Estate Planning and Entity Formation with David Meredith

We are live from B-52. Welcome everyone. Thank you for joining us. And if you are out there, wherever out there is, we are glad you joined in. Go ahead and like our page, share it with people because we've got a really cool show tonight. We're going to be interviewing David Meredith, a lawyer in the Houston area. He does all kinds of estate planning, wills, Those types of things. We're going to get into more of that. We're also going to be talking about entity formation today. And so we're really excited that you're here. We've got a live audience, everybody.

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They're actual people.

That's right. And I'm here. Craig's here.

I'm here.

All right.

Yeah, we're going to, we're going to get it rolling tonight. We don't want to make everybody online, if you're watching, and everybody here in the audience, be sure and jump in the chat because we told everybody here tonight we're running a contest. The person with the best comments tonight, which means it gets the most thumbs up, wins one of the Crazy Clean toilet cleaners. And then the VIPs, if you leave the link to your business, the link that gets the most likes in the chat is also going to win one of these. And let's go ahead and kick that off because this is our first sponsor tonight, Crazy Clean. Guys, this is a really cool product. There's no chemicals. It's just magnets. It keeps your toilet from

scaling. And it's our first big sponsor that we have. We're really excited about bringing these down. We interviewed the CEO. Brought this product to light back on the Joan Rivers Show. And now he's rebranded it as Krazy Kleen. That's Krazy Kleen with 2 Ks. And you can jump on their website and order these. They're running a special right now. I think when you order 4, you get a pretty significant discount. Everyone that I've given one to has said, can I get more? And the answer is no, you have to go buy them. Because that's why they— how they continue to be sponsors of the show. Kevin, how do you get ahold of them?

Pretty simple. Just go to Krazy Kleen, K-R-E— K-R-A-Z-Y K-L-E-E-N. Go there and you can order it right there off their website.

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Right. And we got Walkie Wilson Law Firm right over here, guys. When you are going through a difficult marriage separation or any— I mean, what else are we dealing with over here? I mean, custody issues. Thank you. Yeah, prenups, postnups. Just listen, fantastic group. We love working with them. They've been a big supporter of the show. In fact, you— I think you have like one of our biggest clips right now. It's like 50,000 views. Yeah, it's crazy. So anyway, reach out to him, give him a call. What's the number?

Number is 281-942-4052.

Also, one of our VIPs is Paul the Plumber. Paul sitting right here. He and Deborah have been on the show a couple of times now, right?

Yeah.

Yeah. And listen, commercial, residential, they're going to get taken care of. Fantastic family business. They want to get your plumbing solutions taken care of. So, you know, when Listen, when the crapper goes out, like you don't want to deal with that. Like that's right.

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All right. We also have Marianne with Memory Making Vacations. She actually planned a vacation for us just this last year. We took the whole family to Universal. It was incredible. Even though Disney's her specialty, She knocked it out of the park for our Universal trip, uh, and she specializes in Disney and cruises. And look, she specializes in Universal because she kicked butt on that one. Um, like, whatever your vacation plans, she can make it happen. She's going to be there to take care of you from start to finish. I've talked to her when she's been talking with clients when she's on vacation. She's going to take care of you. Give her a call. How do you get a hold of her?

Her number is 936-689-9879.

All right, we also have Adrian with us tonight, uh, In-Home Floors, right? That's right.

Yeah, that's the one. Kitchen and bath.

He's wanting that backlink. I know what's going on with him. Listen, kitchen, bath remodeling, floors throughout the house, guys.

He, he has—

do you still have a mobile showroom?

Yes, sir.

Yeah, mobile showroom. We'll drive it up to the house, let you look at the products that they have available. He is stellar when it comes to this. He'll help you get it designed, help you get it finished, help you get it knocked out. It'll be beautiful.

I've seen some of the stuff.

He actually just did a project for one of our former guests, Christy Fennell. Fantastic remodel on the condo, right? Yeah, it looked beautiful. Congratulations on that one. So how do you get a hold of him?

Get a hold of him by 832-420-0844.

Awesome. Am I missing anybody? Did I miss—

I mean, Meredith Law Firm.

We got David with us tonight. His name's up there on the screen. Yeah. So we're gonna be talking about all things having to do with his profession. And part of the reason we wanted to have him on the show, one, David has taken care of all of our stuff. And he has been a fantastic resource for our business and for our family. And we wanted to make sure that you guys had the opportunity to hear from him, listen to what he does, listen to how he's been taking care of us. I mean, you know, we— and I don't mind if you share, you know, all of the gory details of our situation.

That's attorney privilege. Sure.

Yeah. We don't have time for that.

Almost a 1-hour show, Craig.

That's right.

Um, but just about everybody in the room— and, and this is something different that we haven't done before, and Kevin and I were talking about this last night— is many of our listeners are you guys, business owners and operators. And, and one of the biggest requests that we get, because we're providing all this content for homeowners, we want to introduce you guys to homeowners, the feedback we're getting back from you guys is that we want business content. We want to hear like, what are the nuts and bolts of running a business? What are, what are the— and, and so this is one of the big ones for me. We had a tragic situation in our life that really encouraged us to move over and have a conversation with Dave about setting up a trust.

And in order to protect our business. And it can be complicated, and it can be difficult. And it's not always a fun conversation. But it's a necessary one. And so we wanted to make sure that you guys had the opportunity to hear from a professional that does this every single day. He does it for guys like you. Um, and so we're just going to get into it, if you don't mind. I mean, just, just to kick it off, let everybody know exactly what it is that you do in a nutshell.

Yeah, well, to start, I, I thought it was interesting that to get people to come listen to a lawyer, you have to hold this at a brewery where they can have a lot to drink. So that's fair. Anyways, but no, so our, our practice focuses on, as you mentioned earlier, estate planning. Some people know it as trust and estate work. Basically, what we do is we talk to people all the time about who you love and what you have and what's going to happen to those people, what's going to happen to those things if you're either incapacitated or you pass away. And unless there's somebody here who owns absolutely nothing and plans to live forever, then at some point you or somebody that is close to you will need

work that we do or work that somebody like us does. And so Essentially, you know, we talk about what happens if you don't have the mental ability to talk to your bank, or you can't talk to the insurance company, or you can't talk to a doctor, or you pass away. What's going to happen to your house? Where's your business go? Stuff like that. So that is, you know, kind of a— in the broader scheme of, you know, the legal profession, it's a really small niche, but we cover a lot of stuff under that umbrella.

Okay. And I mean, just to kind of kick it off, What is there a significant difference between like a will and a trust?

So both of those, both of those are going to pass along your assets to somebody after you pass away. The big difference between the two, and so when you talk about a trust, what I'm going to refer to is sometimes what we call a living trust, right? There's, it's a revocable trust. There's also irrevocable trust. But under this strategy, if you have a will, When you pass away, very often, like to the tune of probably greater than 90% of the time, we're going to have to go through probate after you pass.

Okay.

Because a will doesn't transfer title on anything. A will just says, when I die, here's where my stuff goes.

And real quick, for people that may not—

what's probate?

So probate's the process of transferring the ownership of that thing. Let's think about a house. So let's say if you have a house and you pass away and your will says, I want it to go to my wife or my kids, The will just tells us where it goes. Probate's the legal process of transferring that title from you, who's now deceased, to the people that you've identified in your will. Okay, so probate's a title-changing process.

And who's responsible for the probate process?

So in your will, you have named an executor. It's not an executioner, somebody mentioned a while back, but, um, it's already taken. You're already dead. But the executor, sometimes known as an administrator, but that's the person that you have said, when I pass away, here's the person in charge.

Okay.

So that will goes through probate. That's a legal process, can take on average, at least in our office, and it's not because we're slow, it's because the courts are slow, but there's, you know, probably 6 to 9 months of work. A trust, on the other hand, to quickly answer your question, if that trust is properly set up and properly funded, you can avoid probate. There's still some work to do, sure, but you don't have to go through the court process.

So I mean, if there's a business tied up in your passing, yep, and you don't have a living trust set up and you just have a will, what could that potentially do to your business?

So it could, it could certainly put things on hold for a while because you need to know who's gonna, who has the ability to run that business, who makes business decisions, who has the authority to sign on bank accounts, who can write payroll checks to your employees or pay the bills that are coming in. So business succession or business continuation planning is certainly something that we talk about with folks that have an existing business that they're running and operating.

Right.

Not everybody does, but most of you guys do. And so that's certainly part of the discussion of if I pass away or if I can't run my business, who else is going to do that for me?

Yeah. And so is a trust necessarily only active in the event of someone's death? I mean, is it something that can come into effect? I mean, I imagine there's lots of situations that—

Yeah, so you can create a trust that would only exist after you pass. So for example, if you had a will, you may say, I leave things in trust to my spouse or in trust to my kids. So that type of trust does not exist until you pass and we go through probate. Or you can create what we call a living trust. And the way I just kind of describe that to my clients is we're creating this trust while you're living, therefore we, we think of it as a living trust. That trust exists while you're alive. As soon as you sign it and execute the document, that trust exists. Initially it's unfunded.

So— Okay.

By the way, I think of a trust like a bucket. So if you picture a big bucket, you know, we've created the bucket, but an empty bucket doesn't do us a lot of good. We've got to put stuff into it. That's what we call funding. And then you've got to designate somebody who's in charge of the bucket. That's the trustee. So who's going to put stuff in, manage it while it's there, and take it out and distribute it out to the, to the beneficiaries?

And does it have to be one person? I mean, can be— you can have several trustees?

You can, yeah. So if it's a husband and wife, very often both husband and wife are going to be co-trustees of that trust. Not always, but a lot of times that's the case. If it's a single person, that single person can be the trustee. You could have a third-party trustee. There's situations where that's going to come into play, but a lot of times if you create a trust, you're going to be the trustee of that trust.

And for people like, I mean, like our audience tonight, I mean, that are in business, they're operating, and maybe they're operating several, but what— why is it that you encourage them, or maybe you don't, I don't know, I mean, like, would you encourage them to look into a living trust, and if so, why?

I think it really comes down to what your, what your goals are. You know, one of the things that a lot of people don't enjoy about probate is that it, it's slow, it takes a while, it's not free, it costs some money.

Yeah.

And it's, it's public. So for most folks, you're not going around passing around copies of your wills. I didn't see anybody here say, here, here's a copy of my will, take a look at it. That's a private document while you're alive.

Oh, good to know.

Another thing that you're probably keeping private is your financial data. You know, how much money's in your bank account, what's in your 401, you know, how much is in your— what's your business worth, you know, stuff like that. When you pass and you go through probate, anything that is submitted to the court becomes a public record. And so your will private while you're alive, but when we go through probate, you can get online, anybody can get online a free account with the Montgomery County Clerk, Harris County Clerk, doesn't matter, and you can read any will that's just been submitted up there for probate. For example, I was using this example a few years ago, and I pulled up the will

of Barbara Bush, former First Lady of the US. It's on file with Harris County Court, Probate Court number 1, and you can see where George W. signed it as the executor of the estate. And so it's not just for normal people that have to do that. I mean, presidents, you know, do that. And so, so first it's public, and then the inventory— while we don't always have to produce that to the probate court, very often we do. And that lists all your assets that are considered in that probate matter. It also shows the value of those assets. So all that financial data that you've been keeping close to the chest while you're alive, That very often becomes public after you pass away. And so

to your question, Craig, do you need a trust? It depends. I mean, if you're comfortable with disclosing all that stuff when you pass, then a will is going to be perfectly fine. If you would rather keep things a little bit more private and not have the courts involved in what's going on, then a trust may be, may be a good option for you.

So it sort of shields you a little bit from the public eye. if you don't want to just be disclosing like your financial data and all that kind of stuff.

Yeah, it's a way to, to help you keep a little things a little bit more private and confidential. Because frankly, I mean, when it gets down to it, a lot of folks really don't love the fact that their neighbor or, you know, their disgruntled heir, right, can know, hey, I wasn't part of the will, or I didn't know you were worth, you know, X number of dollars. I thought you were Less than that. Weird stuff happens.

That's the thing is weird stuff happens when people die.

People come out of the woodworks and be like, I want, I want part of that.

And it's like, who are you? You know, and, and you know that weird stuff happens. It's why it's really, really important to take care of this ahead of time. Yep.

Yep. There's a painting in my parents' house that my sister and I have agreed to leg wrestle over. Oh, she said she might, she might, but I think my mom actually put it in the trust and And I asked her what she did, and she's like, it'll be a surprise.

Oh, geez.

I was like, that's not fair. We needed to have combat. It's the only fair way. So, I mean, well, like, take us a little bit through the process. I mean, I've gone through this with you a little bit, but like, I want them to kind of know, I mean, because it's not easy. It's not necessarily fun. It's interesting.

Yeah.

I think you learn a lot about yourself by doing it, but like, kind of take everybody a little bit through the process. Like, how do you even get started?

So normally, you've already made an appointment. We're going to send you what we call a personal information form. That is our way of helping you gather some information, some data that if you don't already know, you need to be thinking about.

Mm-hmm.

And then we look over that. I look over that before we sit down. But in our initial meeting, we're going to talk through— first of all, we're just going to get to know each other, you know, tell me about your family, you know, where are you from? How'd you end up here in the Houston area. We'll talk about a little bit about your, your assets, you know, what you own, how is it structured, how are those things structured.

Truly, you're sussing out, making sure you're not getting into like human trafficking or— Yeah, right.

But then the first part of our initial meeting, a lot of it's just educational. So we'll talk about powers of attorney, we'll talk about wills, we'll talk about trust. I really want to hear from the family, what are you trying to do? You know, what, what, what are the concerns that are on your list that we need to talk about? What are the goals that are on your list that we need to think through? And so that first initial meeting, a large part of it is just educational. And a lot of times families have some things at the end of that time they need to go home and just think through some things.

Yeah.

You know, hey, we didn't really know this was important to us till we started talking about it, and we need to think about it. And so, so that first meeting Pretty much educational. We'll send you home often with what we call discovery questions. It's our way of kind of helping you think in a little bit more focused scenario of some details that we're going to need to know to draft whatever documents we're going to do.

Right.

And then we'll follow up, we'll get all that information. Eventually we get to the point where we know here's what we're going to do. You've told us here's what I want, and then we'll figure out what the cost is and all that stuff.

Yeah, it was fun. My wife and I learned how to fight in all kinds of new ways.

Not in front of us, thank you.

Well, how often do those things need to be updated? Because I know people's scenario changes, you know, kids get older and graduate and, you know, go off, and all of a sudden, you know, some of those things don't matter anymore. But how often do those need to be updated?

I tell our families you really need to take a look at it about every 3 to 5 years. And maybe nothing needs to change, but at minimum, you need to take a look at it and see, does it still have the right people in the right positions? So for example, if you have young kids, young meaning under the age of 18, in our world that's a minor child, then, you know, who's gonna take care of them if it's not you? And very often, as those kids grow up, as your guardians, the persons you've nominated to take care of the kids, as maybe they get older or stuff that happens in their life, maybe you need to you need to make an adjustment there.

I don't want Uncle Tommy taking care of them anymore.

That's right.

And so, uh, he made some poor choices.

Um, so every 3 to 5 years is a, is a good benchmark. Uh, but if there is a life event, you know, if somebody passes away, if somebody gets remarried, if somebody is born, uh, if somebody, you know, has some sort of criminal issues, then that's a— even if it's not 3 to 5 years, you need to take a look at it and see, is this something that's going to affect This, this planning. It's rarely something that you're going to do and set aside and never look at it again. A lot of people do that, but that doesn't really serve you well long-term.

Yeah, I mean, I think, I think we came back to you within like a year and we're like, hey, we— there's some changes that we need to make on ours. I mean, and that's not a big deal, right? No.

Yeah, I mean, it's because every document— well, I can't say every— most every document that we're going to prepare is amendable. So if you get into it and you realize, hey, I need to change this, it's pretty easy to make a change. Yeah, you know, if we're talking about an irrevocable trust, that's a whole different, you know, type of planning strategy. Not impossible to change it, but it's more difficult. But there are times where you just need to take a look at it and say, does this still do what I want it to do?

So I mean, let's just be real for a minute. I can go to LegalZoom and spend a whole lot less money Right. Than if I come to your office.

You spend a lot less money at LegalZoom.

So, but, but it's a, it's a real thing that's out there, and it is a fully legal entity to, to do some of this stuff. Why, or what's, what is the real big difference?

Yeah, so LegalZoom will, um, they're not going to give you any advice or any counsel. Uh, they're not a lawyer, and it was created by lawyers, so I understand where it all came from. But you will go through an interview and they'll ask you some questions. Here's what do you want to do? Here's who are the people in charge? And it will spit out a document that is valid and is legal, but does it get you where you want to be? I don't know.

Yeah.

I have seen a lot of families take an initial stab at it, and I've even probated wills that were done on LegalZoom, and then the family's like, that's not what he wanted to have happen. But yet that's what happened because that's what the document said. So one analogy that we use sometimes is, you know, you can learn anything on YouTube, and I imagine if you poke around far enough, you could figure out how to take your appendix out. Well, most people aren't probably gonna be that brave and do it themselves. I would hope not. They're gonna look to see, you know, that's a little above my pay grade, so I'm gonna hire somebody else to do that.

Yeah, I do wanna meet the guy that wants to try that though.

Yeah, there's probably somebody.

Just a 5-minute conversation, that's all it is.

I mean, you really do get what you pay for almost always in life. Yep. A removed appendix or an actual legal document.

That usually comes with a side of sepsis.

Sometimes it's just worth spending the money, right?

So I mean, it's like I could go and buy a whole bunch of cans of Raid and stick them around my house, or I can call Craig.

Yeah. So yeah, yeah, I don't recommend— no one should ever buy Raid, by the way. Um, please don't. Um, uh, just, just for your own safety.

Spectracide?

No, no. Okay, none of it. None of it. It's all going away anyway.

That's true.

So I mean, like, what are some of the— I want to, I want to kind of step back a little bit and talk about corporations because I know this is, this is something that a lot of people are interested in. Are there any formed corporations that don't work with like a living will or a living trust? Sorry, living trust. Sorry.

Because the living will is something different. Yeah, we can talk about that. So yeah, there are. So when we talk about entities, There are a number of different strategies or structures that you can create through the Secretary of State. So when you create an entity, maybe it's a corporation, a partnership, or an LLC, you simply can go online, again, not saying you should, but you can fill out your own certificate of formation, pay your $300, send it in, and you've got a company. You've got a shell, that's the way I describe it, you've got a shell of a company, but you really need to think through, you know, what are all the formalities and the other stuff that

go with it. All of those will work with a trust. One of the things that a lot of people come to us is, and through our discussion, they— something comes up and they're like, well, hey, I'm worried about, you know, if I hit somebody in the intersection and somebody sues me, can they take my stuff?

Right.

If you have a corporation, like if your company says, you know, whatever it is, got the letters Inc. behind it, that's a corporation. That's different than what— than an LLC, a limited liability company. Those are 2 very different types of structures from an asset protection point of view. So both of those structures will run a business. You can run a business under either one. But in a corporation, you have stock. A shareholder is the owner of a corporation. In an LLC, the owners are called members.

Okay.

Okay, so if you have stock, let's say you've got your corporate structure set up and you're, you're set up as a corporation and you get sued for some reason on the personal side. So let's say you run a stop sign and somebody sues you because you— they were injured because you weren't, you know, you were texting and driving or whatever. Then that stock in that corporation is not protected against that lawsuit. That corporation is going to protect the stuff inside the corporation.

Mm-hmm.

Or that entity will protect what's inside it. So let's say you've got a business bank account that's got $500 grand in there, or $500, whatever it is.

Sure.

Well, that $500 is protected because it's inside the company, but your ownership of the company is not protected. So if somebody sues you personally, your ownership of that company may be at risk if it's a corporation. Again, ends in INC. But if you have an LLC, that creditor, that person who sues you, they can't touch your ownership of the company. Because the statutes say that shares of a corporation are not a protected asset, whereas LLC membership interests are protected in that type of situation. So they're both good, they both will work as a structure, but you need to think through perhaps what's that going to do long-term if there's a claim or a creditor.

Right, and so is there any like advantage/disadvantage going the other way?

To an LLC?

Yeah, yeah.

LLCs are generally easier to run. Um, you don't have to have company meetings. It's a good idea, okay? Don't hear me say you shouldn't do it. You should do it, but it's not a statutory requirement. That's why most entities that are formed now— LLCs first came on board about the mid-'80s, but most entities that are formed now are formed as an LLC. You don't see many corporations that are being formed. There are some, but most of them, when you're forming a company, it's an LLC.

Hmm, all right. And then how do those function within the trust? I mean, because you can— I imagine you can have multiple LLCs. I mean, like, all that— it can get messy in there.

Yeah, so what typically what we'll do— remember, think of that trust as a bucket. We've got to put your stuff into the bucket. We need to assign your stock to the trust if you have a corporation, or we assign your membership interest. of the LLC to the trust. And so we want to make sure that your ownership of that entity gets funded into the trust. And let me just step aside real quick. If you do have a corporation, don't think, oh, I need to run out and change this, because you simply could— and we do this with a lot of families— we may create an LLC and put that stock into the LLC.

Okay.

And now that stock is protected because it's wrapped up inside the LLC structure. So, and that doesn't impact how your business is run. You know, the general public doesn't see all that stuff, but that's just the internal workings of it.

We got gremlins operating in the system. I don't know what's going on over there.

Someone's back there laughing. So do you work on entity formation as well?

We do form a lot of entities. We do not— we are not business attorneys that will draft contracts and negotiate for you, or if you have a lawsuit, we're not going to represent you. represent you in court. We don't do any litigation stuff. We form a lot of entities in the— or under the umbrella of estate planning.

Okay.

Okay. And, and I mean, I, I imagine I know the answer to this. Is there, is there one that you find— because I mean, we have C-Corp, S-Corp, LLC. I mean, we have lots of different options. I mean, even, uh, limited liability partnerships. Yep. Um, am I missing any? I mean, I'm sure—

Sole proprietorship.

Sole proprietorship, limited partnership.

Yeah, there's a number I mean, like, I know that you probably, for small business owners, like LLC might be like the most advantageous one. I mean, but like, could, if that's the case, could you kind of explain why?

So yeah, LLCs are predominantly the ones that we're going to form most often for a business owner. One, because it, in my opinion, it's the better structure to go to protect the ownership shares of that company. You know, if you think about it, you've started your company, it's your baby, it's your dream, you're working it every day. You don't want some third-party person, you know, a plaintiff coming at you and saying, hey, unfortunately I'm going to attach the shares of your company, and now they're a partner with you in the business.

Right.

You know, that's no fun. And so the, um, having that, that LLC ability to protect the ownership is a big deal for a lot of families.

But a lot of that, the, the difference between like a sole proprietorship, partnership, especially, you know, going from an S corp to a C corp, a lot of that has to do with like how much money you're bringing in too, right? Like—

Yeah, so that's, that's probably more of an income tax question. So I would defer to a CPA on that, which I'm not. But, you know, if, if you run your company and you want to be taxed as an S corp because you're going to be an employee and you want to be able to get a discount— or not a discount, excuse me— you want to be able to to pay yourself dividends without Social Security and FICA and Medicaid and all that type of stuff, then that's, that's probably a better way to go. Okay, but that's a, that's a CPA question. I tell my clients, I'm not your CPA, I'm not going to give you tax advice. I'll give you legal advice, and don't let your CPA give you legal advice.

That's fair.

So yeah, is it difficult to transition from one, uh, entity formation to another?

No, it's not, it's not impossible. Uh, it's not the easiest thing to do. So typically, you know, like I said, if somebody has a corporation and they're like, I don't want my shares to be at risk, we won't, we won't convert the entity to an LLC. We'll just create an LLC and assign the shares to the LLC.

Okay.

And so then you can still run your corp like you've always done, but the ownership is now protected.

Right. And I think we've actually talked about that. We're talking about forming like a separate LLC to kind of hold ownership in all the businesses that we have.

Yeah, more of a holding company.

Yeah.

This is all very confusing. So I think that that's one of the— it's one of the reasons though, that you need to talk to somebody that knows what they're talking about and fully can go, okay, here's your situation. Here's the things that you've got going on, because everybody's different, right? I mean, Craig and I are really good friends, and yet our families are vastly different in the way we handle things. you know, businesses and all that kind of stuff. And so everybody's different. And so finding the opportunity to step in, just have a conversation and make sure that you're—

I don't know who it is, what it is, man. Yeah, just roll with it.

But I just think that that's— the conversations are really healthy because, you know, sitting down and having a conversation doesn't lock you into anything, right?

Right. Yeah, I mean, it doesn't hurt to sit down and talk. No, you know, if you don't take our advice or our counsel, that's fine, you know. But yeah, it's at least an opportunity to sit down and kind of explore the options and see what's important.

Well, one of the things I'll just tell you from my own experience, I— we had an interesting situation in our family that happened, and we needed to try to figure out some estate planning stuff. And I called David and was like, hey, I've got this really weird thing going on. Um, and I need to figure out what's the best path to go. And, you know, it was a great conversation that we just had on the, on the phone. It wasn't any, there was no, you know, presuppositions anywhere. There was no, um, hassle of, hey, you need to come back in and do this, that, or the other. It was just a conversation. And it's one of the things I really appreciated about the opportunity to talk is just, it's very, very

informal, but also very solid advice. So. It's really— was really, really helpful for me.

Good. Yeah. And guys, we're gonna— we're fixing to open it up to Q&A, and like, we want to make sure that you guys— everyone gets an opportunity to ask a question if they want to. So if you've been thinking like, hey, I need to ask that, go ahead and get ready. We'll ask you to come up to the microphone so that everybody can hear the question, and then David can have the opportunity to answer it. David, is— I mean, while they're getting ready to bravely approach the microphone, Is there anything that we didn't, we didn't cover that you want to make sure that everybody has an opportunity to hear about?

Yeah, we didn't. So we kind of jumped in talking about what happens if you pass away, you know, what a will does, what a trust does. And while that's probably nowhere on anybody's horizon, it's going to happen to all of us at some point. But one thing you also need to be thinking through is what happens if I don't have the ability to, you know, just run my business or talk to my bank or talk to my doctor. And those documents, that's what we call power of attorney and healthcare documents. Everybody needs to, to give some thought to that.

Yeah.

And especially if you have young kids, you need to be thinking about, you know, who's going to serve as a guardian for my children if it's not me, if it's not my spouse. If you have older parents, however you define older, you need to make sure that your parents have documents in place that if you can't or they can't do certain things, that you or somebody that they trust can. So for example, earlier today, I'm on the phone with State Farm. I'm the agent for my father who lives in Abilene. He's got some shingles blew off the roof. So I'm talking to State Farm scheduling those guys to come out. Yeah, good luck. So yeah, but, but just being able to answer those

questions and say, hey, I've got everything in place. Here's what you need to do, or here's what you need, State Farm, so you can talk to me. Saves you a lot of headache.

So what is, what is that that you guys have set up with your dad that allows you to do that?

Just a simple power of attorney.

Power of attorney.

Okay.

Well, and I'm looking out to the people that are here, and a lot of you are home service-based business, and, and you, you do stuff that's, it's risky. I mean, you know, looking at John back here, he's dabbling with electricity all day long. Anything could happen.

I'm still surprised you're with him.

I mean, he's, he's amazing at what he does. He's safe, but stuff happens. And if something were to happen and render him unable to make decisions, well, if he doesn't have anything in place, then it could put his whole business at risk and his family as well. So it's just a wise thing to think ahead and go, look, worst case scenario, what does that look like? I hate worst case scenarios, but if they happen, then—

and there's layers to that too, right? There's like power of attorney, medical power of attorney. What else am I missing in there? Yeah, so there's 2.

So a The power of attorney, what we call a durable power, that's who can take care of your things, your, your stuff, you know, your cars, your money, your investments, whatever. The medical power, who can make medical decisions on your behalf if you can't do it yourself.

Right.

A HIPAA release, that's who has the ability to get information from a doctor. And then what we refer to as a living will, sometimes known as an advance directive, that is where you give instructions to your family regarding end-of-life conversations. So if there's no brain function, what do you want your family to tell the doctor?

Right.

So, so those things are really important. We, we often use the phrase in our office, it's not a problem till it's a problem. And, you know, everybody just kind of cruises along and everything's going fine, and then all of a sudden, oh my gosh, I got a problem. And if you didn't take care of it beforehand, sometimes we can fix it on the back end, but But sometimes we can't. Yeah.

And that's when you get involved.

Well, and sometimes even then, there's just nothing we can do. But yeah, it's just something to think through. And I understand they're not always fun conversations, but they're necessary. They're important conversations.

Yeah. Anything else?

I think that's it.

Cool.

Happy to hear from other folks.

Yeah.

If anybody got a question they want to bravely step up to the microphone. Come on.

All right.

Hello. Oh, here, here. Yeah, here you go. I got you. Go ahead.

Hello. Oh, great, perfect. How are you today?

Good.

I have a 2-part question.

Okay.

So I'll make you answer the hard one first, and then I'll make you answer the easy one afterwards. So have you, in your experience, ever seen when people mix their LLC with all of their personal assets into the trust and the trust gets sued, what happens to the assets? That's for all y'all business owners out here.

So in that case, the, um, I guess it would depend on who was sued. If the individual was sued personally, um, you know, I'll take the electrician for example. So let's say the You know, if you caused a fire at somebody's house, then I would assume a lawsuit is going to be directed in 2 directions. One, to you personally, because you had personal liability in that, and then also maybe against the business. So if you were sued personally, you have personal liability there. That LLC isn't going to protect you. The trust won't protect you either. That living trust— that, or excuse me, that trust— the living trust doesn't provide us any asset protection.

protection.

So if there's personal liability, there's really nothing you can do to legally shelter yourself from that. You could have insurance, you could have liability insurance or professional insurance in some capacity, and that will do it. But yeah, you need to be thinking through what are the other layers of protection that I could have, and I think insurance should be part of everybody's discussion at some point. I'm not an insurance guy, I'm not trying to sell you a policy. But that should be part of somebody's discussion from a liability standpoint.

John, that is shocking.

Why would you do— I can't believe you. Yeah, I cannot believe you.

I'm sure that would never happen. Did that—

yes, that answered my question. But let's add, if the LLC is sued and the trust owns the LLC, if someone sues, which entity are they going to sue?

So in that case, I think of— and I don't do any litigation work. I've worked— when I was in law school, I worked for a litigation firm. And so when somebody sues, they're going to sue— that plaintiff, the person bringing the lawsuit, they're going to throw a really big net, and they're going to sue anybody that they can think of. Now, maybe some of them aren't what they call proper parties, and so those parties kind of get weeded out through the discovery and the litigation process. But initially, they're going to sue anybody they can think of. The trust doesn't protect us. That's a revocable trust. It doesn't give us any protection. So then your assets are protected by the, what we call the exempt asset, or yeah, the exempt asset

statutes. So these are in the property code. You don't have to go look it up, but basically in general terms, your house, your homestead is a completely protected asset. Even if that's in the trust, that's protected. Now, unless you don't pay your property tax or your income tax, the county or the IRS could bring a suit, but generally your house is going to be protected. One vehicle per licensed driver— pardon me— is protected. 2 firearms. I know this is Texas, a lot of people don't like to hear that, but you can protect 2 firearms.

Just 2?

Just 2.

That's crazy.

You can pick them, but your, your personal stuff, the things in your house, generally protected. Your pets, your Your clothes, your furniture, all that stuff. Things that would not be protected in that case, even if they're in the trust, you know, a separate piece of property. You know, if you've got acreage somewhere, if you've got a vacation home, if you own, you know, a rental property and that's just in your trust, that's not going to provide us any protection. So then I think it comes down to what is the characterization of that asset and is it protected by statute or is it not?

Awesome. So great answer. And then the last question I have is, how did you become an estate planner? Kind of what was your career trajectory? Oh, this is fun, actually. I'm ready for it. I like this game.

So well, how far back are you gonna go?

Well, how far do you want me to go? I've known Dave for almost 30 years.

And he can tell you why if he wants to.

But so I knew Craig when he was in junior high, because I was his the youth pastor at his church. And, um, so I started out for about 10 years, I was a youth pastor and, uh, worked at a couple churches. I actually worked at the precursor of the church that you're with now. Um, and then about 20, I guess going on 21 years ago, uh, made a career change and went to law school. And, um, you know, 3 years of law school and a couple years working for another little firm and then started my own firm. So So, yeah, it wasn't the traditional, I'm a lawyer because I've always wanted to be a lawyer.

It was never on the radar until I was about 33 and had one child who was, I think, our oldest who's now 21. I think he was 3 when I started law school. And our daughter who's 17 was born my second year into school.

Hmm.

And so, it was a God thing. I mean, I'm not just saying that to be trite, but that truly was. you know, something that we feel like the Lord placed on our heart. That's, that's where we are.

Awesome. Love it.

Financially, it was a good choice.

Well, there's no doubt.

Yeah. Yes, ma'am.

Hi. First of all, thank you for being here. So I have 2 questions. The first one would be, so when you have a will, you, uh, or a trust, you have an executor, of course. So in your opinion— so I have a daughter, she'll be 23 in May, and she's married to an amazing man who's extremely smart and brilliant. Is it weird to put him as the executor over your daughter?

Um, let me—

we're gonna find out.

My son is 10, so he obviously can't be the executor, and she would be the guardian, of course, or they would be.

But so you're— so basically, could you put your— is this your son-in-law?

Yes.

As the executor trustee in lieu of your daughter?

Yes.

Is that right?

What do you think about that?

Well, here's my— here's a quick disclaimer. This applies to just kind of a blanket. So what we're talking about here, I can't give you legal advice because we don't have that client relationship. So we're just talking in general terms. So I think whoever you pick as your executor, your trustee, or your agent on a power of attorney, somebody that you know, somebody that you trust, somebody that makes good, sound, well-thought-out decisions. Somebody who's good with finances, somebody who's good with details, somebody who can make hard decisions. And if that's not your daughter, then you need to look elsewhere.

Okay.

Um, is it weird? It's your call, you know. Um, my sister-in-law says it's not weird until you make it weird. But nevertheless, okay, um, it don't— this is not an area where I think you should be worried about hurting somebody's feelings. Because if you're worried about hurting somebody's feelings, then you're probably going to make a decision that isn't the best. And it may not have any ramifications while you're alive, but after you pass, or if somebody's incapacitated, there could be some serious consequences that come about.

Sure.

And just because you felt poorly about making a decision that wasn't necessarily the best.

Yeah.

So yeah, I mean, I have people all the time that say, hey, I love my children, but they can't manage money, and I don't want them to be in charge of that. Or I love my daughter, my son, but in a doctor's office, they're not going to be worth anything. Yeah, so I want to name somebody else. So make the decision, albeit sometimes hard, that you know is— this is the best decision to take care of you, your things, and your family.

Okay, thank you. And then my second question is, so you've talked about all the benefits, benefits of having a will or a trust Can you talk about what happens when you don't?

Yeah.

So thank you.

That is, um, that's what we call— the legal term for it is intestate. You don't need to remember that. That just means you passed away without a plan. All that means is you didn't create a plan yourself. The state of Texas already has one for you, and there's a default plan that says if I die and I haven't done any planning, then the state of Texas has predetermined where your stuff goes. And real quick, to alleviate any concerns, it does not automatically go to the state treasury, okay? So that whatever you have in your bank account doesn't end up with a— with owned by the state. It does mean that it will pass. There's any number of scenarios, so I mean, we could be here for 3 hours talking about all this stuff, but

generally, if you're married and you have children, and those children are also the children of your spouse, so like Jennifer and I, we've got 2 kids. If I were to pass, with no plan, all of my stuff would go to Jennifer because that's what the state of Texas says. But if you have children that are not the children of your spouse, then it doesn't all go to your spouse. It may end up with— some of it's going to end up with your kids, and if they're not 18, then there's going to be a trust that the court will create. So there's all sorts of scenarios. So, um, that's where one, you know, people that do LegalZoom stuff, I mean, sometimes it doesn't doesn't work the

way they want. And, um, they end up— they think they have a will, and they do have a will, it just doesn't do it what they want to do because, you know, there's, there's too many factors to go into it.

Yeah. Last question.

Okay.

I promise. And why do people— why do you think people would not do that, get a will or a trust? Like, what's the reason?

I think people don't like to talk about it. Um, you know, I don't love going to the doctor, but I know I should go to the doctor. Um, the Yeah, I think one, people don't want to talk about it. So they don't want to have those difficult, scary, sometimes hard conversations.

Yeah.

And I think cost is one, or another factor. I think people are like, you know what, I'd rather do something else with my money than pay a lawyer. So I think it's just fear of the unknown, or it's a financial issue. And I think it's going to cost, you know, $25,000 and You know, it might, depends on what's going on, but it probably won't.

But I will say that, like, cost is determined by a lot of things other than money, right? So I mean, the cost of things are going to come one way or the other. And if you wait and don't do anything about it, the cost might be pretty, pretty high. Pretty high.

Yeah.

You know, in comparison to what it would have cost to just step in and have a conversation.

Well, that's true, because the most complicated and the most expensive probates that we handle are ones where people did no planning at all. So it was free for them while they're alive. They didn't have to talk to a lawyer, they didn't spend any money, they didn't worry about it. But when they pass away, I guarantee you that is the most complicated, the most expensive estate plan you could do.

Yep, 100%.

No doubt.

Yes, sir. Yes, sir. All right, guys, thank you all very much for coming here tonight. Adrian, then on the floors. Uh, a few questions. As long as nobody kicks me off, I'm gonna keep answering them. Uh, but one you glanced over talking about a revocable trust, a living trust. Uh, what are the differences between a revocable and an irrevocable trust in specific regards to taxes? Yep. As well as if you have an irrevocable trust and the next generation needs to change something, how hard is that?

Okay, so the taxes first. When you have a revocable trust, that is, um, that is a see-through or a flow-through entity from an income tax perspective. So, um, Jennifer and I have a revocable trust. We still file a 1040 tax return. That's your personal income tax return. If you have an irrevocable trust, that irrevocable trust is a separate taxpayer. It's got a unique tax ID number. It will file a separate tax return. It files a 1041. That's a return for a trust or an estate. And one thing that changed a few years ago, this gets a little political and into the tax laws, but Congress changed the tax code to where a trust is taxed at the highest income bracket at— put

me on the spot— I want to say it's about $14,400 or $14,500, somewhere in that range. So if that trust earns income, let's just call it $15,000. Let's— because the trust earns income of $15,000, it is going to pay tax, income tax, at the highest taxable rate, which is I think a 37% tax bracket. Whereas an individual or a couple, you're not going to be in the highest tax bracket. I think a married couple is there at $450,000 of income. If there's any CPAs listening, I may be off on those numbers a little bit, but the point being, an irrevocable trust is to pay more tax if the income is retained in the trust. You might distribute the income out and then the beneficiaries pay it, but you know,

that's, that's one difference. Your second question was how to change it, is that right?

Yeah, an irrevocable trust, uh, to my knowledge, is very, very, very hard to change down the line.

Yep.

So if you are passed away, which I don't even think that matters, but if you are and they need to make a change, something drastic happens in the world and it no longer is valid, Right. How hard is it to change?

So it's not impossible, but it is not near as easy as just coming in and making a change to the document and signing your name on it. Very often we need to include the court, so we may need what we call a judicial modification. It's not a trial, you know, there's no jury, it's not Law and Order, but we need to present documents or information to the court. Here's what the trust says, here's the reason why this trust is no longer effective the way it's drafted. Here's the trust, the change we want to make, and we're looking to you, Judge, for authority to make that change. If the trust allows us to use something called a— somebody called a trust advisor, that has to be drafted into the trust, and that person can revise the trust.

There is a strategy called— we call it decanting. Basically, there's a statute in the Texas Trust Code that allows us to sometimes create a new trust, pour that asset or whatever's in that old trust into the new trust. So there's possibility of doing that there. So, so there's ways to do it, but it's— it is more complicated and more extensive than just making a change on a piece of paper and signing your name on it.

Cool. And second question, you've mentioned them before as strategies, and a lot of them are. There's different you know, reasons that you come up with trusts and different hierarchies for the different trusts, right? Uh, and we've talked about a lot of defensive ones, but switching a little bit gears to an offensive trust in which I want to set up some type of bank structure like some of the, you know, Rockefellers and Rothschilds for future generations. Yeah. How do you utilize a trust and, um, A trust, sorry. And, uh, things like life insurance policies to be able to set that up for future generations. That way you don't have to take care of it and they'll always be able to borrow from that trust.

Yeah, so, um, so we do this a lot, um, and you can do this with the terms of a will. You could do this through the terms of a revocable trust. But let's say, um, let's say a husband and wife create a trust and they want to make sure that assets are going to be protected for their kids and grandkids for future generations. So, and again, very common that you will say in that document that when I pass, the assets do not go outright to my kids. In other words, they don't come out of the trust, they stay in trust, and that trust will distribute the assets typically for 4 categories: for healthcare needs, education needs, maintenance and support needs. And so

those, we call those ascertainable standards. Again, you don't need to remember that term, but that just means that the trust holds the assets for the benefit of the beneficiaries, and then the trustee, whomever you pick, and, and if you're creating the trust, you get to pick who's in charge on down the line. The trustee is going to manage the assets for the beneficiaries, distribute them out based on those standards. That's exactly how the Rockefellers, the Kennedys, Vanderbilts have, have created legacies of wealth is they don't give an outright gift, they leave gifts in trust. Uh, when you do it with life insurance, you may have a, uh, you may have a— and by the way, those trusts for your kids, those are irrevocable trusts because that's what protects the

asset. An irrevocable trust protects the asset. Um, harder to change, but we get on the plus side, we get protection for it. Um, life insurance, uh, we may have an irrevocable life insurance trust, and you have the policy owned by the trust. The trust is the beneficiary of the policy. When you pass away, the life insurance company pays the death benefit to the trust. So all of a sudden it's got cash in it. Now that cash is going to be invested, and then that— the trustee manages the money in the trust for the benefit of the beneficiaries. So it's extremely common strategy.

And can you Uh, on that line of, or train of thought, can you then set up the irrevocable trust now so that generations down the line, whenever someone is born and they are of age, the trust will actually open up a policy on that child to keep funneling money into?

You could, yeah. I mean, you could have the trustee give them the authority to buy insurance for, for future beneficiaries.

Cool. Well, thank you very much.

Yep. Thanks, man. Oh, here we go.

Hi. Okay, I think my question is kind of changing gears a little bit, but going back to business formation. So when you have people that are forming business, let's say like they're forming a business together, right? They're each married and something happens to one of the spouses, but it was formed during marriage. And do you counsel your people, or do you talk to them, or set up paperwork that would separate that business from being a part of community property, or kind of dissolve that if something were to happen to one of the business owners?

Yeah, so we talk about that a lot. So when you talk about community property, Texas is a community property state, so we presume that anything you acquire while you're married is owned between the husband and wife. That presumption can be overridden or rebutted, but you've got to show clear evidence as to why it's separate property. But when a situation— let's say these guys are creating a business, they're both married, even if they don't put their wives on the operating agreement, they're not on the LLC formation documents, it's separate property, presumed to be separate property unless we know certain, for certain that it was separate property of either one of these guys. And so typically in business succession

planning discussions, it often comes up, you know, if Craig passes away, is Brandy going to step into that role of running the business? And maybe so, but maybe the other partner says, I, you know, I really don't want to be in business, no offense, Randy, with, you know, Craig's wife. And so he'd be a fool. Yeah, the, uh, but yeah, so that's something you need to think about is if you've got a business created by 2 separate families and you're wanting that business to, you know, continue, what are the implications that if one of you passes away, how is that business ownership piece going to be handled? Does it go to your spouse? Does it come back to the business? Does the other oper— does the other owner have the opportunity to buy their spouse out?

And so to clarify, like when people go online and they just start a business for $300, Secretary of State, that's not figured out?

LegalZoom ain't going to tell you that. So yeah, so when you create your business with the state of Texas, all you're doing is creating a shell. You don't have any legal structure that says what happens if one of us passes away, or if we want to bring in a new partner, how's that going to work? You know, does that person buy into the business? Do they just get the business? Yeah, so, you know, it's those types of things that, you know, going back to the LegalZoom question, they're not going to answer that question for you.

So yeah, awesome. Come on, this is good.

Okay, so a few questions. I'm really short.

Um, okay, so one, just following up on yours, talk to a family law attorney along with your business law attorney if you're setting up a business during a marriage, um, because you could potentially do a postnuptial agreement.

Yep. To protect yourself. Um, 2, for a gun trust— do you do gun trusts? Um, and how is that going to be relevant if a couple is getting divorced or someone passes?

How does that pass?

I do not do gun trusts. Um, that's a kind of a niche area of you know, the trust and estate stuff. So I do— frankly, I don't, uh, I don't know enough about it. And honestly, I can't compete with, you know, whomever that's gonna, you know, the gun shop that says, here, sign this form, it's an extra $99. I'm like, I don't know what you're getting for $99, but I'm not gonna put my name on it that says this is what you should do. So no, I don't know, I don't know enough about it to really even discuss competently, is, you know, truly.

Do you know why people do them at all, or I do, yeah.

I mean, typically, well, they originally came about to when they were— somebody was buying a firearm or suppressor that needed an NFA license or certificate. And so that's from my perspective, that's why people were doing it. I know there's other things that, you know, I mean, if you're going to hold your 9mm in a gun trust, I guess you could.

Sure, yeah.

Yeah, so I'm sorry, I just don't know enough about it to give you a good answer.

No, that's fine.

I do divorces and I'm always looking for people that do.

She's trying to find a partnership.

Yeah. I can't imagine guns being contentious in a divorce.

No. Never.

Never.

Never.

Yeah.

Well, hopefully you don't know where they are. Yep.

Yeah, please go ahead. Yep.

So I am the trustee of my parents' estate, and it has been very emotional, very difficult. I'm in the 4th year of the succession plan for his company. So my first question is, do you know of any companies or any consulting or training for executors?

That's a good question. No, there Your attorney should coach you through some of that. I have seen a couple of law firms not based here in town but based elsewhere around the country, you know, that they have a program for basically children of their clients that say, hey, when mom and dad pass away and you're trustee, you know, let us come tell you about that. But I don't know of any outside resources from, you know, company-wise that that you can look at. But really, I think your attorney, if he or she— maybe they're not still in the picture, I don't know— but I think they should be giving you some advice and counsel on some of that.

He did. I was just— it was kind of— I was just curious about that because it's something that you don't know what you're getting into, and then all of a sudden you've got all this paperwork. And, um, and so yes, I lean very heavily on the lawyers, but there's a whole other piece of it, you know, the emotional part and all this stuff. And I I was thinking that might be a good business opportunity.

Well, we, we do a lot of hand-holding for folks in your situation, and because it is new, you know, and yeah, we live in the world every day, but you don't. And I always encourage my— our clients and our families, even though it's a hard conversation, you should talk to your family, especially if you've named your child or your children as an executor, as trustee, you should talk to them and tell them at minimum, here's what I've done, here's where you can find my documents, and if you're willing to go into it, here's why I've done these things. Because that can, I think, alleviate some hurt feelings, some difficult conversations between siblings sometimes, not always fun conversations. I don't know that you would do it at Thanksgiving dinner, but, you know, I think

again, had your parents done that, I don't know if that would be put you in a better spot. But I think—

I don't think my dad realized the level of effort. Yeah, because he was going to—

did you know that you were going to have that role?

Yes, but I had no idea what it involved, and I didn't know anything about my dad's company, just a single-member LLC.

Yeah.

And so I had to go in and figure out, like, what is his business model, where's the money coming from. So there was a lot of work involved, and then figuring out selling his business and all that. So that was— I was just curious if there was like consulting companies or something that did that, because I did have great legal support, but they can only, you know, do so much for you.

Yeah.

Um, but my second question is, now we're in the 4th year of this, um, closing everything out. And so my question is about— so the will opened 2 trusts, one for me and my family, one for my sister and her family. And so there's contributions that go out and now we're wrapping it up. So my question is, how do you wrap it up? Or just do we just file some paperwork that closes the trust? And then what happens if money comes in that we weren't expecting? Do we have to open it back up again?

So, so did your parents have a living trust or did they have a will?

A will that opened a trust with the inheritance.

Makes sense.

Okay. So There is a way. Well, eventually you'll get to the point— sounds like you're close— where you're going to make your final distribution, you're going to pay your final income, file your final income tax return, and be done. And then you're going to distribute what's left. I don't know how your lawyer does it. Again, not legal advice to anybody specific. In our office, we prepare what we call a distribution and funding agreement, and basically all the family signs that and gives kind of a procedural history. here's when this will was created, here's when so-and-so died, it was given for probate, all this stuff. We have an accounting that shows here's what came into the estate or the

trust, here's what bills were paid, here's the taxes that were paid, and here's what's left to be given out. And then everybody signs it, and part of that agreement is we often include what we call receipt and release language that says I, as a beneficiary, you know, acknowledge that I'm not going to sue the trustee, the executor, mentor and all that stuff. You don't technically have to close out an estate. You can, there's, there's methods to do that. I want to. You want to? Yeah, well, and you can. And the, the benefit of closing it out is that you have a signed order from the judge that they have basically stamped all of your— stamp, you

know, given the stamp of approval to all your actions and say You're not liable anymore, and this thing is closed down. The reason we don't often do that, or at least in my office we don't often do that, is because you never know. Maybe 5 months, maybe 15 years later, somebody realizes, you know, this person owned a minor interest in an oil and gas well somewhere. And if this estate is still open, we just need new letters testamentary, and then we can transfer those interests.

Okay.

But if you closed it out, you got to open it up again. So, um, it just depends. I mean, you know, I've been doing this for 15, a little over 15 years. We've probably only closed out less than 10 estates just because, you know, we never know what's going to come up. And the ones we have closed out, we did it on purpose. More of an emotional thing. Yeah, I just want to be done.

Yeah, yeah, but that makes sense.

That's understandable. So thank you.

You have to raise that thing back up again.

It's being recorded. Um, so, uh, okay, question. So if we've now realized, oh shoot, I'm not protected at all, and you fall off the deep end as far as research goes, and you want to trust with a Wyoming LLC as a holding company, and then multiple other LLCs that rent out from the holding company LLC, and you want to set up this, this structure, uh, of asset protection and anonymity, uh, how much would something like that cost coming from just a, I've got a business but I want help?

Uh, I knew that question was coming somewhere. Um, I hesitate to, to give you a price because everybody's different. Um, so I mean, that's probably a conversation better off held private. I will tell you, at least the way we do business, is that once we know exactly what we're doing, we're going to determine from this planning side, we're going to figure out what our fee is, and we're going to do that work on a flat rate. Every family is different, so because one family paid this doesn't mean the next family will do the same, even if their plans may be largely similar. You know, the issues, the family structure, whatever, may be a little different. So At least in our office, we are going to figure out what

we're doing, and we're going to have an engagement agreement. Before we do any work on any legal documents, we're going to put that engagement together. And that's what says, you say, I'm hiring you guys to do this, here's our fee, here's our scope of employment, and then we agree to that before we do any work. So it's hard for me, I really don't want to, you know, if you can respect it, I don't want to go on record to say, oh yeah, it's going to be this, because somebody else is going to hold it to it.

3 decimal places? 4 decimal places?

It depends.

How about that?

So it's, it's, um, 7. I mean, just go high.

Just go really high, David. Go really, really high. Uh, second question, uh, and this is coming from a construction, uh, background. So there's something that we have called a 1031 exchange in which if I flip a house And use all that money to then invest in another house, I can kick the capital gains tax down the road, right? But I've heard of it in which, you know, the person that did that passed away, and that freight train caught up to the family members. In that situation, would it be better to have a revocable or an irrevocable trust from a tax and probate standpoint?

I don't know that I know the answer to that. I'm not an expert on 1031s. exchanges. But generally speaking, a revocable trust is going to be taxed at your taxable rate, whatever tax level you're in. An irrevocable trust, like we talked about earlier, depending on the level of income, is going to determine what tax bracket that revocable— that irrevocable trust will be in.

So, so the, the 1031 exchange, you have an arbitrary amount of days in which to invest that money into, like 60 days, to take that money and then use it to put it back To the assets, right, uh, in, uh, before those capital gains come true. So if you pass away and it goes to the trust, uh, would it be better to have an irrevocable trust? Because now the ownership changes to the trust versus if it's a reversible or a revocable trust in which it still is under the same tax idea.

Yeah, I mean, it, uh, I think it would depend on what other assets would be in the irrevocable trust? You know, is there anything that's producing income that's going to bump it up into the highest tax bracket? I think that may be a question— it's probably more of a CPA question than me, honestly, because I think that's more of a tax, income tax issue. Sorry, I can't give you a good answer. No, sir.

Thanks.

Yep.

Anybody else? Cool.

I think everybody's drunk from all this. Clearly. They're like, this is throwing it on, give me another one.

All right, John's coming.

Okay, I'm gonna keep it simple, all right? So if you go from a single owner LLC, if you go from a single owner LLC and then you add another owner, which now there's 2 owners, but now you want to add 4 more, what's the best way to do that? So you go from 1 to 2 to 6?

Yes.

Is that right? Um, same entity?

Yes.

LLC?

Yeah.

So in that case, again, not legal advice necessarily, but just kind of in general terms, you're going to need to think about, as a single-member LLC, are you taxed as a sole proprietor, or are you taxed as an S corp or a C corp or a partnership? When you bring on other people, Uh, if you're— if you were previously taxed as a sole proprietor, you're now automatically going to be taxed as a partnership. You can elect S corp or C corp. So we did that.

Okay.

Then potentially getting 4 more. So very likely, again, your CPA— because I'm not— your CPA— Yeah, they may say, hey, just keep the S corp structure. And I see a lot of CPAs that, you know, advise families that way or business owners that way because that can make more income tax sense. But another thing you're going to need to think about is how do those new owners, those new partners, how much of the business do they get? How are they getting that? Are they buying into the business? And who's going to be in control? You know, if you're the original, this is my company, are you going to maintain a majority ownership and these guys have a minority ownership so you get to call the shots?

Fair enough.

You know, so those are some things that I know that I know that wasn't exactly your question, but you kind of need to be thinking about as you bring more people on, where does control sit? You know, if it was your company, do you want to maintain that control? Do you give them voting rights? Do you give them non-voting rights? You know, and that's not really our world. That's more of a business transactional attorney. But those are things that you probably need to be at least running through your head on that.

Okay.

Yeah, I'll ask you later.

I can't think of the other one.

Thank you, John. Anybody else, guys?

This is your shot.

You got one?

All right, come on.

So again, or I guess for you guys, I'm completely ignorant, so you're going to help me out. Okay, so, um, I've got an LLC. I'm a roofing contractor. Um, at what point do we move towards the S corp concept? Um, probably a CPA question for you.

Okay.

But as an S corp, uh, if you're structured as an S corp, you will be able to— my understanding is you're going to be able to take distributions out of that company that you don't have to pay what generally are referred to as payroll tax.

Right.

Whereas if you're— so you're an employee, so you'll get a salary, and it has to be reasonable. You can't pay yourself, you know, $1 a year. Whatever a roofing contractor makes is what you'll pay, right, as salary. But then other monies that are held in the business, you can take— we often call them shareholder distributions, right, or member distributions. So, but those you don't pay all those payroll tax stuff on. So I think that's more of a question for your CPA, but it can have an impact on your, on your income tax liability at the end of the year.

Yeah, my, my, my very limited understanding, and again, not trying to get into anything that I don't know about. It really has to do with how much money you're bringing in, right? The more money you bring in is where you start going, okay, I probably need to protect myself differently. And really, those, those corporation changes are about protection, right? And they are about tax, like, health as well. But the protection on your assets and those sorts of things, that's where it really— that's where those changes come in.

Right, so it's a business partnership and it's kind of similar to what you say. We've had that discussion of when we reach a certain point, do we need to start going into S corp situation? I haven't talked to my CPA or his CPA yet, but yeah.

My, my biggest advice would be not only get with your CPA, but also if you don't have a tax— and this goes for all of you— if you don't have a tax planner in like working with you, then you're probably leaving money on the table. I, I mean, I will guarantee you're leaving money on the table if you are not tax planning, right? There are tax preparers, right? And there are CPAs that will, that will help you with all that. But the planning of it to make sure that you're doing the right things as you're going through the year—

Yeah, throughout the year.

Yeah, that will, that will completely change your ability to understand even Do I need to be a sole proprietor or, you know, S corp or C corp or any of those sorts of things? Because there are also different opportunities you have to work with tax advantages in those different things as well.

I appreciate that insight.

Thank you.

Yeah, thank you.

Anybody else?

Plan or set up from a CPA?

Yes, absolutely. And, and, and a lot of times, just, just so you know, a lot of times if you— depending on who you find, you— it could be the same person, by the way, but a lot of times they're different. But what I'll say is a lot of times, depending on— like, you're an electrician, there are certain tax plans that, that certain planners will have. They go, look, you are an electrician, these are your— this is your plan, because I've already figured out what the plan is. Same thing if you're a plumber or if you're a, you know, a remodeler or whatever it is that you're doing and, and all of that. But you'll typically pay for a tax plan, and they can either be— a lot of times they'll

go, hey, I want to be your fractional CFO because I want to make sure that all this is, is taken care of. And, and I— and, and you're just going, great, because I don't have to think about it, and you're going to save me so much money, it's worth it. It's absolutely worth it. Or they might say, hey, here's the tax plan, it's a one-time fee, here's how much it is, and you just execute it yourself. And then you take those, you take those plans and then, and then, you know, you use them throughout the year, and then your CPA works with you to make sure that it's all compliant and all that kind of stuff. And then your tax preparer can take care of it from there. And a lot of

times those are 3 separate people. Fair enough.

Yeah.

Cool.

Anybody else? Cool. Guys, thank you so much. Give Dave a hand.

I mean, he's a trooper.

Yeah.

So we'll hand out awards afterwards. Thank you guys so much for jumping in and sticking with us this whole time. Hopefully it was valuable. If you haven't yet, you can follow us on the QR code on the front of the table. Or if you're online, just click the heart and the thumb and all that kind of fun stuff. We appreciate you guys.

Yeah, ring the bell.

Ring that bell. Anything else, Kev?

That's it. Thank you guys. Appreciate you very much.

Dave, how do they get ahold of you if they want to? You're not gonna read out our phone number?

Nope. You better know it.

Yeah, our phone number is 832-246-8481.

Awesome.

So 832-246-8481.

246-8481. Yeah, I'm sure you got some business cards with you.

You know, I have a few. Um, okay. And if, if I run out, then, uh, give me your info and we'll reach out to you.

And we can— if you need him, we— you can get a hold of me and Craig. Y'all all know us, and we can get you in touch with him as well. Awesome.

So thank you guys. All right, um, catch you next time.

See you later.