In this episode, Toby Mathis of Anderson Business Advisors welcomes John Anderson, an attorney from Anderson Advisors.
John and Toby discuss the need for a living trust – and why you don’t have to have an enormous “estate” to have a trust. Trusts provide protection from going through probate court, which is expensive and time-consuming, possibly taking 2-4 years to get through. Your living trust can also have a third-party trustee such as a bank or attorney that will look out for your interests and wishes once you pass away. This protects your descendants from having to deal with probate, and even prevents them from fighting amongst each other (or fighting with another sibling that is acting as trustee) for your estate.
Highlights/Topics:
- John Anderson’s background and early years
- A few interesting stories from John’s experience
- Probate – challenges and specifics
- Living trusts to avoid probate court
- Dynasty trusts for multiple generations
- Trusts and the court system
- Advice: Give your younger kids and grandkids some inheritance, let them play around with it
Resources:
Full Episode Transcript:
Toby: Hey, guys. This is Toby Mathis. You’re listening to the Anderson Business Advisors podcast. Today, I have John Anderson on. He’s actually an attorney at Anderson. John Anderson at Anderson. He focuses specifically into the trust area and has a long history in that area.
I just thought you guys would really appreciate having him explain these things as much as I appreciate him at explaining these things. First off, welcome and glad to have you with us, John.
John: Thank you.
Toby: Just dive right in. Can you give me a little background on you, where you grew up, how you got into law, all that fun stuff?
John: I grew up all over. It wasn’t any particular place. Texas, South Dakota, Utah, Arizona, Oregon.
Toby: Military or something? What was it?
John: No. My dad was a professor. My dad’s a professor of information systems. He taught me how to code and stuff when I was a kid. I hated it, I decided to rebel, and became a lawyer instead.
Toby: You went from coding to lawyering. That’s kissing cousins right there.
John: It’s surprising how much of an intersection they have with logic, formulas, and things like that.
Toby: That is true, actually. You’re moving all over. I jumped into your story, because I was just so curious. You moved all over, and then how did you end up in law?
John: I actually was going to college majoring in history. I wasn’t quite sure what I wanted to do. I had a sister who ended up becoming a lawyer. I thought I could do that, so I decided to go to law school.
Before I went to law school, I actually started working with a law firm that specialized in asset protection and estate planning. I got a lot of interest in that even before law school. When I went to law school, I took a lot of courses in that, and then ended up going back to that firm to work after finishing law school.
Toby: Is that what you do day in and day out? You work specifically in the estate planning side, right?
John: Correct.
Toby: How do you like it?
John: It’s good. You get all sorts of interesting stories when you’re working in estate planning, because I need to know personal details. I need to know family dynamics, what are your kids like. It can get very interesting as far as the stories that I get pulled dealing with those situations.
Toby: Without violating any attorney-client relationships or anything like that, what are the stories that you’ve seen that left a mark, so to speak? Do you have any of that just stand out as, oh, my god, this was a crazy situation?
John: Yeah. I had one time where a client called in. He was complaining about their brother who was a trustee of the estate and talking about how he was withholding assets from them. Come to find out that the asset that was being withheld was a garbage can. They really wanted that garbage can. They were supposed to get it under the trust, but the brother was being a pain and wasn’t giving them that garbage can.
Toby: A garbage can?
John: Yeah. You got to understand. It’s a stainless steel garbage can. It had a little pedal or you push on the pedal and the lid flips straight up. It was basically like a DeLorean, only it couldn’t travel through time, but it was that garbage can that they had to have.
Toby: Oh, my God, and then we’re like, let’s force the distribution.
John: Pretty much. You get crazy stories like that all the time.
Toby: What about court? Have you ever had any just stuff where you’re involved on a probate or something? We’ll get into what all these things are, guys. We’ll dive into it. But anything that stuck out as being like, oh, my God, I cannot believe I’m witnessing this?
John: Most of my job is one to try and get people to avoid probate. But in the few cases where I have had situations that did have to go to probate, I had one where a friend, her father passed away. He qualified for a simple probate, so it was supposed to be fairly easy. She went to the court to see if they had any forms that she could follow to use to just file it on her own. She was trying to do it without a lawyer.
They handed her a stack of papers about that thick and said, here you go, just fill this out, and it’ll be good. She started trying to fill it out, and they’re just blanks. There’s no information about what’s supposed to go in the blank or how it’s supposed to read.
She just got super frustrated with it, even though this was supposed to be a simplified probate. She ended up having to actually come to me. I actually fill out the forms for her so she can actually submit the documents and get the probate going.
Toby: All right. You mentioned probate. This would be a good segue into actually talking about what some of these terms mean. I have a few little questions for you, John. What is probate? And why should somebody even care about it? Why would you want to avoid it?
John: A probate, as you love Latin, just means proof. It all comes down to a signature. If I own a piece of property, and I want to sell that property, I have to sign my name in order to sell that property and transfer it. If I’m dead, I can’t sign. What probate is is a court process, where the court is authorizing someone else, the personal representative, to be able to sign on behalf of the deceased person.
Through that process, there are a lot of steps involved. You got to go into the court. If there’s a will, you have to present the will. If there’s no will, you have to go through some extra steps to get someone appointed as a personal representative. And then the court verifies all sorts of different information, who wants an inventory of assets, who wants to make sure that there are no creditors.
You have to do publications to try and root out any creditors. It just takes a lot of time. It usually requires an attorney to do it because there’s a certain language that the court wants to see in the filings.
Toby: But you hear lawyers say it’s a simple process. Oh, it’s not that difficult. Is that true?
John: Well, there’s that term simple probate, but it’s not as simple as if you use a trust.
Toby: It’s like simply going down to the DMV, right?
John: Yeah, because your assets get locked down during that probate. That can take several months. Even within my own family, we had a situation where the father passed away. It was a young family, young kids, and everything was titled under his name. The widow had no access to any of their assets.
The only reason why she was able to get money was through the mortician. The mortician could make a claim on the bank account for his services and get paid directly. What he did was he charged a higher fee than what he normally charges to that account. And then he took that money and gave it to the widow so that they could have money until the probate could get through and actually get the assets.
Toby: Probate, you’re dealing with the court. Are there procedures? I actually know it, but somebody may not know out there. Are there procedures for a surviving spouse, for example, to get access to some of the money, or is it always going to be through the court?
John: If they have their name on the account, they should be able to get access to it. But if they don’t have their name on the account, then no, they’ve got to go through the court. They can do an emergency filing to get access to it, but even that can take some time. It’s locked down unless the court says, okay, you can get access to it.
Toby: You’re dealing with the court, I guess the way I’ve always looked at it is I try not to have people to deal with the court, because the court’s idea of something happening quickly might be six months to a year. It’s something that the ordinary course might be two years to four years as a typical case, right?
John: Correct, and then you’ve got the more extreme examples like Howard Hughes who died in 1976. His probate was closed in 2010, so 34 years.
Toby: Thirty-four years of probate?
John: In probate, right. An entire generation of attorneys made their living just off of that probate.
Toby: Could you have avoided it?
John: Yup.
Toby: This is what always people get frustrated about, especially those of us who are in this area and especially you, I imagine. You can literally just draft around this and avoid the whole process, can’t you?
John: Correct. If you use a living trust, you can avoid the whole probate process. One thing I often see that maybe some attorneys push is they tell clients that they’re going to get a trust, but what they actually drop for them is a will that creates a trust upon their death. It’s a testamentary trust. Michael Jackson did this.
The estate still has to go through probate, because the will always has to go through probate, and then it creates a trust upon their death. But you can avoid all of that just by creating a living trust while you’re alive, transferring assets into it, and then you don’t have to go through probate.
Toby: Oh, my gosh. How does the trust specifically avoid probate? Is it just like I just sprinkled some trust on this and magically I don’t have to probate or what is it? How does a trust avoid probate?
John: It avoids probate by actually owning the asset. You have to do what’s called fund the trust. We talked about how the probate is all about the signature. Instead of having me on that title or own that property on the deed, I’m going to put the trust on there as the owner.
I still control it as trustee of the trust. I’m the beneficiary of the trust. Basically nothing changes as far as how I use the asset, but my name isn’t the name on there for the signature. I’m just the trustee. A trust can name a successor trustee who automatically steps in when I die, and they can now sign for that property without going through probate. You don’t have to go through the courts. There’s just an automatic process. We get around that signature requirement because the trustee is signing, not you personally.
Toby: Instead of having to go to a courthouse and say, hey, your honor, please appoint so and so to act on behalf of the estate, or hey, please sign this document to transfer, it’s already in trust, and now we’re dealing with this now. Is it a written document? Is it something where I still have to go to court, or is this something that can be handled completely privately?
John: It’s a written document. It’s handled completely privately. Sometimes there are times where you may want to go through probate, but it’s fairly limited. You can manage things within the family fairly simply. Most trust, as long as we don’t have to deal with minors, if we’re just doing immediate distributions, two to three months at most.
Toby: Is it really just a will or a trust? Or are there other methods that you can use to avoid probate as well?
John: There are other methods that you can use. You can use beneficiary designations on assets. With a bank account, you can set up a payable on death or transfer on death that says, when I pass away, this account automatically goes to, and you’re going to name the individual or individuals that you want it to go to.
Toby: Isn’t that similar to a trust, though? It’s a written document that says, if something happens to me, here’s who steps in and it is the successor?
John: It’s similar, but it is not the same. The situation that I ran into shows that maybe this isn’t the best option, is where a family, they wanted to avoid probate, but they didn’t want to incur the expenses of setting up a trust. They’re actually not that expensive, but they’re cheap.
They just named the kids as the beneficiaries on the bank accounts. You can do it on a deed, you can do it on various different assets. They had beneficiary designations on all their assets. It avoided probate, and the kids got all their cash and they got the assets. The problem is after someone passes away, there are usually debts and taxes that need to be paid.
With a trust, you have a centralized management through the trustee who’s responsible for taking care of those expenses before making distributions. In this situation, there was no centralized management. Each of the kids got their share. Each of them was like, I’m not going to give my share to pay these taxes or to pay off these debts. And they didn’t do anything.
The IRS being the IRS, they may take a few years. But eventually they came back and went after the estate for the taxes that were owed. By that time, the fees, the interest and everything, and accumulated, they just went after every single one of these kids and took everything.
Toby: Did the kids end up losing what they’ve received or a chunk of much?
John: Yeah, they lost the majority of it.
Toby: Jiminy Christmas. You’re still going to say an individual. Does it have to be one of the beneficiaries? Could you have a trustee who’s a third-party, unrelated third-party, fiduciary, lawyer, accountant, bank company? Does it have to be somebody who’s interested, or can it be somebody who’s completely unrelated?
John: It can be someone who is interested. Depending on the circumstances, if your kids are older, you’re making immediate distributions. You don’t care. It usually works best just to have that family member as the trustee.
In situations where you maybe want a drawn out distribution, it’s usually better to have that third-party trustee, especially if you’re drawing it out when the kids are older, because the situations I’ve run into where you have one kid as the trustee, but they’re supposed to hold the money for a period of time for the other kids and their adults as well, it just is a recipe for disaster. The kids are upset, they can’t get their money.
When your kids are little, I’ve got a bunch of kids, and you put one kid in charge who’s older, the other kids are going to rebel every single time. The same thing happens after someone passes away. They name one kid in charge, and they’re supposed to be holding the money for the other kids. The other kids are going to rebel.
Toby: What do you do? What would you do under that circumstance? Would you tell them to get a third-party?
John: I would tell them to get a third-party. There are professional trustee services, attorneys, accountants, most banks, have a trust department that can act as trustee. Those are actually usually better than most attorneys or accountants. They actually charge less fees a lot of times.
Toby: What if you have a buddy who’s really close to the family and who’s willing to do it? Would you ever name somebody that is a friend of the family or another relative, an uncle or something like that?
John: As long as they are okay with being yelled at, screamed at by the kids, sure.
Toby: You’re going to get ready, because everybody wants the money.
John: Yeah, everybody wants the money. They’re going to get pressure. Every time I’ve ever dealt with a dynasty trust that’s going to last for multiple generations, and I see that the kids are named, I know within one to two generations, that trust is gone.
Toby: You need to have a professional. What would you say to somebody who’s like, what if the bank just steals the money?
John: Well, that’s why they’re licensed and bonded. If the bank tries to steal your money, there are bonds in place to be able to pay you back. Plus, if you look at especially the large banks, they’ve been around for a long time, and they’re probably going to be around for a long time. There’s not really that interest to try and steal your money.
Toby: There are also state laws about what they can invest in, and they’re keeping you from doing anything too crazy. But yeah, we have a few attorneys that came from some of those big banks that dealt with it. I think they would say, too, is yeah, you get yelled at by beneficiaries, because they’re demanding their payment, not in their best interest. It’s almost like a drug addict. They’re screaming, you need to give me money, you need to give me money. Sometimes the best answer and the loving answer is no, not in your best interest.
John: Yeah. Those professional trustees, that’s our job. They’ll sit on the phone, let them yell at them, and then just say, well, that’s not what your parents wanted. This is what your parents wanted, and this is what I’m going to do.
Toby: Their duty is to the trust itself. This is common. What about the lawyer that says trusts are for the wealthy? You have a young couple come in and say, hey, I heard this John Anderson guy talking about how you really should have a trust. Here are some scenarios where it benefits. We don’t want to force everybody to go through probate if something happens to us.
We have some young children. And the lawyer says, oh, you just need a simple Will, it’s so much easier. Or your estate is not big enough, we’ll worry about that later when you build up an estate. What do you say to those folks? What do you say to that attorney, too?
John: I would say if you have younger kids, do you really want them to go through that process? Anne Heche, if you look at her estate right now, it wasn’t actually worth that much. They estimated about $500,000. She wasn’t actually worth that much money, surprisingly. Right now, they’re going through a legal fight.
She has a minor son and the boyfriend who’s the father of that. She has an adult son from a different relationship, and they’re going at it in court. This minor child is getting dragged through all that, because she didn’t do any of that planning. Whereas if she would have had a trust in place named who’s going to be in charge, this is how it’s going to look, this all could have been avoided, and the family wouldn’t have to be dragged through this. Even though it wasn’t that big of an estate, they’re still fighting over it.
Toby: And you’re trying to alleviate it. If she’d have a living trust, this would not be in a courtroom, right? This would all be private and we’d avoid all that nastiness. You’d actually have, here’s the person who’s in charge and their way, their highway, right?
John: Correct, yeah, because most trusts, at least the ones that we dropped have what’s called a no contest clause, where if someone can test what’s in the trust and says, no, I don’t think this is correct, they actually get disinherited. There’s that incentive for them to not actually try and force or challenge the trust, especially if they’re a potential beneficiary within the trust.
Toby: What do you say to the lawyer then that’s doing this? Because we all see them. I’ve been seeing them for 25 years, and it’s been driving me crazy. I deal with it all the time. I go out, I’ll talk to a group, and I’ll say, how many of you guys were told from an attorney that you just weren’t worth that much?
John: It’s what we call a loss leader. They’ll usually charge a fairly minimal amount to do the will, knowing that later on, you’ve got to come back to them for the probate work. They’re going to be able to charge and collect a much higher fee from your estate, because you didn’t do a trust. A trust is usually a little bit more upfront, but it saves a lot of money on the back end.
Toby: Do you know or have a rule of thumb of what it costs to go through probate?
John: It depends on the state. Some states have a set amount that you can charge or a percentage of the estate. But typically, it’s a minimum of $5000–$10,000.
Toby: What about the states like California? What do they have? Statutory amount?
John: They have a statutory amount where it’s based on the size of the estate.
Toby: You know where the parts are and what’s typical. I don’t want to put you on the spot.
John: I’m trying to think. I looked at this a few years ago, but I can’t remember the numbers exactly. I think it started about $3000 if all you’ve got is a piece of real estate.
Toby: I know they have a percentage for the personal revenue and a percentage for the attorney. I think it’s 4% each, then it scales down depending on how big the estate is. I know that AARP did a study. They were around 20% of a small estate, and that’s to probate completely with the appraiser, with somebody who does the inventory.
It may sound like a lot, but you were talking about a small estate, maybe $100,000. You’re probably looking at somewhere in the $20,000 range soup to nuts if you’re going to go through a full on probate process. I’m just wondering how accurate that would be or whether you think it might be higher, lower, sideways. They also said 18 months was the average.
John: I think for a complex probate, that’s probably about right. Some states, you have the simplified probate process. Those are usually a bit lower than that. You’re still looking at $5000–$10,000.
Toby: Is a trust more than that, less than that, somewhere in that range?
John: For a trust, your upfront costs, we charge $3000 for one. After that, depending on the size of the estate, you might need to get an appraiser and you might not. Other professional fees, you might need to pay a CPA to file a tax return. That’s about it, so $2000 maybe, and that’s pretty high.
Toby: Now you’d mentioned something about a dynasty trust. That’s essentially a living trust that lasts a long time. Is that a fair statement, or do you look at a dynasty trust as being a completely different animal?
John: Yeah, it’s a trust that continues on for multiple generations. Instead of distributing out the principle, you’re actually retaining the principle and trust under the control of the trustee, and then you distribute out, typically, just income or a percentage of the income.
Toby: When do you think that’s appropriate, by the way? I’m just asking you personally. When do you think it’s appropriate to do multiple generations?
John: I look at it more on the side of what you would consider like a risk curve. Your typical risk curve, if you’ve got low risk, you typically have a potential low rate of return, your high risk has a much higher potential rate of return.
When you’re dealing with a dynasty trust, you’re going to be expecting a very low rate of return, just because of the fiduciary standards and state laws that control that. You’re not going to get a great rate of return, but you’re not going to lose the money. Your principal is going to be protected in the trust.
Whereas if you want to do more just like immediate distributions or quicker distributions, the potential rate of return is much higher, because the kids can go out and invest it and use it much easier, but there’s also that chance that you’re going to blow it.
If you’re the type of person who just doesn’t like risk, then I would say a dynasty trust may be something you would want to look into. If you’re someone who’s a little bit more risky and you’d like to go after those higher rates of returns, then maybe don’t consider a dynasty trust and do more of immediate distributions to the beneficiaries.
Toby: What if you’re worried about the decision-making capacity of your children? Maybe you have a son who’s married to a spouse that you just don’t like, you don’t trust, you’re not too happy with, or maybe you have a child who has substance abuse issues, or they’re really crappy with money, is this a way to protect them from themselves?
John: It is. If you have a child who has substance abuse issues, then we can protect the assets within the trust from the decision making of that beneficiary and also not enable their behaviors. You can retain the assets in trust and then have it skip or go to the next generation. Then we can assess it at that point and see what the beneficiaries are like at that time.
Toby: We’re talking a lot about if somebody is passing, but what’s the difference between doing a living trust or things that happened during your lifetime? My father had Alzheimer’s, so I’m very sensitive to this. What if you have dementia? What if you have Alzheimer’s? What if you get hit by a car and you’re not able to act on your behalf? Does the living trust help during your lifetime as well?
John: It does, because you’re the trustee of your trust, typically, when you set it up. If you become incapacitated, then the trust will have provisions that allow for someone else to then step in as trustee. You’re still the beneficiary. They have to use the assets for your benefit, but we don’t have to go through a conservatorship or guardianship in order to have the court appoint someone.
You don’t have to be Britney Spears. Britney Spears has set this up. She could have avoided that whole situation. Also, when we do a trust, we also do a durable power of attorney. We’re going to need someone who can take care of financial matters that may not be in the trust. If you become incapacitated, we do a healthcare power of attorney so that there can be someone who can be appointed to take care of you, medically, if you’re incapacitated and avoid a guardianship in court.
Toby: Does a will do any of that?
John: No. A will will not avoid any of that. A will only has power in probate court after you pass away.
Toby: Yup. It requires you to pass away before you know whether you did it right, right?
John: Yup.
Toby: Do you still do a will even if you do a living trust?
John: Yes, we always do a will. It’s called a pour over will. All it does is it says any assets that didn’t get transferred into the trust while I was alive, go into the trust when I die. Now, we don’t want to have to use that pour over will if we don’t have to, but there are circumstances where you actually do use that pour over will.
I had a situation where an older guy was going on a date with an older lady. They got in a car accident, and they both passed away. Now there’s continuing liability from that accident that may go with him or go to his estate. Even though he had a trust, we took part of the assets. We took them through that probate process. It was just like a bank account. It wasn’t all the assets.
Toby: Because she would have a claim against the estate. Is that what’s going on?
John: Correct, because she would have a claim against the estate. We had that pour over will in place, so we could use that and say once the assets are just going to go into the trust. But once that probate was closed, all future claims are closed off against the estate. It was just a way of protecting the estate against future claims from that accident.
Toby: Fantastic. It’s the pour over will that grabs anything that’s not in the trust, because a lot of people are going to be scared of a trust. They’re going to say it’s complex, the attorney is going to say, oh, they’re more expensive, they’re complex, and you have to fund them and all this stuff.
That’s a stopgap to say, hey, you know what, if you screw it up, if you did everything wrong, it’s still going into the trust. It’s still going to be private. I guess I should say that, does a living trust ever get filed in court where everybody can see who’s getting what, or does it always remain private?
John: It almost always remains private, unless there is some kind of contest. If someone challenges the trust, then that trust may need to be filed in the court. But even then, you don’t have to file the whole thing. You may just have to file certain sections of what’s being disputed. Typically, it’s all done privately.
Toby: We just saw that actually in Kobe Bryant’s case. I believe that he had a situation where he left her daughter out of a document. Usually when we draft, we say, descendants instead of naming out all the kids, so if you have more kids, you don’t have to go redo it. But in his situation, they named the kids. I remember seeing the court filing. The trust was under seal with the court, but they were able to go through and make the modification at the child that was left out.
Here’s another one. In a past life, John, I was a court-appointed guardian under certain circumstances. I was a court-appointed representative for a guy that was indigent for 11 years. During that 11 years, I had phone calls with doctors who wanted to end life-saving measures. She was in a hospital on three different occasions.
When I took on representation, she had said, don’t let anybody kill me, they’re all going to want to kill me. She was a little bit bonkers at the time. She was a very interesting character, a wonderful lady, but she was just deathly afraid that because she did not have money that her life was worth less, and that there was going to be a situation.
I can tell you this is what’s interesting. On three different occasions, I had conversations with doctors where I refused to withhold life-saving measures, because I had a written directive from her to continue extraordinary measures no matter what. Hey, don’t let them terminate my life. I want to use whatever measures are available to me to preserve life. Under all three of those, she made complete recoveries.
I only say that not to tick off all the doctors out there, but because somebody may say, I want to make sure I have a representative. Maybe I want the plug pulled, let’s say you have a family and you’re brain dead. You don’t want to be kept on life-saving measures for months and months charged against your estate, which is $100,000 a day or whatever it is, and it could deplete your estate. Maybe you want to have to give somebody that power to pull that plug. But maybe you also want to have somebody who’s able to have a conversation and preserve your life. Is that something that’s also in a living trust? If so, is it also in a will?
John: It’s not necessarily in the living trust itself. But when we prepare a trust, we always include what’s called a living will or sometimes it’s called an advanced health care directive or directive to physicians. It depends on what state you’re in.
It allows you to give direction to the doctors on what type of care you would like to receive if you’re unable to make that decision on your own. There was a situation that I saw where the father was basically brain dead. They wanted to wait for the entire family to all get there to say their goodbyes, and then they were going to pull the plug. The problem was there were a lot of kids, and it took a long time for everybody to get together.
By the time they pulled the plug, he had stabilized. He was actually a vegetable, but in stable condition for many years after that and required constant care and basically depleted the estate. Whereas if he had a document that said, no, just pull the plug on me and just let me die, that whole situation could have been avoided.
Toby: Oh wow. Did the hospital preserve it, or did they have somebody that they spoke to that was the reason why they continued?
John: The family. A hospital is going to preserve your life as much as possible, unless there is a directive from either a person appointed by you under a medical power of attorney or a living will that directs them to disconnect you.
Toby: Without getting too far into the weeds, does a will cover that?
John: No.
Toby: The reason I ask all these questions is because there’s a misconception that we’re talking about apples to apples, when in all reality, we’re talking apples to oranges. Either you have an estate plan or you don’t.
Give me your thoughts on this. When I hear somebody say, should I have a living trust or a will, how do you usually react to that? Do you try to do an education or do you just say they’re two different animals? How do you respond?
John: I usually try to understand the circumstances that the person is in. But probably 90% of the time, I’m going to direct them to a living trust. There are a few circumstances where a will would work just fine or beneficiary designations. Usually it is the other direction. I may stare at someone so I just don’t have anything.
But 90%–95% of the time, I’m going to end up recommending a living trust. I’ll let them know why that is. If you own any real estate, the answer’s just going to straight up be living trust. It doesn’t matter how much it’s worth. If you have real estate that automatically kicks you into probate, it’s going to create a mess, you might as well have a living trust.
Toby: What if I’m in California and I own another piece of property, let’s say in Hawaii, and maybe I have one in Las Vegas? I’m doing pretty well, I have some vacation properties there, or something. Are you probating in all three jurisdictions if I have a will? And is it the same if I have a trust?
John: If you have a will, yes, you are opening a probate. They’re called ancillary probate. You’ll have a primary probate in the state usually where you live, and then any assets you have in other states require an ancillary probate to then be opened within that state to handle just those assets.
With a living trust on the other hand, because you’re not going through probate, and things are just being taken care of by the trustee, there is no ancillary process. Your trustee is just taking control of it and administering your estate privately.
Toby: The living trust, I’m not having to run to each jurisdiction and probate it. I’m able to do that privately. Is that my takeaway?
John: Yeah. Each state may have its own estate tax, and it applies to whatever assets are in that state. If you’re in Las Vegas, but you own property in Oregon, and that property is worth over a million dollars, you’re paying in estate tax in Oregon, unless you do some type of extra planning, usually through a trust, to avoid that.
Toby: Wow. You still can do it even. You can still try to avoid that even in the case of Oregon. You can try to get around that. Interesting. This is enlightening to me. I always find these conversations interesting. And hopefully it’s enlightening to you.
John, this is going to be the cheesy question of the day. If you were going back and you were talking to young John, maybe somebody who was in high school or whatnot, what advice would you be giving them? Again, let’s say a 16-year-old John and you’re able to talk to 16-year-old John now, what would you say?
John: Buy some bitcoins. One thing that got me into estate planning was I actually received an inheritance when I was about 21. It wasn’t a lot.
Toby: It was something.
John: It was about enough to buy a car. It wasn’t a ton of money, but I took that money and I invested it. It’s grown about 20 times since, and it’s been about 15 years since I received that. You want to be smart with your money.
One thing I would consider is, give your kids something, but also if you’re older, your kids are older, maybe give something to your grandkids, too. Let them have something. Let them play around. Let them try. Are they going to blow it? Probably. I have a brother that got the same inheritance as I did, and it was gone in two months. But at least give them a chance to try it out.
Toby: Take the training wheels off. Let them get a little experience there.
John: Yeah.
Toby: Fantastic. I really want to thank you for your time. I appreciate the candor and the straight answers. Lawyers are sometimes difficult, and you were very, very straightforward, so I really appreciate that. If somebody’s trying to get a hold of you, if they want to reach out to you since you’re on a podcast, how would they get a hold of you?
John: The best way to get a hold of me is through our estate planning email, estateplanning@andersonadvisors.com. My assistant usually takes care of the emails. But if you say you’re directing it to me, then it’ll come directly to me.
Toby: Fantastic. Thanks for joining me today.
John: All right. Thanks for having me.
