Ep 4 - Erik Rome on Estate Planning: Navigating Probate and Choosing the Right Trustee

Erik Rome: [: 00:00:00

Well, that would have just paid to the kids and never gone through probate and that will they signed never would have had anything to do with how the property is distributed. So the best way to think about it is your will doesn't help you avoid probate and it [00:00:45] only controls assets. That have to go through probate.

ert insights to achieve your [: 00:01:00

[00:01:15] Now your hosts.

And we have a special guest [: 00:01:30

And, uh, we thought it would be a really good opportunity today just to bring him on. And maybe pick his [00:01:45] brain about a few things and hopefully relay some information, uh, to our clients and to anybody that's watching, uh, about stick planning. So, Eric, welcome and thanks for coming.

Erik Rome: Absolutely. Thanks for having me.

day that'll clear up some of [: 00:02:00

Jeb Graham: I think you will, so.

Erik Rome: We've got, we've got

Jeb Graham: two

Erik Rome: Erics

Um, no, but, uh, so, so Eric [: 00:02:15

Is [00:02:30] everybody wants to make sure that they avoid probate and we thought maybe a great way to start the podcast would just to talk a little bit about what probate is, how do people avoid it. And just maybe start there. Absolutely.

. Probate is a court process [: 00:02:45

And it is, uh, usually best to avoid it for a few reasons. One is. There [00:03:00] are costs that are associated with probate that would not otherwise be incurred and do not bring any added value. You know, for example, court filing costs, attorney's fees, uh, publication costs. There are also delays with probate [00:03:15] where you can, uh, be done with everything.

to some people. Uh, if they [: 00:03:30

So there are ways [00:03:45] to avoid it and we get to that here in a moment.

le of things that go through [: 00:04:00

Is it, is there a way to avoid it altogether with everything?

talk about how we avoid it. [: 00:04:15

So this is pretty common between spouses where they have joint bank accounts, they own their house jointly. [00:04:30] One of them passes away and the house, uh, the bank account just go to the surviving spouse with no probate. Another is a beneficiary designation. So you designate a beneficiary, and I'm sure your clients are familiar with that because you're going through that, and you're in an [00:04:45] intake or a review process.

s a revocable trust, uh, you [: 00:05:00

So I work with my clients to identify all of their assets and then based on the plan that they've set up, we use [00:05:15] one of those three techniques to avoid probate. And when I have clients that have advisors like you, I make sure and provide the instructions To the advisors so they can kind of drive that process with [00:05:30] any accounts that they, you know, control or life insurance policies.

have to go through probate, [: 00:05:45

Erik Rome: No, that's incorrect. Um, if you have a will, the will only controls What assets go through probate. So where I'll see this come up is I'll have clients that had set up wills years ago when their kids were [00:06:00] young and they had trusts that were going to be created by the will that says they get the property.

ey designated their kids as. [: 00:06:15

So the best way to think about it is your will [00:06:30] doesn't help you avoid probate. And it only controls assets that have to go through probate.

Ethan Hutcheson: Dang, I was wrong about that one.

Jeb Graham: That was a softball there, Ethan.

ean, you mentioned revocable [: 00:06:45

Or not gone through probate. When is the appropriate time to establish a trust, I think I'd ask?

easons why we set up trusts. [: 00:07:00

You may [00:07:15] have officiaries that are not young, but aren't able to manage their own assets. They are not responsible. They have other. You know, issues with whether it's a cognitive delay, it's a, um, some sort of substance [00:07:30] abuse, maybe they're in a bad marriage. There's any number of reasons. We don't want to just give the assets to them in their name.

et's say you have three kids [: 00:07:45

If instead you have to go through a trust and you have one person who may be one of your children or maybe some independent trustee, then they can just go ahead and, and administer [00:08:15] everything and your kids don't have to agree on anything. So there's a number of reasons. Sometimes we'll set up trust for a state tax.

rking with clients, I try to [: 00:08:30

Jeb Graham: And I'll tell you, we get a lot [00:08:45] that question so much from our clients, which is, you know, when is it that I need to set up a trust? And when do I hit that point? And I know, you know, kind of one of the explanations. This is something we actually got from, uh, And, uh, advisor that was a little bit older than us, but he would say that, that [00:09:00] really you can do most things that you can do in a revocable trust just by naming TODs and beneficiaries and all that stuff.

gs from the grave. Right? So [: 00:09:15

And so you just want to put [00:09:30] stipulations as to when and how they get those dollars. And, um, and you know, that's, that's an explanation. Would you say, is that a pretty, pretty decent? Are we on, on the right track there? Is there some additional things that a trust is going to do that just naming TODs and [00:09:45] beneficiaries won't do?

Erik Rome: Yeah,

oney outright is usually not [: 00:10:00

But I really think it depends on who are, who's going to be carrying this out, the relationships with the beneficiaries, [00:10:15] whether they get along and can work together. You know, I, I have an example where I've got children or clients with one child and they want him to get everything out right. But if he doesn't survive them, then they've got nieces and nephews that are [00:10:30] all minors.

trust administration that's [: 00:10:45

If he doesn't survive them, then then we have management for all these younger beneficiaries. [00:11:00] So this is where I get to, uh, the answer that lawyers give to a lot of questions is yeah. It depends, right? I have, I have to figure out who the, um, who the beneficiaries are, who the people that are involved in and [00:11:15] what the client's goals are and what works for one family may not work for another family.

, draw out your signature, I [: 00:11:30

Are there any documents that, uh, an individual would need while they're still alive?

hat's a great question. And, [: 00:11:45

Uh, a lot, a lot of people aren't thinking about what happens if I'm alive and I can't make my own decisions or I need help making my decisions. And statistically speaking, that's likely to happen to a lot of us at some point. So, [00:12:15] um, I recommend for everyone to have a durable power of attorney, which primarily covers financial decisions.

out how you don't want to be [: 00:12:30

To help carry out your decisions if you can. And then I also [00:12:45] throw in a HIPAA authorization. So all of these people are allowed to talk to your, your doctors when needed. Um, and, and I, I think it makes sense for everyone, whether they are, um, you know, somebody who is hosing on a [00:13:00] retirement, uh, near end of death, but also I have a lot of clients who.

doctors and with talking to [: 00:13:15

Jeb Graham: So I had

ews on someone getting their [: 00:13:45

And, um, I just feel like that can be super helpful for like a lot of our clients, you know, that are, that have kids that are going to inherit money. Um, Just kind of getting them all in the [00:14:00] same room and kind of going through that. And is that something you do a lot? And maybe talk about that.

Erik Rome: It is something that, um, I do on occasion.

he dynamics. Um, I think it, [: 00:14:15

Again, that can make the process go better. Now there are families where the dynamics are such that that is cleaning up can of worms or clients are comfortable sharing some of those financial details. So you could kind of do a little bit of that. Hey, we [00:15:00] did our estate plan. We did it with this law firm.

but maybe not share the full [: 00:15:15

Jeb Graham: I, I think that too. And that's, that's cause we've been through obviously many, many clients that have passed.

lients who are fighting with [: 00:15:30

And sometimes to your point, depends on the family dynamic and I'm sure it's just completely [00:15:45] unavoidable in some circumstances,

Erik Rome: but

, uh, sometimes if they know [: 00:16:00

Um, and sometimes if they talk to their kids, they may say, well, you know, I know you want me to be first, but I think it [00:16:15] makes more sense for somebody else. So if you're having those discussions with your kids, they're first of all, not going to be surprised. They have expectations. And they may actually be able to provide some feedback that helps my clients make the right decision.

[: 00:16:30

Like, Oh, your, your parents did you a favor and you should be upset because it's an important job, but it's not always a fun job or a glamorous job. So, um, now there are [00:17:00] families, if they stopped, talked about this at, at the holidays that it would turn into a big fight. So, I mean, that's something that we kind of, uh, we have to.

It has to be the right conversation for the right family

e for you, Eric, and this is [: 00:17:15

Erik Rome: [00:17:30] I think it's along the lines of what we were just talking about. It is appointing the wrong Person or people for certain jobs. They, they appoint, um, somebody based on birth order or they appoint somebody [00:17:45] based on what their profession is. And they're not thinking critically about is this, does this person have the right temperament?

that's the kid who runs the [: 00:18:00

I get to see fact [00:18:15] patterns and scenarios where I can identify things when I'm on the planning side that may seem similar where we want to avoid something. So you can have the best estate plan drafted with the wrong people in charge and it can go really poorly. [00:18:30] To me, it's in, in the answer may be that it's none of the family members.

biggest thing is, is who's, [: 00:18:45

Jeb Graham: You actually took that right into one of the things that I wanted to know is just, you know, the difference between naming one of your children as the trustee versus getting a corporate trustee.

Is [: 00:19:00

Erik Rome: I don't [00:19:15] think dollar amount matters. The one thing I'd say about the net worth is if it's too low, a corporate trustee is probably going to decline to serve because it's uneconomical.

e estate. So that that's one [: 00:19:30

And so, um, I don't think it's tied to dollar amount necessarily. It really comes down to do we need an independent person, and maybe it's not [00:20:00] that the family doesn't get along, but nobody has the ability to carry this out. They would all, um, not know what to do, and they'd miss filing tax returns, and they would miss, you know, some other deadlines.

[: 00:20:15

Or, uh, that bank gets acquired by some big [00:20:45] national bank and they're no longer the same group that they were before. So, um, I, I do like to make sure we're not stuck with a particular bank. If, if that makes sense,

Eric Wymore: Eric, how often should someone review their, their estate plan?

Erik Rome: That's a great [: 00:21:00

I would say every three to five years they should at least [00:21:15] look at it. Who did they appoint? Has anything major changed with their asset holdings? Has anything changed with the people they've appointed? Um, and, and if, if there's enough there, then let's, let's get together and talk about it. I have other [00:21:30] families that have just complicated situations because they're constantly Buying and selling businesses, they've got taxable estates.

erly touch points. And that, [: 00:21:45

So, there's, there's things that come up along the way.

s trust that was notarized in: 1995

Erik Rome: Especially if trusts were set up when the tax laws, the estate tax laws, [00:22:15] We're so drastically different than they are to now, uh, today. And right now, the exemption is almost 14 million.

t were set up for estate tax [: 00:22:30

Jeb Graham: Real quick. So, so on that point, because we do get a lot of clients that come in and say, I have an estate plan, I did a trust, I did this, and their estate [00:22:45] planning attorney either retired, is out of the business, you know, maybe has passed away by now.

that estate plan over? Is it [: 00:23:00

Erik Rome: Yeah, so I'll take a look at their documents. Sometimes I'll do, you know, a lot of times if I, I get a copy of their documents before we meet.

rview, you know, how is this [: 00:23:15

[00:23:30] What they have right now versus, um, what they want is, and sometimes it might mean a, a minor amendment, we may be making no changes or we may just restate the whole document. So, um, it's, it's different for everybody, but, [00:23:45] uh, and then updating the asset, uh, titling, you know, you asked me earlier, Ethan, about the, the one major mistake.

ing. You, you buy and sell a [: 00:24:00

Those are the assets that sometimes go through probate. [00:24:15] Um, our, our asset that are obtained after we did the planning.

how they could get ahold of [: 00:24:30

You know, if you, if they needed to do an estate plan or update their estate plan. website?

law. Uh, my phone number is [: 00:24:45

That's right. Eric with a K.

n this, uh, on this podcast. [: 00:25:00

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