Explore the nuances of estate planning with Al Smith and attorney Michael Bailey in this informative discussion. Learn about the differences between wills and trusts, and why having a plan that adapts to life changes is crucial for ensuring a smooth transition of assets. The conversation sheds light on privacy issues during probate and emphasizes the value of leaving a legacy that reflects your life’s values and achievements, rather than just dividing financial assets.
00:00:00 Introduction of Al Smith and Golden Eagle Financial
00:00:24 Introducing Michael Bailey, Estate Planning Attorney
Welcome to Retirement Unpacked with Al Smith, owner of Golden Eagle Financial. You want a retirement plan that alleviates your fears about the future so you know your money will last. As a chartered financial consultant, Al Smith will help you find a balance between the risk and reward of the market and the safety of your retirement income. And now, here’s your host, Al Smith.
SPEAKER 03 :
Welcome to another program of Retirement Unpacked. We have a very special guest today, Michael Bailey, mobile estate planning attorney. And what I do is I help people plan for retirement financially, but what Michael Bailey does is he helps people discern where they want their assets to go, and how that process can work smoothly. Michael, thank you so much for being my guest today. First question I would like to ask is, I imagine a lot of people you have met with already have an estate plan, but they may have a problem with it or a mistake with it. What would you say is the most common mistake you see in people’s estate plan other than not having a plan?
SPEAKER 05 :
Not keeping it up to date. Not keeping it current for where they’re at. Whether it’s, well, we did a will when our kids were five and three years old, and now they’re 35 and 33. Well… Anybody who has children understands that a three-year-old and a five-year-old have different needs than a 33-year-old and a 35-year-old. And, you know, just whether it’s at three and five, you’re worried about who’s going to raise the kids. And now at 33 and 35, you can be worried about, huh, you know, do we want to leave all our assets to them outright or what do we want to do? So life circumstances change all the time. And lots of people, you know, they… There was an old Ronco commercial for like a rotisserie oven where the whole audience would repeat the phrase, you set it and forget it. So an estate plan is not necessarily a set and forget type of thing to do. It’s something that you want to update over time and people forget that life changes or that things become different from time to time.
SPEAKER 03 :
Well, yeah, it’s clearly not a time capsule or something like that. And when you have minor children, the major concern, if you’re a couple, assuming you’re a couple, is who would raise your minor children? Because most couples with small children don’t have monstrous financial estates, but they do have children. And if something were to happen to both of them, I know When I do life insurance and so forth and we get down to the beneficiary designation, someone will say, oh, I want my sister because, you know, she you know, she would take care of the kids and everything like that. And I strongly suggest against that because If the sister were to go through a divorce about the same time both of these parents died, then instead of that money going to their children, it can go to her sister’s ex-spouse or something like that.
SPEAKER 05 :
You’re very generous in how you see that, too. Because if you put your sister and everything goes to the sister, the sister is legally entitled to keep all of that money.
SPEAKER 03 :
Absolutely.
SPEAKER 05 :
By moral and familial obligation, no, they’re not. But legally, they can just keep it. So, like, one of my younger brothers actually has me listed as his beneficiary. And I’m like, uh, that’s not a great idea. I mean, I’ll take care of your kids, I promise. But… If, you know, something happens, I mean, not that I’m planning on divorcing my wife or anything like that, but let’s say that I’m driving along I-70 or I-25, and I’m determined to be at fault for a crash, and now suddenly there’s a $500,000 judgment against me. Well, do you really want your life insurance that’s supposed to be for your kids going to pay for my liability? That’s not really what you want to do, so…
SPEAKER 03 :
Yeah, there’s a very simple provision in life insurance beneficiary arrangements. You actually write the names of the children, and then you write something in there that indicates if they’re a minor, there would be some separate arrangement to be arranged. At that time, there would be some kind of trustee or something, which is far better than naming a sister or something like that.
SPEAKER 04 :
Right.
SPEAKER 03 :
Now, obviously, not updating can be a big mistake. And when you talk to people about their estate plan, one of the things I talked to people about with their financial plan is what they want their retirement to look like, but also what legacy, but not legacy in terms of leaving a bunch of money to people, but what do you want people to take away from the fact that you were here on this planet for 80 or 90 years? Do you ever have a conversation with people about things that go beyond who gets which stuff?
SPEAKER 05 :
Sometimes. I mean, you know, people who want to leave a legacy. And, I mean, the most common conversation I have is, okay, so what do you want the last thing to remember about you? You know, if you have an estate plan and you have a good estate plan and you have an estate plan that can make things smooth and easy, then they’re going to remember, you know, they’ll go to your funeral. They’ll remember all the things that happened there. or if you don’t have an estate plan or you have an estate plan that’s incomplete or outdated or you don’t, and it’s, it’s just a big mess. Then the last thing, the last memory they will have of you is that you left them a financial mess that they had to try to pick up and they had to figure out with all attorneys and maybe fighting with siblings and all those type of things. And is that the type of legacy you want to leave for someone that, you know, the lot, your last act was a failure to act and you had a, So you left a big mess for people? Or do you want your legacy to be, how can I be remembered? Do I pass on? So I’ll use an example from our family. My wife grew up playing a grand piano. She learned how to play the piano on a grand piano. And her four younger brothers, none of them play the piano. Some of their wives do, but not them. So when my in-laws pass away, the grand piano comes to us because it’ll be the remembrance of what she learned to play on and then Depending on when they pass away, if it comes to us and our kids play the piano or something like that. Suddenly, it’s a piano. It’s not going to be we’re going to establish a foundation that will help end world hunger over the next 200 years. But it’s something along that. How do you want to be remembered? Do you want to be remembered as… I had a client who, by the time she died, she was down to like $60,000. And she left $20,000 to each of her kids. And one of her kids, the house was going into foreclosure. And so the $20,000 was enough to save the house. The other one had just gotten divorced, and the $20,000 was enough to pay the legal bills. And the third child was in a much better financial situation, so the $20,000 got used on a vacation to Costa Rica and the Caribbean islands. So three different situations, but all of them remembered mom as giving them that final gift that helped them to accomplish what they needed to at that point in their lives.
SPEAKER 03 :
And the fact that the mother treated them equally in spite of their different financial needs because a lot of the people I sit down and work with and we talk about if they want to leave a financial legacy. And I’ve had people tell me, well, my daughter is a Ph.D. and she’s with a company and has stock options. Uh-huh. and things of this nature. So in some cases, the children are doing far better even than the parents. But in all likelihood, there’s still going to be money left over just because if people were frugal enough to build up a nest egg, they’re probably not going to spend it all during their retirement either. And so I think thinking in terms of, because I’ve had a few that have sort of a lopsided estate distribution based on their children’s ability or inability to go through life, so to speak.
SPEAKER 05 :
Right. And sometimes that’s the most fair way to do it. I had a client who had three children. One was a doctor and a multimillionaire. One was a financial planner and multimillionaire. And one was a third grade teacher. And you’ll notice I didn’t add their net worth on there. Because third grade teachers aren’t exactly known for being the most highly compensated. It’s a tough job. You didn’t add and a lottery winner. No, no, no, I didn’t. But this particular client, they recognized that. So they left 5% to each of the two sons and 90% to their daughter. Because the two sons didn’t need the money and the daughter that was a third grade teacher did. And the sons were kind of like, hey, yeah, we’re way on board with that. Because we have a whole lot more money than… Our sister does, and we don’t need extra. If you give it to us, mom, all we’re going to do is turn around and give it back to our sister. So we set up the estate plan, and that’s how they wanted things to go. That was their preference, and it’s perfectly fine and viable to do. You don’t have to treat everybody equally all the time, but you want to treat them fairly and what would be best for your situation.
SPEAKER 03 :
Well, and those who are listing who are Christians, I think we know that when you go to meet St. Peter, he’s not going to ask you how much was in your 401k or how much were your stock options worth for the company that you founded. You’re going to ask, if you’re asked anything, whom did you help while you were back on earth?
SPEAKER 05 :
Right. I mean, I don’t know, St. Peter might digress into such things if he needed to, but, you know, they are the pearly gates, so we’ll see.
SPEAKER 03 :
Well, exactly. And I think that term legacy has interesting nuances to it because some people think in terms of a legacy only financial. I often think of a legacy as what did people learn from from you while you were there? Did you spend time with your grandkids or did you just send them a card and a check on their birthdays and was that about it? Or did they learn some things from you? Maybe how to build things, how to go fishing, how to build a campfire. If it’s a daughter and a grandmother, you know, dress up things. What are they going to think about you when you leave this world aside from who gets which stuff?
SPEAKER 05 :
Right, and what do they remember of you and what did they learn? I have a little bit of an example of that just from recently. So it’s been a little over a month since I picked up my oldest from her freshman year of college. So she went off to school at BYU. So we drove her over there in August and went to pick her up at the end of April. And so as we were traveling over to pick her up, I ended up helping to clean the apartment because she was one of the last in the apartment and everybody else who had left. And so when you’re the last one to leave an apartment, there’s always stuff to be cleaned. And that’s what mom and dad are there for. And I can operate a mop and a vacuum just as well as anybody else and clean things. But as we were driving over… my daughter was following our progress on snapchat because my wife has snapchat and there’s a fine location so she could see us going there and so we parked and we were walking in and she came down out of her dorm room and we were kind of walking up a little hill and there’s there’s a path that splits and goes around this grass hill she came out of her dorm room and she saw us and she ran as fast as she her as fast as she could to come give us a big hug since we hadn’t seen her since christmas And she’s like, oh, it’s so good to see you. I’ve missed you so much. And I’m like, well, we still have a 16-year-old at home who doesn’t quite grasp how we may not do everything right, and we probably don’t. But suddenly my daughter, when she came home from school, she’s like, it’s so nice just to go do your laundry and not have to worry about is the machine going to be broken, and will somebody pull it out and throw it on the ground? and a big wet pile of clothes. So suddenly now our 19-year-old is beginning to see a legacy of my wife and I and what we’ve done in trying to raise her. And I hope that we can continue that past when we’re here and things, whether you’re taking care of your kids or raising them well or teaching them lessons of, you mentioned being Christian in St. Peter, Are we passing along our knowledge of faith in the Lord to our kids and things like that? Those are all part of the legacies and all part of what we do.
SPEAKER 03 :
Well, I think when you mentioned when your daughter saw you, she began running. All I could think of is she’s running back to the apartment to get rid of the trash.
SPEAKER 04 :
No, no, no, no.
SPEAKER 03 :
That’s what came to my mind.
SPEAKER 05 :
She came to give us a hug. That’s awesome. And then we went up and I said, hey, would you want me to carry this trash out to the dumpster? She said, yeah, that’d be great. So she knew dad would be willing to do that, so.
SPEAKER 03 :
Yeah, that is awesome. I have a strange memory of my first going from high school to college. It was the first time I ever got on an airplane flying from Chicago to Iowa City. That’s a strange story in itself. But there’s a whole lot more that our listeners need to know about creating their estate plan. And we’ll talk a little more about that after the break.
SPEAKER 01 :
Golden Eagle Financial will help ensure that your nest egg will last. Advances in medical science have helped Americans live longer, which is wonderful. But where retirement advisors used to plan for about 15 years of income, today retirees live much longer. That means you’re going to need more money for more years of living an amazing retirement. Sure, there are programs to bridge that gap, like Medicare and Social Security, but that’s not the fulfilling retirement that you’ve always dreamed of. Al Smith and Golden Eagle Financial use financial strategies with guaranteed lifetime income to stretch your principal to last longer so you can do more of the things you want to do in retirement. like vacations with your kids, helping others, or giving to your favorite charities. People like you who are well-prepared will have a more fulfilling, stress-free retirement. It’s easy to get started. Just go to klzradio.com and click on the advertiser’s link to schedule a free consultation. Investment advisory services offered through Brookstone Capital Management, LLC. A registered investment advisor. BCM and Golden Eagle Financial Limited are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents.
SPEAKER 03 :
Welcome back to Retirement Unpacked. This is Al Smith, financial advisor. If you’d like a conversation with me about preparing for retirement or maybe saving a little on your taxes as you move through retirement or making sure you’re saving enough money since people seem to be living a lot longer now than they did in years past, contact my office at 303-744-1128. This afternoon, we’re having a great conversation with Michael Bailey, estate planning attorney who is also on KLZ. His show is on right after mine. And we talked about mistakes people made in their estate plan. And what are the biggest problems if someone has a simple will rather than a trust?
SPEAKER 05 :
So whether it’s a problem or just a difference in approach is kind of in the eye of the beholder. So both wills and trusts will give away assets to your beneficiaries or your heirs when you pass away. So a will does so through the probate process. So if you were to… If when you die, your named personal representative who’s in charge of the will would take the will to the probate court and apply for probate. And probate is the legal process of getting assets from the deceased individuals to the named beneficiaries or the heirs. And so there’s just a process to go through. You apply for probate. They give you legal permission to… and transfer assets out of a person’s name and act on behalf of the deceased person. And you just go through the process. Basically, you tell the court that the person died. They say, okay, here’s your legal permission to transfer their assets. And then the court wants to know what they had. And, you know, do they have any debts? So you go and you pay off the debts out of what’s left over from the person who’s died. And then whatever’s left over, you give a final accounting to the court that says, here’s what we had. Here’s what we paid. Here’s what’s left over. And then you can split it up. And it says, okay. Now a trust is an alternative to a will. A trust can also distribute assets, but a trust only controls property that’s owned by the trust. So if you put assets inside of the trust and the trust doesn’t die with you, the trust continues to exist. So you can have what’s called a successor trustee. Trustee is a person who’s in charge of a trust. So the successor trustee can take over that trust and they have access to those assets and they can take, and they still have to pay off debts and things like that, but they can distribute those assets out and they don’t have to interface with the courts and go through the probate process.
SPEAKER 03 :
Well, for lack of a different explanation, it’s sort of like the difference between a sole proprietorship and a corporation. A corporation continues beyond the life of the corporate owner, but a sole proprietor ends when the owner of the business dies.
SPEAKER 05 :
Right. And so there’s just, I mean, many corporations will end when a person dies because it’s a small corporation, but the corporation itself does not die with the owner. Whereas a sole proprietorship, by definition, it’s owned by the proprietor, passes away.
SPEAKER 03 :
Exactly. Similar to a trust and a will. Now, I know one of the things, in small towns especially, I’ve seen local newspapers and they’ll have um announcements uh if anyone has anything uh that they want to charge against the estate of george peterson they have to go to the elbert county court and present that claim against his estate right whereas that does not apply if someone has a trust so besides it not going to court it’s a more private event when someone passes on and they have a trust is that accurate
SPEAKER 05 :
That is correct, because one of the steps of probate is to give notice to unknown creditors. So you give notice to unknown creditors that are possibly out there that might have a claim against the estate. With a trust, you don’t necessarily have to give notice to unknown creditors. It’s not part of the process. And a trust is a private document. Everything can be distributed according to the terms of the trust. And you don’t have to check in with the government. You don’t have to check in with the courts. Your will, when you take it to the court, becomes a public document. So it’s a public record. So anybody can go look at it. Your will, not that most people would, but many of the wills that we studied in law school where things had gone wrong, they had been filed for probate, and so we could read their wills and learn about things. So like Elvis Presley’s will or Mark Rothko’s will. We never read John Lennon’s will because John Lennon had a trust, and so nobody can know exactly what the terms and who got what. It’s just not because it’s a private document. And so… For people who value privacy and don’t want their personal affairs paraded around, then a trust can be very useful and helpful there too.
SPEAKER 03 :
My daughter showed me, I don’t know if it’s a website or where it is, but incredibly famous people that had absolutely terrible estate plans. And I thought it was incredibly interesting because these people were multimillionaires, but their estate plan, I think Howard Hughes comes to mind.
SPEAKER 04 :
Right.
SPEAKER 03 :
But these other people, their estate plan was either inadequate or too old or very poorly drawn. But I think the most interesting thing is when things are done properly, then things, I’m assuming, go smoothly. And the nice thing about a living trust, correct me if I’m wrong, but it doesn’t pay taxes. The taxes flow through to the individuals. Am I right?
SPEAKER 05 :
Well, you’re alive, yes. So a revocable living trust is a flow-through entity.
SPEAKER 03 :
You’re very much like my other analogy, like an S corporation. The profits of a corporation flow through to the shareholders of the S corporation. Now, years ago, I remember hearing a gentleman who was – very, very big life insurance producer that always recommended a trust. And he gave the example of his wife. And way back then, he was very much the leader of the household. He said his wife hadn’t ever even written a check. That happens. Yeah. And so he was not about to leave her a certain amount of hundreds of thousands of dollars when she hadn’t written a check to pay public service. Instead, he created a trust that created a stream of income so she wouldn’t have to be concerned about any of that. And he would also ask these other life insurance producers who were in the room to whom he was speaking, You’re going to give this money to your children. Well, have you given them a few hundred thousand dollars to practice with before you pass on?
SPEAKER 04 :
Right.
SPEAKER 03 :
And in spite of the fact they thought their children were doing okay, they never had that opportunity before. And with the trust, they would only be able to do foolish things with the money according to the terms of the trust.
SPEAKER 05 :
It depends on how you set the terms of the trust. You can give things to people outright. Or if you wanted to control assets through a trust, you could. I mean, my kids being 19, 16, and 13, if my wife and I die, there’s about $3 million of life insurance that would pay out. So each kid would suddenly be a millionaire. Well, my almost 13-year-old, he’ll be 13 in a week and a half here, he would spend that money on anything related to Minecraft or Roblox or video games. The 19-year-old is pretty, you know, financially, she’s a saver. And the 16-year-old likes stuffed animals and, you know, kind of, she’s getting into nice jewelry now. So, you know, we don’t necessarily want to say, oh, here, have a million dollars, good luck, have fun, figure it out. You know, if your kids are in their 40s, 50s, 60s, and, you know, that you may not have given them the money to practice with, but they’ve earned their own money to show that they are financially responsible, then it might be, it could very well be perfectly okay to give them that money outright. But if you want terms and conditions or restrictions on things, then using a trust that will survive your death is a very helpful thing there.
SPEAKER 03 :
Yeah. I heard of a real interesting thing where it was recommended that a woman, she had a couple of children. One of the children had really, really not made much of himself, and it was suggested that he could receive money from the trust equal to whatever he earned that year because he hadn’t worked in a while.
SPEAKER 05 :
I’ve done that for people where they don’t want their kids to just have some sort of windfall, so… They bring in their W-2 or their Schedule C to show how much income they had, and they’re like, okay, well, the trust will match that. If that’s something that would be useful and helpful, then we can certainly do that.
SPEAKER 03 :
Well, Michael, I want to thank you. How would people reach you if they had a need for estate planning?
SPEAKER 05 :
So they can call me at 720-394-6887, or they can find me online at mobileestateplanning.com.
SPEAKER 03 :
And for people who are in remote areas, you go to see them. Is that accurate?
SPEAKER 05 :
I do travel to go visit people where they are, yes.
SPEAKER 03 :
That is extremely helpful because as people get up in years, transportation and getting around and that sort of thing are not as easy as they used to be, especially with the traffic we’re experiencing. Thank you for listening, everyone. If you’d like to have a conversation with me, call my office at 303-744-1128. God bless you. Thank you for listening. And let’s keep our leaders and our prayers along with the folks in the Middle East. Bye now.
SPEAKER 02 :
But are offered and sold through individually licensed and appointed agents.
