BiggerPockets Money Podcast - 533: What Even We Didn’t Know About “Protecting” Our Wealth

Starting point is 00:00:00 Does a will written on a napkin, hold up. Hello, hello, hello, and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen, and with me, as always, is my still for informational and educational purposes only co-host, Scott Trench. Bigger Pockets has a goal of making one million millionaires, and that starts right here with us and a strong financial foundation, because we truly believe financial freedom is attainable for everyone, no matter when or where you are starting. And once you become a millionaire, you're going to want to protect your wealth.

Starting point is 00:00:35 So today we're continuing our conversation with elder law and estate planning attorney Jenny Roselle. Scott and I consider ourselves quite knowledgeable about money. And you've got some questions that even we didn't know the answers to. Like is choosing your oldest child to be the executor of your will the best option? Or just how binding is that promise made from your great Uncle Bob after six glasses of wine last Christmas. If you are new to our show or didn't catch Jenny's first appearance on episode 532, you might want to press pause on this episode and go back and listen to 532 first. You definitely do not want to miss the three legal documents that Jenny says

Starting point is 00:01:18 are the most important for your estate planning, no matter what your age. All right, Scott, I trust you can handle this question. When do I want to revocable trust? versus a non-revocable trust. Yeah. Usually when you're dancing into irrevocable trust world, it's usually because of either asset protection purposes or tax planning purposes. And when I say tax planning purposes, what I specifically mean are things like estate tax planning.

Starting point is 00:01:48 Taxes are really boring and I don't think you guys want to get into it. But the estate tax limit is pretty darn high right now. And so you have to have a pretty significant net worth. It's 13.61 million per person. So as a married couple, you get two of that. So it's a pretty small percentage of the population that really cares about the estate tax planning side of things. But that number is supposed to drastically reduce at the end of 2025. It actually cut in half is about what it's supposed to do.

Starting point is 00:02:16 So you're usually in irrevocable trust world, Scott, for asset protection planning purposes and tax planning purposes. If not really one of those, you're usually in revocable trust. world. You alluded to having a meeting with somebody to get an idea of what they're looking for before you start working on their estate plan. How long should I expect the creation of an estate plan to take? It doesn't sound like it's a one-hour meeting. Am I unreasonable to think that it can be done in a week or a month or a year? Or like, what am I looking at? Totally unreasonable unless you want to pay like an expedited fee for like a week. And unfortunately, I know we're kind of laughing at it,

Starting point is 00:03:00 but we get a lot of phone calls too where people are, you know, have hours or days to live. And now they're thinking about getting, or really, their family is thinking about getting the estate plan in place. Most of the time, that's impossible. I mean, my, my office and I'm sure most reputable estate attorney's offices, you're not going to be able to, you know, swing that so quickly. You know, having an estate plan from start to finish, like through the process, start to finish, totally unreasonable to do within a week or two. The more advanced planning that you're due, so like if you start getting into trust planning, that's going to take at the very least a couple months because part of trust planning is also to

Starting point is 00:03:43 take assets and move the ownership or beneficiaries to support the actual trust document. And you're, of course, at the mercy of financial and institutions and, you know, recorders offices to transfer property. So that's going to, that's going to be a much longer process than a basic, you know, plan, you know, like the health care documents, power of attorney and a will. We can have that, you know, from start to finish, usually within a monthish. So from a kind of shorter time frame, probably about a month. Okay. And that's, I mean, these are, these are facts. These are what they are. So I want somebody to be thinking, oh, I can't just do this overnight.

Starting point is 00:04:28 But, Jenny, since you can't take care of me overnight? Can I DIY it? Is that still legal if I do it myself? Sure. I mean, there are people truly that do DIY their plans. And the success stories of that you don't hear about. Or at least you rarely hear about. So I would be being a party pooper if I said like, oh, yeah, if you DIY your plan,

Starting point is 00:04:53 like you're, you know, going to, you're just asking for trouble. Sure, if you try to DIY your plan, the risk you're running is that you just don't understand what these documents are, what these documents do. It just comes with a much higher risk. Mindy and I, you and I were talking about John Grisham. You know, John Grisham has all the, I'm in the middle of a book right now where this gentleman hand wrote his own will. Yes.

Starting point is 00:05:17 And, you know, there's, you know, all these stories about people handwriting wills and handwriting deeds for properties and would I do it? Heck no. But do people do it all the time? Yep. Do some of them work? Yep. Do a lot of them not work? Yep. One other component for this that I feel like is really important, or at least I perceive is really important from what I've read, what I've talked to and all this is how you behave around your family, errors, these other folks in the context of this document. Like alcohol influenced discussions at holidays, create seemingly huge drama downstream, I imagine, for people like you, when what was discussed after six glasses of wine at Christmas three years ago is not actually, in fact, in the will.

Starting point is 00:06:06 So can you give some advice there? And do you have horror stories along those lines that you've dealt with or disappointment? Yeah, I mean, what I always tell people is I wish that I could make a blanket statement about, like, communication regarding an estate plan, but it doesn't exist because sometimes people are much more private about this sort of stuff. So if someone's like, you know, I think of like a lot of my clients that are, you know, call them 70s, 80s, they live in rural Indiana. They're very private. If their kids dare ask them about their estate plan, they would be disinherited as quick as you could Blake. I mean, it's like, it's just you don't touch it. Interestingly, the kids,

Starting point is 00:06:51 kids often know not to touch that conversation. They know that it's, you know, dad, mom, whoever, we just don't have that conversation. I personally and professionally am a big fan of communication. I think it does eliminate an immense amount of headaches down the road and immense amount of miscommunication down the road. So I would prefer people be more communicative and transparent about their estate planning and what they're doing and the kind of documents they have and who mom and dad decided to put where. Sometimes people decide to have that conversation with their family. I would not recommend doing it after six glasses of wine at Christmas. But if you do you, I guess, if that's what your family, if your family loosens up and after six classes of wine at

Starting point is 00:07:40 Christmas and that will be best for them, I guess that's best for them. But I would not recommend that strategy because that also would fuel lots of emotions. I'd probably start crying after six classes a line. Should you keep it fair and equal when leaving money to multiple people? We'll be back with more questions and Jenny's awesome answers right after this quick break. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going and more importantly where your tax refund can make the biggest impact. Because the goal isn't just to look

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Starting point is 00:11:08 or I would bet we willing to bet as everybody, if there's three kids, everybody gets a third. It's like, well, which kid had the more expensive college education and which kid lived at home? Like what were the, I think the millionaire next door calls it economic outpatient care components that the parents deliver to their children during life and how that factors in. So like, how do you think about fairness in the context of this for someone, you know, who's passing on in the state? My first reply is fair is not always equal. Sometimes I'm working with a family that has like a farm that is passing down. And, you know, there's one child that maybe has been doing some sweat equity. Or you think of a business owner that maybe a child has expressed interest in taking over the business. What I would say is most of the time people will kick the can down the road. Most of the time, they'll just say, I just want to go equally to the kids, equally to the beneficiaries.

Starting point is 00:12:05 And I'm just going to, you know, regardless of if, you know, little Bobby went to Harvard and little Susie went to a community college, like most of the time people don't put, at least from my experience, most of the time people don't kind of dangle that carrot over kids's heads. They'll just say, you know, when I passed away, it goes equally to my beneficiaries. But trust me, there definitely are people that I have multiple clients, multiple families that I can about expect to see them after every holiday season because at least one of the kids has made them mad and now it's time to decrease their share. And it's a very interesting psychological experiment sometimes to see how people kind of think

Starting point is 00:12:50 through how they are leaving things to their beneficiaries. But I've had honestly, and I probably shouldn't share them in public, but I've had some cases where I very much disagree with reasons that parents are disinheriting their children for very personal reasons that those are the kind of things that as an attorney keep me up at night because it makes my heartbreak. And those kind of people very much exist. And at the end of the day, it's their estate plan. They can do whatever they want with it.

Starting point is 00:13:23 And it allows them to be put in the driver's seat. This is a perfect segue into my next question, which you didn't even know about, but how frequently should I be reviewing or updating my will besides apparently every year after Christmas when I have a big fight with someone? You know, if you ask 10 different attorneys this question, you're probably going to get 10 different responses. There's a lot of attorneys that will say, like, you need to update your estate plan every five years or every 10 years. I usually anchor to life events. You know, of course, if you want to pull that baby out once a year and just like, Double check it. Great. I'm going to be your biggest supporter in doing that. But I always have clients

Starting point is 00:14:08 anchor to life events. And what I mean by life events are like new kids, new grandkids, people getting married, people getting divorced, people dying, people experiencing like, you know, personal issues. You know, those kind of life events, those are the things that are usually going to impact someone's estate plan. Estate plans don't like expire. So like if you did an estate plan at 23 and it's still the estate plan that you have at 63, if nothing, like if your wishes and goals haven't changed, then it's, sure, it's really old, but it's not expired. It's not, you know, game over.

Starting point is 00:14:48 You have to start again. So I say to answer that question to focus on life events. And it's those, you know those life, like your belly, your gut knows those life events that I'm talking about. And it's those ones that you need to be like, oh, does this impact my estate plan? Let me pull out my documents and look. You've mentioned the word divorce a few times here. And I have observed in some wealthy families a desire to protect family estate from future divorcee of child. What are, is that a common fear of people who in estate planning?

Starting point is 00:15:29 and what are the mechanisms that are used to alleviate that fear? Yeah, I mean, I think that we would all be putting our head in the sand if we didn't, you know, realize the divorce rate. If you think about it, if a beneficiary receives an inheritance outright, so, you know, say, Scott, you're my beneficiary and I die and you are my beneficiary that you're going to get your inheritance outright, you get that inheritance, you know, tomorrow. and your spouse files for divorce the day after tomorrow. Well, that inheritance is going to get dragged into that divorce proceeding because it's now in

Starting point is 00:16:09 your name. And so what a trust does when a beneficiary receives their inheritance into a trust, is it provides that separation between them personally and them and this trust entity type of thing that allows for them to gain asset protection against a divorce for their inheritance. Yeah, like this is, I'll admit, I'll admit, like, one of the things like my baby is less than two. But like, I don't want like her future, like, if that were to ever happen, like for that to be a problem in there. And that was something that we thought through. And there's a number of mechanisms. But like, I think that that's perhaps a common thing I'd imagine.

Starting point is 00:16:50 Many people want to want to plan for with the tool of a trust. I think it's a lot harder to do that with a will, for example, where you can't really direct all of those things. So if I am understanding you correctly, Jenny's trust that is left to Scott Trench personally doesn't belong in the marital assets? If he, in that example, inherits a trust. So you can have an estate plan set up where my estate plan, my trust, creates a trust for Scott's benefit to gain him asset protection against divorce, creditors, lawsuits. It's used quite frequently for a lot of different reasons, divorce being one of them. But the difference there is that it's not in his personal name. He doesn't get a check

Starting point is 00:17:47 when I die. He gets a check into a trust that gets created. And, that keeps it out of his personal estate. Oh, interesting. The trust is a person. It's an entity, right? Kind of. That's an interesting way to phrase that. Okay, so to muddy the waters a little bit more, should you review your estate plan with your family, or should you kind of keep it close to the best? I mean, it's kind of that same, that same line of thinking of, you know your family better than I do. You know if your dad is going to get red hot mad, if you ask him, what is the state plan looks like? Or you know your mom will be very open and transparent and actually respect, you know, bringing that conversation up. Like I said earlier, I mean, I'm always going to be a fan

Starting point is 00:18:42 of communication and transparency. Where that will bite you in the rear end is if, you know, you have spelled out, you know, Bobby is your health care representative and maybe Susie is all things financial. If either one of them, like if your relationship with either one of them or both of them become strained or estranged, there could be a little bit of backfire there where, you know, now they know what's in your, you know, part of what's your state plan looks like, what it, what it consists of. And now we have a strained relationship with a, you know, someone that maybe we didn't want to have that information. Probably the theme you guys are picking up on here is that there there's rarely like a clean blanket answer for anything. It's annoying and maybe it's just my lawyer

Starting point is 00:19:31 brain that I just can't give clean answers. Maybe that's more what it is. But it just depends on the personalities and relationships involved. My husband, who I own the practice with, he's an attorney as well, he says it best. He said estate planning and like estate planning documents, are easy. It's the personalities and the relationships that make it difficult. And I always think Kiviv is that little saying that he just came up with because it's so true. It's the relationships involved and the personalities involved are what's going to make an estate planning venture really successful or not. Well, and I think that it depends as a valid answer. I like how you're going into, well, you could do this, you could do this, you could do this. It depends. Like, this is really,

Starting point is 00:20:18 helpful because you might live and breathe estate planning law, but we don't. It probably depends and it evolves, right? Like, there's no right. Like, the answer that's right for me for now is not going to be right for me when I'm 60 and not going to be right for me if I'm lucky enough to live to 90 either. Yeah. And everything evolves, right? Like something I was thinking about earlier, you know, I think a lot of people out there

Starting point is 00:20:40 think that there's this magical Big Brother that, you know, when someone passes away that we can, you know, knock on Big Brother's door and find out everyone's assets. doesn't it? That big brother doesn't exist. And so you think from a place of communication and transparency, the more you're communicative and transparent about this sort of stuff, it's helpful because at the very end of the day, if someone needs to step into these roles, they know a little bit about what's going on, what they're stepping into rather than, you know, surprise, something happens. And hey, you're my power of attorney. Guess what? And you have no idea what assets are out there. There's plenty of families that don't share with their person that they're appointing

Starting point is 00:21:23 that they have listed them in these documents. And it's like, surprise. Up next, we're going to talk about what to do when you don't want your inheritance right after this quick break. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly. where your money is going, and more importantly, where your taxed refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life

Starting point is 00:21:59 easier. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code pockets. What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves the needle. Achieve your financial goals for good with Monarch, the all-in-one tool that makes money management simple.

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Starting point is 00:24:29 Get more with Northwest Registered Agent at Northwest Registeredagent.com slash money-free. Marvel Television's Wonder Man. An eight-episode series. Now streaming on Disney Plus. remake. Not exactly what we'd expect from an Oscar winning director. Action! Simon Williams, audition for Wonder Man. I'm going to need you to sign this, assuming you don't have superpowers.

Starting point is 00:24:55 I'll never work again if anyone found out. My lips are sealed. Marvel Television's Wonder Man. All eight episodes now streaming, only on Disney Plus. We're here with an estate planning and elder law expert, but don't forget about our community of experts. in our forums, which is a great resource for getting your questions answered fast. Go to biggerpockets.com slash forums. Aside from mismatch between expectations and reality, can there be a negative consequence

Starting point is 00:25:27 from it? So for example, could I inherit a property that has debt on it that is underwater, for example, how does that work? Can you give us a quick framework there, any gotches in that world? Yeah, yeah. I mean, yes, you could. to answer your question, if you said, you know, if I had my plan, I want Mindy to inherit my beautiful Michigan cottage. And, you know, I think it's the most beautiful thing ever. And then I passed away

Starting point is 00:25:57 and Mindy goes to Michigan and she's like, this is a hunk of junk. And oh my gosh, there's a upside down in a mortgage. That stuff does happen. And it, there's different strategies around when those kind of things happen. Like, you know, in that example, I would be, if I was Mindy's attorney, I would say, okay, well, you're going to disclaim. You're going to waive your interest in that what she thought was a beautiful Michigan cottage and it's not worth anything. Beneficiary can disclaim and say, I don't want it.

Starting point is 00:26:29 And so, you know, if a listener ever finds themselves in kind of a little bit of a pickle of like, gosh, like, wait, what, what am I walking into? Like, what did I? What am I supposed to receive? Be sure that you understand that as a beneficiary, you're also entitled to seek your own attorney's advice if you want to. Kind of the fun part of my job is coming up with like strategies and options. So, you know, there's there may be options that someone has no idea exists.

Starting point is 00:27:03 Like I just said, like if, if I left Mindy my, you know, terrible cottage and then Mindy goes over there and she's like, I don't want this thing. then and then Mindy calls the attorney, hopefully the attorney is like, okay, well, here are your options. You could take over the cottage and maybe, you know, put some money into it and rehab it and do,

Starting point is 00:27:20 and turn it into an Airbnb. Or you could say, I don't want it. I'm going to disclaim. I mean, there's different strategies often in my world that people can explore to make sure they're doing what's best for themselves. So if you're paying attention and have a reasonable attorney in this,

Starting point is 00:27:40 You're not going to be able, you're not going to just all the sudden realize, like, I inherited stuff and now I'm $100,000 poorer as a result of it. So that that's just like something for folks to realize. But if you're not paying attention, that could absolutely happen if you're unlucky and not on top of things. Okay. Do I, as the inheritor, the person getting the cottage, do I need my own attorney? Can your estate attorney advise me on my options? So it's a little bit of a gray area because I, when I represent, when I help someone after someone's passed away and I am representing the executor or the trustee, I am a very kumbaya kind of person where I'm like, okay, if beneficiaries have questions, like direct them to me, because that's, that allows me to, first of all, keep a pulse on people, but also kind of control communication and what's being delivered. So there's a certain amount that the attorney that is kind of navigating through the administration

Starting point is 00:28:42 process, they can share information and help you explore options. But their duty in all technicality is to the executor or to the trustee. So if they kind of start sniffing around and they're like, oh, this could kind of get sour quickly, then they may say, you know, Mindy, I hear you and I respect you and I respect you, and I respect you so much that I'm going to say that I cannot help you explore those options. I want you to seek your own legal advice to make sure that you are, you know, understanding fully what your options are. So it's kind of a gray area because they, you know, an estate attorney can kind of help

Starting point is 00:29:21 with that communication. But it does, is it a little bit of a gray area merely from like an ethical standpoint of who's the client. And technically in those cases, the client is the executor or trustee, not the beneficiary. Okay. And that's, well, that's good to know, especially for our listeners who may be on the verge of inheriting something as an heir, Scott, or creating their own estate plan. Yeah. What about the napkin will written at the last minute to override the painstakingly built estate plan? Is that a thing? Oh, my gosh. Oh, there's so many, there's so many cases about that from law school, like people, right? like taking a, I forget what kind of tool it was, but there was some like very famous case in the estate world where he took like a tool and like scratched on like the side of like a truck.

Starting point is 00:30:16 Like his estate plan as he was, you know, there was some kind of accident and he was writing like using this tool and writing on the side of a truck. Yeah, please don't do that. Please don't. Please don't. Like Mindy and I know, that's the stuff that happens in. John Grisham books, and those books are 500, 600, 700 pages of reading for a reason, because there's usually litigation involved when that happens. Oh, oh, oh, oh, okay. In one of those John Grisham books, he's put in his will, anybody who can test this will

Starting point is 00:30:50 is instantly out of the will. Is that a thing that you can put in your will? Yeah, yeah. It's called the No Contest Clause. Weird, fun fact, my state of Indiana is always like one of the last states to do everything. Indiana was the second to last state to pass the no contest clause. So at this point, I think most states have it. What I always tell people, though, is that is a very real thing that you can incorporate

Starting point is 00:31:15 into your estate plan to say, if you try to contest this estate plan, it is essentially the way it works. It's like you're not even, you've pre-deceased. So you kind of get skipped over. But there's always going to be ways to attack an estate from a different perspective of like, if there's legitimate concerns about like were you of sound mind, were you, you know, influenced in a way that you shouldn't have been. If there's legitimate concerns around that, that no contest clause is going to get thrown out

Starting point is 00:31:46 the window. But if someone's just grumpy pants, then they can just be grumpy pants. And I'd recommend that they're not hired an attorney because they may have some serious consequences to that. That is, that it's good to know. I, you know, like I said, I've read all these John Christian books. I'm like, oh, I could just do this and this and this. It sounds like what you're saying.

Starting point is 00:32:06 I need to get an estate attorney to help me with my estate plan. I just want more people to have these estate plans in place. I think the statistic I heard was like 50 or 60% of people die without an estate plan. And that's way too many people. Thank you, Jenny, so much for your time today. This was so much fun. And we will link Jenny's information in our show notes. We invite you to post your follow-up questions in the Bigger Pockets forums,

Starting point is 00:32:29 which can be found at biggerpockets.com slash. All right, Scott, that was Jenny Roselle. And I learned that there's a lot of gray areas in estate planning and that DIY is probably not going to serve me best. I really, this is something that my estate plan needs. And I'm now going to go back and revisit my estate plan. How about you? What do you learn from this show?

Starting point is 00:32:51 It's the laws of the state where you pass away, right? And there's like no right answer is what I learned to all of this. The right answer is to have a plan. And it's just a process you have to go through and think through. And no substitute for a professional to walk you through all that. I really do believe that the DIY plan is only good for when you don't really have anything to protect. You don't really. Protect isn't the right word.

Starting point is 00:33:18 When you don't have a ton of assets, you know, you're 18 years old, you own a car and you have $1,000 in the bank. Okay, great. That's a great DIY time. I don't think it's a good steward of your money to hire somebody to craft a plan that says, my mom gets my car and my dad gets my $1,000. Yeah, and I like how Jenny didn't, you know, Jenny corroborated that. You know, maybe use one of these online platforms, which I think is great. And I think, you know, we should search those and maybe look at some of those at some point here.

Starting point is 00:33:46 But yeah, you don't need to build a trust and have all that stuff set up when you're 18 to 23 and have very little an asset in the way of assets there. You just, but you do need to think through some of these things. It is good to have those in place. Everyone should check that off the list. All right, Scott, should we get out of here? Let's do it. That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench.

Starting point is 00:34:07 This is Mindy Jensen saying, where there's a will, there's a way. Don't delay. Bigger Pockets Money was created by Mindy Jensen and Scott Trench, produced by Hajar Eldos, editing by Exodus Media, copywriting by Nate Weintraub. And lastly, a big thank you to the Bigger Pockets team for making this show possible.

BiggerPockets Money Podcast - 533: What Even We Didn’t Know About “Protecting” Our Wealth

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