← Money for Life with Eric Roberge, CFP
Money for Life with Eric Roberge, CFP
When Estate Planning Goes Wrong - and How You Can Get It Right with Estate Planning Attorney Michael Broderick
00:47:20
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- [00:03]
A
Hey, and welcome back to Money for Life. My name is Kayleigh Roberge. I am excited to soon introduce you to our very first guest on the podcast. Today we're going to be covering all things estate planning. So we have brought in an expert, an attorney that we really, really appreciate and love, his take on estate planning, especially for young families with young kids. If you're in your 30s or your 40s and you have young children at home, this is going to be a must listen to episode of the podcast. We are bringing in Michael Broderick, who's a partner at Ferris and Broderick here in Boston. Michael handles estate planning and probate matters for individuals and families across Massachusetts, from simple wills to planning for more complex concerns, including estate tax minimization and planning for beneficiaries with special needs. His clients span and life experience from families putting together a first plan to those making arrangements for imminent transfers to the next generation. And his planning practice is informed by his active representation of trusts and estates in various courts throughout Massachusetts, including his representation of personal representatives, trustees, heirs, beneficiaries, and estate creditors in matters from simple estate administrations to will or trust contests, accounting issues, fiduciary litigation, and creditor disputes. Mike is the expert here and he and Eric are going to be covering questions like the biggest misconception people have about estate planning. And why is this kind of protection planning so important? What goes wrong or what can happen when you don't have this in place? And then for someone in their 40s and 30s, what actually makes up an estate plan? What are the components there? What do you need to have in place to be properly protected? Not just your stuff and your money, but your family, too. We'll also look at some unique considerations that Mike brings up with his clients and go through some common mistakes that he sees people make that you can avoid. So, without further ado, I'm going to turn over to Mike and Eric for this great conversation about estate planning. What it is, why it's so important, and why you need to get yours done if you haven't yet.
- [02:02]
B
Hey, Mike, welcome to the show.
- [02:04]
C
Hey, Eric, thanks for having me.
- [02:05]
B
Yeah, this is going to be a great conversation. I know when people maybe often think about estate planning, they don't necessarily think exciting topics, but I think it's a really exciting topic in that there's so many misconceptions, there's so much gray area and areas that people don't realize, really understand about what an estate plan actually is and how it pertains to them. If they're not 80 years old on their deathbed.
- [02:28]
C
I completely agree. Yeah. Even the name itself, I almost wish they weren't called estate plans, because that makes it seem something out of reach to most people. And it's certainly not. Right. It's actually just a way to memorialize or formalize all of the decisions that we get to make in this weird way that we have to do it so the legal system, the courts will respect them. But, you know, I think estates kind of conjure up images of large houses in the countryside and whatnot. But I agree with you. I think a lot of people don't think about it that often aren't familiar with it, and it seems like it's beyond a lot of people, but it's not.
- [03:09]
B
When someone thinks about the word estate, I think that's the one, right. It's like, well, I don't have a massive estate, so I don't have to worry about this stuff. Like, what does estate planning actually mean for the everyday person?
- [03:19]
C
For an everyday person has an estate, and if we think about it in a traditional sense of assets, we don't need to have assets to have an estate. It's a group of decisions that you get to make for yourself and for your family members. For a lot of people, it does include assets. And of course that's going to be a primary concern about, well, how do we get those to where we want them to go? If something happens to me, or even if I. If I'm not able to make decisions for myself, how do I make sure that people I care about are taken care of and my assets are well managed? The estate is really your bundle of decisions you get to make.
- [03:59]
B
Got it. So the decisions that you get to make. So what kind of decisions are people making? Outside of. Little Johnny gets my set of pennies these days, pennies are going to be the next thing. Right?
- [04:13]
C
Good question. Because I think that's where most people start when we start to speak about their estate plan, is who's going to get what but quickly expand to. It's about if you are to lose capacity to make your own medical decisions, your own financial decisions, and then significantly, decisions about the children. So for minor children, who's going to have physical custody of those children? And for whoever's managing assets on behalf of those kids, what are the decisions they're going to make? So it's. It's about care in addition to who gets what.
- [04:53]
B
And I think the guardianship conversation is one of the biggest sticking points for the clients that we work with if there isn't a very clear person that they would identify as a potential guardian if they were no longer here. And it actually stops them in their tracks from moving forward with the estate plan. Like, they may talk to you and say, all right, we're gonna get estate plan going. And you give them a bunch of questions. And one of the questions is, who's gonna be the guardian of your kids if you're no longer here and it's deer in headlights.
- [05:22]
C
Yeah. It's often something that requires the most thought in terms of the assets. For a lot of families, it's fairly straightforward of leaving most, if not everything to the spouse and then to the kids in equal shares. Some families have variations on that, but I agree with you. And so what? I think one of the most important moments for me with a client is walking through that decision with the clients together, because there's a lot of ancillary questions. Well, how does it work? What do we mean to nominate somebody? You know, if we were to be gone tomorrow, how did they confirm their ability to take the kids? Do they need to be local? Should they be the same age as us? Can it be my mother or father who's 95 years old? And there's no right or wrong answers for any of this. It is really all family dependent. And I will never substitute my judgment for that of my client, but I'll give them some parameters to start to think about this. Right. If you have a sister who is very close with the kids and very good with the kids that lives in Massachusetts, maybe she's the right decision, but you don't trust her with money. So maybe we create a situation where your other sister, who lives in California but is an accountant, can be the trustee to manage the funds. So kind of a division of authority among family members, depending on who might be appropriate. I agree. That is probably the one we talk about the most in terms of helping my clients make the decision as to who the right guardian is. And then we should also say, I encourage all my clients to think of a series of guardians, a series of everybody who they're going to nominate, just in case the person they nominate is no longer around or maybe not willing to serve for some reason, which that can happen. Right. It's a big task to take over guardianship of a minor child. So we want to think of backups. And then we also talk about, all right, if we're going to make this decision, I'll often encourage my clients to speak with those family members first to get their feedback you don't want to appoint somebody who says, no, I don't want to do this, I'm just not equipped. So we'll talk a little bit about the conversation that they can have with those people. You know, we're creating an estate plan. This has come up, this is what it would entail. Would you feel comfortable if we nominated you and you know, you hope the answer is yes and most of the time it is. So I, I agree that that is a very involved question, more so than, I think, a lot of the financial questions. Sure.
- [07:52]
B
That's an interesting point you made too about this, where taking care of the kids is the subject. Right. So taking care of the kids is subject guardian is the, the choice for the person who actively takes care of the well being of the child. Like they live in their house, for example. Then there's the other taking care of the kids, which comes in the form of finances. So if you have the money that gets transferred to the children and they're underage and they can't manage their own finances, just like they can't manage their own household, which is why they have the guardian. There's almost like a two decision sets. It's like who can manage money for my child, who can manage the well being of the physical child. And that's where the split comes in. Right. So some people might have this, the one person that does both. But what if they don't feel comfortable with the guardian managing the money? I know you had mentioned an example, but like, can you go in a little bit more detail there?
- [08:44]
C
Yeah. You know, a very common arrangement that we recommend for every couple that's got minor children is a trust, at least a simple living trust. We could talk more about trust in a little bit, but trusts come in all shapes and sizes to accomplish all sorts of goals. But one of the most fundamental goals is just as you say, if a minor inherits property, we actually don't want that. We don't want somebody who's 15, 18, maybe even 25 to inherit significant property. So a trust is an arrangement where somebody else that we name the trustee manage those funds on behalf of the beneficiary. And unlike a guardianship, which in most cases for most children who have no intellectual incapacities or anything, when they reach 18, they are now adults and they don't need a guardian anymore, it essentially evaporates, right now they're legally adults. The trust, on the other hand, will last as long as you think it should last. So the trust can say the trustee manages funds for my child's health care, education, comfort, support in life until the child turns and let's just pick 35. So you may well have a situation where you no longer even have a guardian, but your trustee is going to remain on the scene until the child turns 35. So you kind of want to think about that relationship too, because the trustee is going to come in and say, I'm going to pay for college. I'll help with the down payment on your first home. I'll help you start a business, whatever you need. Right. I'm not going to buy you the new Porsche because you keep asking for it. Because my job as a trustee is to act in your best interest when you're 35 and you get the rest outright. Maybe you'll feel differently at that time. When it comes to the decision about who the trustee is, I'll often encourage my clients to pick somebody who's good with record keeping. Right. Somebody who maybe has a white collar job and is an emailer or is familiar with Excel or QuickBooks or online banking. Not a requirement by any means. The job essentially boils down to good record keeping and at least understanding I should hire an accountant, I should work with a financial advisor and I should probably hire a lawyer too in order to make sure I get this right. Because the trust documents themselves can be really long and kind of dense. So just to kind of build out the team, you know, there are some people who that's not their strong suit, that's perfectly fine. But the people who that is their strong suit to kind of operate in that world, they tend to make better trustees. And so that's where the split comes in. Very often my clients will nominate a guardian or two co guardians. Right. Spouses can often serve as co guardians together who are also adept at this world of record keeping and accounts. And so they can serve as the trustees and guardians and there's an efficiency there because they need money for the kids. They can take it from the trust account and they can account for it. But in some families there might be a good reason to have the separation of power. So back to my example again of one sibling who's great with the kids but not great with money. One sibling who is far from the kids, maybe not so much relationship, but is good with paperwork. That might be a good example of where you'd want to separate the two. That creates like a check and balance system as well.
- [12:09]
B
Sure. And I bet it also could create some challenging conversations as well. Right. Because if you have this person that is in Tune with the child and what they, at least they feel they need. And then you have the trustee, which is object, maybe objectively good with the financial decisions, or at least has the team behind them that can help make those, but isn't really connected to the life of the child. And that's a big deal. Right? It's not always about spreadsheet math. It's about really taking care of the child. So how, how is the trustee supposed to make quality decisions for the child's well being if they don't actually know what the child needs? And maybe, maybe they don't know the guardian so well. So it's not like they can just assume that the guardian's telling them the truth or what's best, like, how does that conversation go?
- [12:57]
C
That's probably the most challenging aspect and it's hard to anticipate that when you're doing the estate planning part. So the best thing we can do is I have to rely on my clients and their belief in their family members and their decisions. You're absolutely right, because there is no exact one way to do this. The conversation that we've been having is something I will have with each of them. These examples, for instance. And so this is part of what we try to arm them with, to go back and have the conversations and to speak with people they're thinking about nominating. Because you would hope that if they're going to separate the powers, then it would be among members of the family who. The chances of that happening are unlikely. People do get into disputes, even with good estate plans sometimes that what you try to do is make decisions to minimize the chances of that. You know, it's funny, we call the person who manages the money trustee and then we create all these documents. One of the reasons this is challenging is because it is hard to have 100% trust when you're making these big decisions. There are a lot of unknowns. Right. The whole, the whole concept of an estate plan is really kind of trying to anticipate and plan for unknowns. So I think the best we can do is just educate the clients as they're making these decisions so they can try to pick the right people.
- [14:21]
B
Got it. Because I'm just thinking of my own situation where we have separate guardian named and a trustee for the trust. And I mean, no one ever thinks they're going to need this. Right. And then when you do, you do. So, like, is it best practice that they know each other? They, they have a conversation like, hey, this is what the setup is. And at some point, if things go south, you guys could be working together here. So, like, here's so and so. Yeah.
- [14:47]
C
I think the client should have conversation with everybody in the room or everybody on Zoom and say, you're nominated, here's why I picked you, and here are my expectations. And that's a conversation nobody ever forgets. Put the documents aside. The documents are for the lawyers and the accountants. That is one of those moments in life where the people you speak to, if they ever have to remember that conversation, they're going to. It certainly happens, but it would be unusual for especially most of my clients that the trustee and the guardian don't know each other because they're almost always immediate family members.
- [15:22]
B
Oh, interesting. Yeah, that's a great idea about the Zoom call. I'm just thinking of the intense proactivity necessary for something like that. As a planner, I love it. I am talking always about doing something before you need to do it so that when something happens, you're prepared. And this is one of those things. And getting off your butt and actually doing it and creating the date according the conversation is probably so challenging for people. I'm sure that doing it when everybody's objective and there's nothing wrong and nothing is actually happening is a completely different feeling than someone that just got cancer and has six months to live. And now they're going to have to have that conversation with everybody on the call.
- [16:06]
C
Yeah, it's not a fun thing to do. And I understand why people often put off their estate plan. It's not a fun thing to pay for. You don't get a shiny new toy at the end. But to me, what the value that lawyers can bring to the estate plan isn't the documents. Actually, the documents are what they are. And hopefully your lawyer prepares documents competently. But it's not a place to get creative for most people. The value is kind of what we're talking about here and leading the clients to be able to have these conversations. That's how you minimize the possibility. If we're talking about disputes, about the chances of disputes. Right. Where do disputes come from? Later, a disagreement over what the person actually wanted. The documents will get you pretty far in saying, this is what I want. But on the edges of the relationship between the trustee and the guardian in practice. Right. Documents can't spell out how that actually looks on a day to day basis. That starts with the clients having that chat in their own mind first about, well, actually, what do we really want? Learning from me how it actually works and then talking to the family members, hopefully. I'm not saying everybody does this and has these conversations. Sometimes people will make their decision, say, no, everyone's on the same page, we're good. My family's really, really close. But yeah, I think you minimize disputes. When everybody said, okay, I heard it from them directly. And if called to task, I'm clear on what I need to do.
- [17:37]
B
And when the estate planner is that facilitator of. Of those conversations to help people get to the right answers. And that's a big deal, right? Because I do. I do think a lot of people would think estate plans are just documents. They're transactions. Let's get it done, put it on the shelf, and hopefully we never look at it again. But that's not the case. You got to lead people through these conversations. So there's. There's a lot out there. There's. There's, like, online companies that allow people to process their entire state plan online. Maybe you get like an hour with an attorney that you don't know, but you. You get some support. But really it's you doing on your own or it's somebody. A lot of times for our clients, they have a legal benefit at work where they pay like 10 bucks a month to access a legal benefit, and inside of that, they get a free estate plan. So I'm always hesitant to advise people to go that route, not because I don't want them to save money, but because I want them to get the right things in place. So when you look at, like, online systems or the benefit at work, how should people think about those things?
- [18:33]
C
Yeah, it's something that comes up a fair amount. To give you an example, in the last two days, I've had conversations with two new couples. Each of them, when I asked, do you have an existing estate plan they each started with, Well, I started one online, but then I just decided to never finish it. The documents that you'll find online legal zoom, willandtrust.com I'm sure they're well drafted. They hired good attorneys to come up with their forms because that would be step one in creating those businesses. And again, the forms that you'll find from attorneys like me and throughout all other estate planning. We're not reinventing the wheel for your will and your healthcare proxy and your trust. You wouldn't want us to anyway. You want documents that the law is going to understand. If you had to go to court or other lawyers have to read it. You want it to be the trust that I look at someone else's trust Say, oh, I know exactly what's going on here. I'm going to read through it. But I probably didn't even have to. So the documents are one piece that is not the estate plan. The estate plan is, number one, like we were talking about before walking through the decisions. But two, it's taking a look at what's happening in your life, particularly your assets, and making sure that they are coordinated with the documents. Because the documents, in the absence of being married to your actual life, may not accomplish a single thing. Right. To give you one really basic example, if I have a term life insurance policy that's payable to my mother because I took it out when I was 24 years old and I never updated the beneficiary designation, and then I draft a simple will that leaves everything to my spouse, well, guess who's getting the life insurance policy if I never update? It's my mother. So you take that example and you can apply it across now all kinds of assets that people have, they all act a little differently. It's not on my clients to figure that out. My job is to learn your goals, what you would like to happen, and then for me to navigate the marriage between your goals and how the law would treat each of your assets and decisions. It's usually not complicated. You and I have done this for many, many people together. But, you know, the legal zoom is the will and trust of this world. And I hate to say it, but some of these legal services, benefits, which will pay lawyers, you know, $300 for an estate plan, which means that you're going to get five minutes of FaceTime and then a software that spits out, it's going to be the same thing as legal zoom. They're not marrying that with your actual life. And to me, that's the planning part. Right. Again, the documents are what they are. It's. The planning is now saying, okay, what do we have to do with your actual life, your actual house, the actual people you're going to nominate and how you actually want your kids to be treated.
- [21:22]
B
Yeah, that's. People do not. They don't get it. Right. They're just seeing price points and saying, this is so much cheaper. Let's just do that. Glad you you've given me some details there, because that's kind of where I'm. I've been positioning myself without fully committing to it, because I don't. Again, I don't want someone to just spend more money because they should spend more money. I just understand the intricacies of the Conversation about planning for your estate and your family, the protection of both. And it just doesn't seem right to do it quickly or at a very high level without the human interaction.
- [21:58]
C
I agree with you. You know, you think of so many different professionals that you hire. It's not because necessarily you can't go figure it out yourself. Most of my clients are very smart people. I'm sure they could actually scrabble together a reasonable set of documents from online. It's the advising piece. So to me, it's important. And I know that's at the heart of what you do is advising and educating people. But when my clients are done with their estate plan, in addition to their little binder with all of their documents, they have a Law School 101 under their belt, a little trust in estates course. And they don't need to remember any of that. But it's really helpful because if they are buying a new house in two or three years or opening up a new brokerage account, it triggers something to say. Mike talked a lot about coordinating the assets with the documents. I feel like there's something we need to do here. Let me just check in with him. And then we just title it correctly to make sure that it's going to the trust for the kids, where we don't have to go through probate and then so forth. Right. There can be other goals that we need to keep.
- [23:08]
B
So we've talked a lot about the different pieces of estate plan. And so if we're thinking about the client that is, I'm just going to give our general client, like 40 to 45 years old. They're married, they. But they both work. They have two young kids that are minors. You know, they make good money. They're making 500 to a million dollars in income. They. They have a couple million dollars in assets, nothing super complex outside of maybe equity compensation at work. And so if so, and we say, like, all right, you need an estate plan, what are they actually expecting to receive inside of that estate plan?
- [23:43]
C
The set of documents is just going to be last wills and testaments. Everybody needs those, even if nothing is going through probate. That's one of our goals, is to avoid probate, which we can talk more about in a little bit. Appointments of guardians for the kids, those live in the wills and in a separate standalone appointment of guardians, healthcare proxies, event that they lose their capacity to make their own medical decisions, powers of attorney, same concept or financial decisions, and at least a living trust, so called a revocable trust. We Often call it the XYZ Family Trust. And that one will avoid probate for assets that would otherwise go through probate and protect assets for minor children or children under the age of 35, whatever age they pick. That's the base. Right? And then the processes, these conversations like I've been having with you now, and looking through all their assets, suggesting updates to how title is held or how things are payable to accomplish those goals. With a lot of things. The sky's the limit with an estate plan. I personally like to keep it simple for that age group. Other lawyers may disagree. I think simple is good if it's their first estate plan. Primary goal is protection of the kids. The client you just described. There is opportunities to do more terms of minimizing or avoiding the Massachusetts estate tax, possibly even the federal estate tax. Those can save a lot of money in estate taxes. There's also drawbacks. So I will have that discussion with my clients that it's an option for them. If they have taxable estates, I'll let them make the business decision about whether they want to do it in light of the benefits and the drawbacks. But I find that most of them won't. That's usually something that comes later in life. Is planning for the estate tax.
- [25:33]
B
That actually is one of the topics that has come up with. I think I've asked you about this recently too, because I've seen it with clients working with various attorneys where they get a trust, but some of them have joint trust with both of them as trustees while they're living. And then some of them have individual trusts with both of them as trustees to facilitate the avoidance of what I would think is Massachusetts or another state that has a tax, inheritance tax. How does someone think about whether they should have a joint or individual tax when they have a married spouse situation?
- [26:04]
C
It's a decision that comes down to, I think, their set of priorities. Some people look at the estate tax, a possible estate tax, which in Massachusetts is a graduated rate on the amount over $2 million. It's not huge, but it can get significant. Let's say it goes up to 12% on that amount for larger estates. So we. We can kind of give an idea of, okay, what it might look like, and then what it might look like if we do this estate plan that tries to minimize or avoid it, again with at least the two trusts, and I try to give them the tools to make the decision, because it is a business decision.
- [26:42]
B
Right.
- [26:42]
C
It's going to cost a little bit more to do the estate Tax saving plan. In the grand scheme of things, it's almost nothing, really, the extra cost. But for me, they need to be aware of the limitations on that plan. Meaning when one spouse dies, the decedent spouse estate is going to go essentially into their own trust and the surviving spouse has access to those funds, but there are restrictions on the access. That's where the savings comes in. The idea is that in that first spouse's trust, the first spouse to go, you're keeping some amount of those funds out of the estate of the surviving spouse. So therefore it's not getting taxed upon the second death. That might be fine for some people. Say we don't care. There's a lot of factors that go into it. Surviving spouse has enough to live on their own. We are good paperwork people. We are morally opposed to paying a cent more than we have to pay in taxes. Those people are. That's fine. But for the clients we're talking about, they tend to have young kids. It rubs a lot of people the wrong way. If something were to happen to one spouse at this stage in life, the surviving spouse has a lot of survivorship years and the kids are young and there's a lot to do. The idea of any restrictions on the surviving spouse's ability to get everything right away doesn't sit right with them. And also the idea being we don't tax transfers between spouses at all. So all this estate tax stuff doesn't apply when we're going from one spouse to another. Which means that, you know, surviving spouse is 30, 40 years of survivorship. Why are we trying to save some money now? Who knows what their state's gonna be like in 30 years. They could spend it all down. It can go up tremendously by themselves. So a lot of couples with young kids, to me, don't seem to go for this because if something happens to one, we're just concerned about getting all the money immediately over to the survivor so they could focus on the kids.
- [28:38]
B
That totally makes sense to me because obviously that's front center. That's the thing that happens first. You want to make sure that if we have family money, why is any of it restricted if one of us is gone? Because I'm going to need it probably for the kids, because we're not just like super wealthy where money doesn't matter yet. There's going to be a savings on the inheritance tax, which would affect the kids getting our money down the road. That is the reason for the restriction, like, so I totally get that. That's A real challenging thing. And I agree with you. I mean, I always say like, even when it comes to like college funding and things, I would rather have flexibility with my money over the utmost tax savings to optimize taxes. If that comes with significant restrictions. And that seems like it shows up right here.
- [29:17]
C
I agree. And again, this is my personal opinion, not legal opinion, and others might disagree with me, but when I see a couple in their 40s and they've got $3 million, $4 million in term life insurance, to me, if we were to create this two trust system to try to save some of that for this second death, right, to have tax savings on the second death, that could be 30, 40 years in the future. It's term life insurance. It's cheap dollars. And one of the reason you get term life insurance is to pay things like the estate tax. So it will put your estate, maybe it puts your estate way over the threshold, but like you're paying almost nothing to get that money. And if part of the expenses now have to pay some estate tax with it, fine. That's one of the reasons you got it. If we just do a simple estate plan and then the surviving spouse can use the balance of those funds, that's the value in term life insurance. We don't want to overcomplicate it. Again, like I said before, I like simple. If you had another attorney on here, he, she, or they might completely persuade you the other way. Why everybody needs to focus on minimizing estate taxes as a moral obligation from the beginning, they wouldn't be wrong. It's just, this is how I feel. I like simple plans.
- [30:30]
B
Sure. No, that makes sense. Everybody has their own angle at this. And as long as we're following the law, I think it's all good. Right. But the communication to the client to understand the pros and cons of each path is the key here. So with these clients, same clients, right. They're mid career and they have parents that are aging, they have kids that are getting older. There's two questions. One of them is at what age do you tell the kids about the estate plan? I know everybody has their own personal reasons to or not to expose their kids to their finances, which I think more being more open rather than less is important. But like, is there a point where, all right, the kids are X years old and they need to know something about what would happen if we die?
- [31:14]
C
Yeah, really, really difficult question. It comes up, I don't have an answer that's such a case by case basis. Like how my relationship with my kids and are they old enough? I wholeheartedly agree with the principle that you just articulated, which is this stuff should be more out in the open. Period. Again, back to my point earlier about disputes. Disputes occur when expectations aren't met. But if you set the expectations, that really goes a long way. And disputes are very rare. I shouldn't talk about disputes as much. They loom large in my life because I get calls when people are disputing. But the vast majority of people, there aren't disputes in their estate. But yet people should talk more. At the very least, I don't think they need to open up their balance sheet to their kids, but I think they need to say, something happens to us, one of you is in control, and here's why. You're five years old or what have you, the nature of your degree. And our estate plan is located in the filing cabinet upstairs. And here's our financial advisor's contact number. And here's a lawyer that we've worked with. Here's the accountant. Give them the tools so they're not scrambling. And talk generally about what you've got. But I don't think they need to be. What do I know? Every relationship different, like I said. But I don't think they need to be pegged in on kind of a daily basis. But just know the first steps to take if anything were to happen.
- [32:41]
B
Yeah, scratch the surface. Open the conversation up if. Maybe if they have questions and you can answer those questions directly. But don't. Don't ignore it completely like it's not even there.
- [32:49]
C
No, we get a lot of calls, a lot of calls from, I would say, people who are in their 50s and mom or dad. Things aren't going well. They just reached that point in life and there's panic because they have no idea what comes next. That's when siblings start to. Sometimes in some families, lose a little bit of trust among one another or feel like they're being left out because there's never been a conversation. So for the clients we're talking about, if they're conscious of that as they grow and involve their children, once they decide their children are at the right time to start talking about, that just makes everything easier for everyone.
- [33:29]
B
And so at the opposite end of the spectrum. Right. We just talked about you being proactive with sharing the estate plan with your kids. Now you have parents that are aging. And I've seen this before. I've seen parents of a client die or Alzheimer's kicks in and, like, you can no longer communicate rationally with this person and yet that person, the one that died or is no longer of complete sound mind, has all the data, has all the information and the other spouse maybe doesn't know because they don't even communicate about it. So like how does the 40 something year old couple, how are they supposed to be proactive to make sure that they're getting ahead of trying to help their parents estate from twofold, like one, just like the managing of an estate when things go badly and two, if they're getting some sort of an inheritance, is there anything that they need to do personally to set themselves up for success?
- [34:19]
C
There's nothing that they can do to be sure that everything's going to go well. It is a great time to ask mom and dad or mom or dad, do you have plan? Can you let me in? I would really appreciate it if you would let me in because I might need to help you even before you pass away as your healthcare agent or power of attorney. And if we don't have that set up, we need to. I think everyone's always afraid of appearing like they are an errand waiting and want to know how much of mom and dad's stuff they're going to get. That's not the case for the vast majority of people. They want to know how they can help mom and dad if they need to, if they can persuade mom and dad to speak with a lawyer or a financial advisor to start to think about this stuff if they haven't. Because as you know, most people don't have estate plans, which is fine. There's a mechanism for it if they don't. It's just really, really hard and can be very challenging on a family. And if mom and dad have an estate plan and they're on top of it and they say not the time to share, we're not sharing with you, so be it. They have that absolute right. And at least the child in their 50s or 40s asked. But at least knowing that mom and dad do have an estate plan, okay, that's the best you're going to do. It's mom and dad's estate they don't want to share with you, then that's, that's in the conversation. Yeah, but yeah, waiting until it's too late, that creates a lot of problems.
- [35:41]
B
Sure. So it sounds like just asking the question and really I don't need an answer. I mean I'd like an answer. It's your prerogative here. But just, just know that I would love to get some understanding to Best support the situation should something happen. Because it happens again in an instant.
- [35:59]
C
Yeah. And people are very unfamiliar with the process of what happens if mom or dad lose capacity and there is no plan. It's really challenging. Those are difficult cases which we will handle. And very often we will need to obtain the appointment of a guardian and a conservator. Two separate roles for an adult guardian, physical custody, like guardians for minors, like we were talking about. But the adult has lost capacity and a conservator. The best way to explain it is it's a financial guardian. So the law separates those two roles for adults as well. Very often it's the same person who serves this too. Those are difficult cases. First of all, it always has to be an appointment by the court. So just the fact that you're in court now, there's a lot of hurry up and wait and it's expensive, but it's really, really intrusive. The parent's condition effectively becomes a matter of public record. Like really personal stuff on these dockets that you can find. I don't think people are going through and searching in the dockets. The you can and you do have to show up in court and talk about it in front of a room full of 10, 20, 30 people you don't know and wait for the process to play out. I'll tell you, we do not like handling these because they're always sad and there's a lot of stress involved from our clients which we can't help but internalize. That's the alternative. How do you avoid that? A simple power of attorney or healthcare proxy, you know, it takes five minutes to type up and do so. Once someone's lost capacity, there's no going back and doing it again. You're just getting a conservator or a guardian appointed. So in terms of mom and Dad, I mean, if there's any room to persuade mom and dad to do anything, it's to do those at least. So if they get to a point where they can't help themselves, you've got the appointment or whoever that they trust they want to appoint. Of course they get to make the decision. Can avoid that whole massive conservatorship and guardianship.
- [37:54]
B
That's great advice. The financial advisor in the estate planning attorney obviously can work hand in hand with a client to support the entirety of the plan. What would you say is the biggest failure or the biggest risk of a financial advisor in the estate planning attorney not communicating?
- [38:14]
C
I will tell you from experiences that we have constantly, you know, this but for listeners knows, we handle a lot of estates. We handle hundreds of estates. And trust, when people actually pass away, we represent the executors, personal representatives and the trustees. A very common thing, unfortunately, that we see is that the estate plan and the assets never met and talked. So the part that you and I do, when we have a mutual client and we talk about what the plan is and make sure that those two pieces are dovetail, the consequence of that is sometimes we have assets flying all over the place that clearly aren't where the deceased intended them to go. Or we have things that going through probate that didn't need to go through probate. And so it's going to take at least a year to get them distributed to the people that they are meant for instead of almost instantaneously through the proper channel. That's just a failing of a lot of lawyers who do what I do. There are many great lawyers who don't make that mistake, right? Who take the holistic look and say, here's the documents and let's talk about the actual assets. But it's a really common thing. Actually. It's funny, two years ago, I think the Wall Street Journal put out this article that everybody in my life sent to me, like, you should read this. And it was about how a lot of assets don't go through probate and don't listen to your will. And the Wall Street Journal is reporting on this like, this isn't the way it's been for centuries. To me, what I learned is that all these, these weren't my clients sending it to me, but like friends and family who. I'm not talking about their estate plans with them, like this was news to them. Right. And it's just part of the estate planning process to the original point. I think that's something a lot of people don't know. And when that gets missed, and it gets missed all the time, that's where we have to do a lot of cleaning up through the estate.
- [40:01]
B
I would agree with the one thing that I see that is the lack of funding of the trust. Whether it's simply putting the trust as a beneficiary secondary, typically depending on setup, or it's some brokerage account is not retitled into the name of the trust or at least added as a TOD transfer on death, right? It's like just the whole funding mechanism is broken down. It's beautiful on paper and the assets are great when they're living, but like at death, it just implodes. Like you just said, like Nothing happens the way that it was designed to happen. And you've paid for this. This estate plan that doesn't work like it should.
- [40:37]
C
Yeah, we were part of an ongoing saga that just got wrapped up this week from a deed that was missed. Two family property was never put into a trust. Oh man. The more I think about it, I've got like four of these right now where there are fights because the property was never put into the trust and the trust gave the properties to A, but the probate estate went to B or got consumed by Mass Health for long term care, something like that. It really happens all the time. And that's because at some point there is a estate planning lawyer and not actually shouldn't blame the lawyers 100% but they didn't see that transfer through. It could also be the case that they did and then the client took it out for some reason and never put it back in without. And the lawyer would have no way of knowing that. For instance, we see a lot of if you put your house into a trust and then you go to get a home equity line of credit, a lot of home equity line of credit. Departments don't want to invest a lot of time in the transaction. They won't review the trust. Some will, some lenders will. So they'll just say to the borrower, look, if you want this, take it out of the trust, come see us, we'll give you the home equity line. Now can you take out a home equity line against a property that's in a trust? Undoubtedly. There's no question about it. The lenders just don't want to do the review. So we will see. A lot of people have taken their house out of the trust at some point to get the HELOC and then they just never put it back in. When we see that, we kind of scoot it back into the trust.
- [42:07]
B
That's interesting. Do you suggest that people put their house into a trust generally in Massachusetts?
- [42:14]
C
If there's a good reason for it? Sometimes there are. Try not to get too into the weeds on this and sound like a complete title nerd. But about 20% of land in Massachusetts is what's called registered land. Passing registered land outside of a trust is a nightmare. Takes about two years and two legal proceedings. If I see somebody has registered land, I'll explain that to them and say we can avoid all of that. Just put it in the trust. Investment properties and when I almost certainly primary residences, they're young and they may sell again. I'm happy to always do it they might have a good reason not to. We're going to sell in a year or two, save a couple hundred bucks on recording fees. That's fine, too.
- [42:53]
B
Okay, so it depends is the answer and really good reasons to do or not do it? Sounds like.
- [42:59]
C
Right. Part of the going through all the assets and looking at what's going on before you make the actual planning suggestion. There's a strong reason to put it into the trust. Then we're going to tell them. This is why I think you should do this. Sure. Yeah.
- [43:13]
B
I mean, there's a lot of good stuff. I mean, the stuff that we've talked about, we could go down rabbit holes and. And questions and questions and have hours of conversation, which it gets really intriguing because it's real stuff. The questions I've been asking are like, real things that I see in my conversations with my clients that they don't know about and sometimes I don't even know about. So it's great to hear your perspective on this stuff. And so as we wrap up this conversation here, at least the first one, maybe we have another one down the road. Is there any one thing that you would say if someone takes one thing away from this conversation about estate planning and how they can use it in their own life? Like, is there one thing that you would say to focus on?
- [43:48]
C
Yeah. It is to speak with your financial advisor. And I say that not to pander to you as a wonderful host and to follow you, because I really appreciate being on here. It is truly the clients that I speak with who aren't working with an advisor. Again, we're talking about their stuff and where it goes and who holds what. Believe it or not, I can spend an hour with people while they're trying to figure out what accounts they have and how they're titled. When they've got it all on a balance sheet or one of the financial summaries, it's super easy to work with them then on an estate plan. They save themselves time and money on the estate plan. And even if they don't have an estate plan, this is why I picked this as the most important. Just to know that you can go through. Fill out your beneficiary designations, because if 95% of your assets, your retirement brokerage, life insurance, 529, whatever, they all have beneficiary designations. If you don't have an estate plan, okay, 5% of your estate might go through probate, but the bulk of it, just fill those out. Work with your advisor, name your spouse, name your adult kids. You're almost entirely there anyway. So that is hugely important is to stay on top of the actual accounts.
- [45:08]
B
And that's a great answer because I think it's accessible to people. It's just if you want to take the first step towards proper estate planning, get organized. Understand what makes up your estate and where the accounts are and who owns them and then make sure that beneficiaries are attached as as you think they should be as a baseline. And then with that information you come to the estate planning attorney and it's made their job a lot easier from the get go to get that completed.
- [45:35]
C
If a beneficiary designation is blank, never been completed, you're turning this non probate asset, this thing that will transfer effectively for free and effectively immediately, like subject to an application being submitted into a probate asset. So now you have to go to court, open up an estate, pay that into court, wait a year, like just have them filled out and you're doing yourself almost as many favors as actually preparing an estate plan.
- [46:04]
B
Got it. Well Mike, this has been really great. I'd love to have you on again to go in deeper in some of these other aspects of estate planning, but as a broad conversation about what's important for the clients that both of us work with. I know you work with a lot of different clients, but we particularly work in that mid career professional. This was fantastic. So thank you very much for being on here.
- [46:23]
C
You too, Eric. I really appreciate it. I could talk about this stuff forever. This is a really good thing you're doing to the point of educating clients. So anytime I'd be happy to come back.
- [46:33]
B
Thanks Mike.
- [46:35]
A
Thanks for listening to another episode of Money for Life, hosted by Eric Roberge, CFP and founder of beyond, you'd Hammock and me, Kaylee Roberge. Our show is produced and edited by Steve Stewart. If you want to learn more more about wealth management and hiring your own personal financial advisor, visit BeyondYourHammock.com and now for the legal stuff. This podcast is for informational purposes only and does not constitute financial, legal or tax advice and may not cover all critical complete details of every situation discussed. The views expressed by guests are their own and do not necessarily reflect those of the host or the podcast. Please consult a qualified professional about your specific situation before making any financial decisions based on this podcast or any other educational content designed for a general audience.