In this enlightening episode, Michael Bailey, the mobile estate planner, elucidates the nuances of trusts—both revocable and irrevocable—and guides listeners through asset protection strategies. With anecdotes and relatable scenarios, he makes a strong case for why it’s crucial to have a solid estate plan in place. Whether you’re considering Medicaid planning or looking to mitigate estate taxes, Michael provides the expertise needed to make informed decisions about your legacy.
Welcome to Mobile Estate Planning with your host, Michael Bailey. Over a decade ago, attorney Michael Bailey turned his attention to estate law after he recognized the unacceptable number of adults without proper end of life planning. Michael recognizes that many of his clients have difficulty finding the time for making a proper estate plan. That’s why he became the Mobile Estate Planner. He will go to wherever you are to assist you with your estate planning, including writing wills, trusts, and giving you the information you need to avoid probate. Now, ATX, Ask the Experts, presents Mobile Estate Planning with your host, Michael Bailey.
SPEAKER 03 :
All right, good afternoon and welcome to Mobile Estate Planning with Michael Bailey. So we can do something besides just leave you alone. Phone number to talk to me on the air is 303-477-5600. That’s 303-477-5600. And that is the direct line to the KLZ studios because you are listening to KLZ 560 AM or possibly 100.7 FM, possibly the KLZ 560 radio app. If you’re Luke, you’re making sure we can all hear out here. And we have our friends, Mr. Heath and Miss April back today. They were here a couple weeks ago and they’re back to join us again. So it’s a good thing. My direct line is 720-394-6887. And once again, that’s 720-394-6887, which I probably won’t answer for the next half an hour because I’m here on the air. So Mr. Heath, how are you?
SPEAKER 02 :
Oh, Michael, I’m just so great. I love talking about estate planning.
SPEAKER 03 :
Do you? Are you sure?
SPEAKER 02 :
Most people think that it’s not an entertaining thing or not exciting.
SPEAKER 03 :
It’s really not, though, because it’s important and necessary. Exciting and fun are absolutely the wrong words to talk about estate planning. I mean, I at least I know this. I understand this. But, you know, then again, I’m the one that gets excited about it and likes and enjoys in doing it. But, you know, I have this weird warped sense of excitement and fun in my head. So, you know, maybe you do. I don’t know. I got nothing. So why do you find estate planning so exciting, Mr. Heath?
SPEAKER 02 :
Well, you know, it’s something about helping people pass on their legacy, right? Protecting their assets, protecting their family. And that’s just like a cool thing. It’s like almost like buying a safe.
SPEAKER 03 :
Uh, okay. So buy a safe, put stuff in there.
SPEAKER 02 :
And then when nobody knows the combination, they can’t get in or do tell what you, what you have in mind by, I think it’s just like having that extra security to know that, you know, if something were to happen, which hopefully it never does. Right. But you’re protected just in case you say, hopefully it never does.
SPEAKER 03 :
I have bad news for you. There’s only one way out of life. And it’s inevitable. It’s just going to happen. Talk about death and taxes, and it’s a steady business. The only things that are inevitable are death and taxes.
SPEAKER 02 :
The two certainties in life.
SPEAKER 03 :
It’s true. All those type of things. So tell me, sir, you said you had things you wanted to talk to me about when you came back. So what is it that you wanted to talk to me about?
SPEAKER 02 :
Oh, wow. You know, Michael, something that’s fairly unique about you is you have a really unique style. You know, every time you come to these estate planning meetings, you always have a different tie on. What is this tie that you have on today?
SPEAKER 03 :
All right, so the tie that I have on today, and it’s a good thing that we’re talking about ties on the radio because then nobody would know what it is. So this tie is just kind of a, get some video of it. Hey, it’s kind of just an abstract, almost like a painting. It’s got some green and some blues. I mean, I look at it, and it almost reminds me of what it would look like to see the Earth from space. So we’ve got some ocean, some land, and maybe there’s a storm here or something. But it’s not an exact science. It just happened to be the tie that I pulled out of my closet this morning because it was the one that caught my eye. I mean, I have lots of different ties. I have ties for… different occasions. I have lots of holiday ties. So I do have a tie with shamrocks on it that I’ll probably wear as we get closer to St. Patrick’s Day. I had a couple of ties that have hearts on them that I wore for Valentine’s Day. And now that my 12-year-old is starting to wear ties to go to church, he can come in and Sunday mornings he’ll pick out a tie so that we can have the two weeks before Valentine’s Day. He came in and he’s like, I don’t know which tie to pick. And I’m like, here, I’ll wear this one with the white hearts and you can wear that one with the black hearts. It was black with red hearts, sorry. So we had to… So the important thing, as an estate planning attorney, I tend to wear an estate planning type of uniform. It’s kind of a law uniform. So I wear a suit, and my choices are black, gray, brown, blue. I actually bought a green one the other day, too. I don’t know if I still have a picture of that. I took one to send to my wife, but I might have deleted it. But, you know, and then I’m like, well, I’ve got a white shirt. That’s pretty exciting. And so I don’t have a lot of, I don’t have a lot of options. So the ties are kind of how I can have a little bit of fun in individuality.
SPEAKER 02 :
Right. I mean, because estate planning is such, oh, that’s very nice. Yes. Estate planning is a serious topic. Yes. And the suits may be plain colored, but we’ve got to have a little personality with these ties, right?
SPEAKER 03 :
Well, that’s just it. Estate planning, like I said, it’s important and necessary. Is it fun and exciting? Is it the thing that you’re like, you know what I want to do on a Saturday night? No, I don’t want to go out to a nice restaurant and get dinner. I don’t want to go see a comedy show or a movie. I want to go sit down with somebody and do my estate planning. We used to be in college, we’d be like, what do you want to do tonight? Somebody would be like, let’s do something fun. I’m like, no, let’s do something that sucks. And I’m sorry, but I fall under the let’s do something that sucks category for a college kid.
SPEAKER 02 :
You know, I mean, staying in and reading a book and, you know, getting educated. I do that plenty. Right?
SPEAKER 03 :
Yeah. But, I mean, so if we’re going to do estate planning, we’ve got to make it a little bit of fun. We won’t be irreverent about estate planning. We won’t be, you know, but we might be a little bit irreverent about the topic. We’ll be a little bit, hey, you know, we’re going to talk about estate planning. When people ask me about when I do my radio show, They’ll say, oh, well, you know, what do you talk about? I’m like, I talk about estate playing for half an hour. They’re like, it is the most exciting and fun and dynamic half an hour of radio in the Denver metro area. And people are like, really? I’m like, no, not at all. But we do try to have some fun with it because I would think that just talking about death and dying all day every day would be sad and boring and pathetic. And then I would be sad and boring and pathetic and depressed. And then my wife wouldn’t like me and my kids wouldn’t like me. My dogs would probably still like me because the dogs are… Always that way.
SPEAKER 02 :
Okay, so Michael, I gave you a softball to start with. Yes, I know. You know, one of these most common questions that you get, there’s two different types of trust that you write. There’s a revocable and an irrevocable. Right. What are the difference?
SPEAKER 03 :
Well, it’s kind of contained in the words themselves. Revocable, you can change, amend, or revoke it. Irrevocable is, by its very definition, not able to be changed, amended, or revoked while you’re alive, as opposed to a revocable trust that you can change, amend, or revoke. And they’re used for very different purposes. Irrevocable trusts are a lot for asset protection. I use them a lot for my clients who are older. And revocable trusts are, you can change them and revoke them. It’s just they can change and morph over the course of your life to have things done. So most people… where it works out better for them to have a revocable trust because then as life circumstances change, they can change things. An irrevocable trust is very useful and helpful for people who are trying to protect assets from things like long-term care and stuff like that. So you are listening to Mobile Estate Planning with Michael Bailey here on 560 KLZ, also heard on 100.7 FM or the KLZ 560 radio app. Phone number to talk to me on the air is 303-477-5600. And again, that’s 303-477-5600. And my direct line is 720-394-6887. And once again, 720-394-6887. And for those of you who are so excited to call me on my direct line, we got to go 20 more minutes because I’m on air and Heath would get jealous. Let’s face it. So irrevocable trusts. Irrevocable trusts are a way of kind of separating you from assets. So for clients, a lot of my clients who are elderly and things like that, they’re looking at, okay, we’ve worked hard, we’ve got our house, we don’t have a whole, we’ve got a house, we’ve got some retirement accounts. But if we end up needing to go into the proverbial nursing home, we don’t want to have to spend all of that money and we don’t want to have to give it all to the government. We don’t want the government to come and take our house and all that kind of stuff. So if you create an irrevocable trust, you can create like a legal wall of separation between you and the assets so that the assets are not owned by you. And if they’re not owned by you, then when you incur a debt, the creditor can’t come after something that you don’t own. Now, in the case of long-term care and medical expenses, there are look-back periods, which means you can’t just give everything away on a Thursday.
SPEAKER 02 :
The dreaded look-back period.
SPEAKER 03 :
You’re like, well, hey, I’ll give everything away on a Thursday. I’ll go into a nursing home on a Friday, and they can’t touch it. Yay! That would be wonderful if it worked like that. But it doesn’t. So Medicaid has a five year look back period, which means if you’re trying to protect your assets for Medicaid, you want to plan, you know, ideally more than five years ahead in the future. Problem with that is that nobody knows when they’re going to get sick or injured or nobody knows when they’re going to need long term care. So, using an example from my family, my dad had quadruple bypass surgery 16, almost 17 years ago. And probably four years ago, my mom had a seizure and was non-responsive for 30 hours. So they’re not that old. Dad’s in his early to mid-70s. Mom’s just hitting 70. So it’s not like they’re going to be ancient and breaking world records for being 120, 130 years old. But given their health challenges and what has come up, We took that they were in it. However many years ago, we’d started a revocable trust for them. And so we decided to put their house into an irrevocable trust. So we’ve started the five year clock on that irrevocable trust on the house. So if my mom and dad needed long-term care, then dad’s starting to do memory loss, so it’s possible there. But then the house would not be available for them to pay for long-term care. It’s out of what they own because my parents have given up ownership rights in the house. It’s owned by the trust with I and my three siblings as trustees. So they do have to give up control of their assets, which is why everybody doesn’t do it right now. I’m like, well, hey, I’m 46. Let me give up control of my assets to my 18-year-old daughter. That may not quite be what we want to do. But for them, it makes more sense.
SPEAKER 02 :
So that’s a really good segue. Why shouldn’t we give our assets or give our home to our maybe even adult children while we’re still alive?
SPEAKER 03 :
because most people want to be in control of their own assets. Most people want to… I mean, I kind of enjoy the fact that I own my own home. It’s nice. Then when we move a couch into the upstairs and break a banister, I’m like, well, hey, we’ll buy a new banister. We’ll get a new banister put up. We’re trying to figure out if we can… We’re trying to redo the deck and have the deck rebuilt. Well, if I’m the one that owns the house, then I can do that. It’s my house. If I wanted to, I mean, my house is painted a similar shade of green to the suit there. Maybe it’s got a little bit more brown in it, but it’s brownish green. But if I wanted to take and paint my house a nice, bright kind of pink color. The HOA may have something to say about it. But if I can convince them, it’s my house. I can do it.
SPEAKER 02 :
So is there ever a reason while you’re still alive to want to hand your – unless, you know, while you’re still living in it. Is there ever a reason to want to pass along your house to your kid while they’re still alive?
SPEAKER 03 :
Sure. Yeah?
SPEAKER 02 :
Yeah.
SPEAKER 03 :
I mean, if you’re trying to run the five-year clock for Medicaid, or I have some clients who their business is that they run short-term rentals up in the mountains. So they have like 15 different properties that are all short-term rentals. And yes, they carry umbrella insurance and they do all of those things, but they also have short-term rentals in Breckenridge and Aspen and… So, you know, they’re not always there with a shovel and some sidewalk salts. So if somebody’s on their property and slips and falls and, oh, hey, now there’s a $500,000 judgment against them, they don’t want that judgment to come and impact their house that they have, that is their personal house that they live in. So one of the things they’ve done is they’ve separated out all of those different rental properties to be owned by different LLCs and different trusts. And they have their house that’s owned by an irrevocable trust that their 23-year-old is the trustee of. But the 23-year-old is very much involved in the family business and everything. So it’s a lot for asset protection and things like that. You know, I have… We have some friends who they are putting, they’re building an indoor shooting range. And, you know, so they’re building an indoor shooting range and, you know, an indoor shooting range is slightly more risky than estate planning. You know, in my line of business, people might get a nasty paper cut or they might, you know, pinch their finger when they’re sitting down in a chair that goes up and down. Well, in a shooting range, if somebody’s being stupid or somehow they don’t fire towards the correct backdrop, but they shoot through one of the walls or they shoot up and the bullet hits somebody, there’s going to be some lawsuits there. There’s going to be some liability. And yes, whatever insurance solution you have, and it’s good to have insurance, and I’m not saying don’t have insurance, but… And they’re looking at how do they separate out personal assets from business assets so that if an accident, they’re going to be as careful as they can and hopefully nothing will happen. But, you know, they’re also it’s a standalone freestanding building. They’re not going to put their shooting range on the first floor and have a daycare on the second floor. That would be really, really not a good idea.
SPEAKER 02 :
Right. So. Most of the listeners know that if you’re going to create an estate plan and you own a home, that you should probably have trust. For our listeners that are in the higher income bracket, is there a difference or a threshold for, in addition to a living trust, maybe you should have another document?
SPEAKER 1 :
Yeah.
SPEAKER 03 :
It really depends. The estate tax limits used to drive that quite a bit. When the estate tax limit was a million dollars per person, it was pretty easy to be like, oh, hey, I live in Cherry Hills Village. Of course, I’m going to exceed that million dollar. And as normal folk where I live in Thornton, Colorado, paid $254 for my house, and now it’s worth somewhere in the neighborhood of $750 to $800. I didn’t do anything really brilliant besides not destroy it. And so the current estate tax limit is $13.99 million per person or just under $28 million per couple. I don’t meet a whole lot of people who have more than $28 million worth of assets. There’s a lot of people that you can work with that you can help. Sure. But yeah, I mean, even if you hit the $28 million mark, there’s such thing as a qualified personal residence trust where you can remove your house from your estate tax consideration. I mean, there’s… Irrevocable life insurance trusts where you can remove your life insurance so that if you’ve got, say, a $2 million life insurance policy, you’re like, well, I’m at $29 million. Like, well, if we move that life insurance policy over into this type of trust, it won’t count against you for life insurance, for estate tax policy. purposes, so you can move some things around. There’s much more sophisticated techniques on how to do that when you get people who have 150, 200 million plus, and that’s not a place where I play. I have friends who do that, but for the most part, because the estate tax limits are as high as they are, there’s not necessarily one dollar figure that does that. But for many people who have different family situations, it can make more sense. But you should know that we are sitting here listening to Michael Bailey with Mobile Estate Planning on 560 KLZ AM or 100.7 FM, also heard on KLZ 560 radio app. Phone number talked to us on the air is 303-477-5600. And again, that’s 303-477-5600. And my direct line is 720-394-6887. And once again, 720-394-6887.
SPEAKER 02 :
So Michael, you save lots of people money, right? I try to. You help them protect their assets. I know that this question, I don’t know how this will land. We’ll just see.
SPEAKER 03 :
Sure.
SPEAKER 02 :
What’s your favorite, I guess, addendum to a living trust that you’ve created or that you do often that is going to save somebody thousands of dollars?
SPEAKER 03 :
Not entirely sure what you’re asking me. Are you talking about an addendum, which would be something in addition to a living trust, or a provision of the living trust?
SPEAKER 02 :
Either.
SPEAKER 03 :
Either?
SPEAKER 02 :
Yeah.
SPEAKER 03 :
Okay. So, I mean, one of the big things that comes up for a lot of people is their retirement accounts.
SPEAKER 02 :
Mm-hmm.
SPEAKER 03 :
So your IRA, your 401k, for most people, they fund that with pre-tax dollars. Not everybody does, but a lot of people with their 401k, they’ll have it deducted from their paycheck and it goes into a 401k as pre-tax dollars. So it reduces your taxable liability while you’re working. Then it goes into the 401k. It grows tax-free in there. And then as you pull the money out, it is taxed to you as income as you pull it out. So the idea is that you’re working and you want to save money on taxes. But then in your later years, when you’re retired, you’re not going to have your hope. The idea is that you’re supposed to be pulling out less money when you retire than when you were working and had kids and near your house will be paid off and all that kind of stuff. So that on the back end, then there’s those darn medical expenses that come in and can screw that up. But still. But if you die and you’re going to pass an IRA or a 401k or retirement account on to people, it used to be that the rules were you could stretch those payments out over the course of a person’s entire life. Well, now you can stretch that out over the course of your spouse’s life, but not over the course of your kid’s life. So if you have money and you pay it over to, you say, okay, I’m going to put my spouse as a beneficiary. I’m going to have my spouse’s life. And then both you and your spouse have died. Then it pays out to the kids. And the current rules post the SECURE Act passing. It’s really nice that you can call it the SECURE Act. It makes everybody feel better. Oh, it’s the SECURE Act. Well, this must be a good thing. It’s awesome. It’s the SECURE Act. It can’t be anything but awesome because it’s the SECURE Act. Just so you’re wondering, the Act is an acronym for secure. And who wouldn’t like security because you are secure? Well, one of the things that the SECURE Act did, and there’s a whole bunch of things that made it easier for people who work for smaller companies, the IRAs, 401ks, all that kind of stuff. But it also said, well, when you die, it needs to pay out to your kids over a maximum of 10 years. And those 10 years are going to be taxable to the kids. So if you have a million dollars in your IRA and then you die and you’re like, oh, well, we’ll give it all to the kids. Oh, kids like, great. I’m going to take a million dollars right now. And the IRS says, ooh, that’s so exciting. I think we’re so happy for you. We’re so glad that you got that million dollars. That is awesome. And, you know, it’s taxable distribution, so we need half. So you go, oh, that might not be what we want to do. Well, if you’ve got that million dollars, say, okay, oh, we’ve got a million dollars. We’re going to divide it up over 10 years. Well, now it’s only a hundred thousand dollars. A hundred thousand dollars isn’t going to be taxed at the 50% tax rate. Maybe it’s only taxed at a 20% tax rate. Well, now it’s 80,000 times 10 years. You get 800,000 as opposed to 500,000. That’s better. Well, you take, you split that up amongst four kids. So it’s $250,000 a piece. spread over 10 years, now it’s only $25,000. If you’re in a 10% tax bracket, it’s $2,500. So paying attention to how retirement accounts are paid and how they will pay out is very different than real estate or a bank account or just a normal investment account. So, sometimes I have people who will ask me, they’re like, well, why do you need to know what my assets are and why do you need to know about them? I’m like, because they’re treated differently. I actually had one client who she was very, okay, not client, potential client. She was very sure that I was just supposed to, and I quote, do my job and prepare their estate plan. Because when her parents had their estate plan done, they didn’t ask about what the assets were or anything like that. I’m like, well, yes, but your parents had it done 25 years ago when the SECURE Act was not a thing. And so as the rules change, we have to pay attention to how those rules change. One of my goals is to get more of your money to where you want it to go and less to the government and less to where you don’t want it to go.
SPEAKER 02 :
Right. And as those rules change, you’re the one that’s going to be up knowing exactly when that changes and how it’s going to affect people.
SPEAKER 03 :
That’s the idea. Yeah.
SPEAKER 02 :
Right.
SPEAKER 03 :
Is that, you know, we pay attention to things like that. And so we can so I can look at it and say, yes, I mean, you know, I I get people who come to me all the time and they’re like, oh, we have two different trusts. And OK, do you remember why you did that? And they’re like, no, we’re not sure. And then I look at it and. It’s what we called an AB trust or a marital deduction trust. And the idea was that whatever up to the estate tax limit was would stay in one trust and then to go to a different trust so that you’re trying to minimize estate taxes. And I said, well, that is absolutely perfect and brilliant and exactly what needed to be done 20 years ago when you had this done and you had $1.5 million in assets and the estate tax limit was $750,000 so you could split it between the two of you. Now the estate tax exemption can transfer between spouses. So if one spouse dies, you can elect to have their almost $14 million transfer to the surviving spouse. So now you’ve got the full $28 million when the second spouse dies. and that was not an option prior to a few years ago it’s just difference and how things are done so splitting things into two different trusts between the spouses well a very popular and exactly what needed to happen 10 15 20 years ago isn’t necessarily what we need to do right now now if there’s other reasons to split assets like it’s your second marriage and you want your assets to go to your kids and new spouse asks you there are reasons to do that but a lot of the tax planning options and what was there 10 15 20 years ago doesn’t necessarily need to be done now because of the way things are
SPEAKER 02 :
So they definitely, 10, 15 years ago, if that’s when they did their estate plan, they should definitely revisit that then.
SPEAKER 03 :
Yeah. I mean, every 10, 15 years isn’t the worst time to go look at it anyway. And speaking of years and time, it looks like we’re almost out. So thanks so much for listening to Mobile Estate Planning with Michael Bailey. I’ll be back next week, and we’ll talk to you then. Thanks and bye.
SPEAKER 01 :
Mobile estate planning with Michael Bailey will return to ATX next Wednesday at 2.30 here on KLZ 560, AM 560, FM 100.7, and online at klzradio.com.
