeah, hopefully, she doesn’t get mad at me for sharing this, but I remember early on in my marriage we went on a trip. My wife and I, and as soon as we were in the airport, she was like texting a will. Like, if something happens to us, we want this to happen with the kids, you know…  Hopefully, that’s not the situation. But you know, speaking of that, Lynn, when we’re looking at conveying our wishes, there’s probably a difference between conveying your wishes and having them legalized so that the government doesn’t just kind of take over and do whatever they’re going to do. What if someone is legally required to do something to have their wishes legally binding?

Lynn 

It’s different in each state, but they need to be in writing, and they need to be witnessed by at least two people in the majority of the states. Currently, you know where you’re at, Nicole. The aspect of how your wishes is conveyed can be done through the Court or bypassing the Court, and that’s probably the biggest, I would say, a misnomer in estate planning, as everyone thinks that, well, if I have a will, then You know it’s automatically going to happen. Whatever I put into that will have happened. And that’s not necessarily the case. Sadly, all wills have to go through probate, which is the same process you would go through if you did not have a will.

And so, you have to have the court’s blessing and a judge rule that is, in fact, the last will and testament of the deceased person, and so what that leaves open is the ability for anybody that didn’t like what you had in your will to come and, you know, try to get it kicked out as you’re not according to your last will and that they had told you something else. And so, you know, I would like to always think that all families are just harmonious and joyful with each other, and there’s no need to file for a disagreement with the will. But that seems to not have been historically the case.

Nicole 

I want to live in your world. It sounds really good. Right. 

Lynn 

I wouldn’t even do that in my family. You know. 

Lynn 

But unfortunately, that’s what happens. It’s that you know you have to prove that a will is the last will and testament through probate, which means whenever you go through probate, that means you’re in a court case. It means that you have timelines like all other types of court cases, which can be months or years before they’re finalized, and there are all kinds of expenses and court costs that go along with every step, just like a regular litigation case would be, and so you know wills are certainly better. Better than dying without one. But it leaves interpretation and final judgment to the judge.

And so, you know, the thing that I always like to point out to everyone and your and your right both, Nicole, enjoy your right. You guys should also be looking at this. I tell people that if you are out of college and you have, you know, a car or a CD or furniture or anything else, the time to start planning your estate planning is now, and then just update it. From there, as life changes, the only way you can avoid probate is to have a trust. A trust does not have to go through probate court. It’s private. It never has to be recorded. So, all your information is kept private from, you know, the public at large, whereas a will eventually end up on a court docket and can be looked at to determine your wishes. So, there are, you know, two different ranges in which you can record your wishes using the court or not.

Nicole 

Yeah, my grandpa had a living trust, and my grandma put it together. She died first. He changed it after she was gone. But it was situated the way that he wanted it, and things changed after she left. But it was like he tweaked it several different times throughout my lifetime. He was able to go in; it was like a binder if I remember. Like a notebook. And he would go in and change things in it and then take it to his attorney for review, maybe.

Lynn 

Yeah, probably for finalization. Yeah, that’s the nice thing about trust: whoever’s trust it is, they are. They are the trustees until they pass away, which means they can make changes to the trust as life happens. So you know, as kids are born, grandkids are born, or you just are mad at that kid, you want to disown them. That’s like all those things.

Nicole 

Nice because, you know, the harmonious thing isn’t always the case. But there was a clear picture of what he wanted, so it wasn’t up to us to decide whether she should fight over it. It was up to one person to execute it because they knew that’s what he wanted. We watched him.

Lynn 

Right. 

Joel 

Let’s backtrack away from trust just for a second. I do want to go back to it, but I just want to kind of flush out the thing with wills. Short of a trust, I’m sure a lot of people, especially if they’ve never been in business and they’re not familiar with business entities, trusts, or any of that stuff, think that a trust probably sounds super scary, and they’re probably thinking in their minds that it’s only for wealthy people.

So, we’re going to get into that and hopefully make it a whole lot less scary in a second. When it comes to just the basics. Wills, you know. Well, would a text message count as a last will if it was sent right before an emergency? When it comes to conveying last wishes, what’s kind of the best practice in that, short of establishing trust in all of that?

Lynn 

So legally, there are three different types of wills. There’s what’s called a holographic will. Which is a handwritten will. Text messages have not been recognized as handwritten.

Joel 

Oh, come on. Not yet. 

Lynn 

Not yet, although it might be in the future. You know, who knows? There are statutory wills, which are forms like that you can buy at a Staples or Office Depot type thing where it’s a fill-in-the-blank, and those always have limits on how much the estate can be worth to utilize those fill-in-the-blanks. They’re very, very basic.

And then there’s the attorney created with and that’s fully customized; we’re dealing with the assets; you know about the estate itself and what you have. All of them require at least two witnesses to sign, saying that they saw you sign your will. So basically, they’re not attesting to the fact that that’s your wish. But just to the fact that they saw you sign it, that is. The last will.

Joel 

So, kind of the worst is that you don’t have anything, and then if something happens to you, regardless of your age, the government, you know, goes through probate, and the government kind of divides everything up the way that it thinks it should. And then, as a step up from that, you draft a document yourself. You have two people sign it, and that’s kind of like your basic document, A step up from that is a legal form that you can print from staples or from somewhere else. It’s a little more. It’s more legal than just handwritten stuff. You still need two witnesses.

And then, kind of, the best is going to a lawyer and having two witnesses on that. I’m guessing people at the lawyer’s office count as those witnesses if that’s the way it works. And you have it on file with them—how much generally, how much does it cost? It doesn’t cost very much if you just print something out of a printer, but if you go to Staples, it does. It’s maybe a couple of bucks. And then if you go to, you know, your lawyer, how do you know? I’m sure it’s a different state, but what’s the general idea? Cost of a will.

Lynn 

Sure. So, you know the fill-in-the-blank forms are typically around 29 or 39.99. That’s usually a page. Or two to have a custom will do with an attorney. I’ve seen him range anywhere from $500 to $2,500 if they have a length of time for changes in the addendum. So, if you know, a 10-year package or something like that or, as you know, within those 10 years, you can make as many changes as you need to redo the will.

Nicole 

So without that package, is it set in stone without the package to change it?

Lynn 

Yeah, yeah, you just pay each time that you want. You start over and do what’s called a codicil, so it’s an amendment or a change to the previous one.

Joel 

You can kind of have somebody draft one up as like a one-time off and then, you know, pay every change, or you can buy a package and just make changes whenever you want to… Over 10 years.

Nicole 

Got it. 

Lynn 

Right, exactly. And then also, I just wanted to mention that if you don’t have a will or if the will is being challenged, it can revert to just what the statutory code is in the state. which you know is going to go, you know, if you have a spouse to your spouse. If you have kids, your spouse and kids If you don’t have either, it’s going back up to your parents and then trickling down through your family tree, and you know the thing that most people don’t like? I guess what I would say is that it doesn’t leave any room. For family, that’s not directly related to you, your friends, or charities. Or if you happen to be in a relationship with, significant others, some states still don’t recognize that within the estate planning realm of probate, and so even though you know you’ve been together with someone for years, they may not get anything legally. And so that’s important if you know that if you have any of those individuals that you want special allocations to, you need to make sure that it’s in writing so that it can be followed.

Joel 

So you know, I can see why wills might be challenging. I mean, you could not be in your right mind. And then suddenly there’s a change to your will that gives all the money to somebody else. Is there something people can do to, like, enforce the will? Can they have more witnesses? You know have? Have a bunch of different people witness the will. What can people do to kind of reinforce it a little bit of anything?

Lynn 

Yeah, many copies of the original You know. You know you can file for recording in some states. They’ll let you. To have it recorded. The problem with the overall aspect is that you know that all that your witnesses are witnessing is the fact that they saw you sign it. You know, not that that was your actual wish or what the pages before said. That was said.

So, it’s not like the witnesses are reading through the will and knowing everything that you want to do or not do. They’re just saying that they saw you sign this on this day, and so it is still a document that’s open to forgery and open to people lying in court. And challenging, if they think it should.

Joel  

I was thinking that I do want to get into trust now, but I want to tackle one thing first. Now, one of the reasons people might want a trust is because they might want to take on the kind of scary boogeyman that is setting up this other legal entity. Is for tax reasons. If you have stuff that’s valuable for tax purposes, if you don’t have a trust, what generally happens to everything that you own, like how much does the government take?

Lynn 

So I am not a tax attorney, so I’m not going to give you the exact number depending on who it’s going to. How much they’ve received from the person in the past, if anything, or from others, and you know what other deductions they’ve made and how they’re doing if they’re still working and getting paid. I mean, there’s a lot. There are a lot of things to think through. What I can tell you, though, is that typically it is a tax advantage over if you were just receiving that income or that property as an individual or as a regular company. There are tax breaks. what the government gives to the states.

Joel 

I just know that I’m sure we’ve all seen the stories of different States and even the federal government putting in state taxes when someone passes. And I’ve seen numbers and news stories of over 50% sometimes, and I don’t know exactly the ins and outs of what goes into those numbers, but they’ve always been pretty scary to me. I’ve always thought, you know, I am going to need something besides, you know, just writing a will to protect my assets someday.

Lynn 

Yeah, because that’s exactly what happens with the will, or if you go. If you die, you die intestate. And it’s. And you’re receiving things. It can certainly be that many attacks, for sure.

Joel 

Let’s transition to trust now. So, can you just go over what a trust is exactly like in its most basic form?

Lynn 

So, a trust is its legal entity, and it is also a legal description of what you want to happen either when you become incapacitated or eventually when you pass. And so, it is very much like a will, with the difference that it is a document that bypasses those estate taxes that you were just talking about because the document itself, even though you still fully own everything that’s in your estate, the government looks at it as if it is no longer yours because you’ve identified it as a beneficiary.

So, it’s yours because you’re the trustee or the person in charge of it until you die, but it’s not yours. To be taxed. Any longer, because it’s for a future person, you’re just holding on to it temporarily until you do pass. So, it’s this amazing little document.

Joel 

There’s a joke I like to make, and it’s when people are talking about saying, hey, now corporations are people too. 

Lynn 

Good job. Right, exactly. It’s just like a corporation in that it’s governed by a different law. Entity now, but it’s something that you control.

Joel 

I guess one way of putting it is when you set up a trust. It’s like setting up a person who’s does not like you. Instead of you owning these assets or whatever they are, put them in trust. The Trust owns it, just like the trust is an actual person.

And so, if something does happen to you and your stuff is in a trust, well, nothing happened to the trust. The trust still lives on. I guess correlating it back to business to people that might have some kind of understanding there is that any business generally has something that happens as the person that owned the business passes, and then the ownership of the business shifts. You know that there’s something in there, but the business itself doesn’t disappear. You know the business is still there. It’s just a person that owns the business shifts, and when you’re setting up a trust, you’re setting A person who is a virtual person means that if something happens to them, the ownership of that trust shifts. But the trust itself—nothing happens to it—is that that’s probably a sort of description of it or making it more confusing.

Lynn 

No, that’s great.

Nicole 

That and maybe. How does the trust factor into someone who, say, has a benefit and doesn’t want to get rid of their house and their things to qualify for Medicaid because they need them, but they still want to hang on to their assets, and Medicaid is saying, If you own this, this, and this, if it goes into a trust, does it still count as their assets or is it now a separate entity.

Lynn 

The separate entity

Joel 

I guess to take that one step further, if they get money from other sources, like if they have other businesses, they just wrap those under the trust so that the money goes into the trust and doesn’t go into their accounts. Bank account, they would still qualify for Medicaid because they’re not officially recognizing that income themselves.

Lynn 

Possibly I don’t.

Joel 

I’m just thinking theoretically.

Nicole 

Work, but in general, I mean.

Lynn 

We have a lot of Clients that help with that.

Nicole 

In general, just like you know, if I take all of my money and dump it into a life insurance policy, it’s going to grow. I’m not going to have to count that. Financial aid for my Kids. When? They go to school. So for anyone who legitimately wants to set up a trust anyway, I want to make sure everything is for my children. And then later down the road. I don’t want to give up my house, my car, or whatever, but I put those in a trust. I don’t necessarily have a lot of income, so now I qualify income-wise, but those assets don’t count. I say this because I just talked to a lady yesterday with the same situation: she doesn’t qualify, but she can’t afford services. But she doesn’t want to get, she said. I’m just not signing my things over. I worked for those my whole life.

Lynn 

Of course, why not? Why would you want to?

Nicole 

Right. 

Lynn 

Right. And because whatever is in the trust doesn’t technically belong to you anymore, It’s your beneficiaries, right? You’re just managing it.

Nicole 

You’ve been very helpful today. Very help. 

Joel 

I have a family member who was looking at state planning, and they wanted to pass down their assets to the different family members, one of them had special needs, and if they had assets, they wouldn’t be able to qualify for government services. 

And so, they first started looking at a trust because if they needed money or something, they could pull money out of the trust to cover it. As long as the trust said in there what it could be used for, it wouldn’t count as assets, and you know, make it so they wouldn’t qualify for government services. 

So, I know that it can be used in a lot of really interesting ways to help someone qualify for government services, whether it’s for special needs reasons because you know the person couldn’t manage the resources themselves anyway, or because, like you were saying, somebody just needed to get assets off the books to get some assistance in daily living.

Lynn 

Right, absolutely. And I just want to also, you know, mention that. Two, you know, two people that are setting up trust when they’re Young, but also to parents or parents and grandparents that are thinking of their children and their grandchildren. Is that the nice thing about trust? It’s that they’re fully customizable.

And so, when you go through, you know, a very lengthy questionnaire that talks about your wishes, the two things that you want to think about are, you know, control and the financial aspects when you’re thinking of your beneficiaries as far as who’s going to get your assets and the people that are the beneficiaries. In many cases, you know kids or grandkids, depending upon who’s doing the trust and those. Individuals can be different, so you know if you have little ones and you’re like, wow, my sister would be amazing at raising my kid. But she’s not known for keeping a balanced chequebook. That kind of worries me. You know, the individual who takes care of the financial aspect of helping to care for the kids can be an entirely different person. It could be that you know your brother-in-law, who’s a financial planner.

OK, he’s going to, you know, handle the income, and make sure that my sister has enough money to take care of my kids. Because she’s a nurturing parent, I want her to replace me, but I don’t want to have to worry about them. You know, being In a box by the Highway, it’s like, So, you know, you can split over control and financial aspects of that. Whenever you’re thinking about a beneficiary, the same is true, and I talked to a lot of seniors. Which is funny now because that’s, you know, really close to my age. Well now. You know, when you think of your kids and who you want, or your friends or other family members, you want them to have your assets when you’re gone. Not everybody is responsible in life at the same age.

And so it is, you know, even if you’re thinking of little ones don’t have to have it set up so that they get to inherit. You know when they’re 21. If you have two kids that you know, one of them is just going to do that the instant that they get their hands on money. It’s going to be gone, and they’re not going to have anything for the future. You know you can tie inheritance and gift to different life events or different ages, whatever happens, to apply to one.

So if you know that someone wants to be a doctor, You can have it drip money in to help them go through college for many years before they actually get, you know, any lump sums, or if they’re, you know, just not as grown up as their sister or brother in the way that they handle their finances and things, you can have it wait, you know I have. We did one the other day where one child wasn’t going to get their inheritance until they turned 35 or were you married with a child, you need to have at least one. Because the grandmother felt sure that at that point they should be. Grown-up. 

Joel 

When they’re old enough to run for president, they can have some money.

Nicole 

Right. 

Joel 

So, a quick question on this is, when you’re talking about who can be the person that’s in charge of disbursing funds, somebody can have funds allocated to them through the trust, but you can set up somebody else that has to approve expenditures. Does that person have to be in the family? Or can you ask a financial organization or a legal team and say, Shelton Law Associates, I want you to ultimately approve any financial disbursements that come from this side of the family.

Lynn 

That’s a great question, Joe. It does not have to be a family member. There are organizations out there that do that, specifically, that do trustee services and handle that aspect for the family based upon, you know, written instructions before they pass. 

My law firm does not do that because we would be drafting trusts and things, and we just don’t want to step into the middle of a trust we didn’t draft, but we can certainly assist in directing those companies if you want a financial company to be that trustee. We can assist with, you know, what the actual Person’s wishes were beforehand, and in that regard, but you know, when you’re doing your trust setup, you should be asked who the first trustee would be until you pass. Right. And then you need to think of your successor trustees, and you need to think of multiples because you know that the person that you identified may not outlive you.

But they also can say no. I don’t want that responsibility, or I don’t think I would be good enough to do it, or If the beneficiary that you’re leaving everything to does not get along with that person, that could create a personality conflict. We’ve seen people refuse and quit being trustees for that reason, as well as because it’s just too emotional.

So, you want to kind of think deeply when you are thinking through who your successor trustees is. And always end with, you know, kind of a generic like that: they can pick a corporate trustee or a company that does trustee services to make sure that your wishes are followed for the dollar.

Joel 

So, we talked a little bit about how you know or who can decide what happens with the trust assets. And we talked a little bit about how people can put all of their assets in a trust. But what does it look like to pull assets out of the trust? 

So, say I’m looking at retiring. I put all my assets in a trust, so I qualify for Medicaid. I know that I can get some money out of the trust. Time without breaking the rules, you know. Does the money that comes out of a trust count as personal income, or what does it count as when you pull money out of the trust for whatever it is you want to spend it on?

Lynn 

So, it depends on what it’s spent on. If you’re just paying yourself a salary there, it may or may not be counted as income because you’re allowed to. Take administrative fees annually as well from a trust before they could potentially be counted as income. So, it depends on how much. And where you deposit it, if you are just selling things and purchasing additional items, that’s not income, because you still have full control over it, as if it’s in your Bank accounts so to speak, and you can make all of those changes with whatever you own. That you wish to have done. But it could be income, you know, depending upon what you’re paying yourself and how much you know you’re taking out. And how clever you are at describing what’s it for?

Joel 

And I’m sure that’s where Shelton Associates comes in. It’s helping you be clever. 

You know, I do want to get into some creativity. I think it’d be fun to brainstorm some stuff. It’s what I love to do. But before we get into that, you know I want to backtrack a bit. So, someone’s out there listening to this, and they’re saying, wow, this trust thing seems great. You know, I may have a rental home or something. I want to make a trust. What does someone have to do to make a trust?

Lynn 

So, to make it, it needs to be created legally with all of the answers that are required of it. What ifs? That goes through. You know what I say? If I’m not dead, what? If I’m just incapacitated. Who’s going to be the successor trustees and all of that? And it needs to have an asset.

So, you need to put at least one thing into the trust, and that can be something that just has a title. If it’s an item that has A title, like A car, a boat, or Whatever house, or it can be a bank account that you open up and you have, you know, at least the 100 or 50 whatever your bank requires a bank account to be opened with, it needs its own EIN, or employment identification number, because it is its entity. From there and then, to be able to do any of those things, you’ll need a certificate of trust. You can just kind of think of that as a summary of what your trust says. That can only be done once the full trust is legally completed.

So, it’s, you know, the big, long legal document. It’s kind of like you can think of it as an agreement of all of your wishes and instructions of all of your wishes, and then the certificate of trust. Summarizes that and is notarized, and that’s what people receive, not your full trust, which is how it stays private. So, it just has basic information, like what its legal name is and who is the trustee, and the successor trustee knows that, but not really any of your assets or whom they’re going to are in that certificate of trust. It’s a much shorter document.

Joel 

Well, the more things you say, the more paperwork is virtually piling up in my mind. And you get this thing together. It sounds like this isn’t a do-it-yourself kind of job. So, assuming somebody decides to go to a law firm like yours to set up a trust, what is it that they have to fill out a bunch of forms so that we can tailor it exactly the way that they want it, and you kind of take care of the paperwork? Do you take care of the paperwork for, say, transitioning a car or a house, like all of that is kind of handled as part of what you do?

Lynn 

Absolutely. Yeah. You bet. I’ll transfer forms, and things will come at the end to transfer things into the trust. You bet. 

Joel 

So for like a basic trust, say somebody maybe has a house in a car or something. Like that. How much does it generally cost to put one of these trusts together? I mean, you can say 500 to 10,000; I’m just saying, or 100,000; I don’t know.

Lynn 

You know, I mean, ours is a $5,000 flat fee for everybody, and it’s a 10-year package. So that means for 10 years you can make changes as often as you want as life happens, and that’s why we just have a flat fee for everybody across the country most of the time; it’s not a 10-year package. Most attorneys and law firms charge Anywhere from $7,500 to $15,000. And then, whenever there are changes or somebody passes, the successor trustee calls for questions.

Even if you know how to make sure that everything is followed properly, both get charged billable hourly rates, and those typically range anywhere from 375 an hour to, as we’ve seen, being charged as High as 775 an hour for changes or even just questions answered, which personally, I think is disgusting. But that’s why we have a flat fee.

Joel 

Well, yeah, it’s not super. It’s not super inexpensive. So, somebody doesn’t have a whole lot of assets. You know a will is probably the right way to go, but there are a lot of advantages to putting together this will or another. We are looking for someone who does have some assets. That wants to put together a trust. It sounds like there are a lot of advantages to it. It doesn’t… It’s, I mean, complicated, obviously, but it doesn’t sound insurmountable if they’re working with the law firm to help them handle all the paperwork and put it together. And once it’s put there, it’s kind of fire and forgets unless you want to make any changes or pull any money out of it or something. Is that kind of a fair summary?

Lynn 

Yeah, it is. It sounds very complicated, but it’s not. It’s the ability to create trust. I mean, it’s a lengthy questionnaire. That we utilize and most attorneys utilize to ask all of the what if questions, do you have any insurance policies? Do you own a home? Do you have kids? Where were you? Married before you knew.

So, a lot of it is a fill-in-the-blank or a check—you know, a yes or no aspect. But it’s not something that somebody does. Would sit down and just do it in the afternoon. You know, we always tell our clients to just, you know, go at it slowly; you know, sit down with a good cup of coffee, a glass of wine, or whatever. You know, it relaxes you.

And just think it through. You know each person in your life that you want to honor and that you love, and you think through what you have currently. And you know who you are. What would you like to get? And you know, if they weren’t there, then who would you like? To get it. And it is. Also, I think it’s a blessing. It’s kind of one of those weird things where you don’t want to do it, but then when you do start doing it, you realize how blessed you are. Your life depends on how many loved ones you have, so it can be a good experience when you take your time with it.

Joel 

You raised another question I had been meaning to get to a life insurance policy. So, somebody has a life insurance policy. It could be for, you know, $100,000 up to much, much more. That is something. That you can you would set up a trust for, you know, even if you don’t have a lot of other assets: You could set up the trust to be the recipient of a pretty substantial life insurance policy, and I’m sure that there are probably a lot of benefits to setting something like that up.

Lynn 

We always recommend that the life insurance company change the beneficiary to your trust so that you can make changes as needed to your trust. And you don’t have to worry about life events that you should have changed your insurance policies for. There are all kinds of horror stories of people passing away and, you know, ex-spouses getting that insurance money because somebody forgot to change who the beneficiary was when they got remarried. Horrible things of that nature. But if you have it, always go to your trust. Within the trust, you can make those changes easily, and somebody who was divorced would not be a part of that trust by law unless specifically stated.

Joel 

So, I guess playing around with the format of the trust means you have this other kind of entity. Corporations are people too, so you have this entity that has your assets, which could be the recipience of your life insurance policy. Let’s just throw out a theoretical example. Let’s say you were hiring. You’ve got. A couple of rental properties, so though you put those rental properties in a trust, and it sounds like the income from those rental properties goes into the trust, you don’t recognize them as income. You know, repairs to the properties would come out of the

For us If you wanted to use that rental income, could you get a loan and have a trust buy additional rental properties? Without you doing things yourself, how do you grow a trust and grow your assets inside of a trust? I mean, we all hear about wealthy people doing it all the time, but it doesn’t sound like you have to be all that wealthy to take advantage of some of it.

Lynn 

No, you don’t. With real estate in particular, we would recommend that the properties be held by an LLC first, but that the LLC be owned by the Trust, and that’s just to add a level of protection in case there is ever a lawsuit, or somebody got hurt on the property or anything of that nature because you don’t want a trust being sued. Not that they would get anything because it’s not yours.

So it is, but it becomes this big, expensive battle to get nowhere. So, it’s just easier to protect. It and then. You can take it; you know the LLC is the one that’s buying the property, and the trustee is signing on behalf of the LLC because the Trust owns it and you’re growing. You’re growing those properties, and then, as I said, as the trustee, you’re paying yourself an administrative fee to oversee the trust. But also, if you’re your property manager, handling those real estate properties yourself, renting them yourself, or whatever happens to be applicable, you can receive a salary through the LLC. So, there are ways to get income from them as well. Well, that, you know, will keep you in lower tax brackets. But it’s still owned by the trust as well.

Joel 

I now understand that you are not a tax attorney. So, money that comes into the trust from something Like, say, you It sounds like a trust can be a holding company. So instead of having an LLC holding company, you could have a trust be a holding company that has multiple business entities underneath it. That could all be generating revenue. Say their real estate, their business holdings, their investment holdings, or whatever. So, the money feeds back into the trust. Is the trust treated like a for-profit entity that pays corporate taxes, or is it like a non-profit entity where you don’t have to pay taxes as long as the money stays in the trust? Is that a fair question?

Lynn 

Closer to a nonprofit.

Joel 

Do we need a tax?

Lynn 

Yeah, it’s closer. I mean it. Has its own rules. But it’s closer to the nonprofit. Not Like a for-profit Because it’s not yours, it’s for your beneficiary. 

Joel 

You know someone if someone is used in a trusted essay, a holding company. It sounds like if they had multiple investments, they could reinvest through them and receive some pretty significant tax benefits by not recognizing that as income. That’s coming through, and it sounds like something that almost anybody might want to do, regardless of age. Just for that reason alone. 

Nicole 

A lot of people do.

Joel 

Many people are aware of when You hear wealthy people talk about their assets. They’re always trustworthy. So, there’s probably a game where that gets played, I think.

Lynn 

That’s why you know exactly how that happens. When you hear of wealthy people who have or see their tax returns, you know they’re very low dollar amounts. You’re like, you know, pay.

Joel 

Like he’s a billionaire, but he doesn’t pay any taxes. Well, all his assets are in a trust, you know… and he doesn’t technically.

Lynn 

Not really. He is building wealth for future generations. You just happen. to use it while you’re here.

Joel 

Is it getting a little darker in the conversation when it comes to things like healthcare directives, which can get, you know, not quite as fun to talk about? You know, can you just talk for a second about what healthcare directives are and then maybe talk about the difference between having them laid out in a trust versus a will?

Lynn 

Yeah, absolutely. 

Joel 

Or if you use them on a trusted site, I’m not sure.

Lynn 

Oh, absolutely. Sure. Yeah, but let me backtrack just one second if I can.

Joel 

Yeah, go ahead.

Lynn 

So, we were talking about costs—you know, the cost difference between a will and a trust—and a trust is more expensive. But the thing that I didn’t get to point out is that a lot—well, in fact, the majority of states now have statutory fees for probate for attorneys, and what that means is that when you have a will that needs to go through probate to be acknowledged as your last will, or if you die in a test state without a will, they’ve put in place statutory fees for attorneys.

Because most people—the majority of people—don’t have an attorney already picked out to handle the probate process. And because they don’t realize that they need to, most people think that if you have one, you don’t have to go to probate court because probate court is Just for people like that. Don’t have a will. And that’s not true.

And so, because of the statutory, as an example, on a $400,000 estate, so with everything totaling up to 400,000 or more, the low end of statutory fees that an attorney would be paid from your estate is $11,000, and that’s just to the attorney that’s handling it, not any of the court costs. Which can come up to about an additional 50%. Of that so. Even though you think Wills are cheap. They’re kind of more expensive.

Joel 

You know, it’s just paying for it later. Instead of upfront.

Lynn 

And you’re not paying for it. But your loved ones are. Whoever is going to be the executor of the will?

Joel 

Well, who likes those people anyway?

Lynn 

I know, right?

Joel 

I’m glad you added that. That’s an important consideration when you’re looking at the total cost of one versus the other.

Lynn 

But yeah, I just wanted to make sure that that was known as well. And then let me get back to your Advanced Healthcare Directive So basically, a healthcare directive is also your wish. So, it goes along with it, and you should have one whether you make a will or not. A trust, or even if you don’t have either one of them, at least have a healthcare directive done. It is a separate legal document that outlines your wishes around Healthcare and healthcare items

So, it’s going to talk about your choice of, you know, whether you want your life to be prolonged and put on, or whether you want air support to be put on and receive food and nourishment. Whether or not you know you want to have organ transplants done, you know if you want them and if they’re needed.

And also, who specifically is going to make those decisions for you if it’s something new that isn’t in the document yet? So, for example, back in the early 2000s, we did not have a court case that had to decide whether or not somebody should receive food intravenously. It was thought to be life-prolonging, just as if, you know, you were on a respirator, but it came down to being an actual thing that they had to decide on. And they had to have a court decide whether or not to remove food and allow somebody to still be receiving oxygen to starve to death.

If they remove the food, you need to ensure that all of those aspects of your wishes are met. We are placed in that document, and you know it includes You know whether your heart stops, whether you would like them to try to start it again, and whether or not any experimental medications are being tested. Whether you want those, you know if there’s a likelihood that it would help you, whether You want those too. You know that it’s not like a check box where most people are like, I agree with all of that, although some do. Oftentimes, some people say yes to some things and no to others. And an Advanced healthcare directive is probably the kindest thing that you can do for your loved ones. Because none of those decisions are ones that anybody wants to make about somebody that they love.

And so, it really should be done, even if you don’t have anything else. That piece of it is really important, and it’s just an act of kindness to those who care about you. 

And secondly, you know, the other document would be a financial power of attorney, and that is very, very important as well because if you do not have one of those and if the person that you want to be in charge of your finances is not already on the bank account, they will not be able to get access to your funds to be able to continue taking care of things, and that doesn’t even matter if you’ve passed away; you could just be, you know, incapacitated. You know, we saw this, unfortunately, a lot with COVID, where people Were in the hospital and couldn’t do all of the tasks. They needed to be able to do it from the hospital, and nobody could go in to see them to get anything signed either.

And you know, if you didn’t have a power of attorney or if you weren’t already somebody that was listed on a bank account, the funds could have been there to make the house payment, to make the car payments, to pay your kids college funds, whatever the case may be. But if they can’t get to it, then you know they’re having to cover it out of their expenses If they can Until they can get Access to those documents through the court,

Joel 

So how would someone find those documents? Financial power of attorney and the Advanced Healthcare Directive Then you go to a lawyer for that. Or can they find those documents online? What would someone do to try to get those set up?

Lynn 

If they are doing a will or a trust with an attorney, they will make those for you. There are forms again, you know, standard forms that you can get at places like Staples or whatever if they’re basic. You know, then you can kind of fill in the blank. And you know, there are. There are forms online that you can find templates for, but again, they’re going to Be basic. 

And so, they may or may not answer the question about experimental drugs or, you know, something else in there. It may just be about resuscitation, and maybe food. They’re kind of the most basic templates that I’ve seen.

Joel 

Are there any other considerations people should have besides, you know, we’ve talked about the different ways you can try to set up a well? We’ve talked about setting up a trust, and we’ve just barely scratched the surface I think, about playing with trust and how it can be used, but then we talked about The power of attorney and, you know, setting up a healthcare directive—is there anything else people should consider when you know, and honestly, especially with COVID kind of highlighted, this is something that any adult should probably be looking at because anything could happen to any of us at any time? So, are there any other things that we should be thinking about when we’re looking at state planning?

Lynn 

Honestly, it’s everything that they love. So, what happens to pets? What happens if they’re in the country… livestock, Crops, businesses, children with special needs, young children, grandchildren, and really, the one that everybody always forgets is what happens if I don’t die. What happens then? You know, how should the assets be utilized if I can’t make the decisions any longer? And that needs to be a consideration as well so that people can be taken care of and have the assistance that they need at whatever level they need. And be able to be taken care of and still have you lived life to the fullest that you can?

Joel 

But hopefully, I’m not putting you on the spot here, and this is just changing directions completely. But what’s the funniest thing you’ve seen somebody do with it? I’m just super curious. I like how my brain is kind of turning, and I’m thinking of a dozen different fun things to do with it. I’m just curious. Is there anything you’ve seen that you could share with us? 

Lynn 

I would say I love doing grandparents’ trusts. I mean just love them. You already know you can prompt them. The generations below you should be better people, have better careers and lives, and have a reason.

Joel 

You don’t give me grandchildren. You don’t get any money.

Lynn 

I have seen Have seen it? Yes, I have seen grandkid provisions for sure. You know, honestly, I would say there was a grandparent who had six children. All six children. It was a gentleman that did this. That had varying degrees of responsibility, he felt, and so he trickled out their estate through different life events. And so, you know, if they got married, then they got a portion. If they had kids, they got a portion. If they were involved with a nonprofit for at least 200 hours a year. And they got a different portion. They did civic events, just helping out the community. Then, you know, once they achieved that number of hours, they got in another portion. And, you know, that was a fun way to see the encouragement from the grave, if you will. They wanted to see their Kids, and he felt very sure that they would all achieve 100% of what they would receive, but they would receive it over, you know, their lifetime because they were pretty decent goals involved there. 

And then we’ve seen a lot of fun pet special trusts that are carved out of the trust for pets. And you know, taking care of them and ensuring that they get groomed every month and, you know, special foods and not just treated like, oh, I got the dog, you know. That I didn’t want, but we’re being taken care of. Loved as well. So, I mean, that’s the nice thing about trust. It truly is fully customizable.

Joel 

Yeah, my wheels My wheels keep turning. We have to cut this off at 11 at some point. But I do have another thought. So, what about setting up as we talked about? Life insurance is how they can pay out to a trust. How could income-producing assets be put into a trust? Investments could be put into a trust. Do you see a lot of people? Create trusts and say, and it’s almost like they have like a like a. Like the way colleges have these funds set up where they just say you’re not touching the seed funds, but the revenue produced by, say, life insurance goes in, and you say we have a $500,000 life insurance policy. It goes into the trust managed by XYZ Fiduciary, and the profits, like 50% of the profits, go dispersed through whatever channels 50% get reinvested. Do you see that kind of stuff? A lot for trying to create generational wealth through a trust?

Lynn 

Absolutely, yeah. It’s called a spendthrift trust. And so, it’s, you know, you’re dripping the interest and the income that’s being created without actually, you know, attaching anything to what’s called the corpus. You know the main portion, the principle, if you will, of the trust itself so that it can maintain and continue to produce more income next month. And so, it’s like receiving a monthly salary from the trust for your beneficiaries.

Joel 

And can people set it up so that you know other family members can contribute to this? If someone wanted to set up a large family trust where everyone in the family could contribute to this money pile, it would grow for the benefit of the family.

Lynn 

And then you can carve out pieces; you know, your pieces out of it for each family member that’s putting in can be sub-trusts, if you will, as well. So yeah, you can create quite a trust tree.

Joel 

All right. Well, I appreciate you coming on and talking with us. 

Nicole, do we have any questions in the room that people want to ask? 

Audience member 

I thought you could get a free will.

Nicole 

Of free will. She’s not the living trust, but she’s saying she thought you could get a free will done like someone would do one for free.

Lynn 

There may be a nonprofit that offers something I don’t.

Nicole 

Like a nonprofit organization, if you go through.

Audience Member

Yeah, I know. Also, I don’t have anything of value, so my kids will get everything.

Nicole 

Well, I think that’s kind of what she’s saying, even if it’s not anything that you don’t deem valuable. If it’s anything that you care about. Putting it in writing in a trust versus just letting the government say if there’s any kind of disuse Am I explaining that right kind of saying that right? That’s kind of true, even if it’s not anything that you think maybe I would deem valuable, or he would deem valuable. If it’s valuable to you and you know something you want,

Audience member

I know that it’s going to go to all my kids; my kids are not selfish.

Nicole 

OK, so your kids will divide it up, but there won’t be any fighting.

Audience member

OK, my kids. Yeah, I don’t think so.

Lynn 

They shouldn’t, yeah, because they bought me off.

Audience member

They better. They bought the stuff that I got at home.

Nicole 

And hopefully that works out too, yeah.

Joel 

So hey, Lynn, how can someone reach you if they’re interested in this? I mean, they can go to somebody local, but they could also go to Shelton Law Associates. What’s a good way for them to reach out to you if they’re interested in setting up a will, trust, or something along those lines?

Lynn 

So, they can call us to set up an appointment, or they could go to our website, which is SLA.law. There is no .com is just an SLA for Shelton Law and Associates Dot Law. You can maybe put in the chat our phone number or something that they can have, which is 512-535-0090.

Joel 

All right. We’ll make sure that goes in the show notes. Well, thank you for coming. Any last thoughts?

Nicole 

Thank you, and I appreciate it. Was very, very informative.

Joel 

All right, thank you for your time today.

Nicole 

Thanks. Have a good day.