Women's Money Wisdom

Episode 256: Who Needs a Trust with Ashley Waddell-Tingstad

• Melissa Joy, CFP® • Season 4 • Episode 256

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In this insightful episode, Melissa Joy, CFP® is joined by Ashley Waddell-Tingstad, founder of Treetown Law, to explore the vital yet often misunderstood world of estate planning. 

Together, they uncover the significance of preparing for life’s expected and unexpected moments with key documents such as powers of attorney and healthcare directives. Ashley’s expertise brings clarity to the complexities of estate planning, emphasizing the importance of building strong foundations for navigating transitions and crises smoothly. 

What You'll Learn in This Episode: 

  • Why estate planning matters: How essential documents like powers of attorney and healthcare directives prepare you for life’s uncertainties. 
  • Probate vs. trusts: Understanding the burdens of probate and how trusts can simplify asset management, especially for families with minor children. 
  • Beneficiary designations: Strategies for minimizing the probate process by keeping beneficiary designations up to date. 
  • Revocable living trusts: The privacy, flexibility, and tax advantages they offer, and why they’re not just for the wealthy. 
  • State-specific planning: The importance of consulting a local attorney to ensure your estate plan complies with unique state laws. 
  • Post-death planning: How trusts can protect assets from legal and financial vulnerabilities. 

Resources:

Treetown Law LinkedIn

Ashley on LinkedIn

Treetown Law on FB 

The previous presentation by PEARL PLANNING was intended for general information purposes only. No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from PEARL PLANNING or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither PEARL PLANNING’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. PEARL PLANNING is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. A copy of PEARL PLANNING’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https:...

Speaker 1:

Welcome to the Women's Money Wisdom Podcast. I'm Melissa Joy, a certified financial planner and the founder of Pearl Planning. My goal is to help you streamline and organize your finances, navigate big money decisions with confidence and be strategic in order to grow your wealth. As a woman, you work hard for your money and I'm here to help you make the most of it. Now let's get into the show. And I'm here to help you make the most of it. Now let's get into the show. Just a quick note before we dive in.

Speaker 1:

The information that we share is meant to educate and inspire, not serve as personalized financial advice. Everyone's situation is unique, so be sure to consult with your own financial professional for guidance that fits your life. And just so you know, the opinions shared in this podcast are my own and those of my guests, and they don't necessarily represent those of any organizations that I'm affiliated with. For more important disclosures, please go to our webpage at pearlplancom. Now let's get started. Who needs a trust? What even is a trust? These are all questions that I'm often talking about with clients, even though I'm not an attorney myself. But I wanted to bring in the expert.

Speaker 1:

Today We've got Ashley Waddell-Tingstad as a guest. She is the founder of Treetown Law, which is an Ann Arbor-based estate planning law firm. She's got a lot of great experience in the legal world to begin with, but also personally. She's passionate about estate planning, which is basically the documents that you need to keep your affairs in order. She's passionate about that because of circumstances within her family and she has dedicated her legal career to helping families and individuals get the right documents in place. Ashley, welcome to the podcast. Thank you for having me, melissa. This is such a pleasure.

Speaker 1:

Well, estate planning is something that most people don't do every day and it's also something with a lot of assumptions, because, you know, growing up, we all hear about wills. Like you know, you're reading the books and it's like everybody come to the reading of the will. But in the real world, that's not exactly how most things work nowadays Not anymore. Yeah, most assets are in financial accounts where there is some sort of instruction, or lack thereof, linked to each account. So let's talk about estate planning. Give me a little intro and then we can talk about the topic of the day. Absolutely Well, at Tree Town Law in Ann Arbor, you know, I think about estate planning in terms of it's really about relationships, it's about our relationships and our relationships to the people in our lives, the people we want to protect, the people that depend on us, the people that we want to leave our assets to, our relationship with the people that we trust, whose good judgment will help us and help our family in times of need, and our relationship to our assets right and our relationship to our assets right, the values that we hold dear and those that we want to pass on.

Speaker 1:

So we always try to like really zero in on what's going on in your particular family, your particular relationships and how can we honor those in your estate plan. So estate planning, you know we're really planning for. You know both the inevitable and also the unexpected, and so we are planning for incapacity, and then we also plan for after death. So that's really when estate planning documents shine, as in times of crisis, incapacity and after death. Incapacity actually is a pretty broad definition. People are always surprised when I show them that it also means detention or disappearance for more than 30 days without an explanation. So you know, god forbid. I say, like you know, your cruise ship gets lost in the sea or something like that, you know, or you get quarantined because there's somebody who got stuck on your cruise ship. You could be detained for more than 30 days and unable to manage your affairs. So those are all types of incapacity, but then, of course, other types of incapacity medical and cognitive incapacity really really important. So those are the two times that we plan for, and so we have different sets of documents that really help us and help guide us and are legally operative at these times. So, on a high level, you know, the vague documents when it comes to incapacity are our power of attorney for finances all your financial administrative affairs can be handled by power of attorney and then also your healthcare power as a patient advocate, right? So making medical decisions when you can't communicate your medical wishes. And then after death, the big documents are oh, I should pause for a second Actually trusts. Trusts are also incapacity documents. Oh yeah, so they bridge the gap. They bridge the gap and then after death, we've got the will is really obviously really important. And and trust. So you can see that trust sort of like bridge the gap between incapacity and after death.

Speaker 1:

Well, I think people when they hear about trust, they think, oh, trust fund, baby, somebody that has a ton of money, maybe they need a trust. Can you like step back? And if you didn't have any preexisting knowledge of a trust, how would you define it? How would you ask people to think about it? To kind of dispel some myths? So there are. The word trust is describes many, many, many different kinds of financial situations and arrangements, many, many, many different kinds of financial situations and arrangements. And so when people think of trust fund babies, that's one kind of trust. That's probably a tax shelter trust, an irrevocable trust. That's not your typical…. That's a complicated trust, right, that's a very complicated trust with professionals managing it. That is not your typical estate planning trust. So an estate planning trust is an amazing tool.

Speaker 1:

It's called a revocable living trust. This is the most central document. Even if you have a more complex estate and you want to do complex things, you'll also still have a revocable living trust. It's sort of like the trust version of a will in a way. It's just everybody not everybody needs one, but it can be very helpful for most people.

Speaker 1:

And the reason why is that a trust is essentially imagine it as it's a relationship. It is a relationship between three roles, no matter what kind of trust that you have, whether it's a complex one or a simple, or a living trust or somewhere in between. You're always going to have these three roles. The three roles are the trustmaker, who makes the trust. They design the trust, they put the money in. They are typically, you know, making all the rules. The trustee manages the trust assets based on the trust agreement, so it's based on the document that the trust makers have created. And then the beneficiary is the lucky one. They get the benefit of the assets. And so during someone's lifetime, if they create a revocable living trust, during their lifetime and while they have capacity, they're going to serve as all three roles, so all three in one.

Speaker 1:

And the revocable living trust is called a grantor trust. What that means is that it does not have a separate identity, separate from the trustmaker. It is just the trustmaker's money. It takes the trustmaker's social security number. So if the trustmaker creates a, if you have a trust account in your revocable living trust and it earns income, you're going to report that income on your regular tax return. There's no separate tax filing, no separate complication. It's just another investment account. It's really just the title on the account and that it has some extra set of instructions that might be useful or probably will be useful at some point, but we don't know when. Right, and because the trust is totally revocable, amendable, restatable on the part of the trustmaker, the trustmaker can use that money as they wish. They have the right to fund them, to put money in and take money out at will. So they really, you know it doesn't change their relationship with the assets. And so that is during the life, during lifetime, while you have capacity. Now, the advantage here is that this same account, the same trust when you lose, if you lose capacity for any reason.

Speaker 1:

Now, the trustmaker is not all three roles. We actually have a new trustee, a new person steps in. Yeah, yeah, so that trustee. Then you can basically create the document and list hey, if I can't be here, I am here today, I'm planning to be here, but if I can't, here's the next person that should be named. Or you can even have a corporate trustee or something. Well, during incapacity, right, you would just right, you'd have that next person who's named, someone who's going to take care, pay your bills, take care of you while you're incapacitated. And it can be a family member, often for spouses. It's a spouse, right, it's sometimes an adult child, sometimes a close friend, a sibling, or it can be a corporate trustee, absolutely. And then, of course, after death, now we've got the trustmaker has died, now we've just got a new trustee and a new beneficiary there's those two roles left, and so that's kind of how it works.

Speaker 1:

The trust document, in a way, you know it's organized to say, like, okay, at dead in capacity, this is what happens, this is who serves. After death, this is what happens, this is who serves, this is who gets the money right, and these are the rules about that. So it's really just like sort of an instruction book. You know what's going to happen from stage to stage and we try to give as much judgment and discretion to the trustee as possible, because we don't know what the future holds. We need that document to be flexible enough to meet the needs of beneficiaries who may become catastrophically injured, for example, or who may have a substance abuse disorder or may have some other issue that happens to them that they really need help. We really want that document to be flexible, flexible, and we want our trustee to have the discretion to use their good judgment in any circumstance. So, if we think about it, this is not the most basic topic, like there's, you know moving parts, different people, the person putting it in, the person who's in charge, the people who will end up being beneficiaries, the people who will end up being beneficiaries or even, in some cases, for certain people, they may have institutions, non-profits as beneficiaries.

Speaker 1:

If we were to back up and you were sitting down with someone and they say, hey, I live a pretty simple life, um, perhaps I could throw out a couple examples and we can talk through potential. We could talk through potential, you know, do you or don't you need a need, a trust, and, of course, this is very generic. Is not you sitting down with somebody, hearing their all the specifics of their life? Somebody really doesn't have any financial assets. They just have, you know, maybe social security income for a retiree, rent their house or own it, but it's just an individual owner. If they don't use a trust, what would they do instead? Right? So what I like to describe to people is you know, let's imagine all the things that you just said. You know the bank accounts that this person has. Maybe they have a house, they have a car, all the things that you just said, the bank accounts that this person has. Maybe they have a house, they have a car, whatever things that you own that are in your name. Imagine those as a monopoly pieces on a table, just kind of strewn around on the table. They're all in your name.

Speaker 1:

If you die with a will or without a will, it doesn't really matter. I mean, your will tells the judge what to do. But if you die with your, all those monopoly pieces have to make their way to the right person, and that process of figuring out who it goes to is probate. That is the probate judge right is probate. That is the probate judge, right. So if you don't have a will, then the probate judge is going to look to Michigan law to figure out who your heirs are and who they give those assets to. If you do have a will, that is a letter to the judge, just a letter to the judge. Imagine it You're saying to the judge don't look at the law, I'm telling you who's supposed to get my things and who. I want to be my personal representative and come and bring this matter to you. So that is that's sort of how it normally works.

Speaker 1:

Now a lot of people want to avoid probate, for good reason. Why do you want to avoid probate? I mean, it's not. It can be expensive, right, because you need to. Usually you get a lawyer to go through it. It's stressful whether you have one or not. It's usually people's like only you know dealing with the court system and it takes time. So you're going to be Slow. It's very slow. You have to wait for your hearing, you have to file the petition and it's you know the process is not super easy to follow. I have to say there's like so many forms that they can be overwhelming, especially for grieving people for anyone, to be quite honest, but for grieving people especially. So it's just a pain. It's a pain and it can be avoided.

Speaker 1:

I have a client who had a will and actually for most accounts, had also indicated who receives the assets, but the attorney had advised to utilize probate to avoid the cost of a trust. And we are three calendar years in and finally closing the accounts. So it can be very, very slow and there's countless hours that the personal representative spent doing paperwork and you know what. Honestly, typically the price to set up a trust is about the same price that you would pay initially to do probate before anything complicated happens, like you're just going to pay a lawyer, and in this case it was about a 10 to 20 time fold cost. I would say by the time you get done right, if it's a simple, uncontested probate with, like a very simple estate, you're going to pay the same amount as a trust. If there's any complication or hiccup whatsoever, yeah, it's going to start exponentially growing in probate. Yeah, and I would just mention you may just be of the mind, hey, I'm not going to be here to have to deal with it.

Speaker 1:

A lot of people say that that's okay, but just know, especially if you've named a personal representative, you are giving them a job. That is not an easy task, yeah, and that's the hard thing. It's like this personal representative you're probably naming someone who you love very much and who has been close to you throughout your lifetime, and let's try to keep things as like, simple and straightforward as possible for that loved one. Now, there are ways. Without going to the it's not really extremes to me, but without going to the eventuality of a revocable living trust, there still are ways where you can avoid probate. Correct, right, right. So what I like to think about is I like to think about if you can imagine a few boxes, a few boxes on the table that you can take assets out of your probate estate that are just strewn out on this table. If you can pluck those assets out of your probate estate and put them in the box so that they won't go through probate, they'll go directly to a beneficiary.

Speaker 1:

So the biggest one is beneficiary designations. Right, so we have to do those. When we create a life insurance policy, it has to have a beneficiary designation. Typically, we also do beneficiary designations when we have retirement accounts. You set that up with your employer, but often people will. They might start and set that up with their employer and then later get married, later have life changes and never look back at that beneficiary designation, later get divorced but they still have their ex-spouse named yeah. So what we like to I mean part of the estate planning process is just getting that inventory right.

Speaker 1:

When people are working with someone like you, melissa, their beneficiary designations are up to date. But a lot of my clients who come in who don't have financial advisors are telling me I have no idea who's on that, I have to go look that up, or it was from five employers ago. That's that sort of thing. Well, and I just make a note because we sit in Ann Arbor, michigan, we're the biggest employers University of Michigan. You know, if you have an employer plan that has a 401A, 403B, 457, an alphabet soup you may have, might have updated one, but not all. I've seen a lot of custodial lack of beneficiaries where maybe there was some piece of paperwork 20 years ago but it's not showing up digitally. Here's a reminder to do from this episode Go back and check your beneficiary designations. You might be surprised.

Speaker 1:

Yes, yes, we cover a lot of surprises in this practice. Yeah, and ones that needed to be corrected right, like not good surprises. So we cover life insurance and retirement accounts, both biggies, because that's often those are big pools of money in many cases for families. But what about, like your bank account or a brokerage account, things like that? So those accounts, you have to go, sometimes you have to jump through hoops to get a beneficiary designation on them. It's not every, you know it's not the same as there's not as automatic, Definitely not automatic. You know, sometimes you have to talk to a different division of the bank and jump, you know, and do some faxing and things like that. I've seen some crazy things, but they're called transfer on death or pay on death designations and that you would name through your bank the transfer on death designee or the pay on death designee, and then that would also skip probate, because the instructions you know. What we typically do is we've got this bank account with a TOD, we call it TOD or POD, and we call up the bank, we have the death certificate right and we have to give information about the beneficiaries, banking information, and then they will be able to transfer the money. So that is really really helpful and important and it's much, much quicker than going through probate.

Speaker 1:

Let's see, I just lost my train of thought here. That's okay. So we've talked about the tod pod. Yeah, you, really, it's really important to list all your assets, list your, pull out your monopoly board. Yes, look at your list. Yes, and yes, you know a, if you, if you kind of, are a collector of accounts, because I see some clients they're like the more institutions I work, my money is safer, because then I have it a little bit everywhere. Okay, you've got your job cut out for you and not to say that you can't do this, but you need to stay on top of what the game plan is everywhere, because you could have a solid game plan if you miss one or two accounts. Most accounts have a plan, but the rest is over to probate. So that is a big part of what we do in estate planning.

Speaker 1:

People, before they even come and meet with me, they have to do an asset inventory. Yes, and often that's the hardest I mean one of the hardest pieces, right, because it's like I have to figure out where all my accounts are and write them down and I've seen some very long lists. But it's very important because I say to people I'm not really interested. I'm interested in how much money you have for specific reasons One is tax reasons and strategy reasons but I'm really interested in making sure we have a plan for every asset. Every single asset passes in a different way. We need to have a plan for it.

Speaker 1:

And the last way that we can avoid probate is for real estate. In the state of Michigan we really do have an amazing tool called a Lady Bird Deed Not every state has it and this deed will allow a homeowner to separate out what their regular ownership regular ownership is. It's called fee simple, right, it's where I own the property during my lifetime and when I die, my estate owns it. Until you know, the estate is dealt with. So I own it during life and after death. But what we do is we separate out that ownership through the Lady Bird deed and we say I own it during my lifetime and I also…. So I have a life estate but I also can mortgage it, sell it. I have a right to sell this property as well, so I'm not stuck living in it forever, I just have a life estate.

Speaker 1:

And then when I die, if I die and I still own this property, then it goes to whomever, or it goes to my trust. More typically, we send it to the trust. At that point there's different strategies for that right. If I have an individual homeowner, not a married person, we'll put the house in the trust right away. When we do have spouses, we'll often try to keep the beneficial ownership that a spouse has or not.

Speaker 1:

The. It's the beneficial type of ownership. It's called a tenancy by the entireties. That has liability protection built in, and so we will keep the tenancy by the entireties for the married couple and then we'll ladybird to the trust after death of the second person. So that's a long way of saying there are ways to do that through deeds, to avoid probate as well, and then of course, the last way to avoid probate that we're talking about, that doesn't have to do or that you know, includes a will, right, is a trust. So why wouldn't we just send all this money to whoever it needs to go to, through beneficiary designations or through a ladybird deed, and call it a day For some families.

Speaker 1:

For some people, that is a fine choice. For some people, that is a fine choice. Um yeah, like I would start with the um, you know, kind of setting the table by saying we both work with clients where we feel like you know, you as a professional and me as the observer who's been through it. Um yeah, it totally makes sense to name your beneficiaries. I would. I do not recommend the just let it fly with a will or no will. I really want you to title your accounts with that POD, tod, but for many people that is absolutely appropriate and a durable power of attorney can overlay that, so that while you're still living, if you are incapacitated, there is a way for people to act on your behalf, absolutely. So that's the thing about the durable power of attorney. If you again imagine all these pieces on the board, the durable power of attorney can step in when you cannot and actually manage those assets that are on the board. They can also manage the assets that are, you know, have been designated as a beneficiary, you know account right. So POD TOD, that sort of thing. They can manage those assets because they're still in your name right during your lifetime. So anything that's in your name, your power of attorney as agent can manage for you Perfect.

Speaker 1:

So then let's get to the topic at hand, because we have, as you can see, this is not, this isn't just like hey, read this article and go do what you need to do. It's not intuitive. No, no, you need to. You know, there's some basic learning we need to do before we get there. But let's talk about who needs a trust. Right, so, who needs a trust? Well, you know, melissa, you know a little bit better than I do that, acting as a power of attorney, it's possible.

Speaker 1:

It can also be very difficult, yes, because banks do not like it when someone comes in and says I have a different name and a piece of paper, but let me manage this money that's in your client's name. The red tape is just flying at that moment, and it's often on one of your you know. Just a really difficult time it's when you know someone you love needs extra help. They're going through it and you're like, please help me out, I just need to pay the insurance, I need to write the mortgage bill out of their account for them. Yeah, and that can be very hard to do, unfortunately very hard to do.

Speaker 1:

So when we, when we really think we're going to have, you know, maybe we, we may very well have an incapacity situation, right. So sometimes I'll give an example. I mean, if I have a widow coming in or even an older couple or someone with some type of illness, right, and they're like I'm worried, people are going to have to take care of me, maybe they have a very responsible people in their lives who would love to help them. In that case, sometimes we put everything into a trust specifically for incapacity planning. So we would put all those bank accounts into the trust, we put the house into the trust, and now the trustee can manage those assets, um, for for the trust maker, right, and they can make sure that all the bills are paid, they can make sure the taxes are paid, they can fix the roof if it's leaking, and they can do those things much more easily as a trustee than as a power of attorney. Yep, you still need the power of attorney for retirement accounts, because the trustee is not going to be the retirement account, the trust is not the owner of your IRA or 401k, et cetera Right, but for any bank accounts, we still have to have the power of attorney. Yeah, for the bank accounts especially, but then any investment accounts that are not retirement accounts, then this is a very effective way to have more instructions and a friendlier engagement with the financial institution. Absolutely.

Speaker 1:

What I tell people is you know, often, because people get confused about like, who's the power of attorney, who's the trustee in incapacity and I think about it as like a bit of a Venn diagram. Often we have the same person named, but it just depends on which hat they're going to put on. For this account, I have to put on my power of attorney hat you know I'm going to try to cancel this Xfinity I need to wear my hat for power of attorney and then I put my trustee hat to manage trust assets, and so it's just which hat are you going to wear for that particular task? Right. And then, when it comes to after-death planning, trust can be very helpful.

Speaker 1:

First of all, everything that's in the trust already, either because we've already titled it in the trust during our lifetime, or because we have beneficiary designations that name the trust. Everything that's in that trust is out of probate, right. It's all… we're sort of… imagine… I like to imagine a trust box sitting on my board with all these pieces I can put…. I'm going to put those assets in the trust box. I do not want to ask the judge to put those assets in the trust box. That's the last resort, right. And so we always do have a pour over will when we have a trust plan. It's called a pour over will because if there's something left out of the box, if there's something we forgot to do, the beneficiary designation reacquired the asset. You know, at the end of our life and we didn't do that. Then it's outside of the trust and there's no way to get it in except through court. So we're going to go into court with a pour over will and the pour over will simply says judge, I made a trust, just put anything that's in my probate estate into my trust and let my trustee handle it from there. So that's why we always have a will, just in case, but we hopefully won't need it.

Speaker 1:

One thing that people don't realize is that, for Medicaid payback purposes, only assets in your probate estate are touchable by the state. So assets that are in a trust already or after you know, after you die, those are generally protected from payback rules. So that's just an aside. So who needs a trust after death? Well, we may not want to, let's say, you know, we may not want to just give this asset directly to the beneficiary.

Speaker 1:

Maybe we're talking about minor children. That's a biggie, and we both work with many families with minor children, and I, you know, first of all, there's from whatever age they are, until their age of majority, 18 in Michigan. So, okay, I was not prepared for any amount of wealth to be managed at age 18 on my own absolutely not either. And I don't know who has kids, even if they are the most responsible ever, who you expect. You know that that would be appropriate if they are not at that age for you to assess the circumstances. So I like to tell people to think about their trustee as a financial parent for their Reiner children.

Speaker 1:

And often families do get concerned about guardians as well. If both parents die, what you know is this guardian going to be able to afford the lifestyle that we have and take care of all my kids' needs. Maybe the guardian you're picking has their own children as well, or they're on a fixed income right, and so if you're leaving assets directly to a minor child, what happens is that those assets have to go into a conservatorship which is court-created and it's court-supervised. Sometimes you need to get a court order to trip to court to get those assets out. There's also, like you have you know, at least in Washtenaw County no freedom in how you're going to invest those assets. They're all going to one particular bank. They're all going to one particular bank, and so it can be very, very hard and extra costly and stressful to have assets for minor children going through conservatorship when we know that our guardians and our children are going to need to access those assets before they turn 18, right.

Speaker 1:

Well, and I can mention, like the trust that I the original trust I drafted had one person listed as guardian and one person listed as trustee, because we had family members that were more financially savvy and family members that were more willing to and capable of caring for small children, and we also had provisions in there for, hey, if somebody is taking care of our kids. We're not going to give them a big percent of our estate, but we're going to pay them for costs as well as have provisions so that they can make adjustments to their family, knowing that they have two additional kids. Totally. Sometimes they might need to buy a van, yeah, or move to a different house, depending on the circumstances and how many kids are involved. And sometimes people are just like no, you know like it's complicated, I'm just going to leave my money to my brother and then they'll take care of the kids. No, that is just like cringy from our perspective, because both so many things can go wrong. It's dangerous. But so many things can go wrong, it's dangerous. You don't know who like there's no, you know kind of like chain of custody that you can control after that happens and it's a tax obligation for them.

Speaker 1:

We could trust your brother to the cows come home and your brother that those assets are in his estate. If you leave them to him, they're in his estate. Guess what? They're accessible to creditors. If he crashes into a car and injures someone, the plaintiff attorney who comes after him is not going to care that. That's the money that you gave him for your kids that's accessible to his creditor. It also could become marital property andouse with a spouse upon divorce. So there are lots of reasons why you don't want to leave cash just to your brother to take care of your kids. It has to be protected in an account for your kids, um and so uh.

Speaker 1:

Same goes for I've also heard like, oh, we're just going to leave it to the oldest child, they'll they'll figure it's complicated, something like that. No, not a good idea, right? And that oldest child is not obligated. I mean, you've irrevocably gifted this, given this asset to the oldest child, there's no legal obligation for them to share it. Not only is there not a legal obligation, but there is an obligation for them to pay the taxes associated with whatever they've received. There's also an it's. Also there are limitations, excluding a gift tax return for you to for how much you can just randomly give. So, exactly, take a. Take a pause If the you know, pause this episode and call your estate planning attorney or financial advisor if this has been the strategy that you have been employing.

Speaker 1:

Yes, yes, absolutely yeah, I'm in the client services business, but I just have some rules in my practice that I'm just not going to set up an estate plan that I can't put a train on a track for collision. Of course I can't sleep at night to do that. So there's some of the and that is one that's a big one right, leaving assets to someone in their own name to, you know, hopefully trickle down to other beneficiaries. No, we can't do that. Let me. Maybe I can do, because we unfortunately, like I could talk about this for two hours, but I don't want the episode to go on too long. Can I just throw out some circumstances that I have mentioned might be useful to have a trust, and then you can comment and then add a few of your own.

Speaker 1:

Sure, one of them that comes top of mind, and I know you are very familiar with, is if someone has special needs. So let's say that you have a family member who you're going to be responsible for, who is unlikely to be able to be independently managing their finances or money. How can a trust address that? So there's a couple issues. One is they're unlikely to be able to independently manage their assets, and also they may be eligible for government benefits, for needs-based government benefits. So if they have too many assets in their own name, they're actually going to miss out on some very helpful benefits that will help them in the long run, right? So if we're going to, if someone has special needs and they're going to, you know need support for 60 years or 50 years no, it's very hard to have enough money to make it that far, right? And so what we want to do is we want to be able to access Medicaid and access some of these other benefits that are very, very helpful, as well as having a pot of money to meet financial needs that are not met by the benefits, right?

Speaker 1:

And so that's a special needs trust or a supplemental needs trust, and the trust can be designed and set up by parents or by third parties for the benefit of a person who is a special needs person. And those trusts have to be very specifically designed. They have to have specific language in them to make sure that they work, because the agencies, who are the benefits agencies, are going to be reading those trusts and making sure they're in compliance. And then we also want to make sure that we have trustees of those trusts that are sophisticated enough to manage those kinds of trusts. But they are very helpful and crucial really for families who have kids with special needs. And it's also important too to tell other family members right that you don't want them leaving money to your child with all the great intentions that they have in their will, because those assets then will be in the child's name and now they're going to be a problem. Now there's going to have to be other, more sophisticated and costly trust set up or limitation of benefits. That could be a potential outcome. They could lose benefits for a while as well or a long time. So there's lots of different solutions for that. For families who don't have quite enough money to put into a standalone special needs trust, there's actually pooled trust options that are wonderful, and then there's also the standalone trust options, but very, very helpful and critical.

Speaker 1:

Let's say that you're you have three kids that are independent and everything's going swimmingly. Maybe there's a kid that has substance abuse issue. You just don't know how the marriage is going. You don't want assets they inherit to be part of marital property for this beneficiary. Maybe they're in a high-risk profession where they may be more likely to be have liability lawsuits. Things like that Talk to me about how the use of a trust could assist in a case like that. So trusts are magical arrangements in that I could have.

Speaker 1:

There's a pot of money that is for my benefit if I'm the beneficiary, but it's not technically mine, it's not in my estate. It's for my benefit though. So I get to have distributions from that account or I get to have that account pay certain bills for me or maybe make a down payment out of my house, but those assets aren't in my own bank account in my own name, so that they don't become marital assets. They just don't. They're in a separate protected account and if parents have concerns about the money that they're leaving becoming a marital asset for whatever reason, people have their you know concerns keeping it in a trust for their adult child will prevent that and it will take away, like, the awkward situation of the child inheriting a big chunk of cash and say I'm going to keep this in my own separate bank account, I'm going to make a bank account with my own name on it and I'm not sharing it and I'm not putting it in a joint fund. That can feel complicated in a marriage. So really, the trust makers, the parents, can take away that complication by just making it a trust, you know, for their adult child and keeping it in trust.

Speaker 1:

The other thing is that, like you said, what if you are in a high risk profession and you may get sued? Those assets that are for your benefit are not yours. They are not accessible to your creditors if you get sued, it's a really, really great way to protect them. If you have a substance use disorder or you have some other type of financial incapacity I call it right where you're just like a spendthrift, you're a gambler, maybe You're not managing money. Well, money just doesn't… Maybe you're giving it out. We use the example of gambling addiction, cult membership. People give their money away sometimes, and so if they need protection from that, we've got a trustee and they can pay your bills, they can pay for substance abuse treatment, they can make sure that you're not on the street, but also not give you cash to spend in a way that would not be wise, absolutely.

Speaker 1:

I also think, like I was just talking to a client today, we're talking about beneficiaries and it was pretty simple to begin with Mom first, sibling second, but then there's different numbers of kids in the siblings. You know, maybe we would want to get a little more complex. If, god forbid, something happened to you. Know one or two of those first people To me, the more people involved. God forbid, something happened to you know one or two of those first people To me. The more people involved, the more generations, the more tiers. It's a lot easier to write in rules based on you know further scenarios versus the standard TOD or beneficiary designation form, right, right, and you're also again you're sort of removing the responsibility for like somebody in the later generation to be generous or have a favoritism or do something that someone will perceive as unfair. You're fully removing that and in that way you can help to preserve those relationships Absolutely.

Speaker 1:

I always think about the psychological nature of money, right, just how it's so psychological. And so if you have this bunch of cash that gets dumped into your checking account we all have had, you know, maybe we'll we don't know where that money went. We just spent it all, but we don't even can't tell you what we spent it on right with. We just spent it all but we don't we don't even can't tell you what we spent it on right Having it in a separate and special account. Beneficiaries see that. They know that that is the special account that is from my parents and I'm going to think about it really carefully. I'm going to be really intentional. I'm not just going to, like you know… Spend it four times over. I think it was on Amazon in the middle of the night from that account, right, yeah, yeah.

Speaker 1:

So, and then I also think it's important to mention, even though we talked in the beginning, that trusts are for everyday people. A revocable living trust is really a change in account title and an instruction sheet that you get to personalize, along, hopefully, with the assistance of an attorney, along, hopefully, with the assistance of an attorney. But when you are in a high wealth circumstance, it definitely, to me, makes more sense. It's more complicated, there's more money at stake, privacy issues when you go to court, and then other people could find out, kind of, what wealth is at stake here. A lot of different reasons, but certainly, to me, the higher net worth circumstances often lend me to say, hey, cost benefit wise, yeah, you're going to pay a little bit more to draft a trust document, and maybe we can talk about those costs in a moment. But you know, when I look at the cost benefit, I mean it's definitely, definitely pushing up the price of probate process when you have more assets and money.

Speaker 1:

Oh, yes, and probate is public, right, all the bills are public documents. Probate proceedings are public. All the filings in probate are public, including an asset inventory where you list everything and the value of everything. It's all public information, and so people want to keep that private. And for people with higher net worth or special kinds of assets, trust can be very helpful.

Speaker 1:

So one thing that you know there are different ways to leave money to a beneficiary, right. You can leave assets to a beneficiary such that those assets will be counted in their estate at their death, for example. You can leave assets to a beneficiary through a trust such that it will be part of their own estate during life. But you can also leave assets to a beneficiary in a way that it will never be part of their estate and so it doesn't increase their value of their estate at death, which may you know, depending on what the level of their wealth is and the estate tax exemption amount, that may also help their family save on estate taxes, right? So estate taxes are typically highest marginal tax rate. You know almost 40% right now, but most families are not going to reach that threshold because right now the estate tax exemption amounts are very high. Tell me, remind me, what the threshold is in 2024 and 5?

Speaker 1:

I think 13.9 something million per individual, almost 14 million for an individual, so 28 million for joint, and, based on the outcome of the presidential election of 2024, it is likely that at least for the next two years, if not the next four years, that it's a very friendly government kind of stance when it comes to lowering that estate tax rate. At the beginning of my career it was a million, so it's been all over the place and one point it was $600,000. Right, and that's the thing is that part of that. You know estate planners have no control over that. So we're trying to, to the best of our abilities, not overcomplicate plans because, you know, in anticipation of estate taxes, but also put some I call it post-death tax planning options in there so that if the family finds themselves subject to estate taxes they will have some options to reduce those taxes. But some families who know they're going to have a taxable problem, they can make some plans or, if they think they might have one, right, there's ways that you can plan proactively and keep those assets out of your beneficiary's estate and again, it's like a pot of money that won't be taxed at the beneficiary's death. For the next generation.

Speaker 1:

I hope this conversation for those listening is a conversation of possibilities. It's not a prescription, because every person is different and I hope you hear in our conversation that a lot of thought goes into successful estate planning. One of the things when you were just mentioning hey, there could be a possibility of receiving assets that would never be in your estate Not receiving, but having assets that are there for your benefit, that would never be included in your own probate estate or your own estate. But I loved what you said too, Ashley.

Speaker 1:

You can get really complicated, you can get very complex, you can have multiple trusts and things like that. I love the balance of meeting your needs but also not overcomplicating things. Right and so and I know you've kind of take that approach as well of you know, as a practitioner Things should only be, you know, as complicated as they absolutely need to be and no more. So I'm not the lawyer who's, I'm not trying to sell my clients more complex trusts, or you know, I don't charge extra for within sort of within certain bounds if people need more complex planning within, like a revocable living trust. I don't charge extra for those things because I don't want to be incentivized to sell them, because they are tools that are not right for everyone, and so I'm very, very careful because I live in this community and I fully expect my families to come back to me with these trusts if something happens, if someone becomes incapacitated or dies, and I want to make sure that this is a trust that I'm proud to administer. Right. That doesn't. I don't want any angry widows coming to me and saying why did you do this to me? And so, really, you know, the goal again is to know. The goal again is to address all the concerns you know without making anything more complicated than it needs to be.

Speaker 1:

Well, tell me as we're wrapping up. So if someone's listening and is prompted to think, oh my gosh, I'm going to make this a priority for 2025, which both of us love to hear. First of all, you're going to be reaching out to someone who practices in the state that you live in. Yes, you can't just go to a Michigan attorney for a New Hampshire trust. They could practice in multiple states, but that is something where and also I would strongly recommend don't go to the family friend who does all types of law.

Speaker 1:

I hear that all the time too. Like we know a guy, I think they'll give me the family rate, but oftentimes I frequently hear that you don't need a trust in those circumstances and just ends up being maybe not ideal, potentially not ideal. This is something you don't really want to skimp on, I have to say. Hopefully you're not doing it every year. I mean, there are a few people who like to change things frequently, but for most people this is not something that you would need to redo. So I think it's kind of like the purchase of a car.

Speaker 1:

It's cost over time. It's not just the upfront cost. But talk to me how attorneys like yourself or you know there's likely a variety of ways that you pay for estate planning, what you know. How do you bring up what are the costs and what might you do? Okay, I think you were just asking about the cost. Yeah, tell me about the cost, okay.

Speaker 1:

So in my practice I do mostly flat feet, and the reason why I do that is because, after you know now four years of doing this, I know about how long it takes me, about how much it costs to create one of these plans, and so clients really like the predictability of a flat fee and it's very helpful for us as well, and so typically, if we're talking about an individual client, they're going to be looking at somewhere in the ballpark of between $3,000 and $5,000 probably to set up not just a trust but what I call a comprehensive estate plan. So if they don't have an estate plan in place, or if their plan is old or from another state, we would start completely over and make all new documents and make sure everything is up to date. And then for families and make sure everything is up to date, and then for families, we're more in the I would say probably if there's minor children involved, probably in the five to six and could go up higher than that depending on the family's needs. So that would be for like one revocable living trust and all of the other documents. When we have minor children, we do include a lot of additional support, including what we call emergency documents for minor children, and that would be a power of attorney for care and custody of the minor child during an emergency, as well as patient advocate for the minor child during an emergency. You'd be surprised, it is hard to get medical care for children without a parent to consent, and so having the emergency patient advocate for minors is very helpful and we've now seen at least one, maybe two situations locally where people have used them and they've been successful. So that's when mom and dad go to Mexico for, you know, their anniversary trip and the kids stay home with somebody you trust and love Totally and then they get a toothache or an earache and now you know the pediatrician's not going to treat them unless they get some form from you. But you're in Mexico in a, you know, in a cavern somewhere doing a I don't know, but you know I'll have to. I have to give this example, melissa, because it's hilarious. I had so many you know I have a very active and dark imagination doing a seat, and so I've I've.

Speaker 1:

There's so many scenarios in which this, like emergency powers, uh, would be very, very helpful and um more dire than the one I'm about to describe. But in my particular family we've used it once, uh, and it wasn't because we were on vacation or we were in a car accident in another state or anything like that. It was because my husband was out at a bar and didn't have his phone on and I was literally laying in bed with my phone silenced and my children were at their grandparents down the road in the next town and my son had hit his head and was vomiting and so they were worried. They were worried he had a concussion and they want to take him in. So I missed like 20 calls from my mother-in-law and finally my father-in-law just took those emergency documents I'm laughing because it all worked out, I'm assuming, and my son was fine Good, he was totally fine, but they accepted those and gave him care when I was unavailable, which I was, you know, and so that's not the typical use of the documents. That's not actually why I created this, but it worked and it's very, very helpful. So they didn't even need, you know, to get in touch with me to give care to my son. Way to go, grandma and Grandpa, that's great. I'm really impressed that they grabbed the documents too, and that's you know.

Speaker 1:

I would note it's very helpful to share your executed documents with your financial planner because we can keep up on file if you're, you know, it might be a copy, but if you're in Mexico or, you know, not awake, you can be back up. Hey, contact Melissa's office. They might have a copy too, as well as your office, of course, ashley, we always have a scan copy, and the other thing that we do with all of our plans is we actually sign our families up for it's mandatory, we pay for it for this service called DocuBank, and it's basically an emergency wallet card, and the emergency wallet card has on it the name and contact information of the emergency contact, as well as, like any information a first responder should know, like what medications you're on or what you know medical issues you might have. It also says minor children at home, if you do. And then on the back there is a pin, a login and a pin that a first responder can use to access your medical documents and your emergency documents for kids. We upload those with the service for our clients, so when they get the docu… when they get that card in the mail, it's already loaded… locked and loaded and ready to go. And we do that because why create emergency documents if they aren't accessible in the moment of need? And so we just want to make sure that we can figure out ways to make those accessible when needed.

Speaker 1:

Well, ashley, if people have follow-up questions, how can they find you? They can find me at treetownlogcom and please reach out. We have. I'll give you the link for our contact page, but you can set up a 15-minute complimentary consult with me at your convenience and I'd love to get on the phone and meet you and we also. My email address is ashleyattreetownlawcom. Our number is 734-224-3977.

Speaker 1:

Well, I know many listeners. They may even have an estate planner or trust, but it's time to update it and for so many people it's on the to-do list but it's complicated. It's not the most fun topic of like. Who do you trust if something goes horribly wrong? We can kind of have the gallows humor here, ashley, but for people that don't talk about this stuff all the time, it may not be as comfortable.

Speaker 1:

But I would encourage those of you who know that you need to address some of these things, with or without a trust, to make that you know intention for the new year to get things done. It's such a relief when you have something in place and there's no perfect estate plan. I would encourage you to say you know progress over perfection when it comes to an estate plan, because it is so difficult and complex, but please consider getting things updated. It's a gift to yourself and to those that love you Absolutely, absolutely. And you know, if you're local to Ann Arbor, we try very hard to make our office very cozy and welcoming. We know people are nervous when they come in and it's a heavy topic and you know I would just say work with somebody who you trust and you feel comfortable with, because you're going to get to a better outcome if you can really be honest and go deep in this planning process.

Speaker 1:

Well, thank you so much, ashley. Thank you, thanks for having me. Thank you for listening to the Women's Money Wisdom Podcast. If you found value in this episode, the best way you can support the podcast is to forward an episode to a friend or leave a review. Go to pearlplancom and the podcast link to get all the resources and links mentioned.

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Melissa Joy, CFP

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