That time we talked about Estate Planning

This is The Homeowner Show. Whether you're DIY or looking to hire, we're here to bring you the best information and tips for you and your home. My name is Craig Williams, and I'm not used to doing the intro because Kevin is playing hooky. He's not here today. He wandered on up north to go attend a Rangers game. Uh, so let me just take this opportunity to go ahead and, and let it be said for once and for all, for Kevin's sake, Nolan Ryan is overrated as a pitcher. It's— yeah, he had that one moment where he punched the guy out on the mound, and, and that's really what got him his fame. But he just— he's really good at making hamburgers. I

mean, that's pretty much what he's good at. So sorry, Kev. Your, uh, your team's not as good as the Astros, but I hope you have fun in Dallas and that you come back a better host for the Homeowner Show because of it. But anyway, we, we are really glad that you guys could join us today. We have an awesome episode. This is actually an episode I've really been excited about for a long time. Uh, so, but before we bring our guest in, let me go ahead and ask you to hit the subscribe button there in Apple iTunes or Apple Podcasts, in Google Play, Stitcher, whatever it is that you're using. Don't use what Kevin's using. It's like some weird

non-GMO podcast.

I don't know.

It's weird app. Don't use it. It's bad. But wherever you can listen to the Homeowner Show, listen to it. Hit the subscribe button. Send us a like. Hit that notification bell on YouTube. All the things to follow whatever is going on with the Homeowner Show so that you can stay up to date with. what is happening here and the content that we are bringing you to make you the best homeowner possible. But today we have my friend Alan Stroud in the studio to talk about estate planning. Uh, now this is, this is something, uh, that I, I just truly believe is really important for every homeowner to grasp and understand. Uh, and having to go through probate twice now, uh, in, in our family, let me, let me just tell you how important it

is to have someone like Alan Alan on your team. Uh, it's just so crucial. How you doing, Alan?

Doing well, thank you.

And thank you so much for, for coming in and sharing your, your legal wisdom with us.

I appreciate you having me.

Yeah, I know, this is, this is going to be a good conversation, I think. So, I mean, just, just to get things going, give everybody an idea. What's your background? Where do you come from? How did you get into this, this field? What's your story?

Yeah, no, that's fair. Before I went to law school, I was working as a CPA.

Okay.

And I decided that's not the career path I wanted to do, so I looked around and went to law school.

So you'd already had started like a pretty serious career?

I did, I did. I worked— I didn't work in public accounting, I worked in industry.

Okay.

Worked for the phone company, in fact.

Okay.

Um, as an accountant in, in one of the subdivisions of the company.

Right.

And, and various phases of accounting. And in there.

So, but you, you're still technically a CPA?

I am. I got— I passed the CPA exam, got the work experience, got licensed, am a CPA. Yeah, we joke and say CPA stands for Can't Pass Again. So I didn't want to give it up. It's one of those things, you earn it, you want to keep it. I don't practice accounting, but I am still a CPA.

Someone once told me that it stood for Can't Protect Assets.

That might be true too.

Not, not for you.

There you go.

There you go.

But yeah, so I went to law school, went, went back home. I was living in Dallas working as an accountant, as a CPA. Moved back home to Tulsa, went to University of Tulsa Law School.

Okay.

And then because of my accounting and tax background, tax law really made a lot of sense for me.

Yeah.

I worked for a couple of firms while I was in law school that did estate planning and tax work and really liked it. And went on and did a master's in tax law.

Oh my goodness.

At NYU, which is a year-long degree after law school.

Good grief.

And yeah, if that wasn't enough, glutton for punishment, had to do another year. If I could have figured out how to make a living being a professional student, I probably would have.

You and me both, man.

But got out of NYU, came back to the Dallas area, worked as a tax lawyer for about 3 years with a big Texas firm.

Yeah.

And then went to a smaller tax boutique firm and switched to estate planning.

Okay.

So I was kind of doing the income tax thing and then shortly switched to estate planning. But, but one of the models there was they wanted the estate planning lawyers to understand income tax.

Yeah.

Which they really mesh together. You really got to kind of know it all.

Absolutely.

You're looking at all those things and know how they work. So—

I was going to say, like, your, your experience in, in tax law has to be really valuable with estate planning because It absolutely does. So much of what goes on there has to do with taxes.

That's right. It helps me talk to the CPA. It helps me work with a family and really give them the kind of advice up front to get them in a position to make the best tax decisions.

Yeah. Well, not to— I mean, you already speak the CPA lingo, so— Right.

You can already talk code sections with them. That's right.

You're not coming in as an adversary. It's a distant relative. Right.

Right. So, that was all in Dallas. I moved here to Houston about 7 years ago.

Okay.

my dad. I'm a partner there now.

Okay.

Uh, it's a state— it's really an estate planning and probate shop. We got 4 full-time, 2 of counsel. All 6 of us attorneys are board-certified estate planning and probate.

Okay.

And to be board-certified, it's— you got to have a certain number of years in practice of that specialty area, a certain percentage of your practice has to be in that specialty area, and then you got to pass the test.

Yeah.

Right.

And I want to— I want to circle back around here in just a second as to like what all that entails. Uh, I'm actually a little bit curious because, I mean, it sounds like you went to school in Oklahoma and New York. And am I missing one in there?

Nope, you're right.

So it's Oklahoma, New York.

Undergrad was actually at UTA.

And okay, so in Texas and then Oklahoma and then New York.

Correct.

So, but like, from what I understand, like, you attorneys tend to practice in the states where they pass the bar.

Exactly.

And, and so how, how was that experience going from state to state? I mean, because you're, you're in Oklahoma, I imagine it's a little bit different there, probably pretty close to what it's like in Texas, but I imagine New York being vastly different. I mean, to a certain degree.

It's really funny, uh, Oklahoma and New York were probably more similar.

Okay.

Because, because Texas is a community property state.

And, and so what— I mean, for people that don't know, what does that mean?

Community property, it's, it's, it's spouses' interest in property.

Okay.

how they own it, what their rights are.

Okay.

And upon divorce or death, how, how those rights are affected.

Okay.

So, so there's very few, uh, community property states. It's definitely the minority. Most states are separate property states like Oklahoma and New York.

Okay.

And so in those states, whoever owns the asset, it's their asset.

Okay.

The house is in husband's name, Husband's house.

Gotcha.

And typically, those states have alimony and those kind of things. So, if you get divorced and everything's in husband's name, he gets those assets, but then he turns around and has to pay alimony, right, to the spouse. Well, Texas, community property state, doesn't matter whose name the asset's in. If you buy it during the marriage, it's presumed to be community property, and each spouse owns an undivided 50% interest.

Wow.

Your wife's name's not on the house, it's still half hers. And if you get divorced, a judge has the right to divide the community property equitably.

Ah.

And so, if the judge feels—

So, the court can actually seize that asset and—

And give it all to the spouse he feels that he needs, or the judge, she could give it 50/50 to each spouse. Whatever they feel is the equitable division of community property.

Interesting.

Now, separate property, Community property states do have separate property, which is like an inheritance or property you brought into the marriage.

Okay.

Now that is your separate property. You retain that.

It's yours.

You leave with it.

So that would, that would apply to things like in a prenuptial agreement or something like that.

What a prenup does is it defines the terms of how we're going to treat assets if things go— yeah, that's right. So you can say separate stays separate. You don't even need to say that. The law says that. But, but the main reason people do prenups is to overturn what Texas laws are. For example, any income you earn while you're married is deemed to be community.

Right.

Well, you could enter a prenup and say, my earnings are mine, your earnings are yours.

Right.

Or income from separate property is community. So, a lot of people do prenups to turn that rule on its head. and say income from separate is separate.

Gotcha.

So, so that's really the reason people do prenups is to define those property rights and usually to change what the default law is.

Interesting. So is there, is there a big downside to the way that we operate in Texas as community property?

Not really. They're just different rules. I don't know that one's better than the other. Sure, they each have good and bad. For example, Texas typically doesn't have alimony. You don't hear about a lot of alimony because the court can divide the property.

And so, in Texas, typically, if there's children involved, there's child support.

There is child support. That's true. But that's different. Yeah. Texas does have forms of alimony. They have spousal support payments, but those usually will be shorter term.

Okay.

Alimony may last years and years and years, but spousal support is usually to help the spouse either get a degree or help them for a 5-year period of time, something like that. It's usually much more shorter term.

Okay. So like, what were— for the, for the master's program up in New York, what was— I know you said that the degree was in, but what was that helping you kind of focus on?

It was an intensive tax program. Every class was some kind of tax.

Okay.

Corporate tax, estate tax, foreign tax, whatever you can think of. It was all tax classes. So it's literally a Master's of Law in Taxation. And NYU right now, and then as, as then, uh, is a top program in the country.

Okay. Um, so that makes me— actually makes me curious about what you think about, um, certain taxes that apply at, you know, the— at the death of a relative or things like that. So what, what are some of the— I mean, I'm assuming you probably know some of these things since this is what you deal with. What are, what are some of the tax advantages that, you know, homeowners and families typically don't take advantage of that, that you know of, um, there with it in regards to their estate and things like that?

Yeah, what, what I see a lot is people make mistakes. If you wait until death to give someone an asset, right, so it passes at death, then typically They get what's called a step-up in basis in the, in the tax basis of that asset. So let me give you an example. You buy a house, $100,000. You hold it for 10, 20, 30 years, and it's worth $200,000.

Right.

So you've got a built-in gain of $100,000. And, and if your kids were to, in, to, to get that and sell it, Then without other tax rules, that's a $100,000 gain they'd have to report.

Right.

But there's a provision in the tax code that says they get a step-up in basis to fair market value at death. So their new tax basis is the fair market value of that asset at the date of death.

Okay.

So if they turn around and immediately sell it, no gain. So they basically got a free $200,000.

Okay.

Now, what some people will do is they'll make gifts prior to death. And when you're doing that kind of gift planning, you really got to think about the asset, because when you make a gift to someone, they, they receive the asset with your transferred basis.

Gotcha.

So, if you paid $100,000 for it, that's their basis. They turn around and sell it, they have a $100,000 gain. So, so one of the things you want to make sure when you're looking at assets and trying to figure out if you're trying to make gifts before you die or if you want to hold off and wait until you die, a lot of times it makes a lot of sense to actually wait and have that transfer because of death because that's a powerful tool that, frankly, the government gives you, erasing that built-in gain.

And we might be getting into the weeds a little bit, but I'm guessing the rules are different for the different asset classes.

Well, they are. It's the same rule for like stocks and bonds and things like that, but with IRAs, 401s, there's no step-up in basis. Yeah, so there are certain assets that don't qualify for that. Sure.

I mean, I, I mean, even thinking like there's like physical assets like gold and silver and precious metals.

No, same thing, same thing. Um, they would get a step-up.

Okay. Yeah, I'm just wondering how they would even know.

Well, yeah, that, that—

I'm not, I'm not advocating that people hide things from the government, but like certainly With assets like that, that is a risk, and the government knows it is. Yeah, um, which is why it was illegal to even own gold until like, what was it, like '74 or something like that?

There was a problem. Yeah, when probably when Nixon took us off the gold standard, right? Um, but, but yeah, so that, that can be a real problem. And I've had, you know, kind of jumping ahead a little bit.

Sure.

When we do probate, one of the things we ask for is, hey, give us a list of all the assets. Yeah. And, you know, you can only trust that your client is going to give you the full picture, right? I mean, because they may be thinking what you're thinking. Who's going to know?

Yeah.

Who's going to know if I move from the safe deposit box, I move that gold over? I, you know, you, you tell them, hey, it's, you know, penalty of perjury and you got to be honest. And yeah, you know, that's how they got Al Capone cheating on his taxes, right? Exactly.

Yeah.

So, so you got to be honest and, and you hope they are, but you can't make them be.

Yeah, absolutely.

Certainly now, if I know they're not being, I'm not going to file something. I'm not going to help somebody commit a crime. But, you know, if they just absolutely don't tell me, there's not a lot we can do about it.

Yeah. Well, that actually raises something kind of interesting. I think about like sort of the lawyer-client relationship. I mean, you do have the choice if, regardless of confidentiality, I mean, you can choose not to work with somebody.

That's exactly right. You don't have to work with someone. There is attorney-client privilege.

Right.

So once they tell you something, something, you know, you've got certain duties with that information, right? But you can't help them commit a crime. But if it's past crimes, you know, you'll get in trouble. You might lose your license if you reveal something that you shouldn't reveal, right? And so certainly, yeah, oh no, there is, you know, not for that reason, but yeah, there's certainly clients that you walk away from sometimes. Yeah, you don't— you're not forced. There's no indentured servitude.

Well, no, I, I bring that up because I think a lot of people have the idea that I can tell my attorney anything, and then that person's going to continue to act in, in my interests however I direct them, right? Whereas what you're, what you're telling me is like, you know, if I tell you like, look, here's my assets, but actually over here I've got this secret stash of assets that I don't want reported.

Yep.

Like, you as the, as the attorney can go, whoa, whoa, whoa, we're done.

You're gonna have to find somebody else.

I'm not, I'm not like going to turn you in because we have that privilege, but we're also not working together anymore. Exactly.

Yeah, exactly.

That's— I think that's important to know.

It is, it is. I mean, and you're right, it's a mis— one of those things that people don't realize. Yeah, a misconception out there.

So let's roll it back. Yeah. And go, what is estate planning from a legal perspective?

Great question. Yeah, great question, because I get asked that all the time. People think I manage money. Well, that— no, that's, that's— I don't do financial planning, right? Estate planning is simply the process of helping someone arrange their assets to protect them, yeah, from creditors or divorcing spouses or whatever the case may be, and to put them in a position to pass them on at their demise, right? If they die, where do their assets go? So we want to make sure that we've got a plan in place that sets everything as they want it to pass.

And so from, from your perspective, what is An asset is anything, literally, that they own.

It could be a business that they own, so it's the stock in the business, right, if it's a corporation. If it's a DBA or, or just a sole proprietorship, it's every little single calculator and phone and everything that the business has, right? Um, it's bank accounts, it's brokerage accounts, it's IRAs, 401s, retirement plans, it's a vacation house, it's their home It's a homestead. It's a farm. It's the family ranch. It's the couch and the TV. It's their jewelry. It's the furniture, the cups and dishes in the cupboard. Yeah, literally everything you own has to be administered at your death.

Hmm, interesting.

Now, do we detail everything like that in a will? No, of course not.

That'd be pretty meticulous.

But, but it covers everything.

Yeah.

And the will is intended to be very inclusive and very broad.

Well, I was going to say, and you could probably speak broadly in order to—

Absolutely.

All the contents of this particular home go to Susie. All the contents of this home go to Byron or whatever. And those kinds of things. So would your person also be considered an asset?

Typically no.

Typically no. Okay.

Now, intellectual property? Yes.

Okay. So like in it, I'm trying to think of like how to put this because like if you have wishes about your remains, Um, there's a form for that. Okay. Yeah. Is that considered—

Ted Williams and his frozen brain?

Right.

Right. There's a document for that.

Okay.

And that is part of estate planning.

Okay.

Yeah. So, so let me just— there's a couple of sets of documents that we, that we typically look at doing, because certainly there's different ways to pass assets, right? A lot of people do estate planning without a lawyer. They just do it themselves.

Sure.

And they do it by how they own their accounts. They do them joint owners with rights of survivorship. They do them with beneficiary designations.

All right, so you're using, you're using some terms I think probably people don't exactly—

That's fine.

What was that first one?

Uh, typically when you have a bank account that 2 people own, yeah, the default for most banks is JTWROS, joint tenants with rights of survivorship.

Okay.

And that means when one of us dies, it automatically goes to the survivor.

Okay.

So you die, your wife walks to the bank with a death certificate and says, put that account in my name. And if that's the case, it doesn't matter what your will says. That account, you entered into a contract with the bank, and that trumps what your will says.

Really?

Yes. So, anytime you have beneficiary designations where you've listed who gets it with a form at a bank, or if you've got life insurance, you've got a beneficiary designation form, or if you've got an IRA, there's a beneficiary designation form. Anytime you fill one of those out, that trumps what the will says. And that's a big misconception out there, or at least a big point of confusion for people. They don't know which one, right? The will says one thing, this says another. Which one wins?

Yeah, but hey, I updated my, my will.

But I didn't go back and update. You know, you see it, uh, people have a life insurance policy, name their spouse, they get divorced. Maybe the state law where you are says, okay, well, if it's an ex, we're going to treat that ex if they died first, right? That's how we do it in Texas. Not all states are there. So you could accidentally have something because you never took the time to go back and fix that asset. You're giving your ex something.

Sure.

And people don't intend that.

And there's probably good reasons for that being in place.

Yeah, yeah, probably so. Um, historically, yeah, you know, they, they said, look, the, the will's not going to govern it, and that was your last thing that you said you wanted to happen.

Sure.

So we're going to honor it.

Yeah.

Well, now Texas, Texas's specific rule says, look, if you named an ex and you get divorced, the only way the ex gets that life insurance, if you come back after the divorce and list, list that ex again as the beneficiary. Because sometimes in a divorce decree it's required.

Oh, wow.

You might have If you've got a minor child, typically child support's going to stop after you die.

Sure.

So if it's a young child, sometimes they'll put in the divorce decree, hey, get, you know, get a $100,000 life insurance policy and make it payable to your ex.

Yeah.

So that if you die, she's got a replacement for child support.

Yeah. I'm even thinking from like my own perspective, if, you know, not that I think it would ever happen, but if I were to get divorced, I would actually want my life insurance policy to go to my wife because, I mean, like, she's going to be the one taking care of my children.

Yep.

From— and so I want that money to go to her. Or, you know, I imagine there's other ways of setting it up. We can go into a trust or different things like that. But like, at the end of the day, I want that money available to my kids and their care when— and she's going to be the one doing it.

So she's the one that's got them.

And it's not like I'm limited to one life insurance policy either.

Right, right. So, but yeah, you're right. You said there's other ways to do it, and sure, I mean, there's a multitude of ways, right? Yeah. So, so the self-help estate plan— basically, you go in and, and you organize all your assets so that by contract or by law, they're going to pass at your death and you don't have to worry about a will. I don't know that I'd say that's what the majority of people do, but I've heard statistics that only about 50% of people have wills.

Yeah.

So, certainly, there's a lot of people that either aren't planning or are planning the self-help route, and maybe they're not planning all their assets with the self-help, but certainly joint bank accounts and brokerage accounts where you name a transfer-on-death beneficiary or a pay-on-death beneficiary. So, you're listing people that'll get the assets at your death.

Yeah.

IRAs, 401s, all those kinds of assets.

Yeah. But, and from what you're telling me though is, you know, even if I have a will, if I haven't done my due diligence with my other accounts and I haven't, you know, signed my designated, you know, beneficiary to where I want it to go based on what my will now says, it doesn't matter.

That's a great point. Well, when you're looking for an estate planning attorney, you want to find somebody that's going to make your plan comprehensive. We literally ask clients after our meeting and after they hire us, we give them a homework sheet. And one of the homework sheets, one of the items is get us blank beneficiary forms so that we can fill them out and they match your plan. If your attorney hadn't done that for you and hasn't looked at what your beneficiaries are, right, then yeah, how do you know that the will's even going to do what you want it to do?

Sure, you're just churning wills to, you know—

Yeah, so, so that's, that's a key thing to look for if you're out there looking for an estate planning attorney. Yeah, make sure that they're looking out for your Diligence is what we're talking about here. That's right.

Yeah. So, what are some other things that involve estate planning?

Yeah. So, there's the self-help. Of course, I don't advocate that.

Sure.

You know, I think most people need a will because there's going to be some assets you forget about. And frankly, in most states, your biggest asset or one of your largest assets is your home.

Right.

And not all states have an ability with a deed to automatically transfer that to your spouse at death or to your kids. if both of you die, right? So at a minimum, a will's going to cover that, right? One of your biggest assets. So now I say that Texas, and I know several other states, have deeds. And Texas's is called a transfer on death deed. I think Colorado has one called a beneficiary deed, right? And what those allow you to do is say, okay, here we own it, husband and wife. If one of us dies, the survivor gets it. If the survivor dies, These people get it. And so it's, it's a nice probate avoidance vehicle. But the

problem is with the Texas law, it's, it's brand new. This is a brand new— Texas passed it, uh, not this legislative session, but I think last.

Okay.

And what they added into the statute was, however, the home is going to be subject to the debts of the estate. So now Give you an example. Husband dies.

Mm-hmm.

Wife has the house. It's a big house. It's a big expense. She wants to downsize. So, she goes to list the house for sale. They get a contract. Title company comes in and says, ah, hadn't been 2 years. That house is still subject to debts of the estate. We don't know if there's still debts or not. We're not going to issue a title policy because some creditor may come out of the woodwork and claim an interest in the house. And so all of a sudden she can't sell the house.

When you, when you talk about an interest in the house, are you talking about like a lien or a mechanical lien or something like that?

Yeah, yeah. So, so if, yeah, so if, if, if a creditor came in and said there's a hospital bill and the estate has to pay it, well then, then here's this house.

So you're saying it could, it could be something as simple as a credit card?

It could. Okay, it could. Yeah. Now I gave an example of a surviving spouse. Let me correct that. A surviving spouse, that's going to be their homestead.

Sure.

And homesteads in Texas are not available for creditor's claim.

Gotcha.

So let me do that a second example. So, so what— so second spouse dies and gives it to the kids, right? And the kids want to sell it. That's our example where the title company says, look, it's not your homestead. And so, so this creditor may have a claim against the house to where if you sell it, they get money to satisfy the creditor to pay their debt. So we're not going to let you sell it to this guy who's offered to buy it, because if we give you the money, then they may come back after us, the title company, for allowing you to sell it.

Yeah.

And so we're not gonna— you know, title company's not going to take liability. They're no dummies. They're, they're in business to make money, not lose money. So it's a problematic statute, and I haven't seen a bunch of people using them. I have done some, with the caveat every time I've kind of warned my clients, hey, you know, this may affect— yeah, the future sale of this house for a couple of years after a death. Are you okay with that?

Yeah.

And so if they go in with their eyes open and know that's the risk, then okay, I'm fine with it.

Yeah.

But, you know, just you got to make sure they know.

So, and this may just be the weird sinister way that my brain works, but if, if that house was gifted to the kids, could they then make it their homestead?

They could, but it's not their homestead as of the date of death. Ah, so it all matters on that magic moment. They'd have to know beforehand that death was I mean, and they would have to move in. Yeah, file the paperwork and actually be living there and it be their homestead.

Gotcha. So you'd have to be deceptive in order—

Right. And you'd have to do— put the deed in their name.

Yeah, right.

So they'd have to be a partial owner. And then now, now we've got the step-up in basis issue that I mentioned earlier, right?

They know what they're doing. They do. They're gonna get their money.

So, so I'm typically going to recommend that we do some kind of plan, a will or a trust or something That's the document that sets out the roadmap of what happens to the assets at death.

Sure.

So, that, that's, you know, I think most lawyers are probably going to advocate that. Most of us are not going to advocate self-help. How do you get a will? Well, you can go to LegalZoom, if I can give them—

Sure.

—advertisement.

Yeah.

Um, you can go on the internet. There's other services that provide that.

Yeah, absolutely.

They're probably good. The problem with those services is— and I've reviewed a bunch of them— is filling them out.

Yeah.

We mentioned earlier, I don't have all the detail. I don't list every single asset. Usually in a will, I may have a few specific bequests, and that, that's just a fancy term for I give this asset to this person, right? Grandma's wedding ring I give to Sally. My grandfather's Rolex watch I give I give it to my son George or whatever. So, I'm naming things and giving them to specific people. Every will should then at the end say, and everything else, the rest, residue, and remainder, we call it the residue clause. I give everything else X. I give it to my wife. I give it to my kids to be divided in equal shares, whatever. But it's like an algebraic equation. It's X, everything else, right?

Yeah.

I have reviewed wills that either people have handwritten themselves or they've done it on one of those internet deals, and either there's not a residue clause or it, it doesn't properly dispose of all the assets. So at the end of the day, when you read through their will, not all— not everything's taken care of.

Yeah.

You've got what we call an intestacy. An intestacy just means there's no will for that asset.

Okay.

And if that's the purpose, well, why'd you, you know, why'd you do the will?

Yeah.

If you're going to leave holes in it, it's, it's as if you didn't have a will at all. The other problem with those things is, is execution of a will— and that's a fancy word for signing the will—

Yeah.

Is a very specific process in every state. And there's certain things you have to do in a written will to make it a valid written will under your state laws. For example, in Texas, you have to have 2 witnesses and a notary.

Okay.

And, well, let me back up. You only need 2 witnesses, but there's another step to take those witnesses' testimony so that they don't have to later show up at court, right, 40 years later when you die.

Yeah.

And it's called a self-proving affidavit, and that's where the notary comes in.

Gotcha.

So, so it's really a second step. You're just Swearing them in and taking their testimony, and it's all then on the one document.

Preventing inconvenience later on.

Yes, exactly. Gotcha. Can't find them, got to do a different way to prove it up, whatever. So really, a signature and 2 witnesses is a valid will in Texas. Now, other states I can't speak to, but, but it's not the best way to do it. Sure. And so certainly I've reviewed internet wills, and maybe they signed, they didn't have any witnesses, but they got it notarized. Well, that's not a valid will in Texas, so it's as if they had nothing. Uh, I saw where they had one witness and, and that's it. So they signed and had one witness and that was all. Again, I had to tell them, I'm sorry, that's not a will.

Yeah. So, so what would— what I mean, is that something that just immediately sends the estate into probate?

That's a great question. Whether you have a will or not You've got to have that probate process.

Sure.

In Texas, if it's a will, we call it a probate. If there's no will, we call it an administration. I'm sure other states have different terminology.

Okay.

So, it's kind of specific. If there's an executor appointed, that means there was a will. If there's an administrator appointed, that means there wasn't. So, there's different little legal names for these various processes.

I had to learn executress.

Executrix. That's the female form.

Executrix. Yeah, sorry.

That's the female form.

Yeah.

Form of the word. Yeah. And, and there's some courts that are very specific about using that and some that don't want you to use it at all. They want it all in just the generic executor. Yeah, they don't care.

My wife's been named a couple of times, and so I was like, what is this?

Yep, it's very common. And so, so, and it, and it's actually— I don't know if I can even say it— an administrator and an administratrix. Ah, okay. It's even, it's even that way for that term. Wow. But, but you have basically a probate Regardless.

Okay.

So, so that doesn't throw it into probate. You already needed a probate.

Gotcha.

It throws it into a different kind of probate.

Ah.

So if you have a will, it's usually an easy probate.

Gotcha.

Because you've named who your beneficiaries are. The will tells the executor what to do. You just need to get it blessed by the court and then go through whatever your state process is for administering the estate. Without a will, Now, you've got a whole different problem. You've got to prove up who the heirs are, and you've got to look to state law to see who's going to inherit.

Right.

So, that's where not having a will makes your probate costs go through the roof because there's all kinds of extra stuff that happens. In Texas, we have an extra attorney that gets appointed by the court to protect the unknown heirs. And they've got to do research and figure out who the heirs are, how many kids there were, if there was a spouse, if there's kids from another marriage, all these things. They don't work for free.

No.

And guess who gets to pay? The estate.

Before anybody else.

Right. Yeah, yeah. In fact, they get paid at the first hearing. They expect a check at the hearing, which, you know, they've done their work, they're done.

Fair enough. Yeah.

And so, so with that process, you've already added another hearing and another layer of work So, of course, your probate's going to be more expensive than had you had a simple will done right.

Yeah. And so, I mean, like, you're talking about that— that guy's not brought on unless there's not a clear will or trust.

Correct. That guy's brought on when there's an intestacy.

Gotcha.

When there's assets passing without a will.

So, does the— do the survivors then have any choice, or does the court just handle that?

Court has a list. Court appoints them. Some courts have gotten in trouble because they put their friends on the list and make sure they feed. So, there's been some judges that have gotten in trouble. That would never happen, Alan.

Come on.

But, you know, not here, not here, not down here, not in Harris County.

No, this is Montgomery.

But yeah, there's a court list, and of course, you know, you got to apply to be on the list and take certain courses and show that you're a knowledgeable lawyer who deserves to be on that list. So yeah, there's a vetting process.

So I, I mean, I'm sitting here thinking about the, the person who thinks, you know, I don't need one, I can just write a note And say, this is who I want to get this, this is who I want to get that, and sign it, and that'd be it?

I have probated a 4x6 index card as a will. Now, it wasn't self-proved. It didn't have the notary and all that. In most states, a handwritten will is valid.

Okay.

And so, as long as it's all in your handwriting, yeah, it can be written and signed by you. Now, there's probably going to be holes.

Sure.

They may not know to appoint an executor. In Texas, they may not know to ask for independent administration, right, which gets you into the fast probate process, the cheaper, faster, less court involved. Uh, they may not know to say executor shall serve without a bond, right? They may not know all those little things to say, but if they, you know, they generally get where their property's going and they appoint an executor, you know, that can be a couple of sentences if, if done right.

Yeah.

And all of a sudden, yeah, you can, you can do that. So, so it may not be the easiest and cheapest probate.

Yeah. But it's better than having no will at Yeah, and I want to ask it this way because I think, I think it'll be a good lead-in as to like why it's good to have a relationship with someone like you. Um, but like, say you have a will, okay, but then later on you're like, well, I didn't— you know, say, say you know that the time is coming, you know, your, your days are numbered, okay, and you decide to make an addendum to that in handwritten form.

Yes.

Is, is what I write in my own hand gonna hold up against the contrary in my will?

Legally, yes.

Okay.

It's just subject to challenge, right? Somebody may argue you were— you didn't have the requisite mental capacity.

Sure.

Maybe you got cancer, you're on pain pills. They argue, well, the, the drugs were affecting his mind, right? Or, or maybe your daughter moved in and she's kind of—

Took advantage.

Undue influence.

Sure.

And so she's exerting control and your handwritten one says She gets everything. So, the other kids sue and say, come on. That's clear what happened. She moved in and she exerted control on Dad, made him change it. So, certainly, it's a little higher scrutiny.

It's circumstantial almost.

But it's absolutely a valid document. In fact, one of the techniques we use when we draft our wills, we typically will have a provision in the will that says, I give my household goods and personal effects Okay. And then we give a little laundry list of what all that is— furniture, furnishings, jewelry, clothing, whatever. You know, your personal effects, your stuff.

Right.

And, and we say, I give that to my spouse if my spouse survives me. If my spouse fails to survive me, I give that stuff to my kids.

Right.

However, I reserve the right to leave a letter to my executor which may distribute some or all of those assets So we tell the client, if you have specific things you want to give to specific people, get you a piece of paper and a pen, write it out. I give my Rolex watch to— I give my, what, yeah, my Yadro statues, my Hummels, whatever. Give them— name who it is, sign it and date it.

Yeah.

Yeah, that's a codicil to a will, and it's— I've, I've probated those before.

Wow.

So yeah, not a problem at all. We encourage it because we don't want that. We don't want to nickel and dime Yeah. And come back to us, oh, I changed my mind on my knickknacks and I want to give this to my nephew.

Yeah.

You don't need me to do that. Just do it yourself.

Yeah. And so, and you can, you can probably amend that.

As many times as they want. Tear it up, write a new one.

Absolutely. I mean, is that something that they would have to give to you?

You know, we typically tell them we're happy if you want to give us a copy because that way if somebody decides to make it disappear, right, then we can ask about it. But the key is to put it with your will because, because a lot of attorneys in the past, and maybe some still are, but I don't think it's the normal practice now, would keep for— as a service to the client, we'll keep your will for you, right? Keep it safe. Now, I think what they found is, is over time you get fireproof file cabinets full of wills if you've got an active will practice.

You were actually mentioning this to me before. I mean, like, you have a huge storage problem.

It's a storage problem. Yeah. And people move to another state, they don't bother to tell you, but you got to keep that will forever. Yeah, because just because they died, it's still valid if it's their last will and testament. Yeah, and it's still good, so we can't throw it away. So, it's one of those things you got to keep forever.

Yeah, so, and it's not like you're getting any residual income off of that either, right?

Well, that used to, that used to be the thought. I think it was a marketing thing. If we keep the will, they'll come back to us for the probate, right? So, I think that's one of the reasons attorneys used to do it, but they found with their professional malpractice carriers saying, Look, don't keep original documents because if you lose it, they're going to sue you. Yeah, you lost it. So, the better practice is give the originals back to the client, let them keep it. And so, I tell them, if you do that letter, put it in your, put it in your packet with your will so that whoever your executor finds your will, they find your letter. Yeah, that's what I tell folks.

Awesome. Well, and I, I don't want to miss the opportunity to, to ask you the difference here, but like, I think we mentioned it a couple times, but like the difference between a will and a trust.

Perfect question.

Yeah, what's that? Absolutely. So, and is there a difference between living—

Yeah, that's great too. Okay, you've heard living will, living trust, right? You've heard all those terms. So really, in, in, in most states, there's 2 ways to— or 2 kind of platforms, so to speak, to pass your assets. Okay, one is, well, with legal documents. Certainly there's the self-help method where there's not really a will at all, but assuming you go to an attorney and you actually have a plan Yeah. You can either have a will platform, and the will contains all the provisions that say, here's what happens when I die. Tells the executor, here's what you do. Whether it creates trust at your death for your beneficiaries. A lot of people, if you, if you have a taxable estate— we haven't even talked about that yet— if you have a taxable estate, there's planning that you

do and trusts that are involved that are created at first death when the first spouse dies, and at second death when the second spouse dies.

Gotcha.

And those trusts can be created in the will. So, the will has a trust built in. The other platform is to go ahead and make what we call a living trust. And that's a trust document that we create today and it can actually own assets. So, if you had a vacation home in Florida, I would tell you, you probably need a living trust because I don't want you to have to probate in Florida and in Texas.

Gotcha.

Let's get that Florida property in your trust. So, we've eliminated the Florida probate.

Ah.

Now, people that live like in California, they have— the cost of probate are very expensive.

Right.

So, if you've heard Suze Orman on CNN, she's always telling people everybody needs a living trust. Well, that's because they're in California. Everybody in California needs a living trust because, because the executor and the attorneys can charge fees based on a percentage of the estate. So, that cost can get expensive the more expensive your estate is.

Well, and with property values in California.

That's right. So, that's going to drive it up.

Yeah.

So, everybody there— well, not everybody. A lot of people, especially homeowners, have living trusts in California. And what that does is if the property's in the trust and you die, the trust says, here's what you do with those assets.

Right.

So, you don't need probate. You don't need a probate judge to tell you. The trust is a contractual agreement that tells you do, tells the trustee what to do.

Gotcha.

Where a will is only valid if you probate it. So, a probate judge has to bless it, has to basically bless the executor as being appointed and say, yes, you qualify as executor. Now, go do what you need to do.

Right.

So, a, so a will is kind of a probate process where a trust is kind of a private process. Now, the unfortunate term you've heard, yeah, is living will.

Right.

Has nothing to do with property whatsoever. Okay, that has to do with healthcare. We'll talk about that.

Okay, okay. So, and from what I hear you talking about, like a living trust, it, it sounds as if it allows the estate to almost act like a corporation on behalf of a person at the time of their death.

That's a good way to think about it.

Okay, it's a way to hold assets with—

Technically is not a separate entity, but But yeah, you can kind of think of it that way. It's a contractual agreement between a trustee and the beneficiaries. And the grantor, the person who creates the trust— so there's 3 parties in a trust: a grantor, the person that creates it; a trustee, the person that manages it; and the beneficiary, the person who gets the beneficial interest of the assets in the trust. They get the income. They get the assets.

Yeah. And I think sometimes we hear the word trustee and I think we tend to associate that with huge estates, people who are actually hired to manage these trusts. And there's big professions.

Yes, that, you know, that have the trust. Yeah. Yep.

And so you can, you can actually be paid as a trustee?

Absolutely.

As a sort of like a beneficiary of the estate? Is that how I'm understanding it?

Well, no, you're paid as trustee to manage the trust for the beneficiaries.

Okay.

So your job is to invest it, to make distributions, all that. So you, you're, you're the CEO of a corporation.

Yeah.

I mean, to use your analogy.

Sure.

So, so that's kind of the trustee's role. And so, like, it's a fiduciary duty to those beneficiaries.

So you could have, like, zero, like, blood relation to anything. You could be a professional trustee.

Absolutely.

To manage these things.

Oh yeah, big banks do it all the time.

Okay.

Every big bank has it. Well, yeah, I think every big bank has a trust department.

Yeah.

And they'll act for you. Um, most of the brokerage companies have a trust division.

Okay.

Because, because, you know, they want to make sure that their customers are served. Now, So, when I have this discussion with clients, I tell them, look, do you want somebody like that watching over it? And what you're really doing at that point is you're protecting the beneficiaries from themselves.

Sure.

Right? I've heard statistics, and I apologize, I can't vouch for them, but kind of common lingo in the business. I've heard that most inheritances are gone within 2 years. So, so I ask people, people, do you want to protect your beneficiary from themselves, or do you want to allow them to be their own trustee?

Yeah.

And then they have free rein to invest the assets and spend the assets, but it's in a wrapper that we call a trust, right? So that creditors or divorcing spouses can't get to it. So that's the benefit of it. Yeah. But if they're their own trustee, we're not prohibiting them from benefiting and taking money when they it. Sure. Nope. The deal is, is nobody else can force them to. A judge can't order them, take money out of there and pay your creditor. Yeah, take money out of there and pay your spouse in this divorce.

And this, this may be in the weeds a little bit too. I'm just curious though. But like, so say I'm a beneficiary and I'm not happy with the way the trustee's managing the account. What do I do?

Happens all the time. It depends on what the trust says. Okay. So I even talk to clients about that. If we have Do we have a provision? I usually have a removal power. Who can remove a trustee? Yeah. Can, can they remove the bank?

Sure.

Or do you tell the beneficiary you got to suck it up and deal with them? Yeah. And because I trust this trustee and I— this is my money manager and I trust them and I want them to be involved because maybe they move the trust to another trust company, they might fire the money manager and hire their own. Yeah. And so, some clients are like, no, I want it to stay at this brokerage house or this trust company because I trust them. That's— they helped me build this wealth and I, and I want them to help my kids keep that wealth.

Okay.

And so, we don't give the kids the ability to, to hire and fire successor trustees. Now, I usually do have a provision in that case. If I give them the right to fire a trustee, they've got to hire another corporate trustee.

They can't get cousin Bill to come in.

That's right. Or their girlfriend or their boyfriend or whatever, right? Yeah, so, so if we've got it in a, in a professional trustee, then we, we tighten it up and make sure it's got to stay there.

Okay, well, let's, let's circle back around into living will. So, perfect. Yeah, what's that?

So in addition to wills and trusts— so, so those are the documents that pass the assets— every client, I'm going to advise that you have what I'll call my power of attorney package. Okay, I want to take the wills and trusts generally take care of assets and pass them when you die. The power of attorneys take care of you when you can't take care of yourself, or they at least instruct what you want to happen if you can't take care of yourself. So, for example, financial power of attorney— that's the first document, right? If you can no longer manage your assets, you've got Alzheimer's or dementia or whatever the case is, you can't write checks anymore, you can't deal with numbers,

whatever the case is. A financial power of attorney, you're telling the world who you want to be the person that has access to whatever, whatever power you give them, right? Banks, brokerage accounts, IRS. There's a, there's a litany, a list of things that you can say, I give you these powers.

Yeah.

And so, you know, maybe it's the rest of your life, right? You get Alzheimer's and you live another 10 they may be taking care of you for 10 years, literally doing everything, paying your bills, signing tax returns, whatever, selling your house, anything financially you can think of.

Yeah.

That power of attorney agent will be able to do. So, usually, we list an agent and a couple of successors, a couple of backups, because, you know, this could be a 20-year process. Who knows? So, we want to make sure we got it covered. So, that's the financial power of attorney. The next document we do is a medical power of attorney. And the medical power of attorney says, if I can't make medical decisions, if I'm unconscious or incapacitated, whatever the case is, who's gonna— who can tell the doctor? Who can consent to a procedure? Who can check me into rehab? Who can move me to an assisted living? Who's got the ability to govern my body?

Right.

My healthcare. That's what a medical power of attorney does. And again, we, we try to get them to name name 2 or 3 people so we've got a succession plan in order in case something happens to somebody we've named.

Yeah, maybe that first person's already passed away, or—

That happens a lot. People will name somebody their same generation, or young people sometimes name their parents.

Exactly right.

Happens a lot. The next document that kind of goes hand in hand with the medical power of attorney is the HIPAA authorization. HIPAA stands for Health Insurance Portability and Accountability Act. It's a law that had nothing to do with what it was passed for, because they came back later and tacked additional provisions to it. Basically, it's a healthcare privacy law, and it says doctors can't share medical information without the patient's permission. So, every time you go to the doctor, you sign a HIPAA release so the doctor can share just enough of your information with the insurance company so they can get paid.

Right.

So, you're used to seeing that. If you've been to the doctor, you've signed a HIPAA release. Well, this HIPAA release is specifically for Okay. You've said, I've named these people, and doctor, I want you to talk to them when the time comes so that they can make informed decisions, so that they can see my medical records. You can talk to them. You don't have to ask them to leave the room. You can talk to them and tell them all my options.

Yeah.

So, that's what that is. The next document, other states call it the living will. Texas calls it the directive to physicians.

Okay.

I call it the pull-the-plug document because that's what it's all about— end-of-life decisions.

You can make those decisions.

That's right. Do I want to be kept in a persistent vegetative state, or do I want them to be able to pull the plug and take me off life support? That's really all a living will is.

And so, that actually gives— you can either make those directives yourself or you can give that decision to someone else.

That's a great point. Some states, you actually name an agent on that form. form. Texas has separated the medical power of attorney and the directive to physicians, right? So the medical power of attorney, you've named an agent to act for you.

Yeah.

The directive to physicians is exactly that— it's a directive. You're telling the doctors and your family in the future what you want to happen in a couple of scenarios. If you've been diagnosed with a terminal condition and given less than 6 months to live, and you're on life support, and the doctors have come to your family and said, there's no hope. Do you know what they wanted? Yeah, they initialed this, and they said they wanted you to take them off life support. So that's when you show the form to the doctors and they're able to take them off. The second condition is an irreversible condition. So that's kind of the Terri Schiavo case, if you remember that Florida case.

Yeah.

The girl that was in the coma for 15 years or something.

Yeah.

Husband wanted to pull the plug, parents wanted to keep her alive. Jeb Bush, the president's brother, got involved. I mean, it's just a mess. She didn't have one of these forms. But that's that situation. It's an irreversible condition. You're never going to get better from it. It's on the form. I think it defines it as all kinds of things from a coma, brain dead, end stages of Alzheimer's. It's just a condition from which you're never expected to get better.

Yeah.

But it's not necessarily terminal, right? I mean, you're not going to die from it as long as you're on life support. support, you may live for years and years and years. But do you want to live that way? And this form lets you tell your family and the doctors, no, I don't want to, or yes, maybe I'm Ted Williams. Keep me alive until they find a cure. Yeah. And there is— oh, go ahead.

No, I was just going to say, it almost feels sort of narcissistic to not have this in place. Because do you want your ultimate last few days to be brought together with fighting and potential conflict and all these kinds of things? That's a great point. Or do you want it to be as peaceable as possible? And I think most people have access to this knowledge and know that they should have something in place, but yet just always feel like they don't have either the financial wherewithal Or the time, uh, to get these things in place.

I think the second thing there too is they don't want to face it. They don't want to talk about it. Yeah. Some people are like, man, that was, that was a depressing meeting. We talked about death. And I, I usually try to insert humor and, and make it as enjoyable as possible when we're talking about it. I joke with clients and try to, try to lighten the mood as much as I can because it does get very heavy.

Yeah, it is. It's a heavy topic.

And you mentioned the fighting stuff. The other issue is, is the guilt and the grief. I can't tell you how many clients have sat across the table from me. Their parents didn't have one and they had to make that decision. They feel like, I killed mom, I killed dad, where if mom or dad would have checked that box and said, this is what I want, you're carrying out their wish.

Yeah.

So, it's a great favor you're doing for your kids and your family telling them This is what I want to happen. Yeah. So that they know, and, and that you're kind of taking the burden off of them and letting them feel better about doing one of the worst things they ever have to do. Yeah. Disconnecting dad from life support or whatever the case is. You're giving them the okay, this is what I wanted, you're just doing what I asked, as opposed to you're having to make that decision.

Yeah. So that's a good segue into Into something I wanted to ask you anyway, which you've already answered a piece of right there, is like, what's sort of like— and not necessarily like doomsday, but like worst-case scenario, I don't have this stuff in place. I mean, all the things that we've talked about, like, what happens then?

There are some really great doctors out there. Yeah. And I've dealt with them. I've talked to families that have dealt with them. them, and they hadn't had these documents in place. But these— some of these guys and girls, ladies, get it. And they've been— they've walked families down this road multiple times, and they don't have an agenda, and they don't care that those documents are there.

Yeah.

And they— and they do what's right, and they let the family make the decision, and they— and they go on. Now, the risk is you get somebody who— a hospital's just been sued, and the doctors have just sat through a presentation from the insurance carrier saying, we got to have this form. You can't let somebody die without it because you're going to get sued and the hospital's going to get sued. And they scare them to death.

Yeah.

And, and so they're sitting there looking very much to the family like they're the bad guy.

Yeah.

Because they're not letting them—

You came in here unprepared.

—end mom or dad's misery. But it's really— yeah, it's the family's fault because they didn't take care of business. But certainly they're mad at the doctor. Now certainly there's some true believers out there, you know, some people that just say, you know, they're gonna do what they want to do, they know better. But I think those are few and far between. I think, I think by far doctors, they're people too.

Yeah.

And they're gonna help. I've not heard very many stories of families that have really fought the doctor and had crazy results, but I have heard So, so it's not like it's not happening.

Yeah. Hmm. Well, man, anything else that we haven't covered yet?

Um, you know, we talked a lot about wills and trusts and how, you know, making sure you have a plan. We didn't really talk about why you might want to leave your inheritance in trust. Okay. So, can we touch on that real quick?

Yeah, absolutely.

If you've got minor children, one of the biggest mistakes I've seen Yeah. Is people on their beneficiary forms, and this is particularly people at work. You've got a 401, you've got a company life insurance, maybe you've got an accidental death and dismemberment policy.

Yeah.

Whatever. You've got these benefits at work, and they hand you this form and they say, fill this out and give it back to HR. And it says primary beneficiary, contingent beneficiary. What do 99% of people do? Put their spouse and kids. They write their spouse and their kids.

Yeah.

And if their kids are 8 and 6, Do you think an insurance company or a 401 company is really going to cut a check to a 6-year-old with a lot of zeros after it? You've just created a nightmare.

Yeah.

For those kids. And the crazy thing is, is even if one spouse dies, we've seen this happen where, where sometimes they'll, uh, a parent will name a child to get an asset that. I don't want to pretend to know the reasons, but you expect it's things like maybe they don't trust their spouse not to spend all the money, so they want to make sure it's in the child's name.

Sure.

To maybe protect it or something. So, so sometimes we see that at first death, stuff somehow ends up in the kid's name, a minor's name. A lot of people, a lot of parents assume, well, I'm that child's parent, so surely I have the right to access and spend that money? You don't.

Oh wow.

Right? And that's most people's reaction. Oh wow, I don't?

Oh, I mean, based off what we, what we discussed earlier with like community property in Texas, I would, I would think that that might supersede that.

That's a great example. So, so back to backtrack just a second.

Sure.

Let's say, let's say you have community property in Texas and you're a blended family.

Okay.

Okay, so you've been married before. Maybe there's his kids, her kids, and our kids, right? That doesn't have to be all 3 sets, but there's at least one set outside the marriage. If you don't have a will, Texas has a will for you. And every state's that way.

Yeah.

That's a catchphrase I use when I'm out doing networking and stuff. When I'm giving my 30-second elevator pitch, that's how I usually end it. If you don't have a will, Texas has one for you, and it's probably not what you want.

Yeah.

Especially for blended families. And let me scare you with this one.

Yeah.

Husband has a child from a previous marriage. He dies. Wife— and no will— wife inherits her half, or she continues to own her half of the community property. Husband's half goes to all the kids. Stepkids and wife's kids.

Wow.

So now she owns her house with a stepkid that she may or may not like, who's probably having to deal with the ex, the, the other parent, right, that stepchild, who's now controlling that child's ownership in her house that she lives in. Yeah, horrible situation, horrible result.

But probably happens more often.

Yeah, happens It happens all the time.

And people are just shocked.

They're floored. How in the world? And that's true with a house. That's true with a business. I mean, imagine all of a sudden your business is— your wife dies and all of a sudden, her kids and her ex-husband now own half of your business. How in the world are you going to make that work?

Well, and I think from the outside, some of us would look at that and go, well, that doesn't seem right. But this is the state trying to prevent a Cinderella situation. That's right.

Right. They, they came up with a rule that they thought was most fair, and I'm not going to question that.

Sure.

I just tell my clients, hey, that's the rule.

Yeah.

And most of them say, that's not the rule I want, so let's do some documents and make sure it doesn't happen.

Yeah.

But we do probates all the time where we weren't involved in the planning. They were referred after death, and either there was no planning or there was poor planning, and we're dealing with those kind of situations.

Yeah. Well, and I think that's, that's a good point too, is I I think part of, you know, having a relationship with a firm like yours is understanding what's going to happen to my estate were I not to put these things together.

Exactly.

You know, because I'm not going to get that at LegalZoom.

Right. That's exactly right.

And that's not to, like, besmirch them. It's just—

It's not at all.

It's not what they provide.

Right. They're— they say it themselves in their advertisement and in their website. We're not lawyers, right? They're not giving legal advice. Well, guess what? I am, and I do. Not, not that this podcast can be presumed to be legal advice by me. That's my disclaimer.

There we go, we got that in.

You need to contact me for a consultation.

Yeah, none of this will hold up.

That's right. Let me answer a question you asked, and I took a big—

No, no, go ahead.

Yeah, circuitous track, and let me get back there. So the biggest mistake I see people make is those beneficiary forms. Okay, they list spouse, they list their kids, minor kids, or So, you say, well, what's the right answer? Well, the right answer is to have a will that has, at a minimum, what we call a minor's trust or a children's trust.

Okay.

That says, if both of us die, the assets go to a trust for our children. And you name the trustee. It can be a friend. It can be a bank. It can be an uncle or an aunt, whoever. So, it's this other person that you trust is going to manage this trust until the child reaches a certain age. age. 18, 21, 25, you pick the age. I usually recommend 25 or 30. Let them get older, let them be more mature before—

Their brains develop.

Exactly. But, and so then on the, on the form at work, yeah, you name spouse as the primary, and for the contingent you say to the trust under my will. And that way it flows through the will. Yeah, it's got to go through probate, flows through the will, gets into that minor's trust, and now Now you can spend that money to raise your child, right? They don't have to use other money to raise the child. Yeah, they get to actually use it for what it was used for.

Okay, so if I'm understanding you right, you can, you can build these contingencies into your will and estate to where if I were the only one to pass, it would act like a will. My, my wife would continue to manage the assets of the estate.

Yep.

Just as if I would—

Just say, just say she gets it all.

Right. And but should the two of us unfortunately go in a car crash, then things move in a different direction into a trust under these conditions.

Yep. That's, that's one of the primary reasons you need a trust, right? You've got minor kids. The second reason you need a trust for the kids is you're giving them a lot of money, right? Right. I don't know what that magic number is But what I generally tell people is, when someone gets an inheritance, they're going to spend some money. They're going to buy a house. They're going to pay off a house. They're going to buy a car. They're going to pay off a car. They're going to pay off student loans. They're going to go to school. Whatever. Whatever they're going to do, there's something they wanted to spend money on, but they hadn't been able to. Now, they've got a big pile of money. They're going to spend some.

Yeah.

Now, if they're inheriting enough that they're not going to spend it all, and so once they're done with that kind of initial spending spree, they've got some left over and it's a significant amount that they could invest and save for their retirement, that may make sense to leave that in a lifetime trust so that you've put it in a wrapper where no creditors can get to it if they get divorced. It's like a prenup. A judge can't award it to the spouse. So, you've protected that inheritance then for the rest of their life. So, I don't know what that number is. Somebody comes in, they've got $1 million, but they got 10 kids.

Yeah.

Well, each kid gets $100,000. Maybe that's not a good— maybe they don't need a trust. That's not a good example for a trust. But if they've got one child and that one child is going to get $1 million, they probably ought to have a trust. Yeah. Now, somewhere between there is probably the line of who needs trust and who doesn't. I just— it's different for every family, and I just talk to folks and let them make that call.

Yeah. Well, and, and this, this may be a little specific, but I would imagine, I mean, someone who's in a situation like mine, and we have several people come on the Homeowner Show that are like me, that end up owning multiple corporations.

Right.

And those corporations end up having employees.

Yep.

You know, how do you, because on one hand, you want to protect your heirs.

Yep.

Right? But on the other hand, you have people that—

You're responsible for people's lives.

Yeah.

Right? You're paying them a salary and they're counting on you.

You don't want your little son Jimmy, who's a brat, to come in and sell it out from underneath them and expose them to risk and unemployment and all these kinds of things. How do you then do that?

That's a great question, and we deal with that a lot. A lot of our clients are business owners, and so a lot of our estate planning includes what we call succession planning for the business.

Okay.

And so, we're going to look at the specific scenario. And, you know, maybe the answer is we're going to give the key employees the option to buy the business, right, over a, over a payment term.

Sure.

We don't expect them to come up with cash. If they could afford to buy a business, they might have already bought one, right?

Yeah.

So, we don't expect them to do that. We're gonna, we're gonna get your life insurance person involved, and we're probably gonna look at life insurance products. We don't sell it, but we sure know how to use it and how to recommend it and say this would be a good fit to help fund these different plans. This would be a good way to get some cash flow in the business because if you died, the business is going to hurt until it kind of gets its feet under itself and figures out how to operate without you. Well, if you had $100,000 or $200,000 or $500,000 of instant cash, that's going to help the business make that transition.

Yeah.

So, a lot of times, we're doing it for cash flow infusion. Sometimes, we're going to figure out a succession plan. Maybe you got, you got some kids. Maybe one child is in the business and one isn't, right? Well, what do you do there? A lot of folks that own businesses, the business is the primary asset of their estate.

Yeah.

And they don't have a lot in a brokerage account or a cash account. The business is by far the biggest value.

Yeah.

Well, do you want to just say, okay, well, I leave the business equally to the kids, and the one that's working it feels like he's working for all the other kids because it's, you know, he only owns a 4th, and maybe they outvote him.

Yeah.

So, we look at things like, you know, maybe we do a voting/non-voting reorganization of the corporate equity or the LLC, whatever kind of business it is.

Sure.

Say, okay, 1% is voting, 99% is non-voting. If we divide it, say you got 4 kids, we're going to divide the business into fourths. The one that's working the business gets the 1% voting stock and 24% non-voting stock. Everybody else gets 25% non-voting stock. So, he's got control. He can manage the business. He's not hindered by them interfering in a business they don't understand. They don't have a lot of power to vote him out or do anything. They're just along for the ride.

Still benefiting from it, though.

But still benefiting from the business. Now, the problem with that is, if he's greedy and decides, well, I'm going to just increase my salary and suck up all the profits and never make any distributions, well, then they really didn't inherit much. They inherited put it— a nice piece of paper on their wall.

Better get out quick.

And yeah, so, so sometimes what we do is we say, you know what, you got a couple of kids, one's in the business, one's not. Give the one in the, the business the business, buy a life insurance policy for an equal value, and now you've got money to give to that kid on death. So, there's all kinds of things we do. It's just all usually very custom and looking at the business and how the key employees work and, yeah, who might be a person that might want to buy So yeah, it's different for every client. And again, we just look at those options.

Having someone like you to even know that that's an option.

Exactly.

Yeah, exactly. Man, this is like drinking from a fire hydrant.

It is. And that's— I use that example a lot after a meeting. I start seeing the client's eyes get a little glazed over and I say, okay, planning tolerance is done for the day. Yeah. And I, I use that exact phrase. I say, it looks like you've been drinking from a fire hose. I know I know I've given you a lot of information. You know, let's let it percolate.

Yeah.

And kind of pick 1 or 2 things that you know you need to do. And maybe we can do this in phases as it makes sense. You know, start with the basic building blocks. You need a will. And then we need to start working on, okay, how are we going to protect the assets? And okay, how are we going to make sure the business is set up? And, you know, we just kind of hit them as the client's comfortable with hitting them.

Yeah.

But, but we address all the issues.

Awesome.

And if it's an area of the law we don't cover, we know people and we'll recommend somebody that can step in. For example, you know, you got employment law issues, we'll get a labor lawyer, yeah, in on the team and have them help. If there's, you know, a divorce, we don't, we don't do family law, we're going to get a family law attorney involved.

Yeah, I think, I think 3 of the most powerful words anyone can use in business is I don't know.

Exactly.

Exactly. Exactly.

And I'm not afraid to say it. Yeah. And if I don't know, I'll tell you, but, but I'll find out the answer or I'll find somebody that knows it.

Right. Yeah. That's powerful.

And I have no problem in saying that to people. And you're right, ego gets in the way and some people can't do that. And I think they're doing a disservice to their clients.

Yeah, absolutely. Well, I mean, I think, I think one of the other questions that's probably lingering out, I can, I can hear people asking is like, what, what should I set aside in my budget in order to get this process started?

That, that is a fair question. Yeah.

What, what I tell people is, And, uh, you know, like, we want you to— you know, we, we don't, we don't want you to— anybody to be holding you to any numbers that you bring here. But I think, I think everybody wants a general idea as to what they should be looking at.

That's fair. We— I— let me start with the simple. If somebody just needs a, uh, power of attorney package, right? So for example, kiddos going off to college. Remember, when they're 18, they're no longer your depend— they're no longer a minor. They may be your dependent for tax purposes, but they're an adult.

Yeah.

And so, you don't have any access to their bank. You don't have any access to their doctors. So, a lot of times—

Don't tell them that, though.

Yeah, exactly. But they quickly find out when they're at school and you call and you hit the brick wall.

Yeah.

So, we do a lot of those power of attorney packages for kids going to school.

Which, just real quick, blows my mind with the college scandals we've got going on right now. You know, the admission stuff that we've got going on?

It's crazy.

How did they have access like that when these kids are 18? I mean, it's crazy.

Yeah, sorry. No, I hear you. I hear you. It's, it's— I get a whole diatribe on that.

Sorry.

No. So, so to start out there, we charge, uh, $275 for a single person, $350 for a couple to get all those documents done.

Awesome.

So that's those 5 documents I mentioned. To start with a will, if we just do a simple will, our firm, we're probably— for a husband and wife, we're probably in the neighborhood of $1,000 to $1,100.

Okay.

So, add those 2 things together, $1,400, in that range, uh, for, for a simple will, right, to get things going. Um, we start throwing trust in, uh, minor's trust is a few hundred dollars more.

Okay.

Um, we didn't even talk about special needs trust.

Oh, okay. Yeah.

If you've got a child with, with special needs and may qualify for government benefits, we want to make sure never, ever, ever give that child money in their own name. And even a regular trust doesn't work. We got to have a special trust, and it's called a special needs trust. It can be part of your will or it can be a standalone trust. Either way, if it's a part of your will, we typically add $400 to $500 to the cost of the plan to incorporate that, to add that. If it's a standalone trust, it may be closer to a couple thousand dollars.

Yeah.

So, so a lot of people like the fact, hey, let me get that added to my will as part of the plan. Because that's a lot cheaper to do.

I mean, just real quick, because I know we have a lot of friends with special needs kids. I mean, without having that in place, do you run the risk of that child or dependent becoming a ward of the state?

What typically happens is if you don't have a special needs trust, they're going to— and you die, either you have a simple will that just says, give my kids equally, which is what some people have, or they just don't have a will at at all. And so state law says give to my kids equally, right? They've just inherited whatever. If it's more than $2,000, you've just lost their government benefits.

Oh my gosh.

They, they no longer qualify for Medicaid and, uh, SSI. And so now—

What's SSI? Sorry.

Uh, it's a Social Security disability, uh, benefits, okay, that some can qualify for. And, and there's an asset test and an income So, the asset test says you can't have more than $2,000. The income test says you can't make more than X a month. If you inherit $2,000, boom, you lose your benefits.

Good grief.

So, they worked hard, they filled out all these applications, they got their child these benefits. Boom, they die, they lose them. And now, they can't get them back until they spend all that money. They can't give it away. If you give it away, there's a 5-year lookback. and a denial of benefits for the amount you gave away. So, it's a, it's a huge mistake if you don't do that planning and, and very consequential for you. Because if you, if you have a special needs trust, you could inherit $1 million in a special needs trust and still qualify for your benefits. So, I mean, it's just those are great trusts. It's easy planning. You just got to talk to somebody who knows what they're doing.

Yeah. And there's, I mean, like, there's lots of benefits that the state and the government That can provide special needs. I mean, like, even like specific care.

Absolutely.

Like that, man, that would be insane that they could lose that.

Yeah, having a good social worker who can kind of walk you through that myriad of maze and mines and—

Yeah.

Is worth their weight in gold because they can help you find stuff that can help those kiddos like nobody else.

Okay.

Better than most special needs attorneys.

But to put that onto a will or to a trust, that's usually an extra $450, something like that. $400 or $500.

Yeah, to where if we did a just a special needs trust, we're talking about 4 times that.

Yeah.

So, so it definitely makes sense if it works. The only time you set up one during life as a standalone one, um, is an attorney who wants to make a lot of extra money, or, or maybe grandparents are wanting to gift while they're alive and they don't want to give it to parents. They want to go ahead and put it in an earmarked place for the Yeah. So that makes sense that you're going to go ahead and set up that trust now and let it start receiving assets and letting it grow.

Yeah.

So that there's a fund by the time the child needs it.

So they, they literally can't own any assets at all?

Less than $2,000.

That's crazy.

So I had somebody come in, his son was older, he was working, he got a job as a, as a bagger or a sacker.

Yeah.

At the grocery store, right? And, and making a little money and he'd been socking it away in his savings account thinking, hey, that's the good thing to do, right? Teach my son how to save money. And it was quite a bit. I think he had several thousand dollars he'd socked away. And I said, do not apply for— he was thinking it was about time to apply for some benefits. I'm like, you can't apply with that much money. He won't qualify. And once you're denied, it's horrible because you're penalized for not qualifying.

Then you're marked down.

So I said, let's work this out. Let's figure He can't just take that money and give it to you, but he can pay you rent. He can pay for groceries because he's an adult. You can charge him. If it's your child, you have a duty as a parent to pay for that stuff. But he's a child— or I mean, he's an adult. You can charge him for that. And even if you want to take that money and put it in a savings account that's in your name, but you know it's earmarked for him, fine. You can do that.

Right.

And just tell him, point to it, that's yours. It's just in my name. Legally, it's mine. fine, but in my will, I'm going to make sure that goes to your special needs trust. And you can do that. There's nothing wrong with that. Um, but, you know, you just got to do that planning.

Yeah.

In advance and make sure that's covered. Um, if we do, if we do trust, lifetime trust added into the wills, we're probably, you know, we're approaching that $2,000 number. I, you know, I don't have exact numbers. We've actually got a price list. I don't know that a lot of law firms have that, but basically, you know, if you fall within this category and this is what we're recommending, this is what the price is.

Right.

And so typically what I tell folks, we get a lot of people that call, hey, what's a will cost? Fair question, but I don't know. I don't know what you need.

Right.

So what we typically offer is a free initial consultation to come in, spend an hour, an hour and a half, you talking to us, us asking you questions, We got a little questionnaire we send you. It's on our website too. Tells you things to bring to the initial meeting so that we can give you a couple of recommendations as to what kind of plan makes the most sense for you.

Yeah.

And then, hey, here's a flat fee cost. This is exactly what it's going to cost. It's not going to be hourly. You're not going to show up to the signing appointment and it's going to be $1,000 more than what we talked about. Yeah, it's a fixed fee price. You agree to it when you hire us. If you don't agree, then fine, you don't hire us, you walk away, fine. But if you like the price and, you know, think we're going to work well together and it sounds good to you, that's usually how we do things.

Yeah. And when you were talking earlier about the will being around $1,000, that doesn't include a living will? That's a, that's a separate—

That was— that's part of the $350.

Okay.

Okay. Yeah, so the living will is the part of the finance— the power of attorney package. Okay, so that's $350 for a couple. And then the will itself, the 2 wills for the husband and wife, that's the $1,100, I think, is what— I apologize, I don't have that off the top of my head. I want to say it's around $1,100.

But you're not paying $1,100 as a couple, you're— it's a piece.

It's $1,100 period. Period. For the couple. Okay, 2 wills, $1,100.

That's awesome.

Yeah, we We think it's a fair value. Now, let me say this. Uh, we— before we started recording, I mentioned every lawyer who takes the Texas Bar, and in fact most state bars, there's a section on the bar exam for wills, right? And so every lawyer has to learn all these things about what makes a valid will. And, and because of that, every lawyer out there— not every, but most lawyers out there— think hey, I can draft a will.

Yeah.

And maybe they've done their own and they have drafted wills. Now, and they may do it— sometimes we jokingly call some of them roofing lawyers. They'll do any kind of project that comes in that keeps a roof over their head.

Yeah.

Right? They'll do a will, they'll do a divorce, they'll do some criminal, and there's nothing wrong with that. That's a general practitioner.

Sure.

Nothing wrong with that. They probably would charge less for a will than our firm would charge. As I mentioned, we've got We've got board-certified estate planning and probate lawyers.

Right.

With that expertise, we probably are going to charge a little more. But we— then we say the same thing. We're not downtown. We're not charging what the downtown guys are charging who have the same expertise as us.

Yes.

So, you know, it's all relative. And it's really finding somebody you're comfortable with, finding somebody that knows what they're doing. I reviewed a special needs trust the other day. that wasn't even a special needs trust. It purported to be.

Yeah.

And it quoted a section that, uh, this will be a special needs trust under such and such section. That section wasn't a special needs trust section. So I'm like, look, if you sign this, I'm glad you came to me. I can help you fix it. But this will is not a special needs— does not have a special needs trust in it. It won't qualify. They'll lose their benefits. That would be terrible. And so, you know, I'm sure the guy intended to do well. I'm sure he thought he was doing good work. It just happens if you, if you don't deal in this area a lot. Yeah, there's a lot of special stuff that you're just gonna miss. I mean, that's why I don't do those other areas. Yeah, I don't do patent law. I don't do, uh,

divorce work. I don't do criminal work. I don't do, you know, all those different things because Because you got to do it all the time to be good at it.

Yeah.

And I don't. So, you know, I know, I know I do what I do and I do it well. And, and I pass the other stuff along to lawyers who we, we've got relationships with other firms that we know do good work and we're happy to give their name to clients. And we don't take a commission or a fee or a, yeah, a cut or anything. We just, hey, that's your client. You treat them well. We know you will. If we hear that, if we hear that you don't, we're probably going to replace you on the list with somebody else that does treat their clients well. So that's the value we try to add.

Man, that's— oh man, all of this has been such good information. I think you've even given us like a good filter. So, you know, if I don't live in Houston near your firm, like, I have some good information now to go out and find a good person that can handle this stuff for me.

Yeah, you want to look for somebody, you know, if you're out of state or, you know, we, we're probably not going to do wills out of state. A lawyer generally practices in the state they're licensed in.

Right.

Certainly, we've got clients all over the world with the oil companies here.

Yeah.

We'll do a will for them, then they get shipped off to, you know, Australia or, or the Middle East or wherever, right? And, and I've had people sign wills in foreign embassies before that we've done and sent to them.

Yeah.

But they're still claiming Texas as their residency and their permanent domicile.

I was gonna say, so their estates are handled in Texas?

Yeah, so we can still do that. They generally don't buy property in the Middle East, they rent.

Yeah.

So, so it's easy to say, hey, look, I mean, I'm a Texan, I still claim this as my domicile, is the term.

But if they didn't, they could still— from— if I see if I learned enough— they could set up a trust.

Yeah.

That would force their estate to be settled in Texas.

Trusts are much more portable than wills. That's a great point, we didn't talk about that. But yes, trusts are Trusts are much more portable than wills. In fact, most trusts should have a provision in them that allows the trustee to change the jurisdiction of the trust. So, if you got— if you decided, I'm moving to California, you exercise that provision and say, this is a California trust and California law applies. You die and your kids are in different states, they can do that in their state. So, it's nice. Yeah.

That's cool.

So, trusts are definitely much more portable.

Awesome.

But yeah, if you're in another state, if you're, you know, we can handle handle anything in Texas, but some people prefer their lawyer to be right there in their same town. Yeah, and I understand that. They want to sit down in their office and talk to them. You want to look for somebody that estate planning is a principal part of what they do.

Yeah.

You want to look on their website and see what are the kind of things— what are the kind of things that they say that they do. If there's a big laundry list of things that they do, then they probably don't specialize in estate planning.

Yeah.

But if you kind of, in looking at the things they list, they're all generally related to estate planning, that's probably a good fit. In Texas, you can look for somebody who's board certified in estate planning and probate. Now, I'll tell you, I have friends that aren't, that are good lawyers and, and do good estate planning work.

Yeah.

Uh, I am board certified, so of course I'm going to say it's a good thing to have. And, and generally, you've got somebody that, that has a high percentage of their practice in that area. And they do a lot of it and they were competent enough to pass that exam. In other states, they may have similar kind of board certifications for people who are looking for specific issues, like if they've got an elderly parent, there's a certification called elder law. You may want to look on an elder law website and look for a local attorney that's got that specialty.

Yeah. Yeah.

Um, so yeah, what you're looking for is just somebody that does a lot of that kind of work. And not, not to say that a general practitioner, you could probably get a good will there too, but frankly, if you've got a complicated estate plan, a lot of those guys are going to refer you out to somebody. They know they shouldn't be doing a complex trust with all kinds of tax provisions and all kinds of crazy stuff. I get a lot of referrals from other attorneys that just simply, hey, this one, I'll do the simple wills all day long. But this one is over my head. You do it.

Yeah. So beyond their scope.

If you've got a good, honest person that knows their limitations, they're going to tell you, yeah, hey, you know, I'm not the guy for you.

Yeah. I mean, it's sort of like telling people, I don't know. I mean, it's, it's better for everybody in the end if you, if you know what you can do and you cannot do.

Yep.

Man, you've given us a lot of information. So if— and I know, I know you're going to be happy for people to reach out to you.

If people have additional questions, where can they get a hold Yeah, there's, there's a couple of ways to, to reach out to us. Um, you can go on our website, and that's at, uh, www.jr— like junior— jrbecklaw.com.

Okay.

So all one word, jrbecklaw.com. And there's places on there where you can click and, and type a question and submit it. We've got questionnaires on there that you could look at, give you some ideas about, hey, these are the kind of things you need to be thinking about Yeah. As you're doing an estate plan.

I think you even said it had like a list of things that you probably need to have together before you even come in.

It's got a list of things to bring to the meeting, uh, so that's always good to kind of look at that kind of stuff. You can give us a, you can give us a call at 281-440-4777. You can shoot an email, uh, we've got a general, general mailbox for those kind of things, info@ If you want to shoot it to me directly, alan.stroud@jrbecklaw.com.

Okay.

And so there's lots of ways to reach out and get us, and we're happy to, to entertain those questions. And like I said, we'll offer a free consultation if you want to come in and talk about your plan and get some recommendations.

Awesome.

Happy to do that.

Yeah, we'll link all that up in the show notes.

Appreciate that.

Yeah. I think we need to move on to our now famous part of the program called the Final Four. And that's usually got a little bit more bluster to it, but Kevin's not here to bring that gusto. But we're gonna ask the questions anyway, and I'm gonna show 'em that I can remember 'em. So the very first question of the Final Four, what's the one tool you won't leave the house without? So we qualify this by saying, you know, your friend Joe calls you, he said, Hey, got an emergency situation at the house. I need you to get over here real quick and help me. What's that tool you're gonna make sure is in the backseat on your way over to Joe's house?

Man, that's a good question. I think, and this is any kind of emergency, not necessarily relating to what I do for a living.

Correct, yeah.

Anything relating to the house.

I mean, it could be the dishwasher, it could be a door fell off the hinges, it could be anything. You don't know what it is, but Joe called you and there's something wrong at the house.

Let me tell you, My, my previous answer would have been something different. Uh-huh. Uh, last year, the, the drain from my sunroof on my car got clogged, and it caused the water to back up in a downpour and fill up my floorboard inside my car.

Oh my gosh.

And I was just beside myself. I, I called the car dealership, and they gave me a quote of around 5 grand To fix the problem. They said they were gonna have to pull all the head—

Yeah.

The headliner down, and they were gonna have to pull the dashboard out. It was labor-intensive. And I'm like, oh, I can't pay that much for that. That seems ridiculous. And I talked to somebody, mutual friend of ours, Rick Schisler, and he said, YouTube. He said, get on the internet. You can find something on there that will show you how to fix that yourself.

Uh-huh.

And I, I pulled out my phone and I got on there and I found a video on exactly what to do. And it took me— I had to go around and buy a couple of tools that I didn't have, a real— a really long set of complex pliers.

Yeah.

That would go through the vent To the firewall, through the dash to the firewall. So it was a long, long complex with lots of joints.

Yeah.

Pliers that would allow me to pull this thing out. And so it took me maybe an hour to go around buying the things I needed to buy. And then once I started working and taking the things apart that I needed to take apart, took me about an hour of labor and I fixed it myself. So I would say my computer, or specifically if I'm leaving the house.