Why Most Estate Plans Don’t Work – Episode 185

This transcript was auto-generated and may contain errors.

[00:01] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your host, bestselling author, Kim D.H. Butler and No BS Money Guy, Todd Strobel. Hey everybody, welcome back to the Prosperity Podcast. This is No BS Money Guy, Todd Strobel. Once again, we have Rick Randall as my co-host today, and if you’ve listened to any of his previous podcasts, you know that he is just full of information. This is somebody who has been in the estate planning arena for over 30 years and has really been one of the shapers of the industry. And today he’s going to be talking to us about why most estate plans don’t work. And this is the saddest thing that I think I’ve had to go through, and unfortunately

[00:55] It happens many times that it takes a major disability or a death to find out that the original intentions were never either incorporated into the trust or something was done so that it can’t be executed properly. And wow, it’s so disappointing people who have spent their time and money trying to get their estate to the next level, to transfer their assets and then find out they failed anyway. So, Rick, this is a great topic. Can’t wait to hear more. Yeah, it can be depressing, but the the uplifting part is that there are things that you can do about it. And Todd, if we do a good job, we should end up with kind of a strategy. We call it the three step strategy to create a plan that works. So hopefully this can be pretty clear for people.

[01:50] So when we do our in our practice and our national network members around the country, our lifespan process, we now call the three step strategy process. And so we want to get to what is that strategy. We begin our orientation meeting slide that says most estate plans just don’t work. And by that, we simply mean that they don’t need expectations. And so that’s hard to explain to people that they have expectations because they haven’t thought a lot about it. But the unwritten one is if I sign a document, that’s the plan. And it’s not logical. But when you really work with someone, they’re thinking that that stack of papers, whether it’s a will or a trust, is somehow going to spring to life when you die

[02:49] and do all the work for you, because I took the time to create a document. And you really need a process to make sure that it works. So we start with most plans just don’t work. And one of the main reasons to keep it simple is that you have to do two things to make a plan work. One is get a great set of documents, the higher quality, the better. But also, you need to line up your assets, the things that you own. So how you put your names onto your property. It has to be coordinated with that document, again, whether that’s a will or a trust. Most people don’t do any planning. And the saddest ones are what you described, Todd, where they make a real effort on their to-do list. I’ve got to get in and be responsible and get to the attorney.

[03:39] And they do a transactional, here’s a document. That’s not going to work. So when we say a plan doesn’t work, we use what we call the snapshot test. So you’re up on your cloud looking down, we’re optimists, by the way. You’re up on your cloud looking down and all those people are scurrying around. If they’re doing what they’re supposed to do or not doing what they’re not supposed to do, that would be a plan that works. And yet, when we ask people to describe that, it’s really fuzzy. So we don’t walk around thinking about, you’re my death. And that’s one of the reasons it’s tough to get people to engage in estate planning. So what we did was develop a definition of estate planning. This was started by my mentors in the national network.

[04:28] And they started us down the road. And over time, we became the guardians of this. But it goes like this, Todd. I want to control my property when I’m alive and well. Everybody agrees with that. I want to plan for myself and for my loved ones if I become disabled. So that everything will work out the way, if I could have continued on, the way I would have done it myself. And then after I’m gone, I want to get what I have and the way that I want. And I want to do all that while assuring my wisdom is transferred along with the rest of my wealth. Matt, it’s funny, Todd. Everybody just looks at it and they blink. They say, you’re not asking for much, right? And we break that down and we ask the clients to agree.

[05:13] And in order to do that, you can do that. You just need to engage in a relationship rather than just… I love that saying, wisdom as well as wealth. That needs a little more explanation, but it just rings. Our clients every year and we’ve happened it in the law. And when I first rolled out this wisdom where everybody just kind of sticks his hands, the wisdom, we don’t have any of that. So if you or me tried to tell them they don’t have any wisdom, we’d get slapped their own. And so we’re talking about life risks that we know that there are mistakes that can be made if you don’t have financial experience, you don’t have investment experience, you don’t have tax experience. What kind of support do people need?

[06:27] And then there are life risks like creditors and divorces and big illnesses that threaten the estate like an Alzheimer’s or some terrible thing like that. And it really saps the financial resources of an estate. And so we know to make it clear, this can happen. And once we learn that we can do something about it, we’d like to transfer you the dollars, but in a format that reflects that, includes the fact that these are real risks and that we can do something about it for you. So here is your inheritance in a trust that you can control. If you happen to have a trust already, what would you recommend somebody do to see whether they’ve got a trust that properly represents this? Well, one of the things is the financial advisors are always

[07:29] trying to collect them. So I would say let them do that for you because they will do a lot of the shopping for the estate planning attorney. I hope that’s not too crass for the attorneys that might be listening shopping in quotes, but people generally they’re looking for the right relationship. And one of the ways to get them is to work with advisors that are conversant with a lot of people in the community. With the online world now, folks like me, it’s a great opportunity for me to get introduced to more people. And sometimes we work even online, but we also have this network of folks that you could match up with. All of them typically in our kind of a practice, Todd, have a service where they’ll review documents.

[08:18] And to my knowledge, it’s almost always, and take it early if you come in on referral from an advisor. On the internet, we’re all used to here’s an opportunity, we’ll review this at no additional charge. And what we produce is what we call an estate planning review letter. And it reviews whatever documents are there. And to be very transparent, Todd, most plans do not anticipate, so sight unseen. One of the paragraphs of the review is going to say, you’ve left everything to your adult beneficiaries in their own names, which provides no protection from creditors and predators. So something to consider would be a trust that could protect against creditors, divorces, and illnesses. So to that extent, for us, it’s almost a throw away.

[09:19] If I’m a member of the public, I get this and say, well, how do you do that? Online or sometimes in person if you’re in that marketplace. And they’ll go through how that’s the case. And then, of course, we obviously will have even a podcast, I’m sure, Todd, between you and me, about can stay in control and yet protect against the outsiders. So that would be my sense of an attorney to an estate planning attorney that you’re comfortable with their background and get a review letter and practice it for those in the national network of estate planning attorneys. We will do that at no charge. You mentioned an attorney that you’re comfortable with. Are there any certain, oh, I don’t know, designations

[10:22] that I’m looking for? Or should I be worried if I go to an attorney that handles divorces, attorneys, drunk driving, and all of the above? Well, yeah, you had two great points in that one question. One is there’s not like in the financial field. For example, you might look for someone that has a CLU or a CHFC in the insurance field or a CFP as a financial advisor. There aren’t very many designations in the legal field. So I would say that first I’m looking for extra letters behind the attorney’s name and you’ll get a kick out of this, Todd, usually it’s a negative. So they win awards like some of the specialists. There’s a nomination process where it’s almost like a formalized good old boy network where they nominate

[11:25] or can veto in some of the prestigious organizations. So, and those tend to be tax lawyers, Todd. So they’re already start distance from me as a regular person in comprehensible language. I think the letters, if anything, on balance are a net negative. What I would be looking for is someone that I would be. I said there has to be some expertise. So this is not a kind of practice just like in the medical field. We could take your analogy of divorces and criminal and all of that. If I do what’s called a door practice that I work on any client issue, anybody that walks through the door that’s not what you’re looking for on the other end either. So I think you’re looking for someone that and we have to be careful in our field.

[12:23] You can’t say specializes. Someone that does focus their practice and you wanna do the interview that way of how much of their time is spent and energy is spent in this estate planning area or elder law area. And I think recommendations from your friends and then certainly from the financial world that I mentioned earlier. I think those referrals are the most valuable thing. And then lastly, a lot of the estate plan attorneys will still do presentation. And so if you can get to a workshop and get a little feel for the person before you come in normally you don’t have to invest money. And I would just be looking for, can they explain it? You know, you go to law school, you learn these complicated rooms

[13:15] and you learn complicated concepts. And then to be effective, you got to forget all that be able to talk with the regular person about it. To me, that’s one of the biggest challenges for an estate planning attorney. What we try to do is teach with stories in plain English. And so I think that’s what I would be looking for and how I would go about it, Todd. So the first thing I’m gonna do is I’m gonna have my trust reviewed. Now, when I get out my trust and I read that I’ve signed paperwork that starts out with irrevocable, does that mean whatever I’m done is done forever and I can’t fix it? No, so there’s a fairly recent development, a tool in the law called the trust protector. It will work if you do engage in a process.

[14:07] And so this three-step strategy that we’ve developed involves counseling upfront and then having kind of a program, if you will, an agreement between you and me that we’re gonna stay on top of it. And I will continue to educate you on the law and you’ll continue to educate me on the family and the adjustments in the family. And then as time marches on, we’re both gonna learn a lot more. So the family will be more comfortable when the disability or death occurs and we will be doing more legal behind you. And one of those recent developments, Todd, and I’m sure the purpose of your question is, there’s a position that can be put in a plan called the trust protector, which is an independent third party

[14:55] who can amend your trust as long as it’s consistent with your intent. Even after you’re disabled or after you’ve died. So during your period of disability, we can keep up for changes in the law even if you couldn’t think. And after your death, when your people inherit, they can inherit in trust and address those life issues that we talked about, creditors and predators, and yet have the ability to change in circumstances. To do that, the independent, and to know that they are following your intent, and that there needs to be some process where someone sits down with you and says, what do you think about this? And what do you think about that? And what would we do? And so we document that. And so you can continue to change

[15:48] even though the trust, irrevocable means the words can’t be changed, but you can build into those original words a lot of flexibility and that tool is the mainland. That is just an incredible tool, something that I absolutely had never heard of Well, we started off this conversation with talking about why most plans don’t work. Have we pretty well covered that? Or is there anything else you can think of we should add? Well, we’ve gotten to where we have the definition and I would say that you wanna implement it through the three steps. I wanna get that out to everyone. The first step is to develop your plan with counseling-oriented planning partners. And so a planning partner would be us in the financial world to have someone

[16:34] who’s gonna offer you options, who’s gonna be willing to educate. And you wanna match up with a professional in a program that matches your level of commitment to it. So on the financial side, some people are really interested and some people are less so that it just confuses me. On the estate planning side, some people on the law, it’s just too complicated. I know I need to do it. So you wanna match your level of commitment to that, but you need to have that counseling so that you have choices and that you can actually draw up what you really want, not what the professionals just handed you in the form of work processing-oriented people to work with. And again, you wanna test out before you commit to it.

[17:25] The second step would be addressing the changes in your life and that they have a formal program to do that and that conversely, they can update for changes in the law. And we talked about that with the trust protector, but when I’m alive and well, I’d make the changes myself as the client. So now you’re signing everything and you keep your plan current that way. So you want that ongoing relationship I would suggest. And then lastly, you wanna know in terms of full disclosure, what the fees will be and the whole idea of doing this three-step strategy is that you will lower the cost for your work that you’ve done during your lifetime. And our third step is secure appropriate assistance to ensure that your wisdom would transfer

[18:20] along with the rest of your wealth. We talked, family needs different types of assistance, whether it be in the event of your illness, whether it be financial or legal. And so as you go through, each family is gonna need something different. And so the better that the law firm knows your situation, which grows over the years, my average client has been with me 19 years. And so what we know today about each other is dramatically different than 10 years ago or 15 years ago. So you grow into a better understanding. And the more that the family’s involved, those would be the three steps, counseling-oriented planning partners, yourself and your family to a formal maintenance and education program

[19:21] and then secure appropriate assistance so that your wisdom. Super, and just so that our listeners have it, what would be a good website for them to get some more information on you? Law firm, it is lifespanusa.com. It’s all one word, lifespanusa.com. And the national network of estate planning attorneys is nipa.com, n-m-e-p-a.com. And we’d be able to get you that information and a lot more on the way. Super, and again, if you’d like to ask a question of our show, The Prosperity Podcast, you can send those emails to hello at partners, the number four, prosperity.com. And we’ll be glad to get your question over to Rick and answer it for you as well. Rick, I so appreciate all the information you’ve been bringing to us.

[20:19] Rick has agreed to do a few of these podcasts for us. So continue to watch for the upcoming podcast with Rick Randall. Thanks again, and we’ll talk to y’all again real soon. Thank you for listening to The Prosperity Podcast. To take control of your money and have it work for you, visit us at partnersforprosperity.com. If you liked this episode, make sure you subscribe and leave a review.