Wealth Actually

In this conversation, Frazer Rice and PAUL HOOD delve into the evolving role of trustees, particularly in the context of Delaware’s new Well-Being Trust Statute. They discuss the broader responsibilities of trustees beyond mere asset management, emphasizing the importance of understanding beneficiaries’ needs and the implications of well-being provisions. The dialogue highlights the challenges trustees face in balancing the interests of multiple beneficiaries, the potential liabilities associated with well-being services, and the necessity of having clear processes in place. The conversation concludes with reflections on the complexities of trust management and the importance of careful drafting in trust documents. https://youtu.be/9LFt6HsjpWM https://open.spotify.com/episode/4uqhoeXtfaIIWLbKhd62ej?si=nDTf-09bRSWjT0O_YKX49g Takeaways Trustees have a broader role than just managing assets. The well-being statute in Delaware is an opt-in provision. Balancing the needs of multiple beneficiaries is challenging. A clear process is essential for trustees to navigate their duties. Well-being provisions can complicate traditional trust structures. Trustees must be cautious about the liabilities they assume. Decanting trusts can lead to unintended consequences. The intent of the settlor is paramount in trust management. Trustees should document their decision-making processes. Effective communication with beneficiaries is crucial. Sound bites “I would never opt into 3345.”“Decanting is not that easy.” Well Being Trust Chapters 00:00 Understanding the Role of Trustees04:45 The Concept of Well-Being in Trusts10:33 Balancing Beneficiary Needs17:53 Navigating Well-Being Responsibilities24:30 Challenges and Considerations in Trust Management Well Being Trust Transcript Frazer Rice (00:01.078)Welcome aboard, Pop. Paul Hood (00:02.648)Great to be with you today. Frazer Rice (00:04.598)The Delaware legislature has tried to give us some new tools to give us a holistic approach to planning for trustees and for beneficiaries. Help us sort of think through first from a function perspective what trustees do. I always thought of it as, you know, they held assets for the benefit of beneficiaries and then with that they have to administer them, they have to invest them, and then they have to distribute them. Have we got that about right? Paul Hood (00:35.34)Well, I’ve always had a broader view of trustees. Jay Hughes, a good friend and fellow pilgrim in this field, he talks about the trustee as a persons with confidence and like a trainer, an elder, and for a lot of beneficiaries, and I believe trustees, especially in discretionary trusts, The trustee needs to be that. There needs to be some attention to the person of the beneficiary, not just the finances. Send us a budget. The distributions committee who’s in secret will meet, and we’ll decide how much we’ll give you. Well, I think a trustee’s duty is broader than that. Or let’s say this, you can meet the minimum requirements of being a trustee by doing what you said, but I think the very, very best trustees are persons with confidence. Frazer Rice (01:41.17)I agree with that. The problem is identifying the people who mix the temperament and the talent and then paying for them. So to that end, with those different functions, the world of bifurcation came about. Directed trustees where people got to be good at certain things. Maybe you had a good investment person, you had someone who was with the family who understood the dynamics from a distribution standpoint. and then the administrative side making sure the I’s are dotted and the T’s are crossed as far as the administration’s concern. How do you view that in the evolution of the trustee function? Paul Hood (02:17.612)Well, it’s interesting because I haven’t been in practice. since well the 20th anniversary of Hurricane Katrina is August 29th of this year. My life changed that day. I didn’t know it but it did. And I left Louisiana. So I haven’t practiced law in 20 years but I remember the directed trust percolating up and it was driven by the investments. People wanted the bank trust or the institutional trustees but they hated their investment performance. So the compromise was, okay, we’ll reduce our duties because the bugaboo was always whether it was a proper delegation of investment authority. The trustee could still be held liable for what if the court thought it was an improper delegation, okay, or oversight of the delegation. They started out investing right, but then they got real heavy in crypto and foreign flips. you can go there. So we’ll take fewer basis points, but we don’t have the liability for that. That liability is not delegated. We have segregated it. But enter the Wellbeing Trust, and this is only true in Delaware in the Wellbeing Trust statute because it’s an opt-in. Once you opt-in, you are required, the trustee and all the advisors are required to perform that those well-being, provide those well-being services. Now the question is who is responsible for providing them. Frazer Rice (04:16.891)Let’s step back for a second. The well-being provision, which is designed to give the trustee the tool to promote, improve, advance the well-being of the beneficiaries, which I think we can agree is a good thing in concept. What do we think of well-being as being? How is it defined? And what part of the function is it taking from the trustee’s perspective? Paul Hood (04:45.228)Well, I’m going to default back to, I think it was Potter Stewart who said he knows pornography when he sees it. I think that’s the same with well-being. I think things are either obviously well-being related and are not. And there’s a continuum of them. But the whole concept, I think it’s just pretty much to promote the betterment, the improvement and the just the the maintenance personal maintenance of a trustee i mean of a a beneficiary Frazer Rice (05:26.269)So how do you think about it from a trustee’s perspective when there are multiple beneficiaries and maybe the wellbeing for one is not the wellbeing for another? Very often a trustee has to balance a lot of different equities and I don’t mean that from a stock perspective, sort of taking care of one possibly at the expense of the other with the trust’s assets. How does the new statute in Delaware address that? Paul Hood (05:54.222)Well, and you raise an excellent point. what you said, you were talking about equities, okay? What it really is, is the trustees duties. And the big one is the duty of impartiality. And arguably, the 3345 statute, and I’ll call it that, that’s the wellbeing statute. That’s the opt-in. They have another one and it is to provide, it’s an immediate power. It was added to 3325 as number 32 in the Delaware trust code. And it allows almost the same things. It empowers trustees, now not the advisors. It doesn’t say anything about the advisors in that statute. Whereas 3345 includes, and remember in Delaware an advisor is like the trust protector and the administrative trustee, that kind of thing. They call them advisors. I don’t favor that language because I believe that they should all be fiduciaries. So I call them trustees because I think in the end they’re going to be held, especially if they’re professionals, they’re going to be held to that standard as it is. But that statute was immediate when the law went into effect. So they’re authorized to provide those services now. For me, would provide, I would never opt into that statute. Because why do you want to take on a mandatory duty that’s unclear? Frazer Rice (07:30.12)That’s it. Frazer Rice (07:34.908)Yeah, it sounds like a Roach Motel where you get in but you can’t leave. That’s right. That’s right. So if you were to encounter one of these trusts in the wild and you’ve got multiple beneficiaries, but let’s say three, one of them needs a lot of help. Another one could use the help and then the other one is completely self-sufficient. How do you… Paul Hood (07:40.35)Eagles Hotel, California. You can check out anytime you like, but you can never leave. Frazer Rice (08:02.693)sort of build a process around that so that you are being impartial but you are invariably taking away from potentially the corpus of the trust in order to effectuate different goals as they develop for these beneficiaries. Paul Hood (08:16.782)Well, it obviously starts with the settlors intent. And it’s the settlors intent first as set forth in the instrument. However, because this is not a court case where you’re construing, because I I used be an expert witness, know, construing, you know, problematic clauses in operating agreements, trusts, wills, whatever. You, you, you, you construe that including more information you investigate. The trustee, let’s look more, because you look at the language and well it would authorize it here, but let me find out a little bit more. If the settlor is still alive, I would at a minimum also talk to the settlor, okay? Also, if he or she is not still alive or sentient, I would investigate. I would talk to other people. I would make that into a process so that when you’re questioned down the road, here’s my process. Anytime you have a process, you’re better off. When all that planning was done in 2012, you know, and we filed more gift tax returns. I was the only guy in the country saying, don’t. put your marginal wealth clients into anything big, irrevocable. I said, because I think this is gonna work itself out. And for six hours, I was wrong on January the 1st, 2013, but there were lawsuits. And Jackson versus Colon was one of the cases and poor Colon, the lawyer got sued. because he didn’t have a process for evaluating whether his client had put too much or had retained sufficient assets after they did this planning. So it’s all about a process in the end. So instrument, settlor, and I would investigate and I would wrap it up into a process that was documented. Frazer Rice (10:36.848)So if I’m a clever beneficiary, I look at something like this and maybe if there is a HEMS standard, which made it imprudent maybe for the trustee to disperse assets to me, I might go to a wellbeing component of a trust and say, well, you know, maybe this is something that I could petition the trustee for assets. Is that an area of concern for you or is this something where those are two different things entirely and therefore not particularly related. Paul Hood (11:10.998)I think the latter. Well, first of all, obviously every beneficiary trustee relationship is different. And it’s governed first by the trust instrument. What is the beneficiary entitled to from a standpoint of distributions? You know, do they get an annuity? Do they get a unit trust amount? Do they get fiduciary accounting income? Are they only a discretionary beneficiary of principal and or income? You have to look at all of that. So if it’s something that isn’t covered, well then, you know, the answer’s probably no. Because while I think that the well-being provisions are similar to him’s, they’re not identical. And that would concern me. And that’s if I was drafting it. I would not allow the trustee if it was subject to a HEM standard. And I’m not a big fan of HEM standards. I think they expose you to asset protection, problems. There a lot of things. And I’m just not a fan of it. I like wholly discretionary trusts or unit trust, annuity trust distributions. Easy or hard. That kind of thing. for me, the well, and particularly if it’s an interested trustee, I would define it so it cannot, whatever wellbeing power is exercised stops at the Hems line, the Hems County line. It cannot cross over because then you’ve got a state, know, of course, if there is a state tax problem. Frazer Rice (13:08.216)Right. No, and to that end, you know, I was thinking about this as we were sort of leading up to this today. And, you know, from a prenuptial planning standpoint, I would think the well-being clause would frustrate sort of prenuptial planning with regard to the assets of that particular trust, because a good family lawyer would take a look at that and say, well, you yes, there may be discretionary elements that the trustee has, but overall of the well-being sort of transports not only to you, but maybe the rest of your family slash kids, that that should be part of negotiation in a divorce settlement. Is that something that’s popped into your head or am I fantasizing poorly? Paul Hood (13:50.386)Doesn’t that undercut the holy discretionary nature of the trust? And I don’t see how it doesn’t. Do you? Frazer Rice (14:28.612)No, it’s mandatory, it’s “shall” versus “may”, those two words are important. They’re important in other parts of law too. Paul Hood (14:39.278)Well, and the statute uses, the statute uses shall. Frazer Rice (14:44.078)Yeah, well, I agree with you then. it’s mandatory, mandatory does a lot of things to the word discretion for a trustee’s perspective. So point taken to be sure. Paul Hood (14:53.23)Well, I can tell you this. If I was running a Delaware trust company today, first thing I would do is I would never opt in to 3345. Not until the legislature fixes a few things. The directed trust, sure that whoever clarifying who’s responsible. So if you have an administrative trustee and a distribution trustee and an investment trustee, investment trustee is probably not gonna be involved, okay? It’s going to be one or the other two. And it’s going to depend on what the service is and how it’s treated. If it’s treated as distribution, would argue that the distribution advisor is the one who has the duty and the liability. But their statute right now does not protect, or at least the 3345 statute, does not protect those in that bifurcated All we did when we started the whole idea of this type of trust is to basically segregate because trusts are the bifurcation of legal and equitable title. Beneficiaries have equitable title, the trustees have legal title and the duties. And we’ve just subdivided legal title and those duties. But in the statute they all seem to get melded back together, commingled in a way. So I would not if for a directed trust there’s no way I mean the trust instrument would have to be so beefed up to make sure that was clear that despite what the statute says here’s here’s what our deal is but I’d feel better if they changed the statute. Frazer Rice (16:55.331)So it is a practical matter. Anybody who takes these roles on, takes on, know, with great power comes great responsibility, as Ben Parker told Peter Parker. You get these incredible amounts of power and responsibility and therefore liability. is a practical matter if someone has to, has to, mandatorily deal with the well-being component here, whether as a distribution advisor or as a full trustee. How do you get around that? mean, how do know that you’re picking the right advisors or not subjecting beneficiaries to the drug addiction industrial complex or the psychological industrial complex? And maybe a better way to put it is if you get going and you’ve made a mistake, how do you fix it or… Can you turn it off later if the problem is solved but you have a mandatory duty for well-being? Paul Hood (18:01.782)Well, and that’s a great question. And your comment about the addiction complex, I call most treatment programs 28-day spin cycles. And that’s why the rate of success is so little and so low. So I get that. Yeah, how do you turn it off? And what do you do if a beneficiary says no thank you? Frazer Rice (18:16.033)You Frazer Rice (18:32.216)Yeah, that’s a good question too. I was just gonna say… Paul Hood (18:34.796)Well, I’ll give you another one. I’ll give you another question. What if five years from now you’ve opted in and a beneficiary says, you know, I’ve been damaged because you should have provided me this service three years ago and I’m going to sue you or try to remove you for breach of your duty to provide those services because you didn’t guess right. Frazer Rice (19:01.291)Right. Paul Hood (19:01.516)And I think that gets to where, I think that gets to your concern about all this. How’s the trustee gonna know, right? Frazer Rice (19:08.95)Well, and you know, knew or should have known that, you what happens if the beneficiary lies to you, which happens in tough situations like that. It’s just a brutal one. I look at that and say that, you know, when, that function is melded with larger funding and distribution functions, I, I come to the conclusion, okay, why wouldn’t, why wouldn’t you have a separate trust if the grantor wants to Paul Hood (19:17.814)lot of Frazer Rice (19:38.699)provide for the wellbeing, why wouldn’t you endow, let’s call it a self-improvement trust or something like that with extremely limited functions and distributions and segregated from the bulkier assets so that you aren’t mixing those functions and creating a real quagmire for the trustee to navigate, you know, when they’re worried about selling the company on one hand and then taking care of this on the other. Is this too many functions delineated in the setting that we’re providing here? Paul Hood (20:14.402)Well, I just did a webinar for Lionbird with Jocelyn Borowski from Duane Morris. She has written about well being trusts. She and her partners and firm worked in the committee drafting. I think Todd Flubacher was on that committee. That is, she made that point. that you either could call out a part of a trust that is limited to the wellbeing or you create sort of a sidecar wellbeing trust. And I think that’s a good idea. One thing we did not get to, and I didn’t, and it really slipped my mind to ask, are Trustee and you’re obviously much closer to Delaware than me sitting over here in Michigan and close to Motor City. Are trustees doing anything about this? Are they implementing these types of programs? Frazer Rice (21:19.655)From my perspective, yes. IThey have asked the trustees to fund or take assets and fund a variety of things, whether health or beneficiary education programs, governance programs, things like that. The short answer is yes, I think that happens all the time. I think they folded that into some of the distribution provisions. I if I haven’t seen this specifically, but if I were a good trustee, I’d want a note signed by the various beneficiaries that are participating in this saying that we’re doing this to provide an improvement in this or that. We’re doing it in a way meant to further family goals and sort of set out by the grant or somewhere. But I don’t know of any. corporate trustees that are doing this other than maybe as an add-on service that is separate and apart from their trustee function, which I bet they probably take great pains to put up firewalls so that the decision-making on the fiduciary side is a little bit different from the service provision on some other side. Paul Hood (22:31.176)I think that’s probably right. Again, right now, if I was a Delaware trustee, it would be no opt-ins and by no, even if you wanted to opt in, never, never, never on a directed trust, which now most trusts are. You know, about almost 30 years ago, Frazer Rice (22:53.12)Sure. Paul Hood (23:00.474)I spoke to a national group of trustees of a bank that is no longer here. And I told them, if y’all make the mistake of going to 1-800-TRUSTEE and quit making the hard decisions, you’re going to go the way of the dodo bird. There about 400 of them in the room. And they looked at me like deer in the headlights. And I was right about them because that’s essentially what they went to and then they went down. So, and this is a big national bank. it’s, is, this is, these are the times that tri fiduciary souls and, and, Frazer Rice (23:49.749)at fiduciary insurance providers too. I’m sure. Paul Hood (23:53.678)Well, that’s exactly right. And you had mentioned about could you, you know, could you. get out of it, could you change it? Well, one obvious way is a non-judicial settlement agreement. We all get together and we force King John to sign the Magna Carta on Runnymede. We go from there, but I can see accountings going forward. When they ask you to sign off, there’s gonna be a wellbeing accounting. And it’s going to include things like, okay, here’s the services we provided. Here’s the values, blah, blah. And that’s all the services we believe you need. And if you need something else, you need to let us know. I’d try to flip as much of it back on the beneficiaries as I could. Frazer Rice (24:51.141)and when you open up the idea of qualitative benchmarking to the trustee function, if I’m wandering into a trustee situation personally, I’d be going, no thanks. Hence the term qualitative. There’s no amount of money you can pay me to guess whether someone will sue me 15 years from now. Paul Hood (25:04.438)Right, right, right, because you can’t quantify your risk. Paul Hood (25:18.892)Well, you’re exactly right. And I think that’s where they ultimately are going. I don’t know, because I haven’t been able to investigate and Columbo the information out yet. Because I will go back and pardon me, one more question for you. What I want to know is why… did they, what prompted them to think they had to act then with a quickly enacted law? And my suspicion is the big banks, they all have their upper end concierge service. I Wells Fargo’s Abbott Downing, know, Ascent, I think is US bank. And those groups, Merrill has their own, those groups have PhDs in family psychology and wealth psychology and everything else. They’re providing those services now to their people. And I think the Delaware trustees want to make sure they don’t miss out on that train. But with that comes a lot of liability, as you said. Frazer Rice (26:35.029)Yeah, and also they had to find a way to pay for it. Those services aren’t cheap. Those people are expensive. And invariably, the trust tends to be a pot of money to compensate for that and maybe the only pot of money. And if it’s unclear whether that’s an allowable distribution, mean, that to me, I agree with you, that’s probably part of the reason they did it. I think there’s a good reason they did it, which is ultimately providing another tool in the toolkit for the trustee to help with the long-term wellbeing of the beneficiaries. We’ve gone through a lot of different references before. The road to hell is paved with good intentions here. I think we’ll probably agree that there might be some better precision with the drafting here that could make this a better tool for everyone involved. Paul Hood (27:29.326)Well, I will tell you another area that and Jocelyn agreed with me on this. If you read the unit, the Delaware’s version of the old UPIA. because Umifa replaced it. Okay. If you look at their law, it’s unclear where to charge those well-being payments, whether they’re deductions or distributions . If you look at the new Umifa, they charge 100 % to principal for those services. Jocelyn said under Delaware law right now (and this is something she agreed that they needed to change) those services are all 100 % chargeable to principal under current Delaware law. So that’s another area they need to change. Frazer Rice (28:28.659)Crazy stuff. Paul Hood (28:28.81)You did let me also go back to something that you mentioned about turning it off. Okay well obviously besides the NJSA that we talked about there’s also the possibility people say just decant it out. Well be careful before you decant because people are getting bad news. in state fiduciary, I’ve seen 18 adverse decisions in the last three years in state fiduciary duty actions. And they’ve involved more than just the trustee. A lawyer in an Illinois case got zapped by his malpractice carrier in a decanting. They said it was an intentional tort and excluded from coverage. Another lawyer got disciplined for an improper decanting. People are saying, this is easy. Just pour the bottle in, new trust. It’s not that easy. Frazer Rice (29:24.391)Yikes. Frazer Rice (29:39.059)Perhaps for the unwary. Paul, great stuff. Let’s pause there because we can probably go on for two more hours. How do people find you and your writings? Paul Hood (29:48.318)well, have a lot of webinars and articles at lineburgservices.com. My website, paulhoodservices.com has a lot of my latest articles, as well as some, real interesting checklist, one of the best client development tools that I’ve ever seen and I developed it and I bet it’s for free on my website is my buy sell options grid. And there’s a lot of other stuff there. My email is Paul at Paulhoodservices.com. I get questions from people mostly all over the country, but occasionally from foreign countries. And so, and I’m, you I always respond. Frazer Rice (30:30.803)Great stuff and go Tigers. Go G-E-A-U-X. Further Information on the Delaware Well Being Trust Statute Todd Flubacher Article INDIVIDUAL TRUSTEESHIP Keywords trustees, well-being, Delaware trust code, beneficiary needs, fiduciary duties, trust management, directed trusts, trust responsibilities, estate planning, trust law https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

We go inside the the enormity, complication, and notoriety of the BEZOS PRE-NUP AGREEMENT with divorce attorney, MARILYN CHINITZ of BLANK ROME. https://youtu.be/nMMp6He056Y https://open.spotify.com/episode/39KMPMRhwGfYbdZVMJHEan?si=36c5c8a927bf4a6f Outline of the ISSUES INSIDE the BEZOS PRE-NUP General Concepts What happens without a pre-nup? Process for disclosing assets Previous marriages and those pre/post-nups? Community vs Equitable Distribution (Does the Pre-Nup contract this away?) Separate property Outside trusts?  Estate Planning? Pre-nup vs ultra high net worth pre-nup Financial Considerations (and Complication) Non-Financial- NDA, media activity, scope of negotiations, data and tech issues Let’s go through the General Fact Pattern High Profile Asymmetric Net Worths Kids? Which state is used for choice of law? Portability?  How do you make sure this has teeth?  (Coercion penalties) Spousal support / alimony? Escalator or sunset clauses? Disqualifying or  “infidelity” or “weight gain” clauses? What happens if children? Other constituencies – charities, businesses, political causes etc  Integration with estate documents, life insurance, other vehicles Is there a check-in every five years? What else can we learn from what is inside the Bezos Pre-Nup? Transcript Frazer Rice (00:02.07) – Inside the Bezos Pre-Nup Welcome aboard, Marilyn. Marilyn Chinitz (00:04.088) Thank you, really nice to be here and nice to talk to you about what’s inside the Bezos Pre-Nup. Frazer Rice (00:07.541) We sort of regaled ourselves with a mutual friend and we’re already, I feel like we’re already related. That’s right. So we’re going to talk a little bit about probably one of the highest profile marriages in the world that just happened with the Bezos Sanchez union and get inside the Bezos pre-Nup. But for just for a little bit here, let’s talk about what happens in a sort of family law divorce setting. Marilyn Chinitz (00:13.39) Your best and glorious buddies are ready. Frazer Rice (00:35.232) With general concepts because we’re going to be diving into some specifics with the case study here. What happens when something goes wrong and we have a divorce that happens without a prenup? Marilyn Chinitz (00:46.734) So it depends what state you’re in. If you’re in a state like New York, then we have equitable distribution laws. If you’re in a state like community property in California, then those laws are very different. So if you have no prenup, and a lot of people don’t because they start their marriage with very little assets, and everything that you acquired during your marriage is now subject to a division. Frazer Rice (00:49.569) Of course. Marilyn Chinitz (01:15.918) And what happens is you start to trace the assets and you look at, what do I have? You look at homes that you purchase, real estate that you purchase, stocks, securities that you purchased. It doesn’t matter in whose name the asset is held. It’s a marital asset if it was acquired during the marriage and it was not gifted or inherited. If you come into the marriage with assets and you have no prenuptial agreement and you keep those separate property assets clean, and I’ll explain what that means. When they go up in value because you actively caused their appreciation, they may be subject to a marital claim, the appreciation aspect. If you… have an asset that went up in value because of passive reasons and you kept that asset separate, it will remain separate property. So let’s talk about an example. If I owned a building before I got married and that building was worth five million dollars and then I get married and years later I get divorced, that building is now worth twenty million dollars. It appreciated by 15 million. Did it appreciate because of market fluctuation, because the market went up, real estate did better? Or did it appreciate in value because I managed it, I collected the rent, I made sure the repairs were done, I made renovations to the building, and therefore it went up in value. If it went up in value during the marriage because I actively did something, I renovated, I took care of the building, I managed the building. That appreciation from five million to 20 million is gonna be considered marital. Then the question is, what percentage does the other spouse get? Do they get 10 % of the appreciation or 50 % of the appreciation? If that asset went up because of market fluctuation, I sat back, I did nothing, the market went sky high. Marilyn Chinitz (03:38.905) Then that property will remain separate property and the appreciation is separate. So you have to look at those different factors. But other than that, if you come into the marriage with no assets and you create a marital estate and you have no pre-nup, that marital estate is going to be divided. Now the question is, how is it going to be divided? If you’re in an equitable distribution state, Frazer Rice (04:04.907) Right. Marilyn Chinitz (04:08.718) What does that mean? It means what a particular judge feels in a particular courtroom on a particular day. What does equitable mean? It’s completely subjective. So did the other spouse take care of two, three children while you were managing that property? Did the other spouse work but supported you? Or did the other spouse do their own thing and had no real contribution? It’s very fact specific. And if you can show that the spouse really contributed in a meaningful way while you were running your business or running your properties, I took care of the children, I took care of the home, I took care of you, then the court is likely to give you a more substantial percentage interest of that appreciation. And in New York, for example, equitable, and then we’ll talk about community, California, for example, generally, Bank accounts, retirement accounts, stock security accounts are going to be divided pretty much 50-50. Where the court will not give 50-50 is if it’s a business. And then the court can go anywhere from 10%, 15%, 20%, up to maybe 40 % in unusual cases. What do those cases look like? They work together in the business. They took care of things together. It’s very unusual for a court to give 40 % interest to the non-working spouse unless they were really actively involved in the business. Now, conversely, take California, which is a community property. When you get married and you acquire property in California, that’s 50-50 off the bat. Now, why does that become really important? We’re seeing a lot of cases where people have really created a lot of wealth in their marriage and they are correctly and smartly putting some of that wealth into trust. They’re gifting it to a trust for their children. New York, for example, is a title state. A title state means if I own the asset during my marriage, I can sell it, I can gift it, I can do whatever I want with it. Marilyn Chinitz (06:33.718) As long as there’s no divorce. If you are in a community property state, you can’t do that because that person, that spouse already owns 50%. It’s almost jointly owned. So you can’t give away a marital asset unless you consult with me, your spouse, unless you ask me, is it okay? So in New York, if I wanted to take an asset, an interest that I own during the marriage, it’s a marital asset, but because there’s no divorce, there’s nothing that prohibits me, I gift it to a trust, I have the right to do that. In California, I may not have the right to do that unless I got my spouse’s consent. So, number one, what’s critically important is you need to know what the laws are in the different states. Now, Sometimes people get married. They get married in New York. They enter into a prenuptial agreement in New York. But now they move to California that has very different laws. And if they thought they were going to move to California, then you want to make sure as a New York lawyer to advise the client, we need to engage California counsel. We need to find out what their laws are so that your prenup is portable, it could be enforced in a different jurisdiction. Frazer Rice (08:03.559)So choice of law, obviously very important. Then I would say sort of the process and hygiene around using assets and deciding what happens jointly versus what stays separate is something that’s important to manage going forward. How do you think about that with clients? Marilyn Chinitz (08:20.346)So, I mean, interestingly enough, when I do a, let’s talk about prenups for a minute. Because when I do a prenup for a client, we have a check-in every year. We go to lunch. We talk about what changes, what’s going on. Does the agreement need to be modified? So many times people will sign a prenuptial agreement, they put it away, they don’t even know where they put it. And 20 years later, sadly, somebody triggered. the terms of that agreement. Now they pull it out and they go, my God, everything’s changed. When we signed that agreement, he was only worth X amount. He’s now 20 times wealthier, but I didn’t increase anything. That’s not fair. If the agreement is…an agreement that you entered into with the advice of counsel. If the agreement had full financial disclosure, if the agreement was negotiated, if you had your own counsel, etc., all the bells and whistles, it may be an unfair agreement, but it’s going to be enforceable unless it is unconscionable. So what does unconscionable mean? Unconscionable means shocking to the conscience. So I represented, and I could say it because it was in the media, Liba Icahn, married to Carl Icahn. And he had a prenuptial agreement prepared, and she signed it. Years later, he decided he wanted a divorce. And she argued to the court, I was not her first lawyer. I was not her second lawyer, I was her third lawyer. And I’ll tell you why that was important. She argued to the court that the agreement is unconscionable. He’s now worth several billions of dollars, and all I got was X amount of dollars. That’s unconscionable shocking to the conscience. And the court, lower court said, well, I’m sorry. That’s a lot of money for most people. And by the way, in the statement of net worth, there’s a notation that there’s a diamond emerald necklace worth Frazer Rice (10:23.239)A lot!. Marilyn Chinitz (10:42.56)A million and a half dollars. So coupled with that, there’s nothing unconscionable about your agreement. Now, it was appealed, but the more important thing is that the court said the following. You are barred by the statute of limitations to set aside the agreement. So years ago, you had six years to set aside a contract. Now, if you’re happily married, You’re not going to wake up and go, hmm, honey, it’s six years. I got to set aside that agreement. You don’t do that. And so finally, a judge in New York County, Phyllis Gangel-Jacob, wrote a decision that said, wait a minute, that’s unfair. We’re going to toll the statute. Because people, they’re happily married, they’re not going to wake up and say, I’ve got to change the agreement. Frazer Rice (11:34.961)Right. Marilyn Chinitz (11:35.151)You’re going to toll the statue until there’s a triggering event. And then you have six years to set it aside. Now you would think a seasoned lawyer would know that we talked about knowing the law in different states. You’ve got to know the law in your own state. So in New York County, the first department, Phyllis Gangel Jacobs said, toll the statue. That would have meant that Mrs. Icahn would not have been barred by the Statue of Limitation. She could have brought her case to set aside the agreement. In Westchester County, that’s the second department, they had a totally different law. They went by a six-year Statue of Limitation. So had her lawyer made inquiry about how that…ruling how the statute of limitation works in the different departments, they would have probably started the action in New York County because they owned a home in New York, not just in Westchester. So when we were chit chatting before we went on, I said to you, it’s all about being in the right hands. You can’t be sloppy in this business. It’s too complicated. It’s too detailed. You’ve got to have an attorney who really goes out of their way to find out what’s the best jurisdiction, what are the different rules, what are the different laws. I had a client in Hong Kong and she would have jurisdiction in New York or Hong Kong. We then retained Hong Kong Council to find out what would be the benefit if we brought the action there versus here. I had a similar situation a year ago where I had a client who had jurisdiction in Germany and jurisdiction in New York. That was critical because her husband came from a very wealthy family and there was a lot of separate property. In New York had she brought the action, the court would have said separate property, you don’t get any portion of it. It’s remained intact, no commingling, no transmutation. That’s his. In Germany, they throw everything into the pot. So I called German council and I said to her, you need to go and pursue this in Germany. It was the best decision because in Germany, she had the access to all the assets. Frazer Rice (14:04.732)Again, it’s so hyper-specific. You’ve got to know, as you said, not only the state, but in the state, how things work. Whenever I wouldn’t go as far as to say I advise, I really more issue spot. I had a friend of mine, it wasn’t a client, but basically New York, Florida, Dallas, Texas, and then got married in Ireland. I said, you’ve got a lot of things to work out here because I’m not sure which one’s the best. Marilyn Chinitz (14:11.416)Correct.Yeah. Frazer Rice (14:32.63)And it turned out to be a good thing for him five years later on when it didn’t work. And he ended up using Florida for whatever reason that was the one to choose. So let’s apply. Marilyn Chinitz (14:44.654)You reminded me of something that I did want to bring up because it’s very interesting. So a lot of people will get married and they’ll have these big weddings and big affairs and invitations and come to our wedding and it’s a destination wedding and there is all the bells and whistles. But what happens if you didn’t have somebody to really officiate the wedding? It was someone who just signed up with a website. Marilyn Chinitz (15:12.556)What happens if you did not get the marriage license? And we’re seeing a lot of cases like that, where people thought they were married and they’re not married. Frazer Rice (15:24.008)Those technicalities could just cave your knee in. Marilyn Chinitz (15:26.348)Right. that’s right. So then you look fact specific. Well, let’s see what they did inside the Bezos Pre-Nup. Let’s see how they held themselves out. So it is so many complexities. And that’s why it’s really important that you need to have an attorney who’s in the know who asked you these questions. Frazer Rice (15:42.747)So let’s apply some of these concepts that are inside the Bezos Pre-Nup. First of all, high profile. So I imagine in the prenup that you’ve got not only the financial, which has its own elements to it, but the non-financial, the NDAs, media activity, what the scope of negotiations are, even so far as the things like data and tech issues and privacy. How do you think about that in those big high profile cases? Marilyn Chinitz (16:08.782)I will tell you, I was in Italy at the time they got married in Italy. And it was like on every station in Italian, but it didn’t matter. was all you’re doing is looking at all these beautiful people and beautiful dresses. And it was very elaborate. The thing that I found very interesting is what happened before the wedding? So what happened before the wedding is Bezos, I think, sold Frazer Rice (16:14.2)Right. Marilyn Chinitz (16:37.294)Over three million Amazon shares, generate about $700 million. Was that used for the wedding or as a gift or whatever? But I thought that was an interesting fact. So when you have a prenup like their prenup, number one, it was negotiated over a very extended period of time. And it was viewed not by one lawyer, not by two lawyers, by a team of Frazer Rice (17:02.797)Whole fleets! Marilyn Chinitz (17:05.966)Trust and estate lawyers, tax lawyers, real estate lawyers. This was structured as if it was a business merger. And it was carefully structured to withstand any kind of scrutiny, because there’s a lot at stake, obviously. He had already gone through a divorce where there was no prenup. And that resulted in a $38 billion award to the wife. I think that was great. because she started the company with him. But now you have a different situation where he had this massive wealth long before he got married. Amazon stock, Blue Origin, Washington Post, real estate, and the future appreciation of those assets, just to name a few. There’s a lot to protect here. And so clearly, there’s going to be a massive amount of financial disclosure. Because every prenup has to be accompanied by full financial disclosure. You can’t wave something when you don’t know what you’re waving to. Frazer Rice (18:13.657)Question. So, Lauren Sanchez gets a book of his finances that’s two feet thick minimum. At what point, the detail can be overwhelming and the marriage may not have ever happened if there was, let’s call it complete understanding of his financial situation. At what point do you sort of say, okay, here’s generally what we think he’s worth and therefore that number underpins? Marilyn Chinitz (18:41.868)Well, here’s how you do it. It’s not that complicated. It’s called a title agreement. Everything’s in my name is going to be mine. Anything in your name, Lauren, will be yours. What will be marital is what we put in joint names. It’s very clean way of keeping it. So if he buys interest in future companies and private investments, properties, et cetera, and he puts it in his name, then under that title agreement, it’s his. It doesn’t get sloppy. If she purchases something, it’s in her name, it’s hers. If they purchase something together and they put it in joint names, it will be a marital. But he may say, I put in some separate property. I get that back off the top, it comes to me. Frazer Rice (19:32.706)So once we get that in place, the idea of if something were to go wrong five or 10 or 20 years from now, the concept of alimony or spousal income or any other sort of payout, how does that happen in the negotiation? Marilyn Chinitz (19:51.159) Inside the Bezos Pre-NupSo, you know, you have to look at, let’s put it this way, if Lauren Sanchez is gonna walk away with $400 million, she’s not getting support, right? That’s obvious. And we know she’s not walking away with $20 million. You could have in the agreement that for every year that we’re married, I give you a million dollars, that’s your separate property, you do whatever you want with it. That’s not an uncommon situation for very wealthy people. But what he wants to do is to make sure in the agreement that she does have wealth so that it’s a fair agreement and that he does create marital wealth that they end up sharing. So I’m sure some of the houses and I believe that they already have homes that are in joint names under the agreement will probably be a marital asset. So off the bat she’s probably going to end up with a significant amount of wealth. If this marriage lasts a long time, do they put in a sunset clause? Most likely not. know, sunset clauses can be very dangerous and clearly under the law, he’s entitled to all the separate property because he earned it long before he ever met her. So I don’t expect that there is a sunset clause in there. But let’s face it, you can gift your spouse whatever you want. But it doesn’t have to be in the agreement. So if he is so happy and the marriage is fantastic and they live a very long time, he may never look at this agreement and he may give her a substantial amount of assets jointly or in her name and make it very, very fair. What happens though, a prenup is not only what happens in the event of divorce, it’s also what happens in the event of a death in an intact marriage. I’m sure that he wants to fully protect her. If they’re not divorced and God forbid he dies and it’s an intact marriage, there could be a marital trust that’s set up, you know, that has $200 million or $400 million or more. She gets the interest on that so that she’s well taken care of for the rest of her life. And, and, you know, everybody says that he’s an incredibly kind, generous person. Marilyn Chinitz (22:18.156)I’m sure he’s also made provisions for her children inside the Bezos pre-nup and estate planning. Frazer Rice (22:21.111)How does this integrate with the other pre or post-nup or the divorce settlement with the first wife and then with those estate planning documents? That to me, you’ve got a conference room with the marital family law attorneys, the estate planning attorneys, her attorneys. How does everybody stay organized on that front? Marilyn Chinitz (22:45.774)So it’s something that we do all the time and you separate it out. Look, there’s a lot of issues that get involved in these kind of agreements and settlements and as I said, a business merger. There are tax issues, right? So if he gifted her anything before marriage, that’s a taxable gift. So… The estate lawyers know that nothing should be given to her until after their marriage. And then these trusts are very sophisticated. And you separate out what’s trust related. When you put assets into a trust, they’re no longer part of the marital estate. They now belong to a separate entity. And so these trust and estate lawyers carefully craft trust that are going to accomplish different things. One, could be to take care of a spouse’s health, education, welfare. One could be to distribute property or principal. It’s not uncommon. It’s very common when there are agreements like this that you have people who are of extraordinary wealth. Mackenzie, the prior wife, has nothing to do with this at all because she got her Amazon shares. And I’m sure those shares now are worth probably $180 or $200 or $300 million because they’ve gone up. But the first wife issue, there’s no issue. If you got $38 million, you’re not a support candidate. He doesn’t have to consider it that. So this is really being looked at as if there are no other factors involved. But this is probably why the negotiation of this agreement took place over a long period of time. Frazer Rice (24:44.802)For the some further down the pike certainly not at the Bezos level but let’s say at the high net worth level where you’ve got outside trusts that you that you don’t have ready access to there’s a trustee that can make payments at a discretionary basis. Do you have to be careful as far as how you receive money that’s distributed from a trust so it doesn’t get tainted ultimately. The other spouse if they’re divorcing that that’s not part of, you know, maybe a standard of living that they’d become accustomed to. Marilyn Chinitz (25:18.836) INSIDE THE BEZOS PRE-NUPThat’s a very, very good question. So I’ll give you an example. Joe and Mary marry. Mary comes from a wealthy family. Her family set up a trust and put $20 million in that trust for her, for her benefit. And during the marriage, he made a lot of money. Marilyn Chinitz (25:42.2)I’m sorry. During the marriage, he made a lot of money. They lived a good lifestyle. Her parents would on occasion distribute money to her. But it was a discretionary distribution. 20 years later, they divorced. And he said, I don’t want to pay you any support. We’ll divide up the assets, but you get no support. And the reason why you get no support is you’ve been getting distributions from your parents. That’s more than enough to take care of your expenses. And she said, That’s not fair. It’s discretionary. I don’t know when my parents are going to distribute. I can’t force them to distribute. And therefore, I’m asking the court for support. Well, the court agreed with her. The court said it’s a discretionary trust. And therefore, we can’t she can’t bank on when she’s going to get it because she may not get it. You must pay support. So the court will look at again, fact specific. Are they discretionary or are non-discretionary? If she was getting distributions on a regular basis, the court would impute that, its income to her, they would consider those distributions because they’re non-discretionary. She’s getting them, she could rely upon them. She could use it to pay her own expenses and her own support. Frazer Rice (27:08.766)Is it good hygiene, I guess, to have it go into an account in her name as opposed to a joint account? Marilyn Chinitz (27:16.842)If you want, well see, you’re raising really good questions. Here’s why. If you want something to be separate property because of the gift of an asset, if you put it into joint names once you get it, you’ve now commingled it. You transmuted what was separate and you’ve now made it marital. So if you get a distribution from a trust or a gift, You’re going to have to put that in a separate account in your name only. And let’s say you buy stocks and your husband works for Morgan Stanley. And he says, well, wait a minute. I can trade that account for you. I’ll make it go up in value. Once he does that, he’s actively contributing to the appreciation. He will now have a claim. I caused that account to go from 800,000 to 5 million. I want a piece of the appreciation. So when I said to you earlier, I meet with clients a year later, and it’s really to say, keep your assets separate. Do not commingle them. If you did, then you may have lost them. What does the financial circumstance look like now? People can amend a prenup. They can enter into a postnup. But you’ve got to look at the agreement to know what you signed. If you look too late, it may be too late. Frazer Rice (28:41.63)So I hate to wind down on this because we’ve gone through and there is a ton of unbelievable information here. Most of us do not have the Bezos Sanchez wealth, not only the asymmetry, but the size that we’re talking about here. What are some good lessons for people to take away? Either going ahead and marrying or if circumstances changed after the marriage? Marilyn Chinitz (29:07.63) So I think there’s so much wealth of information out there. I think number one if you are I Think prenups are great. First of all, why because you learn about the other person’s or or debt So a lot of times people live a very lavish lifestyle. They have a beautiful apartment. But you don’t know if there’s a mortgage on that apartment. They have a beautiful home in the Hamptons but is at their home. They drive a fancy car, but is there dead on it. So when you enter into a prenup, you have to make full financial disclosure and all you find out, wait a minute, I thought you own that apartment. You don’t own that apartment? Or you bought that? Did you borrow against it and it’s all debt? Or you owe this to your former spouse? And now all of a sudden you’re finding out the full picture. You can make a decision, yes I want to marry that person, but you’re in the no. Being in the no is important on every scale. So if you’re to enter into a prenuptial agreement, number one, you want to get the best attorney, and you need to know and have the time to really negotiate the terms, you have to understand what do I want to accomplish? Do I want to create a marital estate? I recognize you came into the marriage, let’s keep that separate. I agree to that. But anything that we build together, I want that marital. You take the time to negotiate. You don’t rush into it. Never sign an agreement given to you on the heels of a marriage. Do not feel pressure. You’re not doing yourself a service at all. So having good counsel, financial people, a good team of professionals, I find is super, super helpful. And then in terms of… What happens after marriage? Again, stay in the know. Don’t tell me that you didn’t know that there was a mortgage on your house. That he refinanced three times and you signed the documents and you have no equity in the home. So ask your spouse, tell me what’s going on. Sit down every year. Marilyn Chinitz (31:30.146) (INSIDE THE BEZOS PRE-NUP)Can we look together and figure out what we have because if God forbid something happens to you I want to make sure the children and I are okay. Can we go and meet with a trust and a state attorney because we need to understand in case anything happens how do we set things up. If you just close your eyes and you bury yourself you’ve buried all the information and who wants to do that in life. I think no one should be afraid to ask questions nobody should be if you are then you’re in the wrong marriage. But you have every right to know, what do we have? What kind of debt do we have? How would we pay this off? How are we protecting ourselves in the event something happens? Should we get life insurance? Should we put some assets in trust so that it grows in the trust tax free? There are important decisions to make in marriage, just like there are important decisions to make in business. You don’t enter into a business transaction and sit back and hope everything goes well. You are a part of things and make decisions. And that’s what you have to do in your marriage. Frazer Rice (32:35.876)Great stuff. Marilyn, how do our listeners slash watchers find you? Marilyn Chinitz (32:39.51)So I am a partner at BlankRome, B-L-A-N-K-R-O-M-E. I’m in the matrimonial department. If you go on the website, you’ll see my name, my email, my phone number. And it was pleasure talking to you. Ask great questions. Frazer Rice (32:54.268) Inside the Bezos Pre-NupLikewise, thank you. Other Resources Related to Pre-Nup Planning and Inside the BEZOS Pre-Nup LINKEDIN FORTUNE ON INSIDE THE BEZOS PRE NUP PAST EPISODE: ULTRA-HIGH NET WORTH DIVORCE WITH BROOKE SUMMERHILL https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/ https://www.northcarolinadivorcelawyersblog.com/billionaire-vows-what-jeff-bezos-prenup-teaches-us-about-high-stakes-marriage-planning/ Inside the Bezos Pre-Nup

NICK MAGGIULLI, successful author of “Just Keep Buying” has a new book out called “THE WEALTH LADDER.” It’s a well done framework on how one’s relationship with money has to change as they move up the different strata of money and spending. We get into the book, how major life changes can shape our views, and the writing process. https://youtu.be/pFmWTHlPTUY https://www.amazon.com/Wealth-Ladder-Proven-Strategies-Financial-ebook/dp/B0DKMPFTR3/ OUTLINE What does this book seek to accomplish? How was the experience different from the last book? Surprises in your findings? Has getting engaged and married change your lens on any of these topics? THE SIX LEVELS OF THE WEALTH LADDER Level 1: Less Than $10,000 Level 2: $10,000 – $100,000 Level 3: $100,000- $1M Level 4: $1M-$10M Level 5: $10M-$100M Level 6: $100M and beyond TRANSCRIPT Frazer Rice (00:02.178)Welcome aboard, Nick. Nick Maggiulli (00:04.138)Thanks for having me back, Frazer. Appreciate it. Frazer Rice (00:04.911)Easy to have you back and congratulations on two fronts. You just got married and you’ve also in a sense given birth to a new publication here. Tell us about the last few months and what it’s been like. Nick Maggiulli (00:14.41) It’s just been very busy, lots of things. We were doing wedding planning. We got engaged late last year and so wedding planning did that, had a few small celebrations. And now it’s book launch time. We’re delaying our honeymoon until the end of August because the book’s coming out now and the book’s out, so going from there. So it’s been fun. Frazer Rice (00:38.094)Big things happen in three, so it’s all coming together in a couple of months there. So I’ve been watching this book getting written over the course of last, I guess, two years now. What was the gist of the book for the audience here? What got you into the wealth ladder concept, having written Just Keep Buying? Nick Maggiulli (00:41.374)Yeah. So the gist of the book is that your financial strategy needs to change over time. I think it’s very easy to get caught in a certain set of habits and you can follow those to their logical conclusion. But if you’re trying to kind of go to the next level, so to speak, as I say in the wealth ladder, you might need to change your strategy. And there’s a ton of examples of this and it really depends where you want to go, how much wealth you want to accumulate, etc. Knowing all those things will help you better determine which strategy you should follow. That’s the high level of the wealth ladder. Frazer Rice (01:30.574)So as you were sort of getting into the research on it and you take a lot from your personal experiences, you’ve moved up the wealth ladder and have had to have a little self-discovery on that. What would have been the interesting findings in your own experience and in the research that you’ve had and maybe things that were surprising? Nick Maggiulli (01:51.338) the Origins of the Wealth LadderI think this is something that I’m hoping a lot of people who have built wealth have come to the same conclusions, which is like as you build more wealth and have more money, like money doesn’t mean the same thing to you anymore. It doesn’t have the same value. Like I remember still being a, you know, semi-broke college student, you know, and then being a, you know, semi-broke just graduated college student, just started earning money and stuff. And I remember not wanting to pay for a beer at a festival because it was $9. And now that beer is probably 15 or 20 bucks. But at the time I was like, this is crazy. I can’t pay for this. But looking back now, it was because I just didn’t have a lot of money and I was trying to be very careful about my spending today. Looking back, if I had known everything I know now, I’d be like, I can, I can buy the beer. I’ll be okay. Right. I don’t have to sneak these little mini liquor bottles and all the crazy stuff I used to do. Right. That’s like an example of like over time, just money changes. Because of that, you’re like, yeah, I shouldn’t have been as, you know, I shouldn’t have cut back as much when I was younger. also just how you view it. I view it more as a tool now and less from like as a scarce resource. Like it’s a tool I can use to do things. I can help my family with it or travel with it. I can donate. There’s all sorts of different things you can do with your money. And I think seeing it as a tool is really the important part. And lastly, it’s just how like the amount of money I need to change my lifestyle just keeps getting bigger and bigger. Right. We’re like, you know, ten thousand dollars back when I was 22 would have been like, wow, that’s like a ton of safety. I wouldn’t worry as much about money. Today, $10,000 just doesn’t mean as much as it used to. And so it’s great. would still be, used, hand me a $10,000 check. That’s great. I’d be happy, but not even close to as happy or wouldn’t have as, as big of an impact on my life as it would have when I was 23. Right. I think everyone understands that, you know, what’s $10,000 to someone with a million. It’s not as big of a deal compared to someone with close to nothing. And so, yeah. Frazer Rice (03:36.14)Yeah, one of the things that, you know, as was reading the book, super interesting is the idea that as you move up the wealth ladder and more and more people become involved and are part of your responsibility umbrella in many ways. And it gets back to something I wrote in mind where I talk about how the liabilities increase geometrically even though the assets may increase linearly. Is there a process around when you start thinking less about yourself and wealth than you start thinking about a family unit and then… intergenerationally and beyond. It’s something that I think gets lost in many times in the sort of the financial planning shuffle, but it’s something that I think your book covers well. Nick Maggiulli (04:23.454)Yeah, I think the big error that people make in that front is thinking too much about the monetary and the financial piece of that and not the non-financial piece of it. So it’s like, Hey, my gosh, I accumulated, say $20 million and I’m going to have this for three generations and I’m planning this and I’ve trust and all this stuff. And you can set up all these structures and do everything perfectly right. But if you don’t have the right relationship with your kids, if you guys don’t have a shared set of values to build off of going forward, It’s going to derail as soon as you’re gone because you know, maybe they’re just following your wishes while you’re here and as soon as you’ve passed, how do you know that those things are going to live on? You don’t at all, right? At the end of the day, I think what’s more important is having a stronger relationship with your children so that you can talk about these things and listen to them, get their feedback and then plan your money more together instead of just doing it completely on your own and trying to create this control beyond the grave, right? And I think that’s what can create other issues within the family. It’s the thing that people overlook because I think everyone’s just like, if I just get the wealth and it’ll last. And I don’t think the second part is true unless you have the value set up. You’ve thought about all these other things that people tend to overlook. Frazer Rice (05:35.883) the Wealth Ladder and CouplesJoelle and Doug Bonaparte have come out with a book about wealth and marriage and money and you’re going through it right now having just been married. What’s been sort of the first takeaway in getting married and sort of the principles of the wealth ladder? And I guess another different way of asking that is how do you merge your way of thinking about these wealth concepts with what your wife is thinking about? It’s not pinning you down specifically, you’ve been buried above. But at the same time, I’m sure you saw that where when you’re merging different views on wealth and as you sort of put a timeframe and a ladder frame to it, what have you found interesting in your research on Nick Maggiulli (06:22.25)Yeah, so I haven’t done too much research on couples in particular. I can tell you that my wife and I are very aligned on a of our finances. She’s actually more frugal than I am. I try and I even use, you she’s read the book at this point, right? Cause I, you know, I was writing in and I gave it to her. Frazer Rice (06:34.526)You forced her! Nick Maggiulli (06:51.69) Yeah. And for no, she wants, she wanted to read it on her own. So she wrote like a EPUB version of it and read it and stuff. She really enjoyed it. But I think for her, like she still has trouble spending money. And so I like came up with this spending framework using the 0.01 % rule, which is like, Hey, take your net worth multiplied by point zero one percent or divide by 10,000. It’s the same thing. That’s the amount of money that your wealth is like generating daily in like a very conservative sense. Right. If you point zero one percent do that, you know, let’s say 365 days in a row. That’s about three point seven percent a year. It’s a very conservative return. And so if we assume that like you could spend that in theory every day and it’s like a trivial amount of money to you So she’ll be like, oh, I don’t know if I want to spend 50 bucks on this thing. I’m like, baby, our net worth is over 500 K. So we don’t need to worry about that. Right. Because at 500 K, the point zero one percent rule would say you’re spending about 50 bucks a day on these like marginal purchases. So I’m trying to get her to not think through that. like, yes, obviously, your spending depends on your income. That’s obvious. But I think the marginal spending decision, hey, can I afford this thing? I like to think of it using this spending rule because it does scale very well with wealth. Right. And so I have these six levels of the Wealth Ladder and I can walk through those and then talk through the spending real quick. So level one is less than $10,000 in net worth. Level two is 10,000 to $100,000. Level three is a hundred thousand to a million. That’s like your typical middle class level four is 1 million to 10 million level five is 10 million to a hundred million. And finally level six is over a hundred million dollars. When you apply this to the 0.01 % rule, that means, you know, let’s say you’re in level two, that marginal decision when you divide by 10,000 is going to be between $1 at the beginning of level two up to $10 by the end of level two. So I call that grocery freedom. Like when you’re at the grocery store and you’re trying to decide which brand of an item to get like eggs or cage free eggs, the difference in cost is going to be somewhere between one to $10, right? It’s a small difference. Level three, which is a hundred thousand to a million dollars in wealth. When you use the 0.01 % rule that ends up being 10 to a hundred dollars in the marginal spending decision. So I call level three restaurant freedom because when you’re at a restaurant, when you’re deciding which item to purchase, the difference in the cost could be anywhere between you, let’s say 10 up to let’s say a hundred dollars at the extreme. If you’re getting like a nice steak versus, you know, just a, you know, a salad or something that’s much cheaper. And so you start thinking through this stuff and that rule I found is very helpful for spending. Lastly, in terms of how my wife and I do our finances, actually wrote a blog post about this recently. We kind of have a joint account where all our income and expenses go into. Nick Maggiulli (09:11.644)And then I’m sorry, all of our income goes into all of our expenses come out. And then if there’s like, if I’m assuming we’re, know, earning more than we’re spending. our, you know, there’s a growing balance in that account over time. We will then do like quarterly. We’ll take a distribution. We’ll say, Hey, okay. We have an extra 20 grand in the account. Okay. You take 10, I take 10 and we take that as just like almost like a. dividend payment to ourselves, right? And then we do it again for another quarter and we’ll keep doing that. and obviously if we need to, let’s say we need to buy a house, then we need to take our, from our separate assets and we put money back into the joint account to buy something. So if we, we need to put down a hundred K on a home. Okay. She puts in 50, I put in 50 and then we, know, into the joint and then we buy from there. So that’s just, it’s a simple, very easy way of doing it. It allows for separate assets throughout the marriage and it also, so can kind of have your own assets. At the same time, there is this joint component, is like everything’s pro rata in terms of income and expense splitting. Frazer Rice (10:02.633)uh… i’d really like to get the point of one percent rules of the general framework uh… great little rule from one of the things that you know as i get older uh… i i have a greater appreciation for cash and having comfort in the cash balance and is as you move up the ladder even for people who get in the ten million hundred million and center and certainly not that but the uh… would like to be but uh… not quite there That cash component, which in some ways, there’s a comfort and safety aspect to it. It stitches interestingly with your last book where if you can keep buying assets that accumulate produce income over the course of time, that that’s a good outcome too. What did you think about in terms of that? Did that come across your authorship while you were going through? Nick Maggiulli (10:55.508) on the Rungs of the Wealth LadderIn general, like the whole idea of the Wealth Ladder is that every level has a different strategy you can focus on. And so in level three, the love, the strategy I talk about, and once again, level three is a hundred thousand to a million dollars in wealth, which is about 40 % of us households. I consider that like the middle class in the United States, that wealth level, the strategy there is just keep buying. Right. The strategy for that is that book basically. And because it’s like every, you know, if I say, if I want to get from level three to level four, what do I need to do? You need to keep investing in income producing assets and just give it enough time. And, know, in theory, if you do that and you do it for, you know, 30, 40 years, you should be able to get into a million to 10 million. And of course that’s not going to be true of everyone. Some people need to raise their income to make sure they can save enough to do that. But that’s a part of that. And so when I was thinking about. you know, income producing assets, all those types of things. It’s really a flywheel up the Wealth Ladder because the more income you have, it’s usually easier to save. Then you can take that money and invest it in income producing assets, which create even more income, which makes it even easier to save. And so like you end up getting this flywheel where the amount of income in each wealth level just keeps kicking up. Like in level four, the median household incomes about $200,000 in level five, it’s closer to $750,000, which is, know, once again, level five is 10 million to 100 million. And by the time you’re in level six, which is over a hundred million in net worth, the median household income is $4.3 million annual income. You can see like from 200 to 750 to 4.3 million, there’s just these massive jumps in income. And a lot of that is due to wealth, right? Once you have wealth, that wealth is usually kicking off income for you. And so it makes it a lot easier. Frazer Rice (12:32.056)The as you get up the ladder here and I guess this is some of the, know, where my day job kicks in and you have to start thinking about the spending that goes beyond you, beyond your family. And you’re worried about different constituencies, whether it’s charitable or generation two or three or even four. That the flywheel for income also turns into a flywheel for expense in many ways. And this is something that it’s easy to. It’s easy to observe, sometimes different to experience. What did you see on that front when you were talking to various experts in that world and how people handle it? Nick Maggiulli (13:14.004)So I don’t know too much about generational planning and I didn’t focus on it too much in the book. I talked about it briefly but once again I focused on the non-financial aspects because thinking through the finances of a multi-tier strategy it’s not my area of expertise like a multi-generational like approach. I have no idea how you would even structure that. can start guessing at that but it’s not something that I’ve done for a long time or anything like that. So I didn’t focus on it too much. The one thing I did think it’s easy to overlook as I said earlier is You’re probably not. need to make sure that the, you could set all that stuff up, but if you don’t have the right conversations and the right relationships with those family members, it’s very likely going to fail. Right. And so I think as much as I care about the math and the structures and all those things, which I don’t have the expertise in the other piece is like, wow. You need to think through how you actually approach this from a personal standpoint. Like how do you approach this with your children? How do you how do they all make sure that we’re all on the same page and everyone feels like it’s fair you know and your will and you know the trust you set up etc. So when I’m thinking through that I am thinking through the non-financial piece because I think it’s the most overlooked right like you can pay someone if you’re if you’re in level five you can pay someone to do all the other hard stuff like all that expertise stuff that that the person in level five may not have any expertise and you can pay people to do that right. The thing you can’t pay someone to do is to get your relationship with your children correct. That’s on you, right? So when I’m writing the book, I’m saying, what are the things that the person in level five actually need to do? They need to do this because the other pieces can be paid for. This piece can’t be paid for and that’s the difficulty. Frazer Rice (14:50.758)You know as I tell people that you know there are a lot of smart people that can help you get through the tax and finance and legal and all that that that’s beside the point but the communication aspect if you don’t get that right your your house is on us on a rickety foundation. You know I to sort of flesh out the point a little bit differently I’m now in sort of a world where you know when people come to me asking my advice on this stuff yeah there’s the blocking and tackling but it’s really a citizenship exercise it’s defining the terms under which you living within the family and with living underneath all of these resources what are the rights and obligations that come with it. Without a real firm understanding of what that looks like you know the rest of it, it’ll be in place and it’ll give you a chance of maintaining things from one generation to the next but It’s certainly not going to solve for everything and it probably won’t be flexible enough to deal with life as it intervenes and causes people to veer off in different directions. Nick Maggiulli (15:55.604)Yeah, that’s very true. so once again, it’s always difficult, even when the communication is set up properly, like things come up, the future’s hard to predict, like bad luck happens to people, right? All sorts of things can happen that derail these generational wealth planning ideas and concepts. But. At end of the day, you gotta just try your best and hope for it. And then once again, by the time you’re gone, you’re not gonna know the result anyways. It’s one of these, like you just imagine, you imagine all this stuff and it like doesn’t really matter. You’re gonna pass one day and that’s the end of it, right? Frazer Rice (16:18.35)Right. I was recently been dealing with a trust that was set up so long ago. was essentially electricity was recent. The airplane was recent. There’s no way any of the things that we worry about and stew over were even contemplated in terms of the different levels of spending, the different risks that were out there. so you do the best you can with what you’ve got. The difference between this book and Just Keep Buying: was there any difference in writing it and the publishing process we talked about a little bit that was a little bit different? maybe take us through what it was like getting off the post high and I would describe it as sort of a nice slow burn in terms of sales with Just Keep Buying and how that fed into finding the topic that you were interested in and then getting through the process of doing it. Nick Maggiulli (17:25.034) on The Wealth LadderYeah, so we just keep buying the writing process was, you know, 70% old blog posts that I stitched together. I created a structure and then kind of cleaned it up a little bit with the wealth flatter. It was based on a blog post I did in December 2019, but I had to take this one little, know, I spent five to 10 hours on this one blog post and then I had to take it and expand it and just dig deep onto every single sub concept and come up with new concepts and really clarify. A lot of my ideas. I remember when I posted the Wealth Ladder blog post in December 2019. It was on the front page of hacker news for like eight hours, which is like crazy. And so I read every comment in there. People had all these comments about the post. this post doesn’t address this doesn’t do this. I addressed every single one of those in the book. I went through every comment and I addressed all of them. So if someone’s going to read this book, they never heard the idea was like kind of getting a site. It was getting a insight into the hive mind. What do people think about this. Someone’s going to start reading this and say, wait, what about this? keep reading. It’s addressed. It’s going to come up later in the chapter. Right. And so all those types of things, I think that for me was very helpful because it gave me this insight of like, Hey, here’s the pushback I’m going to get. As soon as I address it in the text, people are like, wow, this person thought this through. And it’s like, I tried to do my best with that. So in terms of the Wealth Ladder writing process, they both took about the same amount of time to write. obviously the wealth letter is far more new material. Like I would say it’s like, you know, 70 to 80 % new material and the old blog post that became it was like you know 20 percent of it if that and then I expanded from there so I’d it’s mostly new material versus my old book was you know mostly old blog post and so that’s the big difference here in terms of the writing process I still think Even though this was new material, I had done it before. So I kind of know how to write a book. You know, the most important thing is the beginning and just getting the structure set up. And once you have the structure, the writing is not as difficult. As long as you know kind of what you want to say roughly in these chapter, the writing isn’t the hard part. The hard part is, in my opinion, is the structure. Right. And I think that’s where a lot of books go wrong because they just put a bunch of stuff together. They don’t think about the structure and that structure is the planning. It’s like the plot of the book in some ways. And so that is very important. And I think it’s probably the most important thing when writing. Frazer Rice (19:31.237)I’m fascinated that the Wealth Ladder Reddit subheadings and so on where people went in and had the different questions for you almost, you workshopped it before you even workshopped it. And also you almost had a focus group in place to kind of help steer it correctly. When you were doing Just Keep Buying, you didn’t have any of that really. We were just sort of writing and some things were popular and some weren’t and you sort of picked and choose between them. Nick Maggiulli (20:01.298)Yeah, it was more like that. And so I did have some feedback from people telling me about different ideas and different things. So there was some but it was more just like what I remembered I didn’t have. I can still go right now. I can search it on hacker news find that article click on it and go and see every single Comment that’s ever been posted on it, right? Patrick O’Shaughnessy said something or he talked to someone on one of his podcasts one time. He said a lot of things that succeed usually succeed like right out the gate. That’s not true of everything. Some things take a very long time. Compounding all the stuff, but you get like a, an insight that this could succeed, right? There’s always a possibility. Usually get some feedback. The fact that this blog post did so well said, Hey, there’s something more here. I would have written it sooner, but just given the timing of everything I started writing, just keep buying in 2021. So I had to kind of go through that cycle, let that play out. And then I said, Hey, In late 23, I was like, I need to start thinking about the next book. I started thinking through that. Go through the agent process, talk to the publishers, et cetera, and go from there. It all worked out in the end. I had let that process kind of finish before I could get back to the wealth ladder. That’s when I knew I was going to write it. After I wrote Just Keep Binding, I knew I was going to write this book. I just didn’t know when or when the timing was right. And late 23 was the time to start. And I had the manuscript done by August, by October. I didn’t really start writing it until really April ish I kind of had just ideas But then we signed the contract in April and then I really started writing in April and got it done by October. So Frazer Rice (21:28.727)Sometimes being obligated by a piece of paper like that can create focus for you. Those people who are writers out there, just keep buying with one publisher and wealth ladders with a different one. There’s pluses and minuses with everything. Was there anything particularly helpful about the new publisher? That sort of helped get things pushed forward or create some focus where maybe… Nick Maggiulli (21:32.233)Yeah. Mm-hmm. Frazer Rice (21:57.876)You didn’t have the same type of thing with just keep buying. Nick Maggiulli (22:02.026)I think the there’s two things that a bigger publisher can offer you. One is money, obviously, like pay upfront, like nothing against Harriman, but they just have a different model. And the second is they’re just, they have a bigger marketing. They have like, you, have a publicist now I have a specific publicist for me, right? There’s a marketing person I work with, right? The design team, it’s everyone’s just hot. Like this, if I had self published the Wealth Ladder, I wouldn’t have a cover this good. And I’m not just saying that, like people have told me like, my God, that’s a great cover. There’s six wealth levels or six, you know, everything kind of just fits very nicely. And so I wouldn’t have been able to come up with this stuff on my own. And of course we went through rounds with the cover and this and that, and I, you know, went back and forth and they came up with this. said, wow, this is great. I love this idea. Let’s kind of keep expanding on it. And so that’s an example where if I went self published or something, it just wouldn’t have come out as good. And so I think there are times in working with a publishing house. There’s just a like a higher quality unless you know a good designer a good editor a good like you can go down the line unless you know all these people already you kind of want to go with a publishing house because they have this expertise and if it’s not I just want to focus on writing and doing the best writing I can do and like let the rest of the stuff up to the publishing house. That’s my goal. And so whatever I’m that may change in the future. I may not use a big publisher again. I’m not sure. I got to see how this does how the marketing does like all those different things or what’s really important to me. Frazer Rice (23:19.244)Cool. So, we’ll wind down here. The book launches when? Nick Maggiulli (23:25.228)July 22nd. So by the time this comes out it will be out. It should be out now. So Frazer Rice (23:30.253)be more thrilled for you on that front. Between that and the day job, what’s next? Being married, you’ve got a lot on your plate. You’ve got the next probably six plus months framed out in terms of making this a big success. Have you got any other projects in mind? Nick Maggiulli (23:49.322)I don’t have anything framed up for this. It’s like, let it release and see what happens. See what opportunities come up, which ones don’t, et cetera, and go from there. Next big thing, I mean, next big thing in my life is probably gonna be me, you know, if God willing having a child. hen that’s gonna happen, who knows? We have to kind of wait and go through that process. but yeah, so that’s about it. I don’t have any other big plans. Just kind of doing my thing, staying with Ritholtz, promoting this book. We’ll kind of see where it goes from there. It’s hard to know the future. Yeah. Frazer Rice (24:15.98)Well, I’m ecstatic for you, And we need to get dinner shortly. those, Wealth Ladder is here. And I got to read it and watch it through its gestation period. So it’s been a lot of fun and I’m thrilled that it’s coming out. Nick, how do people find the book Wealth Ladder? I assume it’s on all major platforms, that type of thing. Nick Maggiulli (24:19.27)I appreciate it, Frazer. Yeah, Amazon Barnes and Noble, Target bookshop.org anywhere you can everywhere books are sold. You’ll find it. Frazer Rice (24:45.384)and how do people find your blog? Nick Maggiulli (24:48.162)Ofdollarsanddata.com. You can also follow me at Twitter slash X at dollars and data. I’m also on LinkedIn at Nick Maggiulli or on Instagram at Nick Maggiulli. So, and I respond to every DM. So you have a question, feel free to send one to me. I may be a little delayed because this week is launch week. Whenever it just depending when you get to me, I can, I will definitely try and respond. Frazer Rice (25:06.762)Put up a big sign when you go on your honeymoon so you can enjoy that please. Nick, thanks for being on. I appreciate it. Nick Maggiulli (25:10.492)Yeah, of course I will. Something of that nature. Thanks for watching. HEAR MY INTERVIEW WITH NICK FROM HIS FIRST BOOK: JUST KEEP BUYING. https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

The Business of Estate Planning is in the midst of a revolution- or is it? BRANDON RAINS discusses advising clients responsibly, profitability, and the “firm of the future.” https://youtu.be/a7VdZvrH9LI BRANDON RAINS from the Denver-based Rains Law Firm and I discuss estate planning in an era of artificial intelligence, scalability, the democratization of advice being delivered by non-lawyers and the fun and games that exist when people die and plans go into action. https://open.spotify.com/episode/6FeR3ACd8vXVkKyMZODnlu?si=Q0XrGGMRR92usDUiKcsT9g Outline for the BUSINESS OF ESTATE PLANNING What is involved with the process of educating/advising a person or family ? Good judgement, discretion, and experience is something worth paying for What does drafting and implementing involve? The benefits of “Professional Liability” and experience The intersection with technology / AI / drafting tools The dangers of DIY How to be a good client and get to adult conversations sooner Puttng thought into staffing important roles (and backups) Ongoing maintenance / administration Transcript Frazer Rice (00:02.954)I’m Frazer Rice. Today we have Brandon Rains. He is a practitioner in Colorado and owns his law firm in Denver. We’re going to talk a little bit about the business of estate planning and what it’s like to have an ongoing profitable enterprise when trying to help people arrange their affairs and do the right thing as far as advising. Brandon, welcome aboard. Brandon Rains (00:22.222) Thanks, Frazer. Pleasure to be here. Frazer Rice (00:23.926) So we’ve had a nice back and forth on the topic and maybe tell us a little bit about your practice generally and what you do, who your ideal client is, and then we can go into why we think it’s important to get paid for this type of advice. Brandon Rains (00:42.254) I my own firm about nine years ago, the Raines Law Firm, very originally and imaginatively named. I was leaving my previous firm, was interviewing with a bunch of other attorneys trying to find a good landing spot, and it just kind of hit home to me through those conversations and kind of debriefing with my mentor that they’re lots of times the state planning attorneys interact with their clients in the same way, generally speaking across the board. In some of those aspects, just not necessarily how I’m wired as a person, not that it’s necessarily better or worse or anything like that. I just felt that there might be more space and to kind of throw my elbows around within my own firm to kind of figure out what that could look like for me and serve clients in the best way possible. so started from scratch and still here and alive and kicking. Frazer Rice (01:38.028) So one of the things that I think is interesting is, I talk to people all the time and they indicate that they don’t understand the process of drafting and implementing and what does a lawyer actually do in putting together in a state plan? Take us through little bit about the process of advising and educating a client to help them understand what they’re identifying as far as an issue is concerned and then solving it. Brandon Rains (02:04.942) Well, I mean, think some of it is some of that answer is kind of what you would expect, right, which is asking good questions and listening. Beyond that, I think a lot of attorneys are going to be really different. I know that some attorneys that I’ve talked to, they have very strong feelings about our role to make recommendations, sometimes even tell the client what’s best for them or not. I think there are some situations where that makes sense. Again, it’s even though that’s not how I go about it, I think that they have, there’s some good sense there too. Some, think there’s a lot of decisions that can be personal that the client is best positioned to make those decisions of. so for me personally, kind of shy away from making recommendations for the most part, helping them have the information and advice and counsel that they’re looking for, for them to decide what’s best for them and their family. That’s kind of the tack that I take. For other attorneys, I know that they have stronger feelings. It’s like, we are not going to do this. This is not a good option. This is, you know, the best ones might say that and then explain why. But generally speaking, walking the clients through the decision-making process, I think offering that advice, being able to explain things in layman’s terms is so incredibly vital and important. Throwing… Legal jargon in our world doesn’t really offer too much help to people. They’re just going to end up just dazed and confused and going along with whatever you say because they don’t understand any better. I think deep down at the end of the day, that’s not really anything that what anybody wants. then, you know, understanding the questions that we’re asking, the decisions that we’re guiding our clients through is vital. as I understand, we’re gonna be talking even more about later on the benefits of working with an attorney as opposed to other options out there. But I think it’s kind of touching on that. And then on the back office side, you know, there’s over the last 10, 15 years, the growth of centralized drafting software programs has proliferated. Brandon Rains (04:31.982) Whereas before each firm would have their own templates and Word documents, copy, replace, copy, paste, and replace, and stuff like that. I know that there still some firms that still prefer to do it that way. But third party companies providing the forms that company, that attorneys or their staff use.has kind of proliferated. I personally am in that camp just being able to learn from hundreds or thousands of other attorneys and their experiences and the process of keeping those documents up to date with legal changes. It’s a lot easier with something like that. But sometimes that sense of ownership of those documents is lessened when someone else has prepared them and updating them and maintaining them. Sometimes it’s easy to take it for granted. But the process of drafting, the basic principles of drafting of legal advice are the same, really is we need to match the language that we prepare for our clients to their goals and their vision, their hopes, their dreams, their concerns. We really kind of capture all of that in the legal documents and do it in a way that’s understandable and ultimately is going to be effective after our clients have passed away. Then of course, walking clients through them and explaining it in the hopes that maybe a week or two after they’ve signed their documents, they might remember a thing or two of what they’ve been fighting. Frazer Rice (06:14.719) on the business of estate planning Always a challenge. One of the things I tell people is that you’re hiring an attorney to help you out on these situations because you’re going through it something that’s very complicated and opaque with huge ramifications for your life and after your life. With this being usually the first and only time that they’re dealing with that, it’s helpful to have a very well-equipped sherpa to help you along that journey. But then you’re also paying for the good judgment, the discretion and the experience that working with hundreds of other situations brings to bear to the instant case. describe that experience for me. You came from another firm, you decided to go this route and maybe a case study or something like that where a client really was able to find benefit from your having dealt with something similarly that occurred in your past experience. Brandon Rains (07:17.196) Yeah, I mean it’s you know there’s so many examples, but so it’s interesting how often clients come in. Like even just this morning, had a client, a couple come in, we had an initial meeting and kind of partway through that conversation, I was like, hey, do you have any questions for me in any way? It was kind of towards the beginning of the meeting a little bit. They were like, we don’t even know, we don’t know. We don’t even have the knowledge base to be able to ask you any questions in the first place. It’s like, okay, that’s fair. And so sometimes that’s just subject matter knowledge that is really helpful. I think a lot of times when couples and families benefit from our, to use your terms, your good judgment, discretion, and experience, we see that a lot when clients are making decisions. So it’s what makes sense, know, it’s, it’s, especially when children are struggling, right? I had some clients that I was meeting with earlier this week. We were helping them make decisions one of their one of their children is Just an amazing go-getter and the other one is struggling and so we had a real conversation about whether or not they should give money to their son or actually skip their son and go with give it to their grandson or granddaughter or whoever it was right, but just skipping that generation and walking them through that decision making process. Because some people, for example, think they don’t realize all the options regarding distributions to their loved ones. think it’s just everything. The only option they have is outright distributions, which is giving it to them all at once. Well, I don’t trust my child to give them everything all at once for drug addictions, manipulation, their spendthrift, whatever. So I just need to disinherit them. Sometimes clients have legitimately, literally come in with that mentality. When we talk to them and help them understand that there are more options than that to spread those distributions out over time and protect from those potential bad situations. That burden is just completely lifted off of their shoulders. It’s like, okay, I can give them money, but I can give it to them in a way that is best setting them up for success with some protections, with some guideposts, guidelines with some restraints because we think that’s really what their life and situation calls for. I’m gonna kind of draw an analogy here and I like yours with a sherpa, right? Where, you know, you can go on a, you can climb Mount Everest on your own or you can climb Mount Everest, you know, with a sherpa or you can climb it with a group. Right? You can kind of imagine the different levels of success there. The analogy that I tend to draw, unfortunately, Harkins is back to school time, but that was kind of the thing that came to me. Working with an attorney is like working, is taking a test with the teacher sitting right there beside you explaining the principles, reviewing the question, helping you understand the answers, and helping to quote unquote make sure that you get 100 % on that test, right? That’s what like working with an attorney can be like. Whereas doing it on your own is, you know, and I know that we’ve talked about to kind of talking about this with do it yourself options for estate planning. It’s like just taking the test on your own. Maybe open book, right, because Google kind of serves that purpose. But there’s no outside eyes. There’s no like true explanations. And if you’ve done any search on Google, you know it’s not that hard to find contradictory information. I’ve had clients come in with wrong understanding based off of Google. Now the tough part about is taking a test on your own. I don’t know about you, Frazier, but I always got 100 % on my tests until I got my grade back. And that’s the tough part. What’s especially hard with estate planning is you don’t get the grade back on your tests until after you’ve passed. There’s no extra credit. The grade is final. And you have to live with that. so there’s… Yeah, Frazer Rice (11:44.049) Yeah or others have to live with it even worse. Brandon Rains (12:09.618) You’re right, better said, right? Others have to live with that. And so it’s, you know, there’s something to be said about that. And there’s also a rise in, with companies that are DIY, they’re kind of talking to the financial advisors. There’s a big trend there of financial advisors walking their clients through the business of the estate planning process. setting aside any contentions or conversations about unauthorized practice of law and stuff like that. To go back to the teacher analogy, that’s like asking someone two or three years in school ahead of you for help, maybe like a tutoring type of a situation, but they’re ultimately still a student. They might have more experience than you, they might know more than you, but they don’t necessarily have the education. the hundreds of clients of qualifications, they don’t quite have that teacher certification, right, that has gone to school specifically for that, have been vetted and licensed by the state. There’s still a difference there. And I think there’s some real unforeseen or easily missed pitfalls with a, I’m gonna rely on a mentor type of a mentality rather than turning to a teacher. Now, of course, a mentor or a tutor or a fellow student may or may not have to pay for that, right? Obviously they’re gonna be paid less, because they don’t have the education, they don’t have the certification, stuff like that, than working with a teacher. But the teacher is the one who wrote the test, right? Who has studied the test, who has studied for… hours and hours and hours, the subject matter that goes into the knowledge, there’s still a real substantive difference there that kind of puts you and your loved ones in the best position to succeed, right, which is really where it is. Frazer Rice (14:20.987) To stretch that analogy further, I sit in the financial advisor role, at the multifamily office level, thinking about these issues. I have my thoughts and experiences and comments. It would not really occur to me NOT to use a lawyer. To take your analogy a bit further, having the teacher with you taking the test, but also having the mentor with you taking the test. Brandon Rains (14:47.245) on the business of estate planningYeah. Frazer Rice (14:49.295) That is better if there are really sort of qualitative aspects that need to be dealt with. Issues like: choice of trustee, do I favor one child over another? There may not be an exactly right answer. However, there can be a best answer through consensus building amongst three thoughtful people. One who’s extremely interested in it, and then the people who are sort of supporting of that. That joint approach to the business of estate planning I like that a lot better than the DIY. Equipping the client with digital tools to make a go of it themselves, and hope it turns out okay. Then maybe get a legal imprint or legal ratification elsewhere that isn’t really based on a relationship. I think ultimately people are looking for interactivity and they want that relationship. trend-wise, I think that’s going to argue for, certainly at some level. A return to in-person meetings and some more tactile interactions between client and advisor. Those team aspects are going to be that much more important in getting to the right result. Brandon Rains (16:12.448)I would agree with that. Some of my favorite meetings are… client, attorney, financial advisor, potentially accountant, all involved, right? Because we’re all addressing the subject matter from different angles, right? It’s when you get the tutor replacing the teacher, right? To kind of keep it industry agnostic, right? Whether that’s a financial advisor who’s trying to replace the estate planning attorney. Or the estate planning attorney who’s trying to place the financial advisor. That’s when you start running into, in my opinion at least, when you start running into different issues, right? You’re losing a team member. You’re getting people where it’s not their 24-7 type of a day job, right? But they believe that they can still do that, right? They can fill both roles or three roles or whatever. In my experience, that can run into issues. But yeah, multiple professionals addressing those conversations Frazer Rice (17:14.189)That’s because… Brandon Rains (17:19.248)those questions from their respective angles. It’s almost like the sum is greater than its parts, is my experience in those meetings add exponential value added rather than just purely linear. It’s an awesome dynamic. Frazer Rice (17:37.859)Exactly. think the other part too is that, you know, whereas we used to have to defend against the absence of information, I worry about the noise and the fact that, and I think the advisors can be affected by the noise too. And to have a couple of people surrounding the problem, I think mitigates that risk, doesn’t eliminate it, but to sort of have a back and forth and be able to make sure that the right course is brainstormed, workshopped, and then defended before being implemented, think that leads to a good result at the end of the day. Brandon Rains (18:15.95)Yeah, 100 % agree. Frazer Rice (18:17.773)It’s one of these things where that’s a lot of people and many times charging hourly or charging flat rates or things like that. People look at that and say, my gosh, I just wanted to get my estate plan done and get something in place. And now you’re telling me I’ve got expensive people on the hook to try to get this going. Part of me sort of says, look, there’s two levels of planning here. You have what you need to get done so that you’re not running naked through the park uh… and then then there is the deeper thoughtful estate planning, you’re trying to deal with taxes and creditors or things like that. How do you think about it in terms of the value added when when being in front of a client Brandon Rains (19:09.19)I think in a lot of ways it’s, you know, the biggest benefit of working with an attorney is the advice and the counsel and the experience, right? At this point… I haven’t done necessarily a count, but somewhere between 750 and a thousand different clients in the last decade, right? You combine that with just the knowledge that I’ve gained through studying, continuing education and stuff like that. It’s hard to replicate that from anybody else, right? Just as if I were trying to step into your shoes, it would take me 20-30 years to be able to fill in your shoes, right? Because that’s how long you’ve been doing this for. I think that’s something that we as professionals, especially over the last, don’t know, during this time from the information age and generative AI is going to be making it a really interesting thing for us to think about is how well do we explain the value that we bring to our clients and the families that we work with. For me, it’s the advice and counsel, the insights, the experience of this is what other people have decided. This is how I’ve seen this work out. And being able to take these abstract legal principles or even these experiences from other families, there’s always that question, I think, at the back of clients’ minds of like, okay, how is this going to impact my family? Whether it’s from a tax perspective, a control and access to assets perspective. What about family relationships perspective? Brandon Rains (20:57.006) Is this gonna help? What am I going to do? Is it gonna help them interact with these assets that we’re passing on to them in an appropriate way? Are they gonna interact with the world and with each other in a positive, constructive way? All of those things that we can do that I try to bring to the table as an estate planning attorney is to help them understand how these theoretical or not their experience can play out in their own family. Because that’s really what they’re looking for. They’re looking for clarity, they’re looking for comfort. Really the only benefit that clients get through their own estate plan is peace of mind. And so try to help them understand. The only way they can get peace of mind is not by, I would argue, true peace of mind is not just by making a decision. By making a well-informed, well-advised, well-counseled decision, taking all these different data points and being able to apply it to their own family, their own relationships, their own personality traits, their own characters, and the people that are involved, and to be able to say, okay, this is what I think is how people are going to engage with and interact with the estate plan with each other and by extension the world around them after they receive the distribution. So to me that’s the real crux of any value add for me at least. Frazer Rice (22:30.163)One of the things that people ask about is the analog world of estate planning and the new digital tools. Are they going to intersect? I use AI frequently. A variety of other tools help game out scenarios, look at documents, to do all sorts of things. I don’t think what we’re talking about is that the exclusion of technology, because I think technology is going to get us to have what I would describe as more adult discussions quicker. I’m wondering how your experience with technology so far, you talked about it a little bit about, you know, sort of having drafting capabilities and so on. Where do you see that going? Brandon Rains (23:13.74)Yeah, that’s a great question. I think a lot of estate planning attorneys use technology more than people might realize. There’s a difference between technology in the back office and technology on the client facing experience, right? There’s a difference there. Conversations with an attorney is human, right? I would say that’s not even analog, that’s human. And that’s something that… If AI ever replicates a human conversation, like really truly, that we as professionals can have and be just as accurate or more accurate with that advice, which is a whole different, that’s not as much of a given as we might like to think, then we’re all in trouble. But I think what technology does for the business of estate planning, and I’ve noticed with my own practice. Leveraging technology to create systems and processes to delegate to communicate within our internal team and know document sharing with a client or whatever that looks like that allows us to be more efficient to be able to focus on the unique and individual circumstances of our client. The business of estate planning is getting to those adult conversations faster. It also allows us to spend more time with those adult conversations too. I think part of that dynamic is already here. Now looking towards the future, it’s really, really interesting. I don’t play around with AI a ton, I’ll have to admit that. But what they think AI can do could be pretty awesome to leverage, right? Earlier this week, I got an introduction from a financial advisor to a client. The financial advisor used an AI-based estate planning review software program to review the estate plan. And ultimately, the financial advisor and the client had different feelings about the quality of the estate plan. The client thought it was great. The financial advisor was like, hey, this isn’t all that great. And the financial advisor sent me the estate plan and their AI-driven review. Brandon Rains (25:39.63)And with the in those, this is actually the first time that ever had ever done this. What I found with the AI was both a positive and a negative. So in one particular aspect is what really stood out to me. I won’t bore your listening audience with the details. However, just with one aspect of it as an example, I felt like when I was reviewing it. I felt like it maybe overstated the strength of some of that planning that was in the document. It might have missed the mark as well a little bit. Because it used a very specific phrase with this issue, I was looking for it. And one of my complaints about this document was the organization was a little funky. Any attorney is gonna take some time to look through a document that they hadn’t noticed. But because it…I was looking in this one spot for this phrase that this planning structure implied. My first thought for several minutes was, AI got it wrong. I was like, there’s not this planning at all. It’s something else. Since I looked at it, I’d seen it on the AI, I said, let’s just keep on looking through. I hadn’t gone all the way through the document yet, but it wasn’t in that spot. Lo and behold, that phrase was like dozens of pages later. I was like, oh, okay, you weren’t wrong, AI, this is great. There were a couple of places where I felt like it had overstated some of the protections. Because the AI had noticed it and picked it up in one spot at a disconnected location, it actually helped me find it. I can go back to the client. This is the type of planning- rather than me saying, you know, you have this other different type of planning. Then they’re like, well, wait a second. So I thought our attorney said we had this and it turns out that they are right. I was wrong. And that would just make me look like an idiot. Right. So that’s kind of, think where AI is right now, right? People say, you know, trust, but verify or don’t trust, but verify. That’s what it kind of seems like to me is where AI is. how effective it’s going to be. I talking with another attorney just this week on the business of estate planning. He was like, AI is as dumb as it ever is going to be, is right now. I think that AI is going to impact the legal staff. It could potentially replace legal staff sooner that it will replace the attorney. Whether that’s AI-voiced phone calls or AI-driven emails. or AI might become an integral part of drafting where it can take your notes from the meeting and you organize it in a certain way and you train the AI on how to read your notes and it’ll draft your document, right? It could get you that rough draft where before it might take you 20, 30 minutes, two hours, three hours, depending on your internal systems and processes to get to that same point, right? So, should it ever get to the point of replacing legal advice? I might be biased. I don’t think it should. But I think it will certainly have the capability. It’s there to augment and make bigger what we bring to the table, I think is where AI is at its best place. If it’s used to replace us, then we’re running into issues because AI has shown that it hallucinates quite a bit. I guess that’s the official term for creating stuff out of thin air or lying. There are attorneys that have been sanctioned because of inappropriate reliance on AI and replacing legal research and legal drafting. It’s not there yet. I don’t know if it’ll ever get there, but augmenting it and saving time and streamlining processes. Frazer Rice (29:41.758)Right. Brandon Rains (29:59.384)To me is the thing that makes the most sense because then again, to use your phrase, gets us to those adult conversations faster. It gives us more time to spend on those adult conversations. Frazer Rice (30:12.696) on the Business of Estate PlanningGood stuff. Brandon, how do listeners find you? Brandon Rains (30:17.708) on the Business of Estate PlanningYeah, so the website is rains-law.com. Rains is R-A-I-N-S spelled just like the weather. Or they can reach out to me directly. So, Brannon, just normal spelling, B-R-A-N-D-O-N at rains-law.com. Great ways. Frazer Rice (30:32.818) on the Business of Estate PlanningWe will revisit the business of estate planning going forward. We can talk about lots of different issues for hours. Maybe we’ll put a pin in this for now and have episode two, three, four, etc. as we go forward. Thank you for being on. Brandon Rains (30:50.766) on the Business of Estate PlanningThank you for Frazer, appreciate it. THREE ESTATE PLANNING MISTAKES GENE HACKMAN’S ESTATE PLANNING https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

“IS THE CIO DRAGGING DOWN THE FAMILY OFFICE’S PERFORMANCE? (And What Can You Do About It?)” with R. ADAM SMITH. https://open.spotify.com/episode/1Cl26HkpjZBnovg3zumuBx?si=0c7e252e629d4603 https://youtu.be/p3VtFCVpp8o The Family Office CIO job involves a delicate high wire act. The position can be the fraught intersection of: Asset Allocation (& collision of “endowment” vs “family adjacent” strategy) Cash Management Deal Sourcer/Vetter Club Deal Gatekeeper Risk & FOMO mitigater Overall One-Man Band R. ADAM SMITH advises families around deal and investment structure via RAS CAPITAL PARTNERS. We discuss the evolving CIO in family offices, Our discussion addresses the importance of expectation-setting on both sides. We get into what the families can do to understand their own needs (and why they might be the problem!). The goal is to help both sides unlock potential and get out of the way of performance. Adam Smith’s Background (2–3 min) Adam gives a brief personal background and current work with family offices Set up the problem: Many family offices operate with misaligned or underperforming CIO structures Mention growing tension between opportunistic deal flow vs. structured allocation frameworks CIO Dragging: Defining the“Non-Functioning CIO” (3–4 min) Describe what a non-functioning or misaligned CIO looks like in a family office Common traits: reactive, relationship-driven over process-driven, lacking risk discipline The consequences: inconsistent returns, governance confusion, lack of accountability Deal-Driven vs. Allocation-Based Models (4–5 min) Explain the difference between a deal-centric CIO vs. one focused on institutional-style allocation Why the dealmaker mindset often prevails in emerging family offices Tradeoffs: speed and access vs. diversification, scalability, and defensibility Challenges when there’s no clear investment policy statement (IPS) Why Do Families Tolerate This? (2–3 min) Emotional and trust-based dynamics—families often default to familiarity over structure Over-indexing on “access” as value Underestimating the long-term risks of ad hoc strategies What CIO Institutionalization Looks Like (3–4 min) What a functional, institutional CIO framework looks like (clear mandate, reporting, delegation, rebalancing discipline) Role of governance in supporting this structure When and how to make the transition—triggers and best practices Cultural and Generational Resistance (2–3 min) Why some families resist institutionalization How generational shifts are challenging legacy CIO models Importance of aligning values and objectives—not just tactics Closing Thoughts THE CIO DRAGGING ON THE FAMILY OFFICE PERFORMANCE (2 min) Tie back to broader themes of sustainability, legacy, and governance in family offices Call to action: revisit your CIO model—does it reflect your goals or just your past? Emphasize the importance of aligning investment leadership with broader family vision Other CIO Dragging Considerations- Do the staffing and comp models adequately align the employer and employee?   What does a successful structure look like and how much does it cost?   What dos a minimum structure look like and how much does it cost?   Are CIO’s under resourced and put in a failing position?   How does career risk factor into CIO decision-making?   Does the threat to the family’s relevance in decision-making risk factor into this?   How much time is wasted doing “pretend” work to maintain access to other family offices deals?   Do you measure investment adjacency to the family specialty and how should that affect the evaluation of the CIO’s performance?   What happens when a deal-centric CIO is thrust into an asset class that is out of their expertise?   What is the benchmark performance for a FO CIO these days?   On the ESG, DEI, impact and philanthropy front, are these buckets in an overall allocation (sometimes where younger generations can be brought along?) or are you seeing FO’s incorporating the values metric in the overall allocation?  Is there a trend to think of family offices as useful for one generation and then to have them split up? BRIAN ADAMS ON FAMILY OFFICE RECRUITING https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

https://youtu.be/UizVi4fJzPs?si=MeLp0txegEzBkVLl CIVIC ENGAGEMENT: The Secret to Revitalizing Communities- this is how we improve our neighborhoods. It’s a great way to teach the next generation about citizenship and how to be a part of something bigger than themselves. But what is involved in getting involved? Politics has an ugly reputation. How does one participate, get meaningful results, and keep ones sanity? Friend of the show, BLAIR DUQUESNAY, takes us through her experience navigating levee governance and politics in her hometown of New Orleans after Hurricane Katrina. She explains why civic activity is important to her and the example she wants to set for others. It’s a great example of citizenship that we can all learn from. https://open.spotify.com/episode/3BjQeTf3nz5mgt6UD2pgpy?si=ntfqCSR1S2aCQvmVxSNQoA Summary In this conversation, Frazer Rice and Blair discuss the importance of community engagement and civic responsibility, particularly in the context of New Orleans post-Hurricane Katrina. Blair shares her journey into civic activism, the challenges faced in flood protection governance, and the grassroots efforts to raise awareness and advocate for reforms. They emphasize the significance of being informed and active citizens, the lessons learned from local democracy, and the need for ongoing engagement in community issues. Takeaways Civic engagement is crucial for community well-being. Personal experiences shape one’s commitment to volunteerism. Grassroots advocacy can influence local governance. Awareness of local issues is essential for effective activism. Democracy requires active participation from citizens. Building relationships with elected officials is important. Researching issues enhances advocacy effectiveness. Community coalitions can broaden outreach efforts. Caring about local issues is a fundamental aspect of citizenship. Voting is a critical component of civic responsibility. The Secret to Sound Bites “We’re all just humans in this process.”“It’s important to research the issues.”“You have to vote to have a voice.” Civic Engagement Chapters 00:00 Community Engagement and Civic Responsibility05:59 Political Challenges in Flood Management12:11 Lessons in Local Democracy? Titles Reinvigorating Our Communities Navigating Governance After Hurricane Katrina Other CIVIC ENGAGEMENT EPISODES https://frazerrice.com/civics/ WHAT IS CIVICS? https://frazerrice.com/all-the-presidents-money/ https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/ Keywords community engagement, civic responsibility, Hurricane Katrina, governance reforms, flood protection, grassroots advocacy, local democracy, civic engagement, informed citizen, activism, belle curve, blair duquesnay, ritholtz wealth, next capital, next vantage, frazer rice

The massive costs of caregiving can be a big surprise to most people. It is an expensive undertaking in the best of circumstances and can be a full time job. BETH PINSKER, a columnist at Marketwatch and the author of the new book, “My Mother’s Money- A Finanical Guide to Caregiving” takes us through her experience. There are many great tips to help get support for this difficult experience. https://youtu.be/WNYLOR_Pvw8?si=8dS2LPG3vfe1FWIX https://www.amazon.com/My-Mothers-Money-Financial-Caregiving-ebook/dp/B0DW3RLJSF/ https://open.spotify.com/episode/120pb9198YPecMzPir7RyC?si=mqlnY7XmRA-gtRzfJemq_w Outline 00:00 Introduction to Caregiving and Aging 02:15 The Importance of Planning Ahead 08:28 Navigating Legal and Financial Caregiving 10:33 Understanding the Emotional and Physical Toll 14:29 Making Informed Decisions for Loved Ones 19:40 Financial Planning for End-of-Life Care 25:28 Essential Documents and Digital Access Transcript Introduction to Caregiving and Aging Frazer Rice (00:04)This is a real treat for me in the sense that I have had personal experience around this. Your book, which we’ll get into in just a second, is going to be coming out in November. I think it’s going to be an important resource for pretty much anyone who has ⁓ any exposure to aging or anything like that or any sort of caregiving. Give us a little bit of a sense of the timing of the book first and we’ll get that out of the way, far away. Beth Pinsker (00:35)Great, you know what, we’re all in this together and nobody’s gonna escape any of this. You will either need to care for somebody or you’re gonna need to be cared for yourself at some point in time. Like it’s inescapable. you ⁓ know, we’re all, we all need this information. The reason I put it together was because I couldn’t find it out there when I went looking for it. When my mom got sick, there wasn’t a resource that told me how to deal with the things that I had to deal with. Being a CFP and being a retirement columnist and a journalist, I got the caregiving information. Then I wanted to put it out there for other people to benefit from it so they could plan a little bit better or get through whatever they were stuck in the middle of. I pulled together a bunch of columns I had written and brought in them out. I interviewed a lot of people, like almost 100 people, especially for this book. Over the years as a journalist, I’ve interviewed probably, you a thousand people about, you know, planning and estate planning and all of that stuff that goes into it. This book is coming out November 4th from a Penguin Random House imprint. You can pre-order it on bethpinsker.com or through the publishers portal. Hopefully you’ll see it everywhere and every bookstore you go to. Frazer Rice (01:51)One of the concepts of the book that I think is vital is that it’s important to have these steps. This caregiving analysis, this process established while everyone is at least a little bit on the top of their game. That you’re not making decisions under maximum stress, either emotional, financial or otherwise. Maybe take us through a little bit about how you came to that realization and how you articulated that. The Importance of Planning Ahead for Caregiving Beth Pinsker (02:06) Yeah, so I got a call from my mom ⁓ one day. You know, she’s perfectly fine, 76 year old, and she’s like, I’m gonna have surgery. It’s gonna be a big one. I’m gonna get my back operated on so that I can continue to walk. She really wanted to be able to walk and she was losing her abilities. The thing we need, we needed two things. We needed a power of attorney for ⁓ financial needs and a healthcare proxy because she was going to be incapacitated for a certain amount of time. We didn’t know how much and we needed those documents. If we would not have had those documents, my life would have been an utter disaster. It was already really hard with those documents, but without them, I would have had to go to court. I would have like not been able to do anything. I would have had to pay her mortgage out of my funds, I would have had to pay the caregivers out of my own funds. I would have been locked out of her life and locked out of making decisions for her and I would have had to, you know, get a lawyer and, you know, that cost about $18,000, right? So instead we had forms that said I could act on her behalf and she got them as part of her estate plan. The equation I put in the book is you can get those documents for free or you can pay $18,000 to go to court. Like that’s the position that people are in before something bad happens. Like, do you want to just spend 10 minutes and get a power of attorney and healthcare proxy? Or do you want to go to court and spend months and agony and lots of money? So, you know, if you put it that way and you explain to people why and show them how hard it is to not have those documents, I’m hoping it will spark a discussion that somebody in the family will say, hey, Does mom have those documents and does dad have those documents? Does Aunt Sue have those documents? We really need to get those and do it. Everybody over the age of 18, so don’t send a kid off to college without them. My son turned 18 and he needed some minor surgery before he went off to college. Printing out documents and marched him down to the notary and got those signed for him. He’s like there was no way I was gonna have him do even a minor surgery where he wasn’t even gonna be really fully under and Was gonna come home the same day I wasn’t gonna let him do that without having some sort of paperwork in place because he’s 18. He’s a legal adult You know Frazer Rice (04:46)I mean, everything related to the Terry Schaivo case to situations where decisions for accidents that happen abroad and so on to not have those documents in place is a disaster waiting to happen as you described. One thing that I’ve gotten from my experience is that it’s important to not only keep them reviewed to make sure that people are in place, et cetera, but also to have them just generally updated. I’ve found that hospitals and medical practices sometimes say, you know what, this is more than five years old. We’re not going to respect it. Beth Pinsker (05:22)Yeah. Frazer Rice (05:23)Was that any part of your experience or have you heard about that from anyone? Beth Pinsker (05:26)Absolutely, because ⁓ people move, right? And so my mom and dad had their estate plan done in Pennsylvania. ⁓ Then they retired and moved to New Jersey, primarily. So Pennsylvania and New Jersey have different rules. If they would have gotten sick in New Jersey and had a Pennsylvania power of attorney, Frazer Rice (05:30)Right. Mm-hmm. No question. Beth Pinsker (05:47)We would have had trouble. Then they packed up and moved to Florida. So if they would have gotten sick in a time period where I needed to take over for them and they still had their old documents, we would have been stuck. ⁓ As it was, my father died in 2018. The first thing I did was have my mother redo her entire estate plan in Florida as a single adult, right? No longer, I give everything to my husband and my husband gives everything to me, ⁓ which they call sweetheart wills, which everybody in your audience already knows, but ⁓ if you’re watching and you don’t know, that’s what they call those. ⁓ Frazer Rice (06:18)That’s right. Beth Pinsker (06:25)But so they had sweetheart wills and if something happened to one of them they said I give the power to the other in a power of attorney and my brother and I were named as you know successors. ⁓ But after my father died, those things are no longer any good, right? So my mom needed to update her plan and I was already a CFP and a retirement columnist by then. So she listened to me and she went and got all these documents done in Florida. And so when she got sick, it was within five years. ⁓ Nonetheless, I went to the bank with them and tried to get access to her bank account and they just look at me and they shook their heads. They said, Nope, you need a court order. And I said, Nope, I don’t. I don’t need a court order. have valid paperwork. They said, Nope, you need a court order. We went back and forth like that in like, you know, for like 10 minutes. I knew what I was doing and I stood my ground, but I wonder how many people don’t ⁓ and go off and you panic. But I made, I stood my ground. made them, you know, let me talk to a customer service rep. made an appointment. I came back and they put the paperwork through, but I really had to like, ⁓ you know, hold a sit-in and refuse to leave. Frazer Rice (07:42)Gosh, the one of the things that that brings up, go in all sorts of directions on this. But the first one is that is the changing of planning once an event happens. And so when your father died and your mom was on her own and the characterization of the estate planning is different at that point, you know, it’s sort of take it’s taking one set of circumstances into account. Well, those circumstances happened and now you have to prepare for the next tranche of life. both from a caregiving perspective and then from an estate planning perspective. It’s also, I think, a unique opportunity to sort of look in as you sort of diagnose too and understand who is actually making the decisions for people at this point because the dynamic is now completely different. Navigating Legal and Financial Caregiving Beth Pinsker (08:28) Yeah, no, my mom, you know, didn’t know a lot of this ⁓ stuff. And I think a lot of people don’t like in the process of writing this book. I got an edit note that was like, I didn’t know this, you know, and it was that when you have a couple and they’re both getting Social Security when one dies, you know, you go down to one Social Security income and you can can shift to the higher of those Social Security incomes. But people don’t realize that. And if they’re counting on paying bills with the two Frazer Rice (08:49)That’s right. Beth Pinsker (08:58)social security incomes, that’s a big shock to their financial system. And people like you, you’re surprised by what people don’t know. So if you’re a professional and you know that and don’t even think about it, but don’t understand that your clients don’t know that they’re preparing for a different financial situation than you’re helping them prepare for, right? They’re thinking they’re getting two checks ⁓ perpetually and they’re only going to get one and they need to plan differently. And so somebody along the way has to explain that to them so that they get an understanding of what their income will be if one of the couple goes. ⁓ Frazer Rice (09:36)One of the things that I really liked about the book ⁓ is the concept of getting the caregiver, usually someone younger, one of the kids of the parent or someone like that, or sometimes it’s the spouse to the other spouse, then there may be an age, ⁓ sort of assymmetry on that front. But getting them used to the idea that caregiving is a full-time job with multi-faceted approaches to it. We’ve already alluded to the sort of intersection with the banking system and the legal system and then the healthcare system, all of which is maddening in terms of detail and again, a full-time situation and then that doesn’t even get into the emotional and physical aspects of it. How did your experience shape that? There are obviously plenty of surprises, probably many of them unpleasant around that. What happened on that front? And I’m sure that was a big part of the thrust of the book. Understanding the Emotional and Physical Toll Beth Pinsker (10:19)Yeah. Okay. It was, and there’s a difference. I draw a line between medical caregiving, like physical caregiving, and the financial caregiving. And I’m purely focused on the financial caregiving. There’s a lot out there on the medical and the physical side, and even the emotional side of caregiving. ⁓ But those are things that you can actually pay other people to do. And it’s really hard to pay anybody else to do the financial caregiving part. Even a financial planner, even a manager. Like you can hire people to do some of it, but ⁓ you know, like my mom was not gonna give her ATM card to just anybody, right? She certainly wasn’t gonna give it to a banking stranger or somebody she hired to be in that relationship. She wouldn’t trust them, especially if she was incapacitated. Certainly, she wasn’t gonna give it to one of the ladies who was helping her in the bathroom. so. That’s another thing. Frazer Rice (11:16)Sure. Or worse maybe she would have and that’s another problem that you have to insulate yourself against. Beth Pinsker (11:33) So, you know, for somebody, need somebody you trust who’s really on the ball to like, you know, have access to the bank account and the credit card and all of those things. And it goes way beyond that because when somebody’s in the hospital or sick or navigating, you know, the care infrastructure in the United States, you have to keep an eye on it because it’s just, it’s so complicated. You have to be on site or visiting often or making spot visits or calling them in some capacity. They’re trying to move your parent. They’re trying to release your parent. Things need to be taken care of every single day. If you don’t check in on them, that person could be waiting in dirty bed clothing to be changed. And you don’t want that for your parent or any sick loved one. Just the amount of mental energy and physical energy caregiving takes. I think I counted them up for the book. In eight months, I made eight trips back and forth from New York to Florida. Each of the trips was at least a week. Some of them were for multiple weeks, like three weeks. I made a trip, I was there for three weeks, because stuff kept happening and I kept having to stay. My mom’s time was short because her illness got serious pretty quick, but it was a lot. I have a full-time job. I’ve got kids. I’m divorced. when I’m with my kids, it’s just me and I have a dog. People have stuff that they have to do in their regular lives. It’s hard to add an entire other complicated human being on top of that. Mom’s coming home from the hospital. You got to go find a place, either a nursing home for her to go to, or you got to be at the house to accept the medical delivery. Somebody’s going to be there who’s responsible to sign for it. That can’t just be anybody, you know, like you need to be on top of those things. Frazer Rice (13:39)Well, and you’re fighting the caregiving business model in many ways. The healthcare business model is not an empathetic thing. Not only are you fighting that and all the different bureaucracy that accompanies it. There is so much mental energy to do what you described. To make sure that the aging process and the recovery or hospice process is done with the dignity that you want. That is squarely at odds with what the healthcare system is wanting to do at that point. I tell anybody on that front to get ready to deal with this stuff. You’ve got to really swallow hard and get ready. It is going to be an emotional and energy tax that you may not have prepared for yet. Making Informed Caregiving Decisions for Loved Ones Beth Pinsker (14:29)Yeah. And you really need to know what caregiving that person wants. So that’s where a living will, ⁓ the healthcare proxy, the HIPAA permission, there are all sorts of ways to express that living will. There are these things called five wishes, which help you ⁓ say what you want in a more ⁓ common way instead of legalese. But the living will is a legal document, right? Like you need that in order to be able to prove what your loved one wants or wanted if they can’t speak for themselves. ⁓ And you don’t want to be making that stuff up. You really need to like have a discussion about it. I think that of all the things I went through taking care of my mom, knowing very clearly what she wanted was the only thing that brought me peace in the whole process is because I was there as a steward to take care of what she wanted. And if I didn’t know what that was, I would have driven myself crazy. Like it’s too hard emotionally to try to make life or death decisions for somebody else, somebody you love, without knowing what they want. And, or especially if you’re going to go counter to their wishes, because that’ll blow up your whole brain. ⁓ But I knew what my mom wanted. I knew what her parameters were. I knew what she considered hopeless and how mostly how she didn’t want to live. Without knowing those things.I would never have been able to make decisions, hard, hard end of life decisions, And you need them, not just verbally, but you need them on paper. You need both. And, you know, estate lawyers, God bless you, like all of you out there, like you help people get those things together and people need them. And I just wish more people had them because like, you know, I’ve, looked at all the stats for this book, right? Perennially over decades, 60 to 70 percent of people do not have any documents in place for their incapacity or death. Like 30 percent of people in almost all surveys, 30 percent of people have a will of some sort. That’s not enough. You need the capacity of documents. You need a living will. Like if you’re going to help, if you love people, like you have to put this stuff together for them. They have to know what you want. Um, and I, what my book tries to do is show people why, right? Here’s my caregiving story of what I went through. Here’s when I needed this and that document. And finally, here’s what having that document meant I was able to do and able to feel and able to survive. Um, and here’s what having that document, not having that document would have done if I didn’t have it and here’s what it did to you know other families that I talked to. You really have to understand that why and I think a lot of people don’t and I think that’s why they don’t get the documents done. That’s why when a lawyer hands them in a state planning binder and asks them to put information in it, it just sits on a shelf. Frazer Rice (17:40)It’s a huge mistake and all it takes is one time touching the stove like that and people understand right quick what it means to not have that in place. And when you don’t have documents in place, you’re stuck with the default rules that the government sets up for you and with the process that the government sets up for you, all of which is painful. And to not do that is to not get things in order. It’s a small thing, ⁓ but it’s not a small thing. If you don’t do it, you’re setting up the people who are in charge of taking care of you or that you’re dealing with that just get raked over the coals with crazy. Beth Pinsker (18:27)Yeah, and it’s even more important, people think about that in terms of ⁓ state mandated succession, if you die without a will. ⁓ But after somebody dies, you have a lot of time, nothing’s gonna change in that situation. When you’re incapacitated, there’s deadlines. If you don’t have access to certain things in a certain amount of time, like money for a mortgage payment or the ability to make medical decisions, even who can see you in the hospital if you’re divorced or if you’re in… There are people in this country who have family members who don’t agree with their lifestyle, say. If you’re in a same-sex relationship, and you don’t have paperwork in place and your family swoops in and won’t let your partner in to see you, that’s still happening out there. And without legal paperwork, you can’t fight it. That’s just really sad. And I don’t want that to happen to anybody. So if you can reach some people with storytelling, that’s what I was hoping to do. Frazer Rice (19:22)One of the things that’s a little bit scary too is the numbers around all of this, where to me, one of the things that scares me going forward, country-wise or otherwise, is the amount that the costs of the last two years of life are and what they’re going to be. And the safety nets that are out there may or may not exist later on. They’re so poorly understood as to how to deal with them anyway. ⁓ Maybe take us through a little bit about what you found related to getting the dollars in order so that ⁓ those last two years, which are the most expensive years of life, usually even the last two months, ⁓ how that can creep up and really ⁓ create a situation. Financial Planning for Caregiving and End-of-Life Care Beth Pinsker (20:12)Ha. Yeah. Probably nothing made me crazier than, than hospice. Like I didn’t understand that hospice like wasn’t a place. I thought hospice was someplace that you went like, oh, when, when you’re at the end of life, they send you to hospice, right? Hospice is like, for the most part, just your house, you know, and they, they pay for some of the medical supplies and they, uh, you know, a nurse will come by. Um, but for the most part, you’re just like living your normal life until, you know, until it’s really, really close to the end. I think a lot of people don’t understand that, you know, because like they go home and think they’re on hospice and then, you know, 18 months later, you know, they’re still footing the bill for all this care or somebody has to quit their job to stay home with them. And I didn’t understand any of that. You know, my mom’s illness went really fast. So, we were in this hurry up offense, the whole hurry up defense for caregivng, I guess it is- I’m not good with sports, but we, you know, we were just running gun the whole time. It wasn’t until we got my mom home for hospice that, you know, we started to look at how long can we handle this. We didn’t, you know, my mom didn’t have a terminal diagnosis. So it’s not like she had cancer and we knew how long it was going to be or something like that. We thought she was potentially gonna get better and she just wanted to go home so she went on hospice so she could go home with some support. We thought that we were gonna be in for a long haul- in Jimmy Carter land, where you’re just on hospice and when you go, you go. He was on hospice for more than a year. Frazer Rice (21:49)Right. Beth Pinsker (22:07)That happens to people, but not very often. We started to plan then. What we did, you know, I these formulas in my book. Which are standard financial planning formulas that you learn, you and that any CFP knows. Mostly you have to plug them into software. The parameters and the Monte Carlo simulations get too complicated. It’s basically, you know, how much are you spending now? How much do you have? How long, ⁓ and then you plug it into a formula about how long is that going to last, right? If you have enough to last a significant amount of time, you need to factor in growth, right? So the money’s growing at the same time you’re spending it. So you can’t, it’s not just subtraction is the point I was trying to get along to people. If you’re spending $15,000 a month, You have $100,000, it’s going to last a little bit longer than just, you know, taking $15,000 chunks out of it. If you’re lucky enough to have, you know, more than that, or the ability to sell a house or whatever, you have to factor all of those in. So you have to make a plan. Okay, for the next six months, we’re going to spend down the savings, and that’ll get us to point B. Then after point B, we’re going to sell the house and you’re going to go to a nursing home. That’s going to be more expensive. but we’ll have the cash. Then after that, you know, we’re gonna have to think about Medicaid or somebody in the family’s gonna have to put up some money to fund the cost. And then you’re sort of playing this like game of catch up the whole time. You know, is the person gonna stay alive for that length of time? You know, are they gonna need significantly more care as you’re going through those equations? Because you have to change them all the time. My mom started out with one set of aides who covered a 24 hour period. Every day, seven days a week. But when she came home for hospice, one caregiver wasn’t gonna be enough, right? So we had based our whole budget on, you know, one caregiver at a time. They would do a 12 hour shift. Then the next one would come in and do a 12 hour shift. When she was home for hospice, we needed those shifts to overlap, because she couldn’t be left alone. If the caregiver needed to go to the store or run to the pharmacy to get medicine or leave the room to go make dinner or whatever a normal life requires you to do, we were gonna need them to overlap a little bit. That was more money, you know, and it lasted longer than we thought. So they were going to need vacations because they were getting burned out. Then you’re paying for a caregiver to go on vacation and then paying for a caregiver to cover for them. And the cost just, they’re just exponential. They’re just, it’s just so much money. Frazer Rice (25:07)It does not stop. As we wind down here, what are the top parts of the checklist that everyone should check off and make sure that they have in place? And I say that as a subtle jab to people to buy your book because that’s going to be, you know, the details underneath that checklist are going to be important. Caregiving: Essential Documents and Digital Access Beth Pinsker (25:28)Yes, so you need to have the power of attorney and the healthcare proxy. You need to have access to the person’s phone. That means knowing their latest phone code. And also, I bring up a thing, I don’t know if, you know, this is some things people miss. Like, I don’t know everybody out there if they’ve done this. If you named a legacy contact for your phone. that is like naming a beneficiary for your phone. And it’s really important because phones are hard to break into. And people ⁓ think that you know their phone code. Then they change it and they forget to write it down, especially old people. If you can’t get into the person’s phone, you’re kind of… It’s as if you don’t even have power of attorney. You can’t two factor anything. ⁓ You don’t know anything about their life if you don’t have access to their phone. So you need those proper documents to do it legally. You need ⁓ access to their phone before and after death. ⁓ And you need some sort of will or trust or something to say end of life, ⁓ you know, cause power of attorney, a lot of people don’t know this either out there in the world. Power of attorney stops when somebody dies, right? So you need something for after that point. So you need power of attorney and healthcare proxies up until the point somebody dies. And then you need whatever you’re gonna do for after. Whether that’s a will or a trust. It depends on your circumstances, but you need those documents and you need access to the person’s key, Frazer Rice (26:45)Sure does. Beth Pinsker (27:06)⁓ digital existence, which is their phone. With their phone you can mostly get their passwords. So it’s not important that they write everything down. Like my mom didn’t. My mom thought she did. My mom had an old check register. She wrote all the passwords to anything that she had a password to. I couldn’t make any sense of it whatsoever. She thought she was so clever and so prepared. I literally couldn’t read her handwriting, had no idea what she was talking about. like it was written in scribbles and I couldn’t make sense of it. So I just went in and two-factor everything and overrode all our passwords and reset them. But that’s time consuming. Think if somebody had to go into your entire digital existence and reset all of your passwords. Conclusion Frazer Rice (27:56)If I’m doing it, it wouldn’t happen. I confused myself on that front. So as we, what is the best way for people to get to the book? I know it’s coming out in November, but pre-sales are important. So everyone get out there and, and, and get it. Beth Pinsker (28:09)These titles are everything. Bethpinsker.com and I write regularly for Market Watch. I’m a retirement columnist, so you can always find me out there on the internet, on social media. It’s just my name. All you have to do is search it and you can find it. I’m readily available on all channels. Frazer Rice (28:28)and title of the book. Beth Pinsker (28:30)My Mother’s Money, a Guide to Financial Caregiving, out November 4th from Crown Currency. Frazer Rice (28:35)Excellent. Beth, thanks so much for being on. Beth Pinsker (28:37)Thank you. ⁓ JENNY ROSELLE on Aging and Roles in Estate Planning https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

There are plenty of LESSONS FROM GENE HACKMAN’S ESTATE PLANNING. https://youtu.be/HZI4oiP0ZtM It’s a cautionary tale about managing changing circumstances. Proper implementation and monitoring has to be in place. Periodic reviews of the documents, asset titling, and staffing of the fiduciary roles are a must. Finally, understanding the family dynamics and desire for confidentiality are vital in putting the estate plan in place. The disposition of $80 million was at stake here. LAWRENCE D MANDELKER, Partner at the NEW YORK OFFICE OF VENABLE, and I discussed the fact pattern, what could have been avoided, and points to take away in one’s own affairs. https://open.spotify.com/episode/1ndlYCQRiAokJ4FyATL9Te Transcription Frazer Rice (00:02)Welcome aboard, Larry. VENABLE ARTICLE ON GENE HACKMAN’S ESTATE Lawrence D. Mandelker (00:04)Thanks for having me, Frazer. Frazer Rice (00:05)This is, I wouldn’t say it’s fun talking about someone’s estate, but this one’s particularly interesting. We all remember Gene Hackman from Hoosiers and Superman and Mississippi Burning and all sorts of great movies. Unfortunately, his end was sad and as it turns out, Gene Hackman’s Estate was complicated and public. From a planning perspective, we can learn a lot. ⁓ Take us through a little bit about where where Gene’s estate kind of went from and ended up as far as a fact pattern. Fact Pattern in Gene Hackman’s Estate Planning Lawrence D. Mandelker (00:37)Sure. So, you know, the news sort of surprised all of us when we heard that he had died. And then over the next couple of days and weeks and even months, more more detail came out. And as you said, it was pretty disturbing. But it seems as though Gene Hackman was a very successful ⁓ actor and he engaged in estate planning. Gene worked with attorneys, which is always a good thing to do it to work with people who are experts in the field And he had a you know a normal estate plan. He lived with his wife It seems like he had a little bit of a fractured family. It was not his first marriage. We learned after he signed his estate planning documents sort of things over the next 20 years sort of changed for him he He had some health issues. He was suffering from advanced dementia at the time he died and as we know his wife died from a virus apparently a week before. Then as the details came out we learned that he had the advanced dementia. There was a fractured family the the wife and his kids did not get along so well. It’s unclear what the situation was with how much contact he did have with his children. But he had a will, he had signed it 20 years before he died. The facts changed. It looks like he hadn’t reviewed it in a while. His attorney died so we have a sad situation here. Frazer Rice (02:12)Many lessons to get from that. Let’s start with the first one. He definitely had ⁓ sort of dementia situations, cognitive dysfunction that eroded over the course of time. Maybe take us through a little bit about the scope of that issue. mean, it affects lots of people and a growing number every year and some things that should be in place because of that. Lawrence D. Mandelker (02:38)Yeah, you know, we all think we’ve got a lot of time and for someone who gets a diagnosis of dementia It’s sort of a warning sign as soon as that happens that, you know, we never know when our time is going to come, but the dementia is sort of the warning. You know, maybe you’re entering the second half of the game or the fourth quarter of the game. So maybe you should start getting your affairs in order while you still can. So it’s a good ⁓ impetus to do that. You know, when we’re looking at estate planning, there’s, you you can do different types of estate planning, but really think about it as, you know, you can do it for yourself. You can do it- your loved ones and then you know for depending on the nature of your assets you can do it for tax purposes but you know getting the the warning that you have dementia doesn’t mean that you can’t sign a will doesn’t mean you can’t do any estate planning it just means that you know you’re probably heading towards a situation where you are going to face you know a number of years during your life where you can’t make the same decisions on a daily basis for your own benefit that you can today. And going back to that idea of the first level of estate planning is for yourself. So you want to make sure that you’ve put in place a plan of who’s going to make decisions for you when you can’t make those decisions, rather than having those people fighting amongst themselves to decide who’s going to do it. You’re empowered to do it yourself. Standard Documents Frazer Rice (04:08)Well, and it goes to goes so far as to reiterate the notion that you should review these things periodically. The idea of making decisions around health care, making decisions around financial ⁓ situations. We’re dealing with a sizable estate and to have that in a confused state, you know, someone’s health starts to decline. That’s a dangerous place to be. Lawrence D. Mandelker (04:31)Yeah, absolutely. mean, you’re at the very basic documents. You want a healthcare proxy and a power of attorney. The healthcare proxy is going to name a healthcare agent to act for you to make your decisions when you can’t make them. And the power of attorney is going to name someone who can do anything that you can do by signing your name. So they can sell your house, they can buy a house, they can take out a mortgage, they can buy stock, they can sign your tax return, they can pay your electricity bill. The people that you trust to do those important jobs may change over time. So when your kids are young and if you’ve got a teenage child, maybe you don’t trust them. But as they are in their 20s and 30s, and at that point when your kids are young, maybe you’re naming your siblings as these agents, or good friends, or trusted advisors, whether it’s your accountant or your attorney, people that you’ve known for a while whose judgment you trust. But then when your children get older, that changes a little bit. Maybe now you start trusting your kids to do that. Your advisor is no longer working or you’ve moved on a different advisor. Maybe your siblings have their own health problems so they’re not able to do it. So it always changes and it’s always something that you don’t need to look at the documents every day. And I sort of tell my clients, know, keep the documents someplace where they will be found but not where you see them every day. ⁓ Frazer Rice (05:57)Well, the backup to that is don’t leave it in a safety deposit box at a bank where necessarily the bank may have trouble getting to it if you don’t have those documents in place or they are in the vault. Lawrence D. Mandelker (06:12)Yeah, you know, that’s the thing that’s one of the first things you learn out of law school as a trust and estates attorney that you you need a court order to open in New York, at least you need a court order to open up a safe deposit box after someone died. So if the will is in there, you you’ve increased your complexity, you’ve increased your costs, you’ve increased your time just to get the will. Implementation Frazer Rice (06:32)So let’s get back to the important notion of implementation and then the close cousin to that monitoring the estate plan as it goes forward. A lot of what’s going on in the Gene Hackman estate is going to be related to titling of assets and making sure that they are in the different entities that were set up, making sure the designations are in place, and then understanding that that is where that it follows the intent of Gene going forward. What do we learn on that from what we had here. Lawrence D. Mandelker (07:04)Sure, know, a lot of our clients come in, they sign the documents, and they think, wait a minute, I’m done, right? And, you know, sort of there’s a next step. You want to make sure that you’ve implemented your plan. So that means you know if you have a revocable trust because you want to avoid probate Well, the assets have to be in the revocable trust You actually have to retitle your assets if you want to update your beneficiary Designations on your retirement accounts or on life insurance policies. It’s not enough to just say you want to do it. You have to actually fill out the forms. You have to send them in. Practice pointer: you should follow up with the insurance company and get written confirmation that you’ve done it correctly. If you name three children and they only put down two, then they’re only going to pay it to two kids. You want to always check and recheck to confirm that everything that you’ve done. Frazer Rice (07:58)This was a case where sort of the way of going about it, where they “set it and forget it.” It really hurt things going forward. Lawrence D. Mandelker (08:06)Yeah, he signed his will and he didn’t review it, it seems like, for quite some time. So he named as a fiduciary, he names his attorney. And meanwhile, his attorney ⁓ predeceased him. We don’t know if that was because maybe he lacked capacity to change those documents at the time the attorney predeceased or he just didn’t look at it. But in any event, if the attorney’s getting older or something’s happening, you you should know, you should constantly monitor. If these are the people that you’re counting on to take care of you, then you want to make sure that they’re in a good position to do that. Frazer Rice (08:42)I tell people that it’s a good idea to have the people who staff the different roles in your estate plan be, as a rule of thumb, 10 years younger than you are. Maybe more, just so that you don’t have these types of issues. Lawrence D. Mandelker (08:57)Yeah, no, that’s a good rule of thumb. You usually don’t want someone older in the event that you really have nobody else. Or you have a small family or you don’t trust someone. Maybe the family dynamics is really shifting drastically. Then sometimes you’ll just name, maybe add an extra person in the hopes that, well, this person probably won’t act, but if something, you know, happens to me, you know, something surprising happens to me, then at least someone’s there to be able to name someone else to act. So yeah, naming younger people, naming more people is backups that’s always important. Frazer Rice (09:33)Well, and that was an unintended good thing that happened in this estate plan. It sounds like he had a second successor in place because the circumstances around the joint death were a little peculiar. So having someone else in place has helped a little bit in this situation. Lawrence D. Mandelker (09:49)Yeah, absolutely. It’s that second successor. So it’s not only your primary agent and a successor, but sometimes having that other successor. It’s contingencies. I we’re always worried about, you know, the fact when we draft documents, we always in part of our plan, try to figure out, OK, well, what happens in the family disaster situation? Right. You all you’re all on the plane going down to Disney World for a big family reunion and the plane goes down. Who, you know, who outside of the immediate family do you want to get the documents? But we’ve got it. We’ve got a plan for all contingencies. Confidentiality Frazer Rice (10:20)One of the things that’s sad about Gene Hackman’s Estate is that it’s being played out in the public. hear about estate planning in People Magazine is not exactly something we expect. But the fact of the matter is that this is sort of played out publicly when in many cases I’m sure that Gene didn’t intend for that to happen. Maybe talk a little bit about the privacy and the confidentiality issues that are at play here. Lawrence D. Mandelker (10:43)Sure, so your will is your will and it’s just a document until it actually gets probated, which means the court goes in and stamps it as being an official document. But for that process to happen, you have to go to court, you have to file the will in court, and that means it becomes part of the public record. And whenever there’s a celebrity death, sort of a week or two weeks afterwards, the will comes out. It’s always in a newspaper or magazine. I represent highly visible people, They don’t want that. That’s their personal issues. Gene Hackman lived a quiet life. I don’t think he wanted people to know what his relationship was with his family, et cetera- or how he wanted his estate distributed. Now, one thing that he did do was he used a revocable trust. A revocable trust is also sometimes referred to as a will substitute. That does not get probated. So that does not become part of the public record. Where it says that his assets go into a revocable trust It doesn’t mean that it didn’t that he didn’t leave it for his kids or he didn’t leave it to charity.We just don’t know and, frankly, it’s none of our business. No, you know, we don’t we don’t need to know how much money he had. or what he did with his money You don’t know what he spent it on on a daily basis. As someone who represents highly visible people athletes entertainers, they don’t want you know. They’ve got enough publicity. They want a little bit of privacy and we should all sort of give them that. Frazer Rice (12:18)No question. I imagine that’s why Gene kept a low profile, especially in the later stages of his life. He wanted to be remembered, I think, for his acting career and the legacy he left behind. Not the final years and the way he lived that. Lawrence D. Mandelker (12:37)Right, absolutely. ⁓ I wouldn’t want my neighbors to know what I’m doing with my money. I don’t deserve to know what they are. these people just have a, maybe it’s a cooler job and it’s a more visible job, ⁓ but give them that common amount of decency. Hidden Traps in Gene Hackman’s Estate Planning Frazer Rice (12:50)Right. Regarding, Gene Hackman’s Estate, one of the things that ⁓ I think is a real cautionary tale here is that sometimes the boilerplate in these documents is particularly important and the circumstances of Gene and his wife’s demise have created a little bit of ⁓ sort of a walk into the gray area of how things should be applied here. Maybe take us through that. ⁓ This involves sort of the timing of death and how that applies to the implementation of these different vehicles. Lawrence D. Mandelker (13:29)Sure, so when we say boilerplate, we’re kind of talking about the general language and the will. So when you have a will, talk… you know, when your client tells you what they want to do and we’re drafting their will to reflect their wishes, there’s certain provisions that we’ll always have in that will, you know, provisions on how the will is going to be administered, what laws are going to apply, things like that, tax provisions. So, you know, that’s really what we talk about as far as boilerplate. The problem is that that boilerplate sometimes is more important than the actual dispositive provisions of the will. Those provisions that say 50 % goes to my son and 50 % goes to my daughter. Depending on how it’s administered, the 50 % could turn into something very different. This is a perfect example of that. Gene survived his wife. His wife died and then a week later he died. Her will said if Gene survives me, if he’s alive when I’m dead then he gets the money. It goes to him. Later on, it said if he doesn’t survive me, if he’s not alive when I die, then the money goes to charity. The document said, well, if Gene doesn’t survive by 90 days then it’s treated as if he pre-deceased her. That little provision rewrites the whole will. It’s done for the reason to make sure that if jean wasn’t around, if we died in a common accident and maybe I died. We died in a car accident and I died on Monday and he you know survived for three days in the hospital You know, he really didn’t have time to change it. He didn’t benefit from it So I don’t necessarily want it to go to him. I want it go to who would have gone anyway. If he didn’t survive, so that’s the purpose of that type of provision. But really it turns things on its heads. And I really think that the lesson from this is, especially for the do it yourselfers out there who go online and they try to copy a will and type in their name and say, this is the provisions. You don’t know what’s hidden in the, for computing purposes, you don’t know what’s hidden in the code, right? You don’t know what else is in there and what changes those could have on the of the document and the plan. Frazer Rice (15:57)Well, and to put numbers around this, depending on how this gets sort of, sort of disseminated and understood, this could be $80 million going to the heirs or $80 million going to charity. And with some, you can understand that some people are going to have some questions about that going forward. If you aren’t clear about what the intent is in your documents and making sure that that’s understood in that language. Lawrence D. Mandelker (16:28)Yeah, like I said earlier, these little provisions that you tend to gloss over can really change the entire estate plan. This is a swing of $80 million. That’s going to be a huge difference. The Dangers of DIY-Planning Frazer Rice (16:43)For the do it yourselfers, I’m going to reiterate it because I think it’s important. Getting an estate plan document by auto generation is going to cause some issues around this. People put things in place where they don’t understand how the levers get pulled. The directions that an estate plan can go will frustrate intent. So this is my little sort of bromide: if you are using those documents, it’s a good idea to have them go through a lawyer as well so you understand how each of the clauses can impact these types of situations. Lawrence D. Mandelker (17:27)Yeah, I mean, you know, I sometimes say that if you’re being responsible enough to do estate planning. You’re thinking ahead, you want to plan, you want to empower yourself, you want to take matters into your own hands so you get to decide who gets things and how it’s going to be done, then you really should go the next step to do it. Otherwise, you’re really taking a big risk. I could get behind the wheel of my car and blindfold myself and start driving to the store and I may make it. It may work out perfectly, but it’s not necessarily a good idea to do it, even if it works out. Frazer Rice (18:01)Well, and to go back to the other parts of the Gene Hackman Estate fact pattern here, number one, intent can shift. And if you get into places where capacity or dementia start coming into place, it’s important to review these things. And secondarily, you can even have the will or the revocable trust say what you want it to say. But if you don’t have that titling and designation of beneficiaries and various things line up with the document, your intent can get distorted quickly. Lawrence D. Mandelker (18:29)Right, you know what you know, but you don’t know what you don’t know. And that’s dangerous part. Frazer Rice (18:34)We can look into the crystal ball for people and take care of a bunch of risks, but certainly not all of them. Lawrence D. Mandelker (18:41)Right. I think you brought up a very good point just now and thank you for raising it. There are certain things that are done when you sign a will. They can help support the will in case of a later challenge, especially if you have incapacity. So when you’re dealing with an attorney in some states like New York, for instance, where I’m located. When an attorney supervises the execution of the will, there’s a legal presumption that it was executed correctly. When you bring the will to court to probate the will, you have to prove that it was executed correctly. If you had an attorney supervise it, you don’t have to do that. Someone looking to object to a will, to contest it, and say that’s not a valid will. You’ve made their job infinitely harder by having an attorney supervise the execution. Frazer Rice (19:37)People are discovering, for instance, Aretha Franklin’s estate has this issue. Someone found another will in a couch somewhere.Tthey’re going to litigate as to whether that’s valid or not. You can reduce the stress on the executor. The ultimate heirs and family members will thank you if you tie this up in a nice bow ahead of time. Lawrence D. Mandelker (20:00)Absolutely. There’s a lot of things that go into the will execution ceremony, the meeting where you sign your will. There are a lot of things that go into the whole process of your estate planning. You have to deal with correspondence, deal with discussions that you have with your attorney. This is true especially for people that are concerned about having a will contest. There could be concerns about dementia and people saying maybe they didn’t understand the will. Working with someone well versed in what they need to prove the will execution is extremely, extremely important. Can’t be said enough. Final Points- Lessons Learned in Gene Hackman’s Estate Planning Frazer Rice (20:42)Great stuff. Larry, any final points on Gene Hackman’s Estate? Lawrence D. Mandelker (20:46)Your estate doesn’t have to be the size of Gene Hackman’s estate. You should be take these steps, regardless of how large your estate is. You should be working with someone who’s well-versed. Who is going to give you the information that you need to effectuate your wishes. Frazer Rice (21:02)How do the listeners find you? Lawrence D. Mandelker (21:05)I am a partner in the New York office at Venable. They can email me at lmandelker at venable.com . More than happy to talk to anyone. Frazer Rice (21:20)I’ll have that in the show notes. Thanks so much for being on. Lawrence D. Mandelker (21:23)Thank you. I appreciate this. Further Links Some links related to lessons and Gene Hackman’s Estate Preserving Legacies (And the Applicability to Gene Hackman’s Estate) Three Estate Planning Mistakes (and Gene Hackman’s Estate) https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

US/UK TAX PLANNING with ALEX JONES, Partner at London Tax Firm, RAWLINSON-HUNTER https://youtu.be/UjgQRpfqJ-E Thousands of Americans live and work in the UK and record numbers of them are applying for British citizenship. Planning for taxes for these folks has always been challenging, but in 2024, with the change in the non-DOM rules, it’s gotten even more difficult. To help us understand what’s happening here and to try to identify some of these issues is ALEX JONES. He’s a partner at Rawlinson Hunter, the British tax firm. Enjoy. Outline 00:00 Understanding UK Tax Law Changes for US Citizens07:00 Navigating Residency and Tax Implications11:49 Planning for Inheritance Tax and Trusts19:51 Pre-Immigration Tax Planning Strategies30:03 Managing Double Taxation and Tax Credits https://open.spotify.com/episode/4Hmqaalhjk3NklfMCWNd4X?si=8e45eac2d2f247cc Transcript of US/UK Tax Planning Frazer Rice (00:04) Well, we have certainly had a lot of news with British tax law changing. And for those of us here in America who may or may not be part of getting to Europe in a major way and in the UK in a more permanent way, maybe give us a little overview of ⁓ A, what happened, but more specifically, how the UK thinks of US citizens, which can take different forms. Alex Jones (00:31) Let’s start with the back end of that question, how we regard Americans. So from a tax point of view, clearly what we’re really saying is how do we regard Americans who are exposed to UK taxes? And typically that means Americans who are here. Like most countries in the world, the UK will tax people on UK sources of income. If somebody has a trade or business operating in the United Kingdom, we’re going to try and tax it whether they are here or not. But if the US individuals physically in the United Kingdom, then the UK is going to try and tax them in a number of different ways, which I’ll talk about in a second. The pause is really just to emphasize the fact that they’re American. So a US citizen or US green card holder is going to be US worldwide taxable, whether they live in America or not. So America is going to look at everything everywhere in an American way in dollars in a calendar year. And at exactly the same moment in time, albeit in the UK we have a different tax year end. Our year end is a rather crazy 5th of April year end. Exactly the same amount of time the UK is going to look at exactly that same person and say, hey, what are we going to tax? And so you’re starting with the premise that both countries are fighting over who gets the tax first. And the first thing you have to do is look at the two sets of domestic legislation to see how to start, where the problems are, and then you start looking beyond that. In principle, the UK is going to tax people who are resident in the UK on worldwide income. So anything everywhere under UK rules, UK fiscal year, in sterling, et cetera, et cetera. And somebody who’s not resident in the UK on UK-CITUS connected income only. However, the UK has long had a regime which has been known as the domicile regime or the remittance basis regime, which has been pretty well known internationally where we said, Look, if you don’t originate from here, if you’re a foreigner coming in for a period of time, could be indefinite, could be reasonably long, but not permanently, then we won’t necessarily tax all things which are non-UK. We would tax things that you brought into the UK, remitted, but we wouldn’t necessarily tax non-UK things that you didn’t otherwise bring or use or benefit from in the United Kingdom. So the thing that changed in the budget that was announced at the end of October 2024 that largely came into force on the 6th of April 2025 is that we said, hey, this domicile regime, this remittance basis regime is kind of too beneficial to wealthy individuals. You have neighbors who are paying differential amounts of tax just because one person’s kind of foreign and the other person’s a blue blooded Brit who’s lived here forever. That’s not right or fair morally. So what we’ll do is we’ll say, okay, we’re to do away with this term domicile. We’re not going to use it for income tax or the estate tax purposes particularly. And we’re going to create some new terms. And one of them we’ll create it, which is a four year regime. call the fig regime for an income gain regime where we basically say, again, we’re going to tax UK stuff, but we won’t tax foreign things for that four year window. But once you’ve been in the UK for more than four years, we’re then going to tax your worldwide income. And then we have an extra piece we’ve added on, which says, if however you’ve been here for a long time, which is basically resident for 10 out of the last 20 years, we’re also going to say, now you get worldwide inheritance tax. If you die while here, well, if you die with UK stuff, we’re going to tax you on your worldwide assets. as opposed to potentially just your UK only assets, which is how we typically would have treated you if you were a non-domiciled individual under the old regime. So lots of change as to how the UK taxes people and therefore how we view the American is all about the interaction of the two. It’s all about, yeah, but I’ve got both. I’m an American, I’m paying US income tax, I’m paying US estate and gift taxes. How do I deal with the fact? How do I prevent? Two sets of taxation globally, such that my income tax rate isn’t a top rate of 37. What I don’t want it to be is 37 plus the top rate in the UK of 45, plus maybe some tax I’m still paying in California or New York because I’ve got a residential property that I’m renting out in one of those two locations. how we treat Americans is we treat them under domestic rules. We treat them in a way that says what are we or are we not going to tax in our way how we think about things. And by that I mean if we think it’s taxable, it’s taxable. If you guys think it’s municipal bond interest which is exempt, that doesn’t mean anything to UK eyes. We look at it go, well, it’s just interest income. From our perspective, Britain has our own domestic rules which try and stop double taxation. That means give credit for other people’s taxes. Frazer Rice (05:37) Sure. Alex Jones (05:50) And also, most importantly, between the UK and US, we have two tax treaties. We have one tax treaty that deals with UK and US income tax, and we have a completely separate tax treaty which deals with UK inheritance tax and US estate and gift taxes. So we call estate and gift tax inheritance tax in the UK, and it applies in life or death. So we’ve got two treaties which are both trying to minimize unacceptable double taxation. That’s kind of a… kooky term of art, Minimise unacceptable double taxation. A little bit of double taxation may be acceptable in the eyes of government. Well, these two treaties, they’re designed to try and minimise. So when we deal with both UK and US taxes, and I’m a both UK and US tax guy, I’ve been doing US tax since the late 1980s, what we’re trying to do is try and get the two systems as closely aligned as we can. To the amount of credit we can get between the two countries so that overall the person’s paying the lowest amount of tax that they should pay as opposed to maybe double tax. Frazer Rice (07:00) US/UK Tax Planning So if you’re so let’s steer this back to the Americans quickly. The typical situation that you’re running into is, guess, an American who has moved over to the UK either for work or for something else. Maybe take us through a little bit of how you analyze that in terms of sort of understanding how long they’ve been there and then how that sort of surfaces through the regime you just described. Alex Jones (07:25) Yeah, so. there’s always a duality here so we have to talk about sort of both sides to understand the whole but from a UK perspective when we’re thinking about how long have people been here is what we’re really saying is hey are they UK tax resident have they done enough to make themselves UK tax resident because if they are they’ve got an expansion on the things we can tax maybe we can start taxing worldwide income and in the UK we have a test we call substantial residence test, statutory residence test, excuse me. And that’s a slightly complicated set of rules, which is designed to say, hey, if you spent too much time in the UK, are you tax resident? If somebody spends, as an example, more than 183 days or 183 days or more a year in the UK, we’re going to treat you as a tax resident under pretty much all circumstances. But if you spend less than 16 days a year in the United Kingdom, we are always going to treat you as non-resident. And that’s quite a big gap. In between those two, there’s a combination of day of time and factors which can trigger residency. So we’re looking at how much time. We’re also looking now under this four year FIG regime as to have you been here for more than four years? Have you been here for more than last four years? Because if you have been, we are going to tax worldwide everything. If you haven’t been, if you’re still in year two or three or four, then we aren’t going to tax the non-UK income or gain sources or at least most of them. And indeed, we won’t even tax you if you bring and use those funds in the UK. We’d quite like you to bring that money into the UK because that’s good for the UK economy after all. From a US point of view, ⁓ ignoring US citizens or green card holders, you have a test which is called the Substantial Presence Test. That’s basically what the test you would apply to a non-American who is spending time in America to determine whether they were US tax resident and therefore worldwide taxable in America. So both countries are looking at a time component as to where you’re spending time. We also have to look at time in the context of employment income. Employment income is deemed to source, belong to the country where you do the work. Not the country who pays you or the company that pays you. Where do you physically do the work? That’s the source of the income. That can give taxing rights to either country respectively based on where the work is performed. If I spent too much time working in America, I could become US taxable. If you spent too much time working in the UK, you could become UK taxable even though you don’t acquire UK residency. So there’s lots of reasons that you have to look at where people are, how much time they spend in the UK and ultimately for, as you say, our sort of typical average client. Who’s an American coming to the UK, we’re also interested in this long stop now of, you been here for more than 10 years, or 10 after the last 20 years? Because if so, now you’ve got UK inheritance tax. And again, without giving too many games away, the UK and US have the same rate of estate tax and income tax, 40 % currently, but you guys have got a $13.99 million lifetime estate tax exemption today, and our lifetime. Not lifetime, but our estate tax exemption, our inheritance tax exemption is £325,000. So top rate still 40%, kicks in a lot earlier. So it’s not just about income tax for the people who were here for quite a long time. And in the olden days, before 6th of April, 2025, that long time was more than 15 out of the last 20 years. Now it’s more than 10 out of the last 20. So we’ve cut down the length of time that people can spend in the UK without really paying the price of full exposure to double tax. Not on income tax that kicks in earlier, but particularly in relation to estate tax. Now we’ve effectively knocked off a third of the time that somebody can spend in the UK before they have to worry about, what happens if I die? Hey, what happens if I give a bunch of money to the kids? Frazer Rice (11:49) US/UK Tax Planning So if you’re an American who may or may not be spending a lot of time in the future going to, ⁓ getting to the UK and becoming a resident for UK purposes and sort of tripping those time trip wires, ⁓ can you do planning ahead of time to let’s say cordon off assets so that they aren’t viewed by the UK as part of the overall inheritance tax regime, especially after this new April 6, 2025 deadline that we’ve leapt over. Alex Jones (12:21) I’m kind of now going to say no, but let me explain that. So under the old rule, the domicile remittance basis regime, we had the ability to set up vehicles like trusts. We can still do that, but the rule set, the application is different. So we could have set up a trust. And if we did so before we became domiciled in the UK, and if that trust contained Frazer Rice (12:28) Mm-hmm. Alex Jones (12:54) – US/UK Tax Planning Exclusively non-U.S. not sorry non-UK property so let’s say the stock portfolio in America then that would be excluded from the UK inheritance tax regime on a subsequent death it would be locked away forever. Now some U.S. trusts might be revocable for U.S. tax purposes particularly living trusts for example The UK has never had a great relationship with trusts that are revocable. So sometimes you have to be a bit careful about what we mean by when we say the word trust or settlement is a more typically common word to use in the UK. But we used to be able to do that. We create these excluded property trusts, lock the assets outside of UK tax forever. Under the new regime, that’s not necessarily true. We are now operating a rule set which is much more like the US grant or trust rule set. We would refer to it as a settler interested trust where the settler of the trust is going to be taxable on the trust’s income, whether it’s a UK trust or a foreign trust or whatever, to the extent that they have an interest in it and that might mean either they’re a beneficiary or their kids are a beneficiary and so on. From an estate tax point of view, we have two ways we can trap folks. in relation to trusts. One is in relation to a trust which has what we call a gift with the reservation of benefit. I’m going to give the money to the trust, but hey, actually, I’m still a beneficiary, so I can get it all back. Maybe I’ve got a revocation power. Maybe I’m the principal beneficiary and I’m going to get things back, in which case the UK is now going to say, well, in that case, you never gave it away properly, and it’s going to be still part of your estate. So contrast that to the intentionally defective US grant or trust, which is a grantor trust for income tax purposes, but you gave the asset away permanently because you irrevocably transferred to the trust. For UK purposes, if you’ve got one of these trusts that can give you back assets, then that will be part of your estate and we will include it within your taxable estate on death, whether it’s got UK assets or foreign assets or whatever. But we also have a separate regime, which has been around for a long time. This is what we call a decentennial charge, a 10 year charge in relation to trust assets. That charge didn’t apply to these excluded property trusts in the past, but now does, or rather it didn’t apply to the offshore trusts before, other than in relation to UK situs assets. So you could have had a foreign trust with UK assets and this charge would have applied. Basically it imposes a 6 % charge every 10 years of the trust’s life. So you look at when it was created, you count 10 years and on that day you have a 6 % charge on the value of the assets in the trust at that point in time. And the reason for that existence, you’d also to be fair, if you made distributions in between those 10 year anniversaries, you would also have a proportionate charge and you would also have a proportionate charge if you had a trust which fell into the rules which you essentially exported from the UK, then you’d have a charge at that point. And you can do that simply by leaving the UK. You could have a proportionate 6 % charge. So think of it as the 10 year charges. When we as individuals in the UK transfer money to a trust that’s taxable, so if I set up a trust tomorrow and transferred too much money in, I would have a lifetime 20 % charge. So I would have an inheritance tax charge half of the main rate, half of our 40 % rate during my lifetime. And in addition to that, the trust would suffer this 6 % charge every 10 years. And what the UK is trying to do is over the course of a generation, replicate the 40 % tax charge. So the 6 % charge is basically just the back halves of the 40 % charge I would have got had I just left the asset in my estate. Frazer Rice (16:42) Mm-hmm. Alex Jones (17:07) Tell switch time as I died or gave otherwise gave them to another individual. Frazer Rice (17:11) US/UK Tax Planning So you’re staging and front loading the realization event so that you don’t have to wait generations for the revenue to show up. Alex Jones (17:21) But we’re meaning the UK government, correct? Yes. Not that I am obviously the UK government. I wish. Yeah. So yeah, so we trust, it’s just different. It’s different than America. Whenever you’re dealing with things that interact between the US, I’ve kind of said it already that, you everybody’s everything under their rules, their tax year, their currency. They don’t really care what the other country thinks something is. That’s true of… ⁓ Frazer Rice (17:23) That’s right. Me neither! Alex Jones (17:50) Basically everything! I sometimes use the word, would be easier if you guys spoke Dutch. Because when you explain to tax rule, we’d go and get a translation into English. But we both speak English and it’s the old adage separated by the common language. In taxation, we’re talking ever so slightly different languages. And yet it’s so, tempting for us to assume that everything will be the same. Frazer Rice (17:56) Ha- That’s right. Alex Jones (18:18) But you guys intrinsically know that we drive on the wrong side of the road. You accept that. You know that we mispronounce words like tomato, or in my case, words like bath and grass, because I’m originally from the north of England. Somehow, mysteriously, when it comes to taxation, people say, oh, I just kind of assumed it was the same, and that the same type of exemptions might apply, and the same sort of stuff will be tax exempt, and so on and so forth. But we’re speaking alien languages. One of my truisms or other truisms is I’m not American. For tax purposes, I’m an alien from a US perspective. I’m an alien. That’s how foreign I am. I’m proper alien. I could be from Mars as far as the US tax system is concerned. I’m really strange. And that’s how you have to think of each other’s taxation. A Brit goes to America, you’ve to think that’s an alien language. The American comes to the UK in taxation, we’re talking in alien language with alien sets of rules. But what we’re trying to do is get them mapped together so that we can treat the same thing happening at the same time in broadly the same way. Then all we’ve got to argue about is which country has the higher of the two taxes, because probably that’s the one we’re going to end up paying. Or at least that’s going to be our overall global worldwide cost that we’re aiming for. is don’t pay any more than the higher of the two taxes. If you can do that, you’re doing a good job. Frazer Rice (19:51) Right. So if you’re ⁓ doing what’s called pre-immigration planning for a US resident, and I know that ⁓ US citizens, a lot of people are investigating going to the UK and getting citizenship there or otherwise living there. From a pre-immigration planning perspective, maybe take us through your process as to sort of how to analyze things so that you can align your affairs and not get the double taxation or… you can benefit from the lower tax rate if at all possible. Alex Jones (20:24) – US/UK Tax Planning So slightly different game sets based on the direction you’re heading, UK to US is different than US to UK. But it can be quite simple things, like you would look at your stock portfolio or your investment portfolio absent this four year period where we in the UK don’t care about your foreign investments. let’s put that to a side. We’d look at your investment portfolio and go, OK, well, you’ve got you know, some direct stocks, that’s fine. Direct stocks are easy to measure. We actually measure them in slightly different ways. The UK pools stocks together. We don’t look at individual stock sales and treat on a FIFO basis. Britain pools them together and take average cost basis. And we obviously do it in sterling, not in dollars. So there are differences even with things as simple as a direct stock. But then you might say, well, I’ve got a whole bunch of ETFs and mutual funds because I want diversification and that’s kind of important. We would look at them and go, well, they’re not UK funds, they’re foreign ones. And why would a Brit, why would a UK tax resident invest in foreign funds? That’s a bit strange. Should be said that exactly the same is true in America. You would look at a Brit coming to America with what we call unit trusts, unitized funds or open-ended investment companies. And you go, why the heck would an American invest in that foreign stuff? That’s not going to benefit the US fund management industry. So we would look at US mutual funds and say, That’s not benefiting the UK firm management industry. We don’t like that. We don’t want to encourage that. So what we’ll do is we’ll tax them in a slightly penal way. So one of the things if somebody’s moving to the UK and was going to be here a long time, it’s at some point you want to get out of investments, which the UK is going to view negatively. You don’t really want to be in a tax exempt bond if you can get a better rate of yield from a taxable bond because the US Mutual Fund is going to be taxable in the UK, even if it’s not in America. So you’re always dealing with the after-tax yield. So if you can get a higher coupon, albeit taxable, that’s better for you if you’re going to be taxable in both countries, albeit America isn’t taxing that. Same with US mutual funds. You don’t want to be in a US mutual fund that when you sell it, we’re going to tax it as income tax rates of 45 % up to, as opposed to treating it as a capital gain as you would in America. You want to be in a fund that both countries view in broadly the same way and ideally both as a capital gain on exit because you have a 20 % long-term capital gains tax rate of course, albeit plus the 3.8 % net investment income tax. And we now have, as a result of the changes that happened last October, we now have a 24 % rate of capital gains tax. And you might curiously say, and that will lead you through a whole different cul-de-sac of tax, Frazer Rice (23:01) Mm-hmm. Alex Jones (23:18) You might go, that’s coincidental, isn’t it? That 20 plus 3.8 is pretty flipping close to 24. Okay, so am I paying 24 plus 3.8 if I live in the UK as an American, or am I paying 24 in the UK and I’m going to cover off the 20 % and maybe can I cover off that 3.8 net investment income tax as well? That’s a very current question in the world of UK and US taxation. So yeah, so you want to look at things like that. You also do want to look at, you know, slightly more exotic investments than simply direct stocks and funds. You might look at insurance backed contracts and think that’s fine. it’s an insurance policy. It’s going to lock things away, I’ll only pay tax when they exit. While that is true, the insurance contracts can park investment growth while it’s in the contract. Don’t for a second think that the UK looks at US insurance contracts and says, we’re gonna tax it like a UK insurance contract. We’re not. If you exit, we’re gonna tax it. And exit includes death. That’s for what we in the UK would term whole of life type policies, policies that have an investment component. On death, that’s a chargeable event. That’s not true of term insurance policies. It’s literally if you die in the next year, you’ll get a payout, but the contract otherwise is worth nothing. Those term insurance policies, both countries will… we’ll look at and go, yeah, death benefits tax free. However, insurance contracts can lock away the investment growth until you exit. But if you exit, when you’re in the UK, we’re taxing the whole lot. If it’s not a UK qualified contract. So. Frazer Rice (24:58) US/UK Tax Planning As you mentioned about the municipal bond income, if you’re a US person, you’re on autopilot that has preferential tax treatment. Again, same thing like some of these other concepts. Look it over because the UK doesn’t care that the US states are getting a benefit. They’re going to tax it as regular income. Alex Jones (25:22) – US/UK Tax Planning When we sell an offshore fund, as we would call it, a US mutual fund typically, we will treat the gain that you generate on the disposal of the contract as though it is income. Technically, it is a gain, but we tax income tax rates. And so often with US individuals that haven’t planned or thought about this, we’ll see quite kooky results. So for example, you have a typical US broker account portfolio with a mix of direct stocks and funds. You might quite naturally think, okay, what we’ll do is we’ll have sold some stuff early in the year. We’ve generated gains and we’ve come to the end of the calendar year. What we’ll do is we’ll cash out on some lost stocks. We’ll get rid of some stuff that generate losses. We want to try and balance the capital gain and the capital loss for US tax purposes. That makes utter sense from a US perspective. You’ve had some gains, you want to kill the tax on those gains by realizing some losses that you’ve got in the portfolio.Tthen you can go buy something else with the net proceeds. But if you do that the wrong way, the stuff that you sell at gain could be those mutual funds. And then UK will look at the gain and go, okay, well, that’s actually taxable as income tax. And then the stuff you sell at the end of the year, the loss stuff, maybe that’s direct stocks. Well, that’s a capital loss. In the UK capital losses are offset against capital gains. They’re not genuinely offsetable against income tax and they’re not offsetable against offshore income gains. You would have a perfect zero position in America. You’ve got no gain or loss because you’ve offset the two perfectly. For UK purposes you’ve got a whole bunch of income taxable fund gains. You’ve got a capital loss you can’t do anything with other than carry forward till next year. So these differences can cause real timing issues and differences between the two countries. When you get differences, you get unexpected tax results. That’s normally going to be bad and something that you don’t want. The reverse is also true. And I should say before even thinking about the reverse, am an American investing in UK unitized funds. That’s where you create a four letter word in America called the PFIC. Passive foreign investment company is just bad. Don’t do it, please avoid. There are some non-UK funds and this includes many US mutual funds that have a special status. We call it reporting status. Reporting status fund is a typically a US mutual fund that gives HMRC, our tax authority, information on what’s going on underneath. Frazer Rice (27:47) Right. Yes. Alex Jones (28:16) It tells the UK how much income and gain that the fund is generating. The individual, if they’re UK residents, is taxable on their proportion of that underlying income or gain. As it happens, which is basically the same as a US mutual fund. Therefore, you’ve got an alignment between the two countries. Both countries try to tax the same growth in the same way at the same time. Then you don’t get these differential rules where one country is treating it as a capital gain. You’re just treating it as a completely different type of income event. You get both countries looking at it and going you’ve got underlying income of 100, we’re going to tax that. The UK says, yeah, yeah, we agree. We’ve got underlying income of 100, we’re going to tax it too. Now you’re just arguing which country wins. Who gets to tax it first? And you’re, look, you’ve also got some underlying capital gains and we’ll tax those at the same time too. Again, who gets to tax them first is your question. And that’s when things… get complicated. He says after having made things sound complicated! Where things are complicated is how you offset the two taxes. And it’s worth just pausing on that because it’s, again, that is itself an alien concept to most people. It’s not about who you pay the tax to first. The two countries sat down and agreed which country would win if there was double taxation. And we call that the income tax treaty. Frazer Rice (29:16) Ha! Alex Jones (29:42) So the treaty between the two countries dictates who has the primary taxing right. That’s who should get the money first, even if they don’t. That country is never going to give a credit on that item of income for tax pay to the other country. You could have a situation where you pay US tax on a gain in November. The UK tax year ends in April and therefore we’re going to tax it in the year to 5th April 2026, let’s say. And then you owe the UK tax, the UK 24 % tax. So you file your 2025 US return, reporting this gain in November 2025.Yyou pay your US tax on the 15th of April, and then you’re going to file the UK tax return to 5th April 2026. And we’re going to say 24 % tax please. Now any sensible person is going to go, hold on a second, I’ve just paid 20 % to the IRS. Surely you’ll give me a credit. And the UK would say, did you sell the US real property? No. Oh, that’s a shame. Because if you did, we would have given you a credit. Did you sell the US trade or business property? No. Oh, that’s a shame too, because if you had, we would have given you a credit. What you saw, did you sell US stocks? Yes. Okay. Well in that case we win. So we’re not going to pay any attention to the 20 % in America. What you need to do is get the UK tax back from America. you need to claim a credit on the US return. Of course you can’t do that in 2025. You’re not paying the UK tax until you file the UK tax return, which could be in 2026 or could actually be in early 2027. And so there’s a timing mismatch. The US foreign tax credit system as we call it works, is the US will say we’ll let you put the tax on the tax return in the year you pay it. Frazer Rice (31:16) US/UK Tax Planning Gosh. Alex Jones (31:31) Physically pay it. There’s another term we use called accrue, which is a little bit more complicated, but basically the foreign tax year ending within the US tax year. We’ll allow you to put it on the tax return. Now that doesn’t mean you get to offset against US tax in that year. It just means we’ve identified it exists. Then they ask a second question.” Do you have any US tax on the same type of stuff in that year?” Against which you can offset it. Let’s say you don’t. Let’s say you didn’t have any more capital gains in that 2026 year or 2027 year. Then they would say, okay, well. That doesn’t seem entirely right or fair. What we’ll do is if you’ve paid UK tax in calendar 2026 and you can’t use it against the same type of income, US tax on the same type of income or gain, we’ll allow you to carry it back to the previous year, one year only, to use against US tax on the same stuff in the previous tax year. If you can’t use it in that one year carry back, then you can carry it forward for another 10 years to see if you can use it anytime in the next 10 years. But remember I said, we file our UK tax returns for the year to 5th April, 2026. We don’t have to file the UK return until 31st January, 2027. So we might not be paying the UK tax until 2027 for gain that happened in November, 2025. Yeah, yeah, that’s two years different. I said you could carry back one year only. Frazer Rice (33:02) So have a nice deep cash position. ⁓ Alex Jones (33:10) – US/ UK Tax Planning So I can get UK taxes back into 2026 calendar year. I can never get them back to 2025. You can generate double taxation just, so it’s not just about a deep cashflow position as you said, that’s absolutely true. Actually you can create double taxation just through that passage of time. Hence you can see when I say this is when things get complicated is how you play that foreign tax credit game. Frazer Rice (33:30) Crazy. Alex Jones (33:38) It’s absolutely critical if you are fully embedded in both systems. But to some degree, that’s simpler than the situation we have today or had before 6th of April, 2025, when we had this non-domiciled remittance basis regime where the UK said, we won’t tax the offshore stuff unless or until you bring or use the money in the UK. So you could have an American who’s deliberately in the past structured their affairs to keep non-UK stuff outside the VUK tax regime. And five, 10, whatever years later decides to buy the big house in the UK and bring the US funds into the UK to help fund that purchase. And all of a sudden, under the old rules, we were going to go, hey, that’s the stuff that we could have taxed had you brought it into the UK back in the day. Well, we’re going to try and tax it today because you brought it and used it in the UK. And then you’ve got this multi-multi-year gap in taxes between when the US taxed it in the past and when the UK is taxing it in the future. So the good news about the new rules, if we’re looking for silver linings on tax changes, is that other than stuff that happened before 6th of April 2025, that’s less likely to happen because either we’re taxing an American who’s here today on worldwide income or they’re in this first four years of being in the UK regime, in which case we don’t care whether there’s any foreign income at all. We’re not taxing it, whether they bring it in the UK or not. So although we’ve sort of done with the remittance basis regime and the non-domicile domicile rules as we have them, in reality, if anybody’s already here, if anybody’s been here for the last few years, they’re still stuck in this regime where they may have had income will gain outside of the United Kingdom. It’s never suffered UK tax, but it will if they ever bring it to the United Kingdom. So we’re kind of stuck with the thinking of this remittance issue, maybe for the next generation. But in parallel, we’ve got this new go forward rule set, which is simpler, that basically says first four years, US income, we don’t care. We’re not going to pay any attention to it and we’re not going to tax it in the main. But once you hear from Auden, Frazer Rice (35:47) Oh my- Alex Jones (36:02) – US/UK Tax Planning Four years we’re going to tax worldwide income. Then it’s basically full double tax in both countries at the same time go figure it out. Nice and simple, nice and comparatively black and white compared to the present situation. Great for people who arrive in the UK now, perhaps nice, simple, planable. Not so much help for the individual who may have been here for 20 years or certainly less than 15 years. They may have all sorts of offshore income and gains and funds and private equity interests and, you know, real estate funds back in America. And they’ve never been analyzed for UK purposes because nobody’s ever thought the money’s going to come to the UK. But maybe now the person’s been here for 15 years. So it’s kind of thinking, I like the UK, maybe I won’t go home. Maybe I’ll stay. And if I’m going to stay, then at some point I’m probably going to start thinking about bringing that offshore stuff into the UK. So, Anybody in the space I operate in has got to think about those things and has got to think about the, if somebody is here for a long time, what about the old stuff? The nice thing about the way the UK operated the changes is that for a few years, for three years, we invented or created a temporary repatriation facility, as we call it. The temporary repatriation facility is basically, if you’ve got any of that bad stuff, this remittable things outside the UK that you were benefiting from under the old rules. If you want to bring it to the UK, what we’ll do is we’ll apply a flat rate of tax and for first two years, that’s a 12 % rate of tax. We’ll just, you bring it in, you point at it and go, that’s what I’m bringing in that Apple, Abbot Labs, Google, Tesla stock sale from a couple of years ago, I’m bringing that into the UK and the UK will go, okay, that’s great. It’s your temporary repatriation tax is 12, but flat 12 % on whatever that income or gain was. And we’re not going to pay any attention to foreign tax credits. We’ll just hit you with 12%. So you can do that. So for the next couple of years, we’ve got a really interesting regime, is when is it beneficial for me to pay that 12 % rate? After year three, it goes up to like 14%. When is it beneficial to pay that 12 % rate? Or when is it beneficial to just pay, just to remit the thing directly to the UK and pay UK tax? And just to give you an example of that quickly. I mentioned earlier that if a question which was, you sell US real property? Did you get, did you have a gain on US real property? US always wins on US real property. You always get, you America gets its tax first. So if you had a US real property gain and you brought that into the UK and you go identify it and point to it and prove what it was, we would say, okay, well, we’re going to tax the gain too. Sure, we’ll convert it into sterling and we’ll do some, there’ll be some foreign currency differences with, you know, to determine the gain or loss in sterling. Basically it’s the same gain and we’ll give you a credit for the US tax you’ve already paid. So in the UK, we’re going to tax real property gains now at 24%. We used to tax them for a short period at 28, but that fell back last year to 24. We’re going to tax at 24%, but you paid 20 % maybe to the US on that real property gain. So we’ll give you a credit for the 20%. You also potentially or likely paid a 3.8 % net investment income tax because you probably had too much net investment income or gains. Therefore you paid 23.8. Well, our rate’s 24%. So if we give you credit for both of those, the incremental UK tax might only be 0.2. And that’s before I asked the question, did you pay any state taxes on the gain? Because we’d give a credit for those too. So potentially you could have wiped out all of the UK tax on that US real property gain. Or, you could pay 12%. Which would you rather have zero or 12 %? Well, obviously that’s a rhetorical question. The answer is I’d like to pay zero please. But you may have to do some work in order to be able to get to that level of identification where you can basically go, am remitting and I can prove it that gain. And therefore that’s what I want to use. And on that I may pay zero. So this temporary repatriation facility is great on certain type of income. Frazer Rice (40:05) Right. Alex Jones (40:28) If you had US municipal bond interest, which I’ve said exempt in America taxable in the UK, the UK rate could be up to 45%. That’s our top rate in the UK. But if somebody said to you, well, if you bring that qualified foreign stuff that you haven’t paid tax on so far in the UK, you’re going to bring that to the UK and we’ll let you pay 12, if the answer is would you like to pay 45 or 12, that’s also a rhetorical question. No, the answer. So we’ve got this really interesting regime for the next two, three years of if an American has been in the UK for an extended period of time and likely wants to stay for a good deal longer and wants funds in the UK to invest in businesses, buy property, do normal life stuff, then actually there’s an opportunity to get a lower tax rate than you might otherwise get either in the future or that you would have got had you paid tax on it in the UK at the same time. But it’s going to be quite specific and it’s going to involve lots of looking and it’s going to involve lots of being able to evidence what things are to get the best tax result. But it can make these differences where you can have a swing from zero to 45 just based on what it is, whether you can identify it, and whether you’re using this new temporary repatriation rule to try and clean up the past. or whether you’re just basically saying, no, no, no, the direction of credits that the two countries have agreed on happens to work in my favor in this case, so I’m going to take advantage of it. Frazer Rice (42:07) US/UK Tax Planning Really cool stuff. Alex, we could go on for another two hours plus just ⁓ ducking and weaving all of these different tiger traps here. ⁓ How do we find you? How do people who might have this situation get in touch? Alex Jones (42:11) US/UK Tax Planning Easy, easy. So I can be found at the Rawlinson and Hunter website. Name is Alex Jones. We have a team here of 18 people that practice both UK and US taxation. All of us are qualified in both UK and US taxation. And therefore, we live and breathe these interactions. So I’m forgetting the email address. www.rawlinsonandhunter.com. is the email address. Rolnton-hunter.com is the email address and you can find me there. FRAZER IN LONDON https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

JOHANNA DAVID, Adjunct Faculty Member at Hofstra Law School is with us to talk about three estate planning mistakes and how to avoid them. Johanna is a Trusts and Estates lawyer, and a partner at Forchelli, Deegan, and Terrana. She’s also the adjunct professor of law at Hofstra University. We’re going to talk a little bit about mistakes that we see in estate planning and the simple things you can do to keep them away from your situation. Enjoy. https://youtu.be/gD_d9J609Vg Three Estate Planning Mistakes Chapters 00:00 The Importance of Estate Planning09:47 Common Mistakes in Estate Planning19:54 Understanding Trusts and Their Benefits24:00 Navigating Elder Care and Estate Planning Outline of “Three Estate Planning Mistakes” Frazer Rice (00:01)Welcome aboard, Joanna. Johanna C. David (00:03) -Three Difficult Planning Stories and What Can We Learn? Hi, thank you. Thank you so much for having me. I appreciate it. Frazer Rice (00:06)Well, happy to have you on because we are now, most people sort of put their estate planning off toward the end of the year, but I have a feeling given where the legislation is going, et cetera, that the crush is going to happen earlier than we think. In the meantime, you and I were talking beforehand about some mistakes that people make from an estate planning perspective and that they’re very avoidable. I thought we’d take this opportunity to go into that a little bit. In your practice, maybe let’s start with a couple of, or sort of the big ones that you see, ⁓ give us some ideas of some mistakes that people make that really should be avoidable. https://open.spotify.com/episode/57MMskGgp1P3fOVklGt090?si=ISap3Z_YSdqK_zg4-Dlevw Johanna C. David (00:48) – Structure and Other Planning Tactics Sure, absolutely. So the number one mistake that I think that people make is not having the proper estate planning documents. I see this happen time and time again. I don’t know if it’s because of the stigma. People are afraid to approach estate planning, right? Sometimes it makes your mortality very real. But the biggest estate planning mistake is not having the right documents. Everyone, everyone, I cannot stress, everyone needs to have at least a will, a power of attorney, and a healthcare proxy. And there are people that say, well, you know, I don’t really have much, I don’t need to do that, or ⁓ everything’s gonna go directly to my husband and my children anyway. You know, that’s how it works. But that’s not exactly the case, right? You and I both know. So, especially if you have young children, young couples definitely want to have those things in place. You want to think about who is going to be the guardian for your child or your children if both of you pass away. And a lot of people don’t think about that. And those only cause problems in the long run. I’ll give you a quick example if we have time. But ⁓ Frazer Rice (02:02)⁓ please do. Johanna C. David (02:03) – Long Term Planning Issues and Avoiding Problems I remember, this was several years ago. I must have just started practicing and I had been a young attorney. So it was about 15 years ago and a woman came into the office and she and the decedent had been living together for about 30 years. They held themselves out to be married. Now, Frazer, you and I both know that New York does not recognize common law marriage. Frazer Rice (02:30)This is true. Johanna C. David (02:32) – Correcting a Big Will Mistake She was not aware of that. And so they were married for 30 years. Everything was in his name or excuse me, they were not married. They were together for 30 years, held themselves out to be married, not legally married. He owned the co-op apartment. Everything was in his name. Now he had a daughter from a previous marriage, legal marriage that was a strange. And you guessed it, our client did not get along with the daughter. So the father dies and guess who inherits the co-op that this woman has been living in for over 20 something years, right? And who inherits all of this man’s assets. It ends up being the daughter and the woman is out. Frazer Rice (03:09)It’s not the intent. Johanna C. David (03:13) – The Price of Neglect and Other Costs of a Mistake Right, exactly, not the intent. And you know, this man didn’t have a will. He did not have a will. Again, there are so many myths out there about estate planning. You know, this woman was under the impression that, hey, you know, we’re common law married. If he passes away, if I pass away, everything will go to each other. That’s not the case. So I always remember that case. I always give people that example because it’s so important to have a will. Frazer Rice (03:38)The other part too on that is that the poor person who has to administer that estate has to go through the court and all that. You’re not doing your executor any favors by not having a will. And, you know, there isn’t technically an executor in that case, but someone’s left to clean up that mess. Johanna C. David (03:45) Yeah, the administrator has to clean up the mess and it’s not an easy thing, believe it or not. It’s funny because this week I had a client come in and this one is a little interesting, but I’m going to, you know, just stay with me because it gets a little hairy. OK. Frazer Rice (04:09)Gosh. Johanna C. David (04:11) – Difficult Phone Calls It gets a little hairy. When I teach at school, cases like this, I like to draw out on the board. So I hope that our listeners can kind of follow a little bit. A woman comes in and she tells me that her cousin died. OK? This man died in, I believe, 2012. Up until his death, she was his power of attorney. OK? Another myth. People don’t realize power of attorney dies with you. Okay, she’s no longer the power of attorney. He died in 2012. She was the power of attorney. He was a widow, a widow were rather. His wife had predeceased him. He had no children. She’s a cousin, but they’re very close. She’s the power of attorney. All of a sudden, and I don’t know how this happened, she figures out that there is a fidelity account that has about 300,000 numbers in it. What now? She’s like, well, you know, what do I do? I asked if he had a will. Of course, he didn’t have a will. So I explained to her that, you know, we have to go through what is called an administration proceeding. And I tried to figure out his family tree. He had no children, his wife pre-deceased. He was survived by a brother. For example, for this example, let’s call the decedent Will. William will call him. Will and his brother- let’s call him Dave. So Will was survived by Dave. Right after Will dies, Dave dies. Dave also didn’t have children but was married and had a stepdaughter. So Dave dies, right? As it’s go to Dave’s wife. Dave’s wife dies right after him. I know, it’s crazy. So now Dave’s wife dies. Dave’s wife has one daughter, okay? She dies. I’m not making this up, I promise. Frazer Rice (05:43)My gosh. Tell us where they live so we can avoid it. Johanna C. David (06:01) – Complication So daughter dies, okay? So now, so the brother, Dave, his wife, his stepdaughter, they all die. Daughter had no children, okay? Whose daughter’s next of kin? Frazer Rice (06:18)You’ve lost me, if you go back up, I think there’s a stepdaughter in there somewhere. Johanna C. David (06:22) – Tracing the Lineage Right, so that’s daughter. Her next of kin would have been her biological father. So guess who’s entitled to the assets? So let me bring it all back for our listeners. Basically, Will’s assets, so Will died. His assets will end up going to his sister-in-law’s ex-husband. Frazer Rice (06:28)Right. gosh and they may not have ever met. Johanna C. David (06:49) – The Family Tree Correct. All because if, again, none of these people had wills, and when you don’t have a will, you know, New York State basically writes one for you. And those are called the laws of intestacy. The laws of intestacy determines what happens when someone dies, who inherits, who are their heirs. So we have to follow the family tree. It’s very unfortunate. I had to explain to this woman that the truth of the matter is, yes, we needed to administer all these people’s estates. But then at the end of the day, assuming that this man is alive, which we think he is, right, he will be entitled to the assets. Imagine getting that phone call, Frasier. Frazer Rice (07:28)And not only getting that phone call, but then having to make that phone call when you find this all out. And then part of that too is, some people, and it’s easy to get confused, is that you have beneficiary designations. So the fidelity account, guess in theory, could have also been designated, but that doesn’t sound like that happened either. Johanna C. David (07:49) – Beneficiary Designations All right. There was no beneficiary designation. So you’re right, he could have had a will or he could have at the very least if he was very close to his cousin, you know, she was taking care of him. She was power of attorney and healthcare proxy. He could have at least had her as a beneficiary, which he didn’t. Frazer Rice (08:07)Well, as I tell people, ⁓ yes, the beneficiary designation is useful and powerful, but don’t let that act as a substitute for a will because there are going to be other things going on in your estate, most likely. Johanna C. David (08:19) – Dealing with Institutions Yeah, absolutely. And sometimes people put beneficiary designations. They forget all about it. And then they pass away. So I have seen beneficiary designations that might have been a parent, right? Maybe you had this account since you were young and you were not yet married or had children. And so you put your parent on the account, you know? Now you pass away. Maybe your parent has passed, but now the assets may end up going to, you know, who knows? ⁓ And ex-wife, right? And ex-wife and ex-husband, exactly. Frazer Rice (08:43)An ex-wife ⁓ or… ⁓ Johanna C. David (08:48)- Having Everything Line Up And so, ⁓ yes, so wills and beneficiary designations, extremely important. ⁓ Powers of attorney, very important. People often wait, you know, until it’s too late. If you don’t have a power of attorney, then when you are incapacitated, there’s no one that can act for you. People are under the impression that, well, if I’m married or I have kids, these people will be my power of attorney, right? Automatically. It doesn’t work that way. You know, unfortunately, my hardest… conversations are with families, you know, that I have to explain like, I’m sorry, at this point, we can’t do a power of attorney for somebody that’s incapacitated, right? They can’t sign a power of attorney. And then you’re in the world of guardianship, which is not a nice proceeding. You know, you and I both know it’s expensive, it’s long, you know, drawn out. Everybody gets paid. Frazer Rice (09:39)And there’s a structure around it that doesn’t make decision making easy. So if you have to make fast decisions, that’s not a great place to be either. Johanna C. David (09:47) – Proxies and Why They’re Important Exactly, you have to go to court, you know, so powers of attorney are also very important and health care proxies. Again, people think, I don’t need to sign a health care proxy or I signed it when I went to the hospital. Those are normally for that instance or that procedure, right? It will terminate. So you need to have a health care proxy that says, hey, if I am ever incapacitated, this person can make medical decisions for me. I don’t know if you remember, Frazer, and I may be. dating myself a little bit, but do you remember the Terry Scheinbo case? Frazer Rice (10:17)I sure do, so I’m dating myself right along with you. Johanna C. David (10:19) – Long Term Health Care All right, so we’re in the same boat. But for our listeners, those of you who may or may not remember Terry Shifo, it was very sad. This was a young woman, I believe she might’ve been in her 30s, who suffered an injury. And as a result of the injury, it caused some serious issues with her brain, okay? For lack of a better word, she was completely incapacitated. She was on machines. She was basically a vegetable. I mean, I don’t like to use that word, so I apologize. But she was married. And so there was a fight between her husband. She did not have a healthcare proxy. So her husband, after some time, wanted to disconnect her because he felt that she would not want to live in that state. Her parents wanted to keep her alive. And so they ended up going to court and fighting. This poor woman was on a ventilator, on machines, on breathing machines between 1990 and 2005 when the court finally intervened and allowed her husband to… disconnect her. So she was in a vegetative state from 1990 to 2005. Frazer Rice (11:26)Well, which aside from the moral sort of quandary around whether to sort of pull the plug or not, mean, for, one of the considerations is that it’s just unbelievably expensive to maintain that kind of healthcare. And I’m sure that was a big consideration. Johanna C. David (11:31) – Powers of Attorney Yeah, absolutely. I’m not saying one or the other is right. But the point is her husband had one idea, her parents had another idea. And so they, you know, they took it up to the highest court, you know, revolving around the right to die. You know, if this young woman had had a health care proxy and a living will, she could have explained, hey, this is what I would want in this situation. This is the person that’s going to be in charge, you know, and it would not have been a fight. Frazer Rice (12:09)One thing that I’ve been telling clients and actually have some personal experience with this is to make sure that ⁓ these documents, the power of attorney and the healthcare proxy are updated ⁓ periodically. And I don’t necessarily mean changed, but ⁓ to make sure that the date at which they’re executed is recent. The intersection between people and the healthcare industrial complex is often times awful. ⁓ Johanna C. David (12:36) – Dealing with Hospitals Absolutely. Frazer Rice (12:38)If you’re the hospital and you’re not sure whether the documents are in force or not, or whether it was signed under duress or incapacity, that creates all sorts of issues. Here is my comment alongside that really good example. Make sure that those estate planning documents are updated. Then to probably have HIPAA release forms and even establish a relationship with the hospital or the healthcare provider as best as possible because you could be saving yourself a lot of damage in operating. Johanna C. David (13:05) – More on Proxies – Common Mistakes Absolutely, absolutely. I agree with you 100%. These documents can be your saving grace, can literally be your lifeline. I agree with you with having HIPAA release is very, very important in your healthcare proxy. Yes, I always tell people to look at their documents at least every three years or so, like you said, not necessarily that you have to change it, but just take a look, make sure that this is still what you want. This still reflects your wishes, right? These people that you’ve named, they’re still the right people. We know life changes, things happen. So they’re still the right people that you want. And of course, again, making sure that these documents are updated when they need to be. So I do agree with you, Frazier. Frazer Rice (13:36) That’s right. Yeah, that’s just sort of, I think, a good ⁓ rule of thumb just generally in terms of reviewing the documents and so on. That three years, I think at most five, circumstances change, friends come in and out, your kids have kids, you get married, all that stuff. All of those different life events merit a review of these types of documents. Johanna C. David (14:00) Yeah, that’s good. Absolutely, absolutely. I agree with you 100%. Frazer Rice (14:16)So maybe take us through a situation where ⁓ people have heard a lot about trusts and whether they’re appropriate or whether it’s for me, I’ve got a will, do I need something else that’s more durable or ⁓ maybe a revocable trust that might help avoid probate or that type of thing. Maybe take us through an example where that might be a good situation. Johanna C. David (14:36) – Further Reasons for Estate Planning Sure, sure. So, you know, one of the other mistakes to avoid is, you know, and I’m going to tie in trust here, is transferring assets to our kids. I mean, listen, I remember when I was growing up, my parents would say, you know, not knowing better, not knowing any better would say, hey, you know, when you and your siblings grow up, we’re going to transfer the house to you. We’re going to put the house in your name. We’re going to put assets in your name. And because they thought that that was a way to protect their assets from long-term care or whatever it might be, that was a way to avoid probate. And so I’ll give you a very good example, and then we’ll go through what could have been done to make this better. Another Client So another client that I will never forget again when I was a young attorney, this woman came into the office and she had a brownstone in Brooklyn. Okay. Now we’re talking maybe 15 years ago at the time the brownstone was already worth well over a million dollars. It may have even been 2 million. It was in a historic neighborhood and considered a historic building. And so she had this brownstone. She was a widow. Her husband had passed away and they had one son. He was 45 years old. He was married, living in Atlanta, had no children. So when her husband died, she said to the son, listen, I’m gonna just put the house in your name, right? If anything happens to me, if I get sick, I don’t want them to take the house. If I pass away, the house is already yours. And so she transfers the house to him, okay? And at 45 years of age, he has a massive heart attack and dies. All right, so mom is alive, son dies. Her only child, he had no children. He was married. So I’ll ask you, which is like, would ask our, you know, our audience, who owns mom’s house now? Frazer Rice (16:24) Hmm, I see storm clouds on the horizon here. Johanna C. David (16:27)- Estate Planning Mistakes and How They Apply The daughter in law. Yes. Exactly, the daughter in law. And so it was a situation, it was a very sad situation because the daughter in law now owned the home and she would not let her mother in law even live there. She said to her, listen, you have to leave because my husband’s at an unexpected leave. We have a mortgage, we have bills, we have this, we have that. So I need the money. She put the house on the market. And I was in a position where this woman wanted to hire us to negotiate with the daughter. She even said, like, listen, she was in tears. She said, but this is my house. My husband and I worked hard for this. But I explained to her why it was no longer her house. And not only that, but she even agreed to pay her daughter-in-law rent. Frazer Rice (17:13)Gosh. Johanna C. David (17:13) – Worst Case Planning Scenario Right? This woman is at least, I don’t know, maybe 80 at the time. Okay? So she’s saying, look, please just let me live in my house. I’ve lived in this house for 30, whatever it is, some odd years at this point. This is where I got married. I raised my child. Please let me live in the house. I’ll even pay you rent. Right? So you have money to take care of what you need. Daughter-in-law said, nope. I need the household. She put it on the market. Mom is out on the street. And she had to go rent an apartment somewhere. Frazer Rice (17:40)Oh gosh, stories like that, it… Johanna C. David (17:43) – Dangers It’s heartbreaking. It’s heartbreaking and I will never forget her. She came into my office three times, Frazer, once by herself, but she just couldn’t believe what I was saying. She came in again with a friend, she came with a cousin, you know, and I explained the same thing over and over again. It was just, it was a heartbreaking estate planning mistake. And it still is, it still is today when I tell that story. All because she thought she was doing the right thing. Frazer Rice (18:06)Yeah, well, and sometimes people try to get around that by giving half of the property to somebody else. That’s not necessarily foolproof either. Johanna C. David (18:16) – Asset Protection and Estate Planning Yeah, absolutely because so so let’s even if your child does not pass away, right? Many of us don’t want to think about that. That’s, know, most of us that are parents, that’s our biggest nightmare. And there are people that don’t want to think about it. That’s fine. But what if your child is going through a divorce, a bankruptcy or something like that? Your house is now in their name and therefore is an asset. I’ve also seen people where they transfer their home or a part of their home, like you said, half of their home over to their son or daughter. Now that son or daughter is going through a nasty divorce or going through bankruptcy. And now guess what? They’re sharing the house. That’s up for grabs. Frazer Rice (18:50)That’s right. Johanna C. David (18:51) – Avoiding Estate Planning Mistakes with Trusts Right? So the way to avoid that is by creating a trust. And so if this woman, for example, had put her home in a trust, for example, a revocable trust, let’s say, she would still own the house. She would still have the right to live there. But she would ensure that if she passed away, the house would automatically go to her son with what we call a step up in cost basis. This means that the son would inherit it for the value on the date of her death, right? So she could do a revocable trust. It goes directly to her son upon her death. But that trust would say, if my son dies before me, the house goes to whomever, right? When I die. So she may have wanted it to go to maybe her family members, right? Her cousins, her nieces, her nephews, or whomever. It would not have ended up with her daughter-in-law which was a massive estate planning mistake- both current and future. Frazer Rice (19:14)That’s right. Johanna C. David (19:40) – Avoiding Probate and Other Planning Goals Creating trust. Now there’s also people that say to me, okay, well, it avoids probate, but what about if I, you know, want to protect my house from a nursing home? I have to put it in my kid’s name. That’s not true either. You can create what we call a Medicaid asset protection trust, where you put the home in the trust, you’re allowed to live there. It is an irrevocable trust, but in the state of New York, you still retain the right to change a trust. These are the beneficiaries. And the home can be protected from long-term care issues and other estate planning mistakes. I think that that’s also one of the biggest mistakes that people make is not getting the right advice, not seeing an attorney and not planning for the future. And I know I’m taking up a lot of my time here, but if I could just, can I squeeze in one more quick example? Yeah, you know, so I was growing up, I grew up in Brooklyn. I’m a Brooklyn girl and I grew up in Brooklyn and I distinctly remember a good friend of my parents at the time. They were a little bit older and the husband had to go into a nursing home. Frazer Rice (20:31)No, please do. Examples are great. Johanna C. David (20:49) – Poor Titling and a Another Planning Error And so he did and they owned a home right on our block. And so when the husband went to the nursing home, they kept on calling the wife saying, you have to pay us, you have to pay us, you have to pay us, know, thousands of dollars a month that she didn’t have. So she thought that the right thing to do was and they said to her, you know, we’re going to come after your house or whatever have you. First of all, that is not true. They cannot put a spouse out on the street, right? You can’t come after your house if somebody’s living there. They can’t kick your spouse out. Anyway, the woman was led to believe that she ends up selling her house, moving in with her daughter to pay for her husband’s nursing home care. It eats up most of the proceeds from the home. And not only does he die shortly thereafter that she ends up dying too. And their kids inherit nothing. Frazer Rice (21:40)And with a couple of conversations ahead of that, they could have had a much different, much better outcome. Johanna C. David (21:45) – Avoiding a Planning Mistake Absolutely, absolutely. Just getting the right advice. And listen, I always say that we can always do something in terms of if you are facing a situation where maybe a nursing home or home care services or long-term care is imminent, get the right advice. See an elder law attorney. Because we can at least steer you in the right direction. ⁓ A lot of people don’t do that and they think that they know how the system works, right? A lot of people say, well, I’m gonna lose my house anyway. What do I need to worry about estate planning or any mistakes? I might as well just give it to them or sell it, you know, and then, and so, ⁓ you know, unfortunately, you know, I’ve seen people lose assets, you know, their hard earned money, their nest eggs, so to speak, ⁓ and then their loved ones, their children and grandchildren inherit nothing. Frazer Rice (22:32)I think too, one thing when people are selecting people to trust and talk to from an attorney perspective, I find that estate planning and elder care are extremely related, but very different practices. And so I think it’s a good, maybe a good practice for people if they’re going down this road ⁓ to ask the attorney if they have experience in both the estate planning and the elder care, because it’s one thing to deal with administer wills and trusts and so on. It’s another to sort of Johanna C. David (22:46) Yes. Frazer Rice (23:02)in a sort of deal with the government program and everything that’s involved with that. Johanna C. David (23:07) – Elder Law and Estate Planning Mistakes Absolutely, absolutely. I happen to have a background in both elder law and estate planning, but you’re right. ⁓ It is a different area of practice. And yes, they overlap. An elder law attorney can actually do a well-powered attorney in health care proxy. But not all estate planning attorneys ⁓ can walk you through that process of long-term care. Frazer Rice (23:30)I had personal experience with that. was family members who we had to navigate the elder care system. The estate planning was almost beside the point, but the elder care system, we really needed a sherpa to help us get through it because there were veterans benefits and Medicare, Medicaid, what can you access? How do you do this in a way that doesn’t lead away the assets unnecessarily? It’s money well spent to avoid these planning mistakes. Johanna C. David (23:48) – 3 Estate Planning Errors Yeah! Frazer Rice (23:58)To have someone smart on that front- top avoid the planning mistakes. Johanna C. David (24:00) Exactly, absolutely. listen, for those of us where that is not a concern, that’s fine- it won’t be a planning mistake. It’s still worth your while to see an estate planning attorney to discuss your will, your power of attorney, your health care proxy, whether a trust is appropriate for you or not. Right. Depending on, you know, we were at the beginning of the conversation, you and I were just talking about the sunset and different things happening with tax laws. Right. You know, do we need to do some estate tax planning for you and avoid any mistakes? It’s always worth your while to get the advice of an attorney, right, and to also speak to your financial advisor and things like that about getting these things in place because you don’t want your assets to end up in the wrong hands. Like I said, you know, your assets may end up with your sister-in-law’s ex-husband and things like that to happen. Frazer Rice (24:47) One thing just to dovetail on what you mentioned about the sunset. know a lot of people are hearing the federal government, the estate tax and all that, the exemptions are so high it doesn’t apply to me. I would tell people that are in states like New York or Illinois, Maryland, other places that the ⁓ state tax or inheritance tax if you’re in one of those states, That’s something you can creep into very quickly. In New York, I guess it’s about $7 million. That’s a lot of money. But for some people who’ve been living in neighborhoods that have gentrified and it started out as one thing, all of a sudden they’ve got this asset. They may start creeping up toward that exemption. I think it’s worth having that conversation no matter where you are, just in case. Johanna C. David (25:23) – Three Estate Planning Mistakes Thanks. I agree, I agree. And I think that especially, you know, people like you said that are in those kinds of neighborhoods where all of a sudden they have this asset that’s worth so much, you know, tend to undervalue it. You know, tend to think, it’s not gonna be worth that much, but all of a sudden it’s marked as a historical site. You know, all of a sudden you have a brownstone in Brooklyn that’s worth a few million dollars. ⁓ So I guess I agree with you. Frazer Rice (26:00)Terrific. So as we wind down here, ⁓ maybe take us, wind us down with a couple of things to think about as people are going through this process. Johanna C. David (26:10) – Three Estate Planning Mistakes Sure, so a couple of things to think about as you’re going through this process is, know, what is your family dynamic? You know, where would you like your assets to end up upon your passing? But before you even get there, just think about some of the basics, right? Estate planning is always gonna start with the basics, and then we build on that if we need to especially to avoid mistakes. So in the event that you were sick or incapacitated, who can handle your affairs for you financially? Who can speak for you in a medical emergency? ⁓ If you have young children, you know, who would be the guardians for your children in the event that you and your spouse or you your significant other passed away? I would at least start the ball with that, right? And then maybe also having a good understanding of what your assets are. Do you have beneficiary designations on those assets? So I think that that’s a good place to start. Frazer Rice (27:00) Summary of Estate Planning Mistakes to AvoidPerfect. So wills, powers of attorney, healthcare proxies, and make sure your beneficiary designations line up with what you want. Joanna, how do we find you if someone wants to reach you and find out more? Johanna C. David (27:04) – Three Estate Planning Mistakes Right. Absolutely. Sure, so I am a partner at Fort Shelley Deacon in Toronto. I’m in Uniondale, New York. I can be reached at my email address jdavid at fortchellelaw.com or at our phone number 516-248-1700. That’s 516-248-1700. And again, I’m at Fort Shelley Deacon in Toronto in Uniondale, New York. Frazer Rice (27:42)That’ll all be in the show notes. thanks so much for being on. Johanna C. David (27:45) Thank you so much. appreciate your time. Thanks for having me. Other Estate Planning Mistakes WHAT IF YOU ARE NAMED IN A WILL OR A TRUST? https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/