Estate Planning with Rick Randall – Episode 183

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[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. We really got a treat for all of our listeners today. We have a gentleman by the name of Rick Randall. Rick is in a state planning attorney who has a really he’s one of the leading thought makers, I guess you would say in this particular industry, looks at it quite differently than what most of the people that I know. And not only that, but he’s been able to convert the way he thinks about these things

[00:54] into a system that allows all of us to not only understand but be able to utilize the tools that we need to protect our money during our lifetimes and to preserve it, to transfer it to our next generation. And I just can’t tell you how excited I am to have him on the podcast. Welcome, Rick. Thanks, Todd. Appreciate it. I’m excited to be here too. Super. Well, Rick, why don’t you just so that people kind of get to know you. Have you been doing this for one or two years maybe? That’s about about 30. I started with the side when I was in law school, and it really helped shape some of the thinking is that I actually got some training on the financial side in both insurance and and I also ended up having a CFP and I started a financial practice with some partners

[01:48] and we began making recommendations of living trust and it was early enough, Todd, it was in the late 80s and I’m from Indianapolis, Indiana. So out here in the heartland, living trusts were were completely unknown. So people were doing them in Florida and in California, but out here it was in the hinterlands. It was the attorneys either didn’t know how to do it. They couldn’t do it or they wouldn’t do it because they were entrenched in probate. And that’s what offered me my opportunity. And so I ended up switching back over because as an advisor, I couldn’t get the attorneys to implement. And so I opened up my office and the first week I got contacted by 17 advisors saying, would you work with your law firm with our clients now that you’ve left yours,

[02:42] which I actually hadn’t done. So it’s kind of a funny story. And I ended up leaving that practice. I went back up to my partners and said, I really do need to go and been doing estate planning since then 1990 and specifically living trust based planning. And it’s grown into this process. What would you say is the typical client’s experience with estates and estate documents? I mean, what is it the average person sees and hears? Well, I think I did a little article, Todd, called what were they thinking? And I think that the typical client’s experience is if you tried to create a system that had literally no chance to work, you’d come up with what most people end up with. Kind of like a trip to the dentist would be the way I would describe it.

[03:36] Very reactionary. You come in, if you can minimize the time, a popular attorney is one that would minimize the time. Hopefully you can get in and out relatively painless. And you end up with a stack of documents. And for most people, Todd, unfortunately, they don’t participate in the creation of the documents. They end up with really word processing forms and they put them on a shelf. And it’s either in a book or one of those little old English things. That’s the fancy writing that says last will and testament. So it goes in the shelf or safe deposit box. And a long time passes. And then eventually there’s a disability or a death and then people pull it out. So very little thought from that that the idea is, or I guess their belief is,

[04:33] that okay, I’ve done my job. So it’s a transaction with most attorneys. And I think that’s the experience that most people have, and particularly with living trust, because you have to get the documents created and also need to get the assets coordinated with it for it to actually avoid probate. Most plans don’t work because, you know, the heirs come in and they say, well, mom and dad did a living trust and living trust avoid probate. Well, they actually don’t if you don’t take the extra steps. And so for most people, the plans fail the vast majority of people because the experience is in and out with documents, put them on a shelf, and then we’ll see in 20 or 30 years to implement the estate at much higher cost

[05:21] and with a lot more complication than what was expected. You know, the next thing I guess that we hear so much is that the laws have changed and my estate isn’t big enough anyway. So I don’t have to worry about that anymore. And especially if you’re thinking about trust-based planning, the myths are that it’s only for the rich. The reasons that I would need a trust have to do with I would need to have a big estate. And rich, I’ve always gotten the kick out of Todd is the definition of rich is more than I have. So trusts are always for somebody else. And they’re usually negative where people would think that you need a trust if you can’t handle your own money. Very wealthy, as I mentioned, there’s something wrong with the beneficiary,

[06:19] those kinds of things. And actually, trust can be done very affordably because the classified trade secret is attorneys have computers. So it doesn’t matter whether you do a will or a trust, the documents themselves, it’s very efficient to create. The question is, what will the attorney charge you to do it? Um, and recently, your point, I think, is that as the laws have changed, the is even going away because under the current law, we have a $5 million coupon, if you will, for so much off the estate tax. And that’s indexed for inflation. And so about 99% of the public will not have a federal debt. And so working together are tending to make it so that people don’t do the planning and the little that is done,

[07:16] about a third of people ever do any kind of plan at all. But most of them just acquire a document and then wait until the end. And it’s the heirs then that get hit with the failed process, the reactive process at the end. And just a quick word about that, if you think about that, we know that the grieving period is the worst place in the world to try to receive new information because the mind just kind of shuts down to protect against pain. So you’re throwing a lot at surviving spouses and at adult children have just lost their partner or their parent. And it just really makes no sense if you actually think about it. So we needed an alternative system. And that’s what we’re trying to bring to the public.

[08:09] You used a term living trust. Are there many different types of trusts? There are. But most of them are either what’s called the living trust that’s created while you’re alive or a testamentary trust, which means after death. And that term is not that complicated, Todd. That comes from a trust that would be formed under your last will and testament. So if it’s formed under a will, it’s called a testamentary trust. A living trust would be formed during your lifetime. And the typical structure is that the client would be their own trustee. So they would create a document. And the only real impact when you’re alive and well is that on the asset titles that your investments and the beneficiary designations on

[09:02] insurance or annuities or your retirement plans would now be the trust rather than you individually. And so that would be the impact of a living trust during lifetime. Two other ways quickly to look at it is a revocable trust or an irrevocable trust. The revocable trust is one that I could, as the name suggests, I could say, I don’t like it anymore. I revoke it and just end it. The irrevocable trust cannot be revoked by the beneficiaries or by the maker. But that doesn’t mean this is another myth, Todd, that they aren’t adjustable. There is a tool and actually in state law, another one that’s a little bit more complicated, but the one that we tend to use is a tool called a trust protector, which means that you can appoint a third party.

[10:01] If you’ll take the time to lay out instructions, you can appoint a third party who is independent from you and the family who can make changes consistent with your intent, even if you become disabled and can’t think anymore or even after your death. And so that tool, the trust protector allows us to move a client situation from a transactional one to an ongoing relationship where, while they can, they can make changes to their living trust on whatever frequency they choose to do it. And then even after a disability or a death, their advisors can step in and continue what the intent is. So the real trick, Todd, is in the initial counseling and then keeping that current. What is it that I really want to do with my plan?

[10:54] This is, like I said, this is something that you taught me. I had no idea it was possible to do an irrevocable trust. And then, like I said, have really sort of a back door to make changes as your life, you know, I mean, trust lasts a very long time. And the idea that you would never want to make any changes is, you know, we’re just not built that way. Right. I think that that tool is very, is, is fairly new. And attorneys are not real comfortable with it yet. But you started our podcast with the question of what’s the typical experience. It’s that in and out. So the attorney is not motivated to say we’ve got all these tools. It might be even in your own plan, buried in the back in the boilerplate,

[11:43] what clients and attorneys alike would call boilerplate. But if you were committed to, which we are, an ongoing relationship with the clients, that became a really good tool. And it kind of shatters the myth that one of the big barriers to doing a trust is that it’s not my property anymore. It feels funny. It feels like I’ve lost control. And, you know, why would I need a trust? And why would I want my family members to have a trust afterwards? And there are answers to that that are really good ones, like a trust for your beneficiaries can protect assets that you leave them, if it’s properly designed, changeable by a third party. And so we can keep it current and keep into account even the years that the family members have it.

[12:39] So you can be creating a trust that can last for decades, but still be very current because of this tool. And so the three main protections that are offered by trust, and very few people are going to have none of these, would be lawsuit creditors. You know that the society is more litigious today. And if something happens, it’s always somebody else’s fault. So we’re going to sue them. And if you’re on the wrong end of that, we tell a story, Todd, about the school bus accident where when we do workshops, my wife inherits the money from me. And then she’s out driving and slams broadside into a school bus hurting and killing little school children. And they come after the assets and properly designed.

[13:28] The surprise is they can get her stuff, but they cannot get the property that I left her in trust. And that can be done for a spouse or for kids as well, any relationship. And so our clients call them school bus trusts. So they can protect against lawsuit creditors. They can protect against divorces of the kids. And in my experience, one of the most common things is that people are very opinionated that I love my daughter like she’s my own butt, you know, if they’re if they don’t stay with the son or they go to the now outlaw. And that can be done better with the trust. And lastly, we’re going to age and they’re going to age. And with most common changes, Todd, is the terms that would keep this from

[14:25] requiring in the event of a long term illness, requiring us to spend every dime that we have in order to qualify for Medicaid. So there are good ways to do it with financial advisors, long term care insurance and so forth. But a backup plan, it works great in combination of the two. The long term care insurance protects my assets and what I inherited from my parents can be protected by this trust. Lots of uses that are very, very positive that people just don’t realize. And that’s what we try to do at this process is to say, get into a process, have it be a relationship, take a little bit of time each year to learn something new. And if any of those areas were of interest to you that I just rattled off, then you could learn more.

[15:16] And I find that virtually every family has some concern in one or more of those areas for themselves or for their family. Super. And if you’re listening to this, we will have a link up here. And I believe that link goes to the National Association of Estate Planning Attorneys. Did I say that correct? National Network of Estate Planning Attorneys and also to our private law firm, Randall Gentry and Pike. And the quick background there, Todd, is that the National Network is one of the leading groups that started. So way back in the late 80s where I got my information was from two gentlemen, Bob Asperdy and Renno Peterson, who wrote the book Loving Trust. And it was one of the things that helped break the stranglehold

[16:04] that the probate system had on estate planning. So I got trained early. I just hit the marketplace at a wonderful time. And then we developed in my firm here in Indianapolis, the lifespan planning process. And now 30 years later or so, 20 some years later, I own the National Network and we’ve licensed our process to attorneys around the country. So not everyone implemented identically, but the concepts are the same all around the country. One more quick question here for you before I let you go. And I certainly thank you for all your information. At what point do I know that I need a trust? Is it so much money, a certain age? You know, what’s interesting is it’s none of the above. You would have to have a minimal amount.

[16:54] So we do a workshop called Truster for Everyone. And because we’re attorneys, we put an asterisk on it. Everybody chuckles about that. Everyone that has an estate and wants a plan that works, that is. And so it’s not a fixed dollar amount, but there are people that just literally have no money and they’re going to go to legal services and pro bono services and things like that. But if you have an estate and it doesn’t have to be a large amount at all, Todd, it depends on the price that the attorney is going to charge, frankly, for the word processing. So if you can get with the right attorney and get a reasonable fee, then it’s not the size of the estate that matters. So things that people go through with larger life,

[17:52] as many advantages for someone that doesn’t have a large, and typically those have to do with the threat of a long-term illness. And how would we fund that? So there’s not an amount of assets. It’s more your commitment level and how much do you care about your family? So our motto is we do plans that work with and for people who care. And then we try to make sure that the fee is not what causes you to not do the planning because, as is usually the case, if you’re proactive, you’re going to save money. And if you’re reactive, what happens is people don’t know the cost after death. And even in very modest estate, the price is a lot higher than people realize. So the estate is going to incur the cost.

[18:46] The question is, will you be proactive and do a little bit of work to make sure that things go more smoothly for those that come after you? You know, I think there’s a natural inclination to think of a trust as a one-time event. But listening to you speak today, it’s really an ongoing relationship, isn’t it? In theory, you can do that with the will. But what I have found is that people are very much want to avoid probate, whatever that is. And I get a kick out of this as I speak around the country. Everyone knows today that they want to avoid probate even though they can’t define what it is. So I don’t spend much time on it. We work out of the trust and say, it’s a given that you want the family in control, right?

[19:33] They say, right. And you don’t want to go through probate and have judges and courts involved. That’s right. Here’s how you do it. And so the family’s got to pick up the slack and it’s the original clients. It’s also those that you select as your helpers. So you need a relationship because you need time for everybody to kind of learn their way around. What do they need to do? And so you can be very invested in this and really save a lot of time and make it really good for the family members. But you could also spend just a little bit more time than what typically is done and still make it a lot better than it otherwise would have been out of the black cat it is. The only kind of plan that works

[20:14] is if you have a relationship driven attorney and very typically a team around you. So similarly a relationship driven advisor on the financial side, those two together could do a lot of heavy lifting while you’re talking with them about legal changes for my side and on the advisor side. How do I invest my money? Same kind of concern. Do I have enough money to work with a financial advisor? And in most cases, the answer is going to be yes. And we need education about that. Super. Well, Rick, I can’t tell you how much I appreciate you today. And for those of you who are listening to this, Rick has agreed to do a few of these podcasts for us and he just gives so much information. I think that this might be one you need

[21:00] to pull your car over for to take notes. But you can listen to it as many times and Rick’s really good about answering questions if you want to click over on his link and there’s more resources on their website as well. Rick, I just want to tell you how much I appreciate you and I look forward to talking to you again on the next podcast. 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.