Why 2021 Offers A Window Of Opportunity For Us

January 08, 2021

Why 2021 Offers A Window Of Opportunity For Us

For a lot of people, one of the things that they have on their checklist for 2021 is to finally get that estate plan either done or to update that estate plan. That’s what we’ll spend time talking about in this episode.

We dive deep into the things you need to think about when it comes to putting together an estate plan. What are the tools that we need as we put together an estate plan.

In this episode, you’ll learn…

Chris’ positive focus for the week
New tax season fundamentals
The real fact behind the Secure Act
Tax conversation of how much money to pull out of the IRAs and 401ks
Insights from the book biography on John D. Rockefeller
Market volatility
New presidential leadership and it’s possible effect on taxes
How the financial crisis can stay for long-term
How to adjust the risk by reviewing your portfolio
Prioritizing Estate Planning this year
Different tools to get you estate plan done
Elder law attorney versus just an estate planning attorney
Estate Plan as a rule book
What is Guardianship
The importance of medical and financial power of attorney
Revocable trusts that avoid probate and control the distribution upon death
Avoiding probate
Beneficiary designations
Estate planning and audit
Utilize trusts to protect against estate taxes
Medicare really only pays short-term rehab VA benefits and then Medicaid
Long term care
Castle Trust as a strategy or potential tool where we move assets into the Castle Trust
Asset protection for beneficiaries

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Episode Transcript:

This is The Chris Berry Show, expert information on wealth, estate, and tax planning for the second half of life, information that you can understand. Here’s your host, Chris Berry.

Hey, everyone. Welcome to the show, of course, this is Chris Berry, and we start the Chris Berry Show every week with a positive focus, something positive that happened over this previous week. For a majority of people, I think the positive focus would be that we’re done with 2020. Going into 2020, we knew it’d be a crazy year with the presidential election and everything that goes along with that, but no one really predicted the pandemic and the fallout from that. Really, I think the pandemic was a health crisis that became a financial crisis that almost became a mental health crisis.

I don’t think we’re necessarily done with the financial fallout of everything, especially with unemployments and jobs, the job loss, the small businesses that are hurting. I think it’s something that we’re going to have to deal with for this next year. Also, I think we’re going to have to deal with the tax ramifications of not one, but it looks like two stimulus bills being passed. We entered 2020 with about $22 trillion in debt and we’re exiting 2020 moving into 2021 with roughly over $30 trillion worth of debt. I’ve talked about this before, but I think one of the big risks moving forward is the tax risk.

We are into a new tax season and there’s some things to think about, especially if you have large pre-tax IRAs or 401ks, it might be time to look at paying the taxes sooner. We’ve talked about this on the show. But yeah, so my positive focus is that we’re done with 2020 and we’re now into 2021. This past week, it was great to take some time off work, spend some time with family, celebrate Christmas and new years, and just take a breath before we fire up 2021. For a lot of people new years are all about new habits, getting those things done that maybe you didn’t get done last year.

For a lot of people, one of the things that they have on their checklist for 2021 is to finally get that estate plan either done, or to update that estate plan. That’s what we’ll spend time talking about in our second and third segments, is just what you need to think about when it comes to putting together a estate plan. What are the tools that we need as we put together an estate plan? We’ll get into that in our second and third segments of the show today. But first, I just wanted to do a little bit of a wrap up of 2020 and talk about some things that we’re watching for 2021.

We don’t need to recap all of 2020. It was a crazy year. I did that on the last episode, but the big things coming into 2020 we were talking about, and we were giving workshops on this, was the Secure Act. Then, all of a sudden, the pandemic hit a couple of months after the Secure Act. The Secure Act really is an interesting law in the sense that it pushes back your required minimum distribution age from 70 and a half to 72, but really the real reason why they passed the law is that they wanted to come after those inherited IRAs.

If you are leaving a IRA to the next generation, understand that, instead of being able to stretch it out over their lifetime, now they’re going to have to pay all the taxes within 10 years. It’s putting more of an onus on those beneficiaries where now they’re going to potentially be knocked into a higher tax bracket. Really, the government was passing this because of the $22 trillion deficit. They knew that there’s about $25 trillion locked up in these pre-tax 401ks, IRAs 403(b)s, and with a $22 trillion deficit and baby boomers, the largest generation, are the ones holding most of that retirement money.

As they pass away, the government’s looking at getting their hands on that money sooner rather than later. Prior to the pandemic, the big theme, the big thing that we were talking about really was tax risk. With the deficit, with the Secure Act, and with the Tax Cuts and Jobs Act that was passed in 2018, it was a unique opportunity, and it still is a unique opportunity. I would call it a window of opportunity. That window’s closing on us because the Tax Cuts and Jobs Act is scheduled to run from 2018 to 2025.

But with the presidential election, and it looks like a switch in office, Biden has run under a proposal of repealing that Tax Cuts and Jobs Act. While we had this window from 2018 to 2025, that window might be closing. With that, taxes might be going, or are scheduled to go up about three to 4% across the board. In our office, over the past couple of months, really what we’re spending almost all of our time doing was looking at tax brackets with our clients, figuring out how much money should they pull out of those pre-tax IRAs, looking at doing things like Roth conversions.

We were doing that up until really about the last week of December. Now, ideally, it’s a conversation we try to start in September and October because now we know kind of what bonuses we might’ve gotten over the years, but we always have some clients that procrastinate a little bit, and as we’re trying to get ahold of them, they don’t come out of the woodworks toward near the end of the year. Even until the last couple of weeks of 2020, the big thing that we were focusing on was this tax conversation of how much money to pull out of the IRAs and 401ks, how much before we get into the next higher tax bracket.

It was a conversation we had with plenty of clients and very happy to be able to know that we probably saved thousands, and maybe hundreds of thousands of dollars in potential taxes by paying the taxes sooner rather than later for all of the clients that we were helping over the past couple of months. That was really the main focus of 2020 for us was this tax conversation of understanding with tax cuts and jobs act set to expire with the newly passed Secure Act, we thought 2020, it was going to be a big conversation about taxes, and then the pandemic hit. Then now we got into a market volatility question, because if you remember back in March, the markets tanked about 30%, and then they made a rebound within just a few months.

Coming into 2020, we thought market risk was one of the top risks out there just because we’ve been on a 12 year bull run. Understand that typically about every 10 years or so, there’s a dip, and this is going back historically, but the last big ones were 2002, 2008, where we call that the last decade. Coming into 2020, we thought, well, we’ve been on a 12 year bull run. We have a presidential election. All signs are pointing to some volatility potentially this year. Then March happened and the pandemic, and we did have that bubble burst, but no one really expected it to rebound so quickly.

I think part of that was some of the smoke and mirrors with the government playing around with the stimulus package and interest rates. It’s actually really interesting. I’m in the middle of reading, or I just finished up one book, a biography on John D. Rockefeller. Right now I’m in the middle of, it’s about 800 pages, a book that talks about The House of Morgan. JP Morgan and the Morgan family, and just how interrelated commercial banking and government has really always been from the beginning. Behind closed doors, all the smoke and mirrors stuff that goes on. That was going on from the beginning.

I think that’s part of why the market bounced back, is that there is some kind of smoke and mirrors between the federal reserve and the government. For the short term, it’s good because the market bounce back, but if you look at it just from the perspective of how the economy is doing with all the businesses shutting down, all the layoffs, it’s interesting that the market is still as high as it is. That’s really the second big risk or big theme that we saw this past year in 2020, was the market volatility. I think it’s going to be a theme as well in 2021, just because again, I don’t think we’ve seen all the financial ramifications of the pandemic.

Where you look at restaurants, as of right now, the restaurants are still pretty shut down. You can’t eat inside. You look at sports and travel and businesses, especially small businesses. It’s just a rough time out there. I think we’re not necessarily through the woods with regards to the financial impact of the pandemic. I think it’s something that should be at the forefront in 2021 in terms of planning, where I remember just last week before we took some time off for vacation, sitting down with a client who thought he had a relatively kind of moderate, maybe conservative portfolio. When we did a risk analysis, it turned out he had an aggressive portfolio that was even more aggressive than investing in the S&P 500. He was absolutely shocked by that.

One of the things that we did, especially because now he’s planning on retiring within the next couple of months, we’re going to adjust his portfolio so it’s more in line with someone in his position who’s nearing retirement, as well as someone in his position who’s a little more risk averse now than he was, say 20, 30 years ago. I think that should be one of the main focuses in 2021, is understand that we’re not necessarily out of the woods with regards to the market, with regards to stocks and bonds and the volatility that’s going on.

I wouldn’t be surprised if we have another, say March, 2020 that happens, but maybe lasts a little bit longer. Because again, this was something that a lot of people were predicting in 2020, just because we have been on a 12 year bull run, and these things go in cycles. I wouldn’t be surprised if in 2021, we’re going to have some more volatility. Not only because of the bull run that we’ve been on, but also because of the pandemic and all the fallout from that. Those are the two main things that I see is issues moving into 202, is understanding that this tax window that we have is closing with the Tax Cuts and Jobs Act. Prior to the election, we thought we had till 2025 to try to move money out of those IRAs 401ks, because when the Tax Cuts and Jobs Act expires, taxes are going up about three to 4% across the board.

Then also we had the Secure Act. Even what you’re leaving to the next generation is going to be taxed more potentially. Then also just with a switch in president under the Biden plan, even though he talked about not raising taxes on anyone that has less than $400,000 worth of income, we know just by him threatening to repeal the Tax Cuts and Jobs Act, that’s going to affect everyone. That affects people who make $80,000 at the 12% tax bracket, 160,000 at the 22% tax bracket. It affects everyone. That whole campaign promise of not raising taxes for people who make less than $400,000 a year, you can throw that out the window.

By repealing Tax Cuts and Jobs Act, that’s exactly what he’s doing because he’s raising taxes across the board for everyone. That’s what he’s promised to do, is repeal that Tax Cuts and Jobs Act. This gives us, with us moving into a new year, this gives us another opportunity to look at making some moves from a tax perspective. If that’s something that you want some assistance with, give us a call at (844) 885-4200. One of the things we can do is run a qualified tax analysis, looking at just how much taxes potentially you would have to pay and look at some strategies on how to minimize taxes.

What we do, we have a CPA that’s a part of our team that’s affiliated with us. We look at your tax return, investment statements and come up with a plan to minimize taxes, not in a specific year, not looking at taxes through a micro lens, but looking at taxes through a macro lens of, how can we minimize taxes over your lifetime and what you leave to the next generation? If you do want some help from a tax perspective, give our office a call, (844) 885-4200.

We’ll set up a short phone call, see if we can help you with that. Then the second big risk, I think that should be a focus of 2021, is understanding that we’re not out of the woods with regards to the markets. That this health crisis that became a financial crisis, that became a mental health crisis, I think is going to be a longer-term financial crisis than just the dip we had in March. Now might be the time to take a look at your portfolio to see how much risk you really have in that portfolio. Maybe you’ll be surprised like some of the people that we sit down with when we run our investment audit, where we take a look at how much risk are you willing to take on versus how much risk is inherent in your portfolio.

If there’s a gap there, then we need to look at strategies to try to close that gap. Maybe we adjust the risk of the portfolio down a little bit. Maybe we take some of the money out of the market, where now it’s, and something that offers safety plus the potential for growth. So, there’s different strategies. If you have questions on that, or want to see how much risk is really in your portfolio, or how much am I paying in hidden fees inside of my portfolio, give our office a call at (844) 885-4200. We’ll schedule a quick phone call and we can get started on helping you with that.

Then, we’re going to continue this conversation and talk about, what I see is typically people’s kind of goal to get done in January, February, every new year with a new checklist of things you want to accomplish in the new year. I find estate planning is typically one of those things that people put off, put off, put off, and then they finally say, today’s the day that I want to get it done. For the next two segments, what we’re going to do is talk about estate planning basics, what are the things that most people are concerned about? What are the tools we use to help protect against those concerns? Things like avoiding probate, protecting against long-term care costs from a legal perspective, making end of life decision-making.

We’ll talk about all the tools, things like trusts and wills and financial powers of attorneys and medical powers of attorney, so that if this is the year that you want to get your estate plan done, we can help you with that. Give our office a call at (844) 885-4200. We have a virtual process right now that makes it as easy as possible to get that will, and trust, and your estate plan done. Join me as we continue this conversation and we’ll start talking about estate planning basics.

Hi, we’re Madison and Ryan Berry.

Our dad is Chris Berry from the Castle Wealth Group.

The Castle Wealth Group used to be the Eldercare Firm, but dad wanted the company to be broader in its scope of services.

To not only protect and preserve assets, but to help people grow their assets to prepare for retirement.

As a certified elder law attorney and fiduciary financial advisor, our dad and his team at Castle Wealth Group can help you with lots of important things.

To tell you more, here’s our dad, Chris Berry.

Thanks, Maddy and Ryan. Here at the Castle Wealth Group, we can help you put together an estate plan to avoid probate, work with you on a tax plan to keep more money for your family and less for uncle Sam, and protect you against the devastating cost of long-term care. Our team is here for your family. I invite you to learn more about the Castle Wealth Group at our next free workshop, where you will learn the three steps to create a legal, financial and tax plan for the second half of life. Call us today to register at (844) 885-4200.

The Castle Wealth Group, formerly the eldercare firm.

Learn more at the castlewealthgroup.com today.

Estate planning is really planning for a couple of things. First, it’s planning for, what happens if you get a knock on your head? Who’s going to make financial decisions, who’s going to make medical decisions? The second thing is planning for what happens if you pass away. If you pass away, how do we make sure things go as efficiently and effectively to the people you want in the manner you want, as simply as possible? Then third, and this is as a certified elder law attorney and advisor, something else that we help our clients with, is that if you were to have a stroke or need long-term care, what can you do to protect your assets?

That’s really what elder law is all about. There’s a lot of estate planning attorneys out there who think of estate planning as planning for what happens if you were to pass away. Well, that’s important, but what we do as elder law attorneys and advisors is we also plan for what happens if you don’t pass away, how can we make sure that your money lasts at least as long as you do? How can we protect from things like the devastating cost of long-term care? Because right now, a nursing home costs about $8,000 to $12,000 a month, and there’s legal strategies, in addition to financial insurance strategies, but there’s legal entities we can create to try to protect everything that you’ve worked so hard from, from that devastating cost of long-term care.

When we talk about putting together estate plan, those are typically the big three concerns or issues that we need to take into account. Now, there’s some other things that go along with it as well. For example, if you were to leave things for your kids, what happens if one of your kids gets a divorce, a lawsuit, creditor action, bankruptcy? That’s really what elder law is about. It’s about asset protection. Not just protection from long-term care costs, but protection from creditors, protection from divorces, things like that. That’s what differentiates an elder law attorney versus just an estate planning attorney.

As a certified elder law attorney, I think there’s maybe 18 of us across the State of Michigan, and of those that are certified elder law attorneys, only a handful, maybe one or two or three also do financial planning and tax planning as well as part of their practice. It’s important to understand all these pieces fit together. But what we’re going to talk about is really the steps necessary to create a comprehensive estate plan. The first thing that most people are concerned about is, if they get a knock on their head, what’s going to happen to them, or if they pass away, where’s their stuff going to go, right?

It’s very important to have or create your own rule book. That’s really what an estate plan is, is a rule book. If you don’t have a rule book or don’t have an estate plan, you’re relying on the government’s rule book. Do you want to leave things up to the State of Michigan? Most likely not. That’s why you want to create your own rule book, because if you don’t have an estate plan, and God forbid you get a knock on your head, you have a stroke, someone needs to make decisions for you, then they’re going to have to go to court to be able to make those decisions.

That would be called a guardianship. A guardianship. Most people want to try to avoid a guardianship because it’s a court process. It’s time consuming. You have to answer to a judge on everything. You have annual reports that you have to provide. Then, on top of that, if you happen to have money, not only are you going to have a guardianship, but also you’re going to have to have a conservatorship as well, where the judge will appoint someone to manage, not only your care, but also your finances for you. That’s what a conservatorship is.

Again, they’re answering to the judge, they’re answering to the probate court, and they owe annual reporting to the court, and they have to run decisions like, whether you’re going to sell a house by the court. All of this can be avoided by having some simple estate planning tools. The first thing is a financial power of attorney. This is a document that appoints someone to make financial decisions if you’re unable to. If you get a knock on your head, who’s going to pay your bills for you? A lot of times, it’s a spouse first, then maybe it’s adult children after that.

The second key document is a medical power of attorney, or in Michigan we call this a patient advocate designation. This is a document that appoints someone to make medical decisions if you’re unable to. Included in that would be decisions with regards to life support. Maybe you’ve heard of Terri Schiavo. She was a woman down in Florida. She was in a vegetative state. Her husband wanted to remove her from my support, her family wanted her to remain on life support. It became a big court battle that lasted over eight years. All of that could have been avoided had Terri Schiavo had that medical power of attorney document appointing her spouse to be able to make medical decisions.

This brings up a couple of key points. First of all, a lot of people assume that, just because you’re married, your spouse can automatically make these decisions for you. That’s not the case in the Terri Schiavo case prove that. These decisions, especially end of life decisions have to be in writing. You have to create your own rule book. You can’t just rely on the government’s rule book. Otherwise, a spouse would have to go to court to be able to make those decisions. Yeah, you heard me, you would have to go to court to be appointed a guardian to make decisions for your spouse if they’re to have a stroke or be incapacitated, or you needed to make end of life decisions.

It’s kind of scary to think about. A financial and medical power of attorney are very easy documents to put together. So, if you don’t have a financial or medical power of attorney, give our office a call at (844) 885-4200. Set up a quick little phone call and we’ll be able to figure the best way to help you. We can help people throughout all of Michigan. We have processes to where we don’t even have to meet in person. We can do this virtually or over the phone. It’s very important. Anyone over the age of 18 should have a financial and medical power of attorney.

If you’re listening to this and you have adult age children that are maybe a way at school, understand that, once they turned 18, legally they’re adults. God forbid something happened to them to be able to make decisions, to be able to get access to their medical records for the doctors to even talk to you. You need to have your adult age children appoint you as a financial or medical power of attorney. Again, if you need some assistance with this, you don’t have documents, or one of your loved ones doesn’t have these documents, they’re pretty quick and easy to put together with our office. Give our office a call at (844) 885-4200, or you can visit us on the web at castlewealthlegal.com.

Now, the third disability document, so if we have a financial and medical power of attorney, the third key document, and this is really looking at it more from an elder law perspective than estate planning perspective. This is looking at it from the lens of, a lot of people don’t go from healthy to passing away, they go through an aging process. The third disability document, in addition to that financial and medical power of attorney is what’s called a personal care plan. A personal care plan. This is a document that appoints someone … Doesn’t appoint someone, I apologize.

This is a document that gives instructions to your financial and medical power of attorney on how best to care for you if you were to need long-term care. If your medical power of attorney talks about end of life decision-making, your personal care plan talks about long-term care decision making. For example, would you want to be kept at home as long as possible? Would you want to listen to certain music you like? There are certain habits that you have. Maybe you have tea at two o’clock every day.

We have a questionnaire that we give to our clients to help complete this personal care plan, because understand that you don’t go from healthy to passing away. You go through an aging process. If we can capture some of that information for loved ones, for caregivers, then it’s going to put you in a better position, because again, we don’t go from healthy to passing away. The three key disability documents, a financial power of attorney, a medical power of attorney, and a personal care plan.

Now, that’s our rule book for if we’re to get a knock on our head, or if we’re to have a stroke. What happens if were to pass away? How can we make that process as efficient and effective as possible and make sure that our assets get where they’re supposed to go? Well, we need to understand how estate administration works. How do assets transfer out of our name when we pass away? Really, there’s only four ways that assets transfer upon death. First would be joint ownership.

If you’re joint checking account with a spouse, one spouse passes away, it goes to the survivor. Second would be through a beneficiary designation. We might have a 401k, an IRA, a life insurance policy. You pass away, it goes to whoever you listed as a beneficiary. Third, we have trusts, and we have different types of trusts. We have revocable trusts that avoid probate and control the distribution upon death. We also have asset protection trusts called a castle trust, that can avoid probate, control the distribution upon death, but now builds an asset protection, protecting everything you’ve built from creditors, lawsuits, as well as protecting against the devastating cost of long-term care.

Think of a trust like a suitcase. While you’re alive and well, you’re holding onto the suitcase. You can put assets into the suitcase. You can take assets out of the suitcase. Then if you pass away, you pass that suitcase on to someone else who then receives the assets or distributes what’s in the suitcase. A key ingredient in that is we need to make sure there’s stuff actually in the suitcase, and that’s what we call funding the trust, making sure the assets are titled in the name of the trust.

This is one of the big issues that I see is there’s a lot of trust out there that were set up, but never funded correctly. Maybe the house wasn’t handled properly. Maybe the bank accounts weren’t changed to name the trust as a beneficiary, things like that. Even if you have a trust, it has to be funded. Understand that, just by nature of having a trust, that doesn’t mean you’re going to avoid probate, and that’s the fourth way that assets can transfer out of your name is through probate.

We have joint ownership, beneficiary designations, trusts, but if an asset doesn’t pass through one of those first three ways, then it’s going to end up going into probate. That’s what we want to try to avoid. We want to avoid that because it’s a court process, it’s time consuming, and it’s public, and it’s costly. On average, 3% to 5% of any assets going through probate get eaten up in costs, whether it’s inventory fees, filing fees, publication fees, sometimes attorney fees. Also, it’s time consuming.

By statute, if an asset ends up going through probate, it takes a minimum five months to go through that probate process. Then also, it’s public. Anyone can see what’s going through probate. It’s a public process. If little Johnny is supposed to inherit $300,000, everyone’s going to know that little Johnny’s getting $300,000. Most of my clients value their privacy, and they value their money, and they value their time. If that’s the case, chances are you want to avoid probate. Now, what’s the one thing I didn’t mention?

I didn’t mention a last will and testament. A lot of people think a will avoids probate, but it does not. What a will does is gives instructions to the probate court on how to administer your estate. If you’re looking at avoiding probate, you don’t want to rely on a will-based estate plan. You want to think about, either a trust or beneficiary designations or joint ownership. Now, let’s talk a little bit more about those. First let’s talk about joint ownership. Well, joint ownership is great for a married couple, but I wouldn’t recommend naming anyone else jointly to your accounts or assets, because you’re opening yourself up to all of the liabilities of that potential person.

If you were to name your son or daughter joined to a checking account or a savings account or your real estate, and then they were to get in a car accident, get sued, or get a divorce, or need long-term care themselves, you might lose that asset. By naming someone jointly, you’re opening yourself up to all of the potential liabilities of that person. So, joint ownership, it’s great for a married couple, but probably not a good way to pass assets to other beneficiaries. Next, we have beneficiary designations.

Again, beneficiary designations are great for a married couple where if one spouse passes away, we can have it go to the survivor, but there’s two potential issues with beneficiary designations. First, the poor financial mismanagement of the individual, so let’s say like I have two kids, Ryan and Madison. Ryan’s now 10, Madison’s age eight. If I were to pass away, I wouldn’t want my 10 and eight year old to receive all my money outright because they’re going to spend all the money on a stuffed animals and Legos and video games, which sounds kind of fun, but it’s probably not the best use of the money.

Now, technically, they can inherit property, and so they turn 18, but I’m young enough to remember what I was doing 18 to 25. If I inherited $5,000, 50,000 or 500,000, I’d have been the coolest kid on campus, but that would’ve been my only year on campus. Right? The first concern is financial immaturity. It’s not always tied to age. I have clients who have children that have a variety of different issues, whether it’s mental issues, or alcohol problems, or just kids don’t always … Life doesn’t always work out the way that we want it to.

That goes for our children as well. If financial maturity is a concern, then we certainly don’t want to rely on beneficiary designations to leave money directly to them. Now that said, a majority of my clients, their kids have good heads on their shoulders, they trust them. But the second concern with just that pillowcase of money approach, or just relying on beneficiary designations is that we can’t necessarily trust the outside world anymore. The world’s a lot more litigious than it ever used to be. Just drive around Metro Detroit. How many different personal injury billboards are you going to see?

Plus with the rising rate of divorce. What’s the statistics? I think one in two marriages end in a divorce. If that’s the case, maybe we don’t want to leave things outright to those kids that do have good heads on their shoulders, because what if life throws them a curve ball? What if they get in a car accident, or sued, or what if, God forbid, there’s a divorce? That money that you left to them could go in a different direction. If they get divorced, half that money might go to that spouse, or what happens if they pass away after they inherit that money? All that money might go to a spouse versus going down to your potential grandchildren.

That’s why beneficiary designations aren’t always the best way. Maybe we want to look at a trust. Understand, not all trusts are created equal. In fact, that goes for all of these documents. They’re not all created equal. One of the things that we can do is what’s called an estate planning audit, where we take a look at what you have and figure out where you want to go with that. If that’s something you want to get started with, give our office a call at (844) 885-4200. Again, (844) 885-4200 as we continue this conversation talking about estate planning.

Hi Madison and Ryan Berry here from the Castle Wealth Group, formerly the Eldercare Firm.

Our dad is Chris Berry.

He’s an attorney and fiduciary financial advisor, which means he helps families plan, protect and preserve their assets.

The entire team at the Castle Wealth Group can help you with lots of important things. To tell you more, here’s our dad, Chris Berry.

The Castle Wealth Group, formerly the Eldercare Firm.

Learn more at the castlewealthgroup.com today.

We’re talking about trusts because trusts are a way that we can A, protect what we leave to the next generation. Now, there’s different types of trusts. The first type of trust we see quite often when we’re sitting down and reviewing a current or a client’s current estate plan, “current”, one they may have done five, 10 years ago, a lot of times, it’s what we call a base revocable trust, where it avoids probate and it has outright distributions to the beneficiaries once they reach a certain age. A lot of times it’s 25, or 30, or 35.

The idea is that this avoids probate and make sure that the kids inherit the money and they don’t misuse it. Now, the problem with this is that you’re just launching pillowcases of money at the beneficiaries. For example, what happens if you have this basic revocable trust and it says, I’ll write to your kids at age 35? Well, what happens if your daughter gets divorced at 36? Half that money might be lost? Or what happens if your daughter passes away at 36? All that money might go to the spouse versus going down to your grandkids.

Now, you’re probably thinking, well, I have this language in my trust, it’s called [inaudible 00:36:21] and it flows down the bloodline. Well, that’s great if your child predeceases you, but if you pass away and then the money goes outright to the child and they’re over that age, the trust dissolves. Now it’s in their name. So, it doesn’t protect them the way you think it does. That’s why a lot of times when we sit down with clients and they have one of these existing basic revocable trusts, it’s almost not even worth the paper it’s printed on because you could do the same thing through beneficiary designations.

You don’t even need that basic revocable trust a lot of times. Now, another approach would be to do what we call a legacy trust. A legacy trust is a revocable trust that avoids probate, but now it builds in the opportunity for a lifetime of asset protection. Whatever you leave to the next generation, it’s protected from divorces, from creditors, from bankruptcies. Then if your child passes away, whatever you’ve left them, doesn’t go to that spouse who might remarry, but instead goes down to your grandchildren. This is an important distinction that a lot of people don’t realize. A lot of people think their basic revocable trust builds in these protections, but it does not.

It says it goes outright to the child at a specific age. If that child is older than that specific age, there is no protection. Instead, that’s where a lot of our clients like to build in that legacy inheritance trust language to say that, whatever I leave to that next generation, it’s held protected, where they can manage it, they could be the trustee, they can decide how it’s invested, but whatever they decide to keep in the trust is protected from divorces, lawsuits, credit action, bankruptcies. Then also, if they pass away, that money stays in the family, it stays in the bloodline, it flows down to the next generation.

This is why we always do an estate planning audit, because a lot of people don’t really know what they have. We’ve been doing this for over 15 years and we can take a look at your current trust, especially if you have an electronic copy of it. We can take a look at that, and in about five minutes, tell you exactly what it says. We run you through this estate planning audit that looks at 10 different areas. We check off whether your current estate plan addresses this issue. Yes or no. Now, not all of those issues will be important to each individual, but as we go through it, if it is important, we’ll put a star next to that issue so that we know that, hey, we saw this, it’s a red flag. Is it important to you? Yes or no.

Then we can either amend or update the trust, or at least now you have peace of mind in knowing what you truly have. If that’s something that’s of interest to you, if you want to see if your current estate plan is this basic revocable trust that says outright and doesn’t really protect the children, versus a type of trust that builds in that legacy protection, give our office a call, (844) 885-4200. We’re helping people across Michigan with this. No matter where you’re listening to this, we can assist you either in person at one of our satellite offices, or virtually. We have processes set up to be able to help you virtually, where with modern technology, we don’t even have to meet face-to-face to get everything done these days.

That’s one of the things that has come out of this pandemic is that we’ve been able to pivot to a virtual process to be able to assist our clients. If you don’t have an estate plan, now’s the time to start. Give our office a call at (844) 885-4200. If you do have an estate plan and you want a complimentary review of that, give our office a call (844) 885-4200. I would just ask to see electronic copies of whatever documents you have, or you can drop it off at one of our satellite offices and we can scan everything in for you. Again, (844) 885-4200.

Now, there’s a third type of trust. We talked about that basic revocable trust. It avoids probate, controls the distribution upon death. Then we talked about the legacy trust, which avoids probate, but now builds in the opportunity for a lifetime of asset protection, passing down what you’ve worked so hard for. Now, we have a third type of trust called a castle trust. The Genesis of this type of trust was in the old estate tax planning that we used to do. Back in the day, if you had more than $600,000 worth of assets and you passed away, anything over that $600,000 number would get taxed at the federal level of 45%.

We would have to utilize trusts to protect against estate taxes. Well, with the Tax Cuts and Jobs Act and everything else that’s going on, that estate tax exemption now is $11 million. Not as many people are concerned about estate taxes as in the past, when it was at 600,000. Then also, over the years, what we found is attorneys since the ’90s, is that people are living longer than ever. A lot of our clients aren’t as concerned about estate taxes anymore, but now what they’re concerned about is long-term care costs.

More specifically, the devastating cost at a nursing home care, which can run $8,000 to $12,000 a month. This is where there’s a governmental program called Medicaid that help pay for that nursing home care. Now, to qualify for Medicaid, a single individual can only have $2,000 worth of countable assets. A married couple, they make you cut your assets in half. At most, you can have $120,000 worth of assets. Then Medicaid looks back five years to see if you moved any money around, and if you have, they’re going to penalize you. Medicaid is one of the six ways to pay for long-term care, where you can either private pay, you can have the kids pay, you can have long-term care insurance.

Medicare really only pays short-term rehab VA benefits and then Medicaid. But Medicaid really, is the best route … Well, I wouldn’t say the best, the most common route to pay for nursing home care, and may or may not be the best. Long-term care, insurance, if it’s structured properly could be a nice Avenue as well. But with Medicaid, in that five-year lookback period, there is a special type of trust called a castle trust, that we can move the assets into the castle trust. Once we make it five years, everything inside of that castle trust is protected from that nursing home or Medicaid spend down.

This means that now we can have Medicaid pay that base level of care and everything inside of the castle trust is protected and preserved to pay for additional services to improve your quality of life, or if you’re married and if one spouse needs long-term care to ensure that that healthy spouse isn’t completely impoverished having to pay for that care, or make sure that everyone you’ve worked so hard for stays in your family, goes to your children, versus going to a nursing home. That’s what’s possible with a castle trust. That’s not possible with your basic revocable trust. That’s not possible with a revocable trust that includes that legacy inheritance trust provision.

If you are concerned about long-term care, then we’ll look at a castle trust as a strategy or potential tool where we move assets into the castle trust, we make it five years. Everything inside of that trust is protected from that nursing home or Medicaid spend down. Now, another nice thing about the castle trust, another nice benefit is that it also provides you asset protection. Like we said, the world’s a lot more litigious than it used to be. For a lot of my business owners or a lot of my clients that own real estate, they like the castle trust because they know that they can put the assets into the trust, they can manage it.

You’re not paying any additional taxes or anything like that, but now, immediately as you move the assets into the trusts, they’re protected, they’re asset protected. That’s something that’s not available in a revocable trust. They’re protected from creditors. If you were to get sued, whatever’s in the trust would be protected. Very different than your basic revocable trust. A lot of clients have a trust. If we’re looking at the full rule book versus the government’s rule book, you’re going to have a trust. A lot of times, in addition to a trust, you would have what’s called a pour-over will.

Now, not always would you have a trust, and it’s not tied to the size of your estate. It’s just tied to what your goals are, but a lot of clients, well, do have a trust. In addition to the trust, you would also have what’s called a pour-over will. If any assets do end up in probate, the will knocks them over into the trust. As part of a comprehensive estate plan, you would have a trust, a will, a financial power of attorney, a medical power of attorney, a personal care plan. Then if you own real estate, we need to do some type of deed, where we’ll either deed it directly to the castle trust, the asset protection trust, or we might do what’s called a ladybird deed, which is a type of deed to say that it’s in your name while you’re alive, and then upon death, it avoids probate and goes into your trust.

This is called a ladybird deed. It’s basically a beneficiary designation for your home, that ladybird deed. Again, it’s in your name, you can refinance, you can do whatever you want while you’re alive, but if you were to pass away, it avoids probate and goes to the trust. Or if you’re not really concerned about building in the opportunity for lifetime of asset protection for the kids, or we might just do a ladybird deed directly to the beneficiaries, and maybe we don’t even need a trust. We can just rely on beneficiary designations. Again, we don’t necessarily need to do a trust every time, but a lot of times, we do, do a trust because of the extra advantages and benefits it does offer.

We have a trust, a will, a financial power of attorney, a medical power of attorney, that personal care plan that gives guidance with regards to long-term care. We need to do some type of deed. Then we need to work with you on funding, making sure all the assets are titled in the name of the trust. Again, a trust, it’s like a suitcase or piggy bank. It only controls what’s inside the suitcase or piggy bank. If you don’t have the trust funded properly, then you might have assets that end up going into probate. Again, that’s what we want to try to avoid.

Now, most of the firms out there, they’ll give you what’s called a funding letter. I call it a CYA letter. Cover your … You can fill in the blanks. Because this “funding letter,” it gives you instructions on how to fund the trust, but we know, in my experience of doing this for 15 years, that if I were to tell a client to go fund the trust, something’s going to happen. Either they’re going to get confused or life’s going to happen. Whatever reason the trust doesn’t end up getting funded. That’s why, in our firm, we take it upon our shoulders to assist clients and we created an asset table where we go line by line to make sure that every asset they have is titled properly, where either the trust is the owner or the beneficiary.

It’s something that makes our firm more of a comprehensive planning firm than your typical attorney, or law firm, or investment firm for that matter. We need to make sure everything gets funded. The last piece is to cover any final expenses, because we know when someone passes away, there’s not only the funeral expenses, but people have to take time off work. Your personal representative has to maybe fly in from out of town, and so we want to make sure there’s some money available for them right off the bat. I’m not saying go out and prepay a funeral at a funeral home, but there’s a way to create basically what’s called a liquid estate plan, where right upon death, within 24 to 48 hours, there could be, say 20 to $30,000 going to whoever your trustee or beneficiary is.

So, they can cover final expenses, they can cover any last expenses, compensate themselves for that time. We want to make sure that the final expenses are covered because we don’t want to leave our loved ones holding the bag on that. Again, the comprehensive estate plan, have a trust, a will, a financial power of attorney and medical power of attorney, personal care plan, funding, and a deed to handle the real estate, and also make sure we cover final expenses. Really, the only variable in that whole conversation ends up being, what type of trust do we want at the end of the day? We can have a basic revocable trust that avoids probate, outright distributions or beneficiaries.

We could create a legacy trust, which avoids probate, now builds in the opportunity for a lifetime of asset protection for beneficiaries, or we could have a castle trust that avoids probate, protects the beneficiaries, but now builds in asset protection for you. Protecting you immediately from any lawsuits, and then also starting that five-year clock. If you were to make it five years from the time you set up the trust, you fund the trust, before you need a nursing home, then everything inside of that trust would be protected from that devastating nursing home or Medicaid spend down.

If you want to help with any of this, if you want to get started, or have your plan reviewed, give our office a call at (844) 885-4200. again, (844) 885-4200. What we can do is a complimentary estate review, where if you have a current estate plan, we can review it, do our estate planning audit, let you know exactly where you’re at and where you need to go with your planning, or if you haven’t done any planning at all, now’s the time to get started. Make sure that we have created your rule book, so if you get a knock on your head, you have a stroke, we’ve appointed the right people to make decisions for you versus having to go to court.

If you were to pass away, make sure that your affairs are handled as efficiently and effectively as possible. Or if you’re concerned with long-term care, we can look at putting together that legal entity that can protect everything you’ve worked so hard from, from the devastating cost of long-term care or protected from creditors or potential lawsuits in the future. It’s all about creating your rule book versus relying on the government’s rule book. If you want some more information, feel free to visit our website at castlewealthlegal.com.

We do weekly wisdom webinars, where every Wednesday at one o’clock I answer questions that are submitted live on a webinar on a Zoom. Usually, we have over 20 people on each one of these. If you do have questions, you can submit them ahead of time, or you can ask those questions live while we’re on the webinar. To register for that, go to wisdomwebinar.com. Again, if you want to get started on that estate plan or have your plan reviewed, give our office a call at (844) 885-4200. Make sure to create your own rule book versus relying on the government’s rule book. This has been Chris Berry, make it a great week, take care.

Learn more about Chris Berry and how he can help your family by visiting online at thechrisberryshow.com. That’s thechrisberryshow.com. You can also call Chris Berry at (810) 355-2584. That’s (810) 355-2584. This program content reflects the opinions of Chris Berry and his guests, not Castle Wealth Group or Advisors Excel, and is subject to change at any time without notice. Content provided herein is for informational purposes only, and should not be used or construed as investment or legal advice, or recommendation regarding the purchase or sale of any security, or to follow any legal or tax strategy.

There’s no guarantee that the strategist’s statements, opinions or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses, which would reduce returns. All investing involves risk, including the potential for loss of principle. There’s no guarantee that any investment plan or strategy will be successful. We recommend that you consult with a professional dedicated to your needs. This program is furnished by Chris Berry and Castle Wealth Group.

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