Transcription:

Episode 17 – Estate Planning 00:19:05

Announcer:

This is Blue Money, a finance podcast made for cops by cops, with us you know your money’s safe. Lieutenant Jim Donnelly of the Ben Salem Police Department and co-host Kevin McGarry of Valley Financial Group, come together to help protect and serve your financial needs. This is blue Money.

Jim Donnelly:

I want to welcome everyone back to the Blue Money Podcast. This is Jim Donnelly. I’m here with my co-host Kev McGarry

Kevin McGarry:

What’s up Jimmy?

Jim Donnelly:

What’s up Kevin? And today’s Kevin. I thought it was important to ask Dave to come on and, you know, we have a lot of reviews that we bring people on the one thing that they’re really struggling with is estate planning. They don’t even really know what the term means, estate planning when we’re discussing it. So, I mean, Kev, if you want to dive into that, let them know what we’re seeing a lot when we’re bringing cops in, or even anyone that is not even in law enforcement. The first thing that they’re really struggling is with like, not having a will, not being prepared, or not even knowing what a state planning is. So hit upon that, Kev.

Kevin McGarry:

Yeah. First let me introduce Dave. David J Balcer. He’s attorney at law. He’s a sole practitioner, right, Dave?

David J Balcer:

That is correct.

Kevin McGarry:

And Dave he’s a partner. He doesn’t work for Valley Financial, but he’s a partner of our firm where he does a lot of our wills for our clients. And Dave can add on to this, but you know, and Jim, you see this in the reviews. According to legal Zoom, only 32% of adult Americans have a will. I mean, think about this, 77% of adult Americans, they designate a guardian for their pet, but they don’t have protection to pass on their assets to their, to their loved ones. And here’s the big number, 36 trillion dollars over the next, you know, 30 years are going to be passed down. And I think it’s important what we see in our planning, you know, I mean, I think the numbers a lot higher than seven outta 10. I think its nine outta 10, you know, prospects that come into our office do not have a will. And I mean, Dave, you know, you’ve worked, you know, many years with us, you know, what’s the importance of a will?

David J Balcer:

Well, the importance of a will is to make sure that what assets you own at the time of your death goes to who you want it to go to. There is one distinction I’d like to make. The will will only control those assets that are in a person’s name at the time of their death. If it is joint account, if it has a beneficiary designation or it’s a payable on death kind of thing. They are all called non-probate assets. And they pass regardless of what the will says, they pass to whoever the joint earner is or whoever the name the beneficiary is. So even somebody without a will may have some direction for their assets if they have joint owners or beneficiary designations.

Kevin McGarry:

Right.

Jim Donnelly:

Okay. The one thing that we see is sometimes people come in Dave and they’ll have a will, but it might be 15 years old. Is there, is there a timeframe where these will should updated? Like what’s your recommendation for that?

David J Balcer:

Well, I have probated wills on behalf of people that wills were longer than that. What’s really important is does it still say what you want it to say? Does it still have the people you want to share in the estate? Is it still have the people that you want to administer the estate, your executor or executrix? But there’s no time limit on it. It’s more of how people’s lives change from 15 years ago when they did the will.

Kevin McGarry:

Right. I think the big thing is, if you look at the numbers and the clients that come in here, Dave, is, you know, the people without wills. What happens to those assets is something if they unfortunately pass away?

David J Balcer:

Okay, well, actually that’s very important because as I started saying, the will says where your assets go, well, if you die without a will, you’re said to have died in test date. If you die with a will, you’ve died test date as in last will and testament. There are in every state in test state laws that says, well, if you died without a will, here’s, we’re in effect writing the will for you. Here’s where it’s going. Now, they do try and mimic what is probably the most common arrangement. If it’s a family with children the interstate laws, especially if it’s the last to die, the interstate laws would pass everything to their children. And if one child predeceased that child share would go to that child’s children. So they try and mimic, it’s kind of a, like a one size fits all, but it’s really one size fits a good number, but it doesn’t always fit everybody.

David J Balcer:

And interstate laws can do things that you didn’t want to have happen. The interstate laws basically say this if when you die, you have things in your own name alone and you had a spouse and children, and the children were of the same union, well, the spouse would get the first 30,000 and then split the rest with the children. It wouldn’t just automatically all go to the spouse. Now, that said most couples it is often the case anyway that the first to die doesn’t even need to have their will probated because they own it jointly with their spouse, or they have IRA designations that are their spouse. And so there’s no need to probate a will. I think it becomes important, however, if especially if one spouse has already died or, or there are some family matters that cause a decedent or soon to be decedent to not pass their money to all of their children, or if they didn’t have children, all of their siblings it, it, it becomes very iffy.

Kevin McGarry:

So essentially you don’t want not have any will. You’re leaving it up to someone else.

David J Balcer:

That’s exactly right. You’re leaving it up to interstate laws and you hope that what happens is what you would’ve done anyway.

Kevin McGarry:

That’s correct. Yeah.

Jim Donnelly:

Jeff, the one thing that we get a lot, and Dave can hit upon this for us, people will come in and they say, nah, I don’t have a will, but I might want to trust. Can you say what the differences are and what we should look for? I mean, is there a certain down dollar amount that if I have, I should maybe look into a trust? Or is it more personal preference? What, what’s the separates that really Dave, like a will or a trust? How should we lead clients down that direction?

David J Balcer:

Separating out first some kinds of special trusts that might, that someone might be interested in, like a special needs trust if they had a special needs child or some other unusual situation. A trust does the same thing as a will. You could look at them both as empty buckets, that if you put money in the trust into a trust document the trust will say who gets it when you die? The most common kind of trust is a revocable trust, which simply means the person that put all their money in the trust can change their mind. If they decide before they die, they want to take it back out of the trust or they have complete access to it, it really acts exactly like a will. I, I think there are some dangers with trusts sometimes. And I think there are companies out there that try and sell trusts so that they can charge somebody a lot of money for something that needs to be that something that can be addressed very easily with a will and perhaps, you know, a few other documents, power of attorney, those kinds of things.

David J Balcer:

But they both kind of do the same thing. Especially as I said, there’s revocable trusts. They’ll basically say I’m going to use my money however I want, and then when I die, here’s where it goes.

Jim Donnelly:

Gotcha. Makes sense.

Kevin McGarry:

And I think, I think the big thing what, what Dave was saying about, you know, the importance of having a will, and you know what you’re saying there, Dave, the will can do a lot of what the trust can do.

David J Balcer:

Well it in fact, it can do virtually everything that a trust can do. And again, parcelling out any kind of unusual kind of trusts situations that you may, that may require a trust, a will can do it fine. A will can do some things that they can either, if, if it’s a younger couple that’s coming in for a will and they have younger children you can in the will designate who is going to be the guardian of your children till they reach majority, who’s going to raise them. It can also designate who’s going to hold their money for them until they reach a certain age. I typically like the age of 23 as at least a starting point, but the trustee that’s holding the money would have the ability to decide whether to use it for some needs the child might have before they reach 23. So in effect, you’re creating a testamentary trust, a trust that’s built into the will. Uh and you don’t need to have a whole separate trust document and, and all that goes with that.

Kevin McGarry:

Well, the one thing you mentioned, and we had a client in Ivy League graduate, and he asked me a question and he said, what the hell is probate?

David J Balcer:

Okay, well there’s a short and a longer answer to it.

Kevin McGarry:

We’ll take the short

David J Balcer:

One. Okay, well this, the, well the short one is this, when someone dies and they have a will, or if they didn’t have a will, if somebody was going in because they were in testing, but it’s typically has to do with the will, you take the will into the register of wills and you are probating the will, which simply means you’re presenting it to the register of wills in the county where the decedent lived when they died. And you’re saying this is an original and this is the final will. And it is accepted into probate. And that person who brought it in, assuming it’s the person named as the executor in the will, they actually get appointed just cause the will says you’re the executor, you can’t do anything until you actually get appointed through the register of wills. That’s the initial probate. Other people talk about the probate process, and that’s just what follows after you get appointed as the executor or administrator. That person’s job is to gather the assets, pay the decedent debts, make sure the inheritance tax gets paid, and then make the distribution. And that’s also kind of the long version of the probate process. The completion of that.

Kevin McGarry:

And there’s always the difference between probate assets and non-probate assets.

David J Balcer:

That’s right. I think we talked a little about that before, but they’re both taxable. As far as the Department of revenue is concerned, if somebody’s getting assets because of someone else’s death, they want to tax it. The importance distinction is that those non probate assets, those joint accounts, those beneficiary designated assets, those payable on death assets, they’re going to go to the person named in that arrangement, whoever’s the name beneficiary, whoever the joint owner is, and the will will only control probate assets. Those assets that were in the decedent’s name alone without any of those connections they, they pass by way of the will they pass through probate.

Kevin McGarry:

Right. And Dave, like, when I’m developing a will for my loved ones or my family, you know, there’s other people that probably need to be involved or communicated with. Can you speak about the different, like the executor and, and the different positions of a will?

David J Balcer:

Okay. Well, let us assume that, or at least for, since it’s the majority of the circumstances, it is a couple or one person coming in the survivor who have children and probably also have grandchildren. So taking that kind of person, I would still want to say to that person, let’s say that person had three children and all three children had children. So they have, so that the person in my office has grandchildren, I would want from them to tell me who it is that in the event one of their children died before them; a) do they want that child’s money to pass to their children? And if so it’s most likely that I would want to, I would want for them to tell me, who do you want to be the trustee? Who do you want to hold the money for that grandchild of yours?

David J Balcer:

I would also say, if, if that person can’t do it, who would you name as an alternate? And even if they had a second alternate in building a will, I try and make it where it’s always the person’s choice as to who it is and, and the ability to even name two an initial trustee. And if that person couldn’t do it, a substitute trustee would typically allow the person creating the will to have their choice as to who’s holding the money. Now, what I also like to do in that kind of testamentary trust, what works best as far as I’ve seen is that you put language in there that would give the trustee the discretion to use the money for the child’s health, education and wellbeing. So it’s a kind of broad umbrella, but it’s still within a range that the trustee has to decide or can decide to either pay medical bills, pay some tuition, or something else that might fit under the wellbeing of a child that the trustee feels is a good idea.

David J Balcer:

A simple example I often say is the grandchild now turns 18, wants to go to college, wants to go to Westchester University, they’re in the Philadelphia area. He asked the trustee, can we use some of the money to buy a car so that he can get back and forth to school, get around town? The trustee think that’s a great idea. The grandchild, you know, wants a, a Dodge charger and the trustee thinks the car idea is good. The four cylinder Honda that’s under Warren is better. So that’s the kind of discretion they could use. I also tell people that you won’t want your trustee to use this as an ATM machine. So that if, for example, the grandchild who happens to be taking under this will, if the surviving parent is able to ta take care of the day-to-day matters of the child, the trustee’s job is to hold it and try and let it grow until the child reached 23. But still exercise discretion and within that area of health, education and wellbeing, should the need arise.

Kevin McGarry:

Eagles on the Super Bowl. Do you let them take the money out?

David J Balcer:

If you’re, if you’re a trustee, you know, the trustee, the trustee has a fiduciary obligation. They’re holding somebody else’s money, they are obligated to use the money under the terms of the trust. And if the trustee thinks that’s in the child’s best interest he better win because if he loses, he didn’t really act appropriately, he has to act as a reasonable person would. We’ve covered the, the broad strokes of what a will is and what it does. I, I guess I’d only want to say that the executor’s job at the end would be that gather the assets, pay the debts, and make the distribution. And so the person preparing the will wants to think about who would be, who would best do that job just as they would think about in the event that some younger individual might inherit under the will, who’s going to hold the money for them? Because the interstate laws isn’t doing that. In fact, the Interstate laws are giving to 18 year olds their inheritance.

Kevin McGarry:

Right. And Jim, like, you know how I open up about, about, you know, 77% of adult Americans, you know, the designated guardian for their animals. I’m not saying that’s not important. What I’m saying is that, you know, you take the time to do that. Take the time to protect the wealth you created and all the assets you acquired over years to pass on to the people or charities or institutions that you choose to. Don’t let anyone else do that for you. And I think that’s the most important thing in planning. And you know, Dave and his, his business does a great job for us, and it’s extremely trustworthy and nothing but positive experience. So I want to thank you for joining us.

David J Balcer:

You’re quite welcome.

Kevin McGarry:

And you know, I’ll pass off to you Jim to close this up.

Jim Donnelly:

Yeah. I mean, I’ll just, like you said, Kev, I’d like to piggyback off you. Dave’s been an unbelievable asset for any of the clients that I have been bringing down in law enforcement. The feedback I always get is that Dave’s understanding, he, he, he works with them constantly. He makes sure the world squared away and tight and I can’t thank Dave enough or, you know, a lot of my friends getting squared away because of Dave. And we’re going to put Dave’s contact information on the show notes. So if anyone out there needs a will or any has got any questions, feel free to reach out to me. And Kev, we’ll put in contact or reach right out to Dave if you need a will or a trust or have some questions. If anyone needs any financial advice out there about the portfolio, would like to come in for a free review, me and Kevin will take care of that for you. We’ll take care of maybe getting you a will. So we’re here for you guys, man, reach out to us if you have any questions, concerns, but everyone be safe out there. I want to thank Dave for coming on and have a great day, guys.

Kevin McGarry:

Be safe. Thank you, Jim.

Announcer:

Thanks for listening to Blue Money. To learn more about Jim and Kevin or for a free financial assessment, visit valley financial.com or click on the link in the podcast description or show notes. Until next time, safe investing. This material is intended to be educational nature and not as a recommendation for any particular strategy, approach, product or concept for any particular advisor or client. These materials are not intended for any form of substitute or individualized investment advice. This discussion is general in nature and therefore not intended to recommend or endorse any asset, class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own Before participating in any investment program or making any investment clients, as well as all other readers are encouraged to consult with their own professional advisors, including investment advisors and tax advisors, valley Financial can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.