Despite what many people believe, estate planning isn’t just for the ultra-wealthy or the elderly. Everyone, regardless of financial status or age, can benefit from having an estate plan as long as you have assets (house, vehicle, etc.) to leave and people to leave them to. In this episode, Heather Szajda, Partner at Virginia Estate & Trust Law, will be joining Tommy and John to discuss exactly what an estate plan might entail, when you should start to consider creating one and what happens if you decide to not create one.
Listen in as Heather explains the importance of frequently updating your estate planning documents to ensure they accurately reflect your current wishes and an appropriate time to create an estate plan. You will learn one of the biggest hurdles parents have to face when creating their estate plan, whether the court has to follow the estate plan that you create and how to find an estate planner that works for you.
Listen to the full episode here:
What you will learn:
- Who Heather and Virginia Estate & Trust Law are. (6:00)
- How you can get in touch with Heather. (8:45)
- What an estate plan is and why you should have one. (9:20)
- The importance of setting up a will when you’re younger. (11:30)
- Why you should frequently update your documents to reflect your current state. (18:30)
- Why everyone needs an estate plan. (27:00)
- Whether the court has to honor your estate planning wishes. (32:00)
- The importance of finding someone who is experienced with estate planning to help you. (40:00)
- How to find an estate planner that works for you. (44:00)
- What to do once you’ve created the necessary documents. (50:00)
Ideas worth sharing:
“It’s not necessarily intuitive about what happens [to your estate] when you don’t have a will.” - Heather Szajda
“The benefit of having an estate plan is that, instead of having someone else make the decision for you when you can’t, you proactively make those decisions so that your wishes will be honored.” - Mason & Associates, LLC
“Does everyone need an estate plan? The answer is yes!” - Mason & Associates, LLC
Resources from this episode:
- Heather Szajda: LinkedIn
- Virginia Estate & Trust Law, PLC
- Mason & Associates: LinkedIn
- Tommy Blackburn: LinkedIn
- John Mason: LinkedIn
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Read the Transcript Below:
Congratulations for taking ownership of your financial plan by tuning into the Federal Employee Financial Planning Podcast, hosted by Mason & Associates, financial advisors with over three decades of experience serving you.
John Mason: Welcome to the Federal Employee Financial Planning Podcast. This episode hosted by myself, John Mason, certified financial planner. And across the table from me, Tommy Blackburn, CFP and CPA.
I know Mike Mason on this episode, he's on vacation. So, instead of Mike, Tommy, I thought we'd bring in a guest and we've got Heather Szajda, from Virginia Estate & Trust Law, joining us today.
And the theme or title of this episode is going to be, Introduction to Estate Planning, with guest Heather Szajda of Virginia Estate & Trust Law.
And folks, if you're just tuning in, this is your first episode, listening to the Federal Employee Financial Planning Podcast, Mason & Associates; our advisors have over three decades of experience, helping federal employees in their financial plan, their estate plan, and their tax plan.
And we're just super excited to have another episode, our second one with a guest. So, really excited, Tommy, that we've got Heather with us tonight. How have you been? How's the family?
Tommy Blackburn: Family's doing good. Zoe's a little over two, as I've probably mentioned on a previous podcast. So, just every day the milestones that are being crossed, it's amazing to see how much development has happened in a short amount of time.
We're all doing good. It's kind of the last hurrah of summer for many families with school-age children. I think summer is over and they are back in to the swing of things. We've got a little family vacation planned that we're looking forward to.
And then from a business standpoint, things are picking up quite a bit around here, one, as clients roll out of summer, it's like they kind of get back to business and then it's going to be a fast stretch for all the end of year planning that I know we'll be doing around here.
As well as, many federal employees, as you and I have talked to, kind of retire this time of year. So, we'll be very busy putting the final touches on those.
John Mason: Well, I know I'm excited for a fall camping season in the RV. That's going to be a lot of fun with Sarah Carter and I, and end of year tax planning, whether it be charitable giving, harvesting gains or losses, which I think we all know we have more losses to harvest this year.
So, that, the retirement plans, our federal employees know that a lot of people retire October, November, December. And seeing our clients retire, make that transition to that next chapter in their life, it's this time of the year — at the beginning of the year, we kick off new relationships, at the end of the year, we see existing clients kind of cross that finish line into the next chapter.
So, we get a lot of wins at Mason & Associates and being able to see different people in different phases of their financial plans is really rewarding. Heather, how about you? How have you been?
Heather Szajda: Pretty good. Pretty busy. Looking forward to wrapping up 2022. We do not have any tax legislation this year, but we're working on gifting and trying to do some of the same tax planning that you guys are doing, harvesting those losses, figuring out what to gift while the values are low, to maximize our client's state tax savings.
Tommy Blackburn: Well, thank you Heather. That's great to hear. I think as we were talking before the podcast, you also, I think have family, school life, everything's keeping you pretty busy. So, between that and work, it sounds like you've definitely got a pretty busy quarter ahead of you.
One of the things we like to ask, particularly with our now, second guest, is have you done this before? And are there any podcasts you, yourself like to listen to, whether they be estate planning-related or personal in nature?
Heather Szajda: I listen to the ABA’s Section Real Property, Trust and Estate Podcast from time to time, although usually, I go old school and listen to the radio.
Tommy Blackburn: Well, that's awesome. And just for our guests that aren't familiar, the ABA stands for the American Bar Association. So, that just gives you a little insight into the professional we've got with us here tonight.
Heather, one of the best, very detailed and that she enjoys listening to the Bar Association in her free time, that just tells you a little bit about her expertise.
John Mason: Well, guys, Heather, number one, thank you. Thank you for joining us. Thank you for being a trusted partner of Mason & Associates. You and your firm have helped a lot of people in Virginia have quality estate plans. And we may do a little bit of bashing today on some other estate plans that are out there. I think we call them red books.
So, we may want to talk a little bit about the difference between like what you guys do and these red books that get printed and really, it could be blue books or purple books, but they're binders that people don't know what the heck's inside of them.
So, I want to talk a little bit about that. But we wanted to say thank you for joining us. Thank you for everything you do. We know you're super busy and we're glad to have you.
So, with that, I want to do a brief intro into Virginia Estate & Trust Law. Read their bio. Tommy, if you'll then kind of read Heather's bio and then we'll dive into intro to estate planning.
Tommy Blackburn: Sounds like a plan.
John Mason: So, Virginia Estate & Trust Law began in 2002. Derek Smith, was the founder, with a focus on estate planning, estate administration, and trust administration.
They serve clients at all levels of wealth and needs, regardless of the asset type or family situation. Their specialty is business succession planning, tax planning, and planning for difficult beneficiaries or blended families.
So, a big niche, really cool. They currently serve as a fiduciary for over 200 trusts, with nearly 500 million in assets under management.
Their attorneys have been recognized in a variety of places, like Best Lawyers in America, Virginia's Legal Elite and so forth. And they've also authored leading publications for the Virginia CLE and Thomson Reuters.
As an alternative to a bank fiduciary — and I'm just going to say this part, because I know why this is so cool. They do the administration part and allow clients to work with the financial advisor that they've trusted many times for decades.
So, supporting that relationship between financial planner and family and then doing what they do really, really well, which is that estate administration piece, that's not the case everywhere you go.
Other entities that want to serve as a fiduciary, they want to do that and they want to manage the assets. Maybe that's a good thing, maybe that's a bad thing, but that's one of the really cool aspects of working with Heather and her firm, is they do what they do best and they allow the financial planners to do what they do best.
Tommy Blackburn: Very well said. And then as far as Heather specifically, she's practiced for 25 years and focuses her practice in the areas of estate planning, estate administration, and tax planning. So, very much aligning with the story of the firm that you just outlined there.
She is a member of the Virginia, North Carolina, Maryland and District of Columbia Bar. She's a member of the Richmond Estate Planning Council and the Trust Administrator's Council of Richmond.
Heather's got a lot of accolades as well as many areas that she served in, some of them being past president of the Commonwealth Community Trust, past president of Trust Administrators Council. And being named as one of the best lawyers in America. Very well accomplished.
This firm, as John said, has a great niche, does it very well. It really allows us to tell any clients that we recommend, we can't think of a better place for them to go, just because they specialize, they truly have this niche.
John Mason: And Heather, we're also going to link you and your firm to this podcast. So, in the show notes, we're going to make sure we do a link to your bio and a link to Virginia Estate & Trust Law, so people can learn a little bit more about you.
As we dive into the content, if they like what they hear, how should they reach out to you and your team, to maybe schedule an introductory phone call?
Heather Szajda: Well, currently, if you link to our website, all of our attorneys have their direct dial numbers and their email addresses right on their attorney bio. So, if they see me or they see another attorney that they'd like to work with, they can reach out directly.
John Mason: That's perfect. And now, let's dive right in guys, to Introduction to Estate Planning. And maybe Heather, you can kind of take this ball and run with it. What is an estate plan and why should clients have one?
Heather Szajda: Well, an estate plan can take on many different forms, but essentially, it is the way an individual rewrites or redirects how they want their assets to pass a death. And to understand what that means, you have to understand what it means to die without a will, which means you die intestate.
And each state has its own set of laws about where assets go when someone dies without a will or an estate plan. And it's not always the same in state to state.
For instance, in North Carolina, I'm married and I have two children, and if I die intestate in North Carolina, my husband and my children split a piece of my estate, goes in different percentages.
In Virginia, if you're married and you have children and all the children are of the marriage, everything goes to your spouse. So, it's a very different result depending on what state you live in.
I always found the North Carolina rule about when you die intestate and you're married and you have no children, to be interesting, because they leave a percentage to the spouse and a bigger percentage to your parents.
So, it's not necessarily intuitive about what happens when you don't have a will. Some people think it goes to the state, but really, that's the 7th or 8th option. These states are trying to figure out what their citizens would have done, had they done a will.
So, a will is commonly referred to as; you need to do an estate plan, you need a will. But your estate plan might actually consist also of a power of attorney or a revocable trust, maybe an irrevocable trust too, depending on your situations. But it can involve a lot of documents, in addition to just a will.
John Mason: Well, I think you hit that so great and one of the things I know, Tommy, you and I talk about is how people think in estate plan is a will.
And a lot of times we're talking to clients about why it's important to see somebody like Heather while they're young, vibrant, competent, able to make decisions for their own.
Because we're not necessarily worried about them dying tomorrow. We're more worried about them being incapacitated or not being able to make decisions right now when they're not supposed to be passing away.
So, I think it's interesting to think about, it's not only death. It's like what happens if I'm incapacitated? How are we going to manage all aspects of the financial plan and make it convenient for those folks who we've elected or asked to help in time of need.
Tommy Blackburn: And by incapacitated, that's — you could probably … maybe Heather can even give us her definition of that one. I think at the highest, most simplest form, it just means we can't make decisions for ourselves.
But I think there can even be an entire legal battle and world around what's considered incapacitated.
I think what was interesting though, that Heather hit on, you hit on John, is just the state is trying to figure out what would be the best solution here. So, all of this being proactive is, instead of having somebody else make the decisions for you when you can, is to proactively make those decisions so that your intentions and your wishes will hopefully be honored.
The other thing I think about here is we get these beautiful documents, with a lot of work and thought put into them. We usually find that they're not worth very much if we don't begin titling things correctly, doing our beneficiary designation.
So, there's a piece of this estate planning equation that we have to also coordinate. We have to get it to coordinate with these documents and this plan that’s put into place.
John Mason: And Heather, maybe because you've already kind of touched on this, with the difference between various states like North Carolina and Virginia, having different intestate laws, where do assets go if we don't have a will.
There are other things that are really different about states, like Virginia calls their medical document different than North Carolina. And I think oftentimes, people confuse or think, “Well, I did my estate plan in 2007 when I was in Virginia. I don't need to update that just because I moved to North Carolina.”
So, I know a loaded question, but I think you'll be able to address that better than us.
Heather Szajda: Absolutely. Let me touch on a few things that you guys mentioned. The first, Tommy mentioned incapacity, and there's actually a difference between medical incapacity, incapacity that might get you a guardian appointed, where we need to go to court and the capacity to make a legal document.
When we think of incapacity, the first thing that comes to mind is somebody's lying in the bed and they're unconscious and they clearly can't make a medical decision for themselves. And that's why you might want to get your state's version of an advanced medical directive or a healthcare power of attorney.
But there's also sort of this gradual decline in capacity, where somebody might be doing alright, they can get up, they can get dressed, they can eat their breakfast, they can go for a walk, but they can no longer understand complicated financial documents. Or they might be unduly influenced by somebody who wants them to sign something.
Maybe it's a spammer, maybe it's a cold caller to their house. But the capacity is diminishing a little bit. We're not talking Alzheimer's yet, but just a little bit of a diminished capacity to make good decisions there.
And that might be enough to get somebody a guardian through the court process. But then there's also capacity to make these documents in and of itself. And that is more of a legal definition.
Surprisingly, the capacity to make a will; you have to know who you are, know who the natural heirs of yourself are. So, you're married, you have kids, you remember who they are, have some idea what your assets are and know what the document says.
So, that's a very narrow, very easy to meet threshold for somebody to make a will. And consequently, somebody with what we think of having diminished capacity, is often influenced to make a will that might not accurately reflect what we want, because that legal threshold of capacity to make a will is so easy to attain.
You also touched on the different intestate laws and the state differences. And while we all think of that threshold of capacity to make a will, so though most states have that low threshold for capacity to make a will.
So, I often will go to the hospital, to a nursing facility, to an age-restricted community to see a patient who might be recovering from surgery or who might just need a little more assistance than they currently get on their own.
And oftentimes, I might have to go once or twice, but depending on when they last ate, when they got their medication, we can get some documents signed if they are coherent and they can answer those questions for me.
There are a lot of state differences, as you said; Virginia calls their healthcare power of attorney an advanced medical directive, and it's very different from North Carolina, which calls their form the healthcare power of attorney.
It's a different state philosophy really on what that document is used for, which is essentially allowing an agent to make a medical decision for someone, if they lack the capacity to make it themselves.
And though both state legislatures have promulgated sort of a sample form in the legislation that they have passed, here in Virginia, you'll find most attorneys will create a form that includes additional items such as language around organ donation, language around HIPAA privacy waivers, and things that make the client more aware of the document's purpose and authority behind it, so that it eases the way for the agent to make use of that.
In North Carolina, you'll find that attorneys do not mess with that form very much. It has remained the same for about the last 30 years.
John Mason: Well, you hit on so many good points and the last one, one of the most recent points was everything that that Virginia advanced medical directive does. And admittedly, I'm not super familiar with North Carolina estate law, I'm not familiar with Alaska estate law or what have you.
But Virginia, that advanced medical directive, sometimes when people hear that, Heather, they think, “My living will, I don't want to be hooked up to life support.” And that's one component of that advanced medical directive. But then it's also, who's going to make decisions for me if I'm permanently or temporarily incapacitated.
And then that last part, I think you mentioned, was the HIPAA release, which says, maybe you've got some family members that are coming to see you at the hospital on shift work, and maybe you want 10 people being able to communicate to the doctors about your status, but only one person to actually have the authority to make that decision.
So, really, thinking this through, the Virginia document is pretty encompassing and gives you a lot of flexibility.
Heather Szajda: It does, it does. I will say this is the one document where it's really hard to get another state to honor something done out of state. So, if you're moving into Virginia, you need to do a Virginia advanced medical directive. If you retire to North Carolina or Florida, you need to get their document in place.
I'm not saying it would be completely ineffectual, but I can guarantee you that doctors look for something that they're familiar with, and if they are handed a document with a different state's language, a different state written on the top of it, they're going to kick it up to their legal counsel, because they just do not have time to make that decision.
And so, it's just going to be easier on your family members or the people who you have tasked to make those decisions for you, if you have the right document in place.
John Mason: You read our mind. I know, Tommy, you and I wrote this question down, it was like, “Do you absolutely need to update some of these documents when you move states?” And we didn't even have a chance to ask Heather, she just answered it for us, which is awesome.
So, if you're moving, are you a federal employee? Are you moving to Texas or Florida or somewhere that doesn't tax your federal pension, whether it be CSRS or FERS? Maybe time to update that estate planning document, not just for the medical stuff, but for a host of other reasons.
And Heather, since we're doing such a good job covering advanced medical directive, in as few words as possible, which I know is hard, one of the questions that has been asked to us is, “Do I really need a Virginia advanced medical directive, because the hospital keeps pushing stuff in front of me and I keep signing things at the hospital. Why do I need to compensate Heather or another attorney for a more specific document?”
Heather Szajda: So, I am aware that hospitals such as the Bon Secours System here in Virginia have trained people to discuss advanced medical directives. If you have one in place and you just tell the hospital, “I've done one with an attorney,” they'll leave you alone.
But they will try to get patients who are going to be admitted for elective surgeries and other things to sign something, because they want to be able to talk to someone about a medical decision, should something go wrong.
And I've heard the training, I've heard I guess the script that the nurses are supposed to follow and it's not bad, but you only need one. And you should get one, that a doctor advises you on.
So, for example, maybe you're somebody that lives in Virginia, but you spend half the year in North Carolina at your beach house. Maybe what you really need is a Virginia advanced medical directive and a North Carolina healthcare power of attorney that do not cancel each other out.
And maybe you need some legal advice on, how do you appoint your agents in successive order or can two agents act jointly? Do they have to act together? What happens if there's a disagreement? All of these things, you should probably talk to your attorney about.
Tommy Blackburn: And really many of these concepts that we're hitting on, apply to much more than just advanced medical directives or also known as healthcare power of attorney, depending on what state we're in. When you're talking about successive agents and can we make decisions independently?
I think this applies to power of attorneys; I think it applies to our trustees. I realize we're throwing out terms that we haven't even covered yet, but it's kind of a common theme of how these decisions need to be made.
You can have some pretty big impacts and probably this topic to a degree will be hit on deeper in a future podcast, because we're trying to cover quite a bit of material in this one, maybe a subject matter for a deeper dive in another show.
And I think Heather, because I threw out power of attorneys, I think that's another classic one, when you go to another state, that you need to have that document revisited?
Heather Szajda: Absolutely. There are lots of states that have adopted the uniform power of attorney act. Virginia is one, we adopted it around 2012. North Carolina adopted theirs around 2018 or 2019.
It makes the default law of a hundred years of case law and hit or miss statutes all comprehensive, all in one. It's a great piece of legislation, but it really comprehensively thinks about what somebody might need an agent to do if they become incapacitated.
It clearly defines what a durable power of attorney is. It defines whether or not a copy of the power of attorney is acceptable or whether you have to have the original. It defines the accounting requirements for the agent.
But most importantly, just having this document will save your family a lot of money, because if you don't have this, the only way they can act on your behalf is to go to court and ask the court to appoint a conservator and a guardian over you.
That is a time consuming and expensive process, and not only when you achieve it, but then it's expensive in terms of the annual reporting requirement that your loved one must do to the court every year in which they serve in that capacity for you.
There are of course, always good reasons to have a conservator or a guardian, if you have a child that is severely autistic or otherwise disabled and will need a guardian or a conservator for their lifetime, of course, you need to go through the court process to do that.
And Virginia has made huge strides to make sure that those individuals are not left hanging, because they don't have the legal capacity to sign a power of attorney. But for the rest of us, you absolutely need to have one. In fact, the day my son turned 18, I made him sign his.
Tommy Blackburn: That's almost like a financial planner, probably with their child, like opening up a Roth IRA at a young age. You make sure they have a power of attorney once they're of the age of majority, I guess, in the state. I don't know if that's the determination there.
John Mason: Well, we never have any idea where these episodes are going to go, and this is so great.
So, today, we're recording September 6th, 2022, are you a federal employee? Do you have a child that just went off to Virginia Tech, ODU, UVA, somewhere else in the country? Are they 18-years-old and they don't have like a stack of these young professional simple will, simple power of attorney, simple medical directive?
These are documents that are important when your kids, just like you said, Heather, turn 18, start going to college. I'm pretty sure Virginia Tech’s not talking to my parents if I'm in the hospital and I don't have one of those things signed.
Heather Szajda: Yes, it's a little irritating to know that you're still paying the tuition and the health insurance, but you don't have a right to know anything once they turn 18.
So, yes, I encourage all my friends to get their kids this document in place before they go off to college. It's one of those better safe than sorry steps we take. We pack sunscreen with them when they go to the beach, get them to do their power of attorney and advanced medical directive when they go off to college.
John Mason: Is that a service? And I don't remember — is that a service that you guys offer at Virginia Estate & Trust Law or is that more of like an ancillary benefit for people who have already hired you, for example?
Heather Szajda: So, for my clients who are already with us, we do a lot of powers of attorney and advanced medical directives for their kids when they become of age. We don't usually do them as standalone documents for just clients who we don't have a relationship with. But we haven't been asked all that often for that service either.
John Mason: That's perfect. And maybe we can kind of sum up this first kind of section of conversation with a simple yes or no answer. And I think all three of us would agree, does everybody need an estate plan?
And the answer is yes. Yes, everybody needs an estate plan, kind of regardless of how much money you have. Because if you don't have any money, you still may find yourself in the hospital. Maybe you have money, maybe you need to worry about minor children or you have other considerations. So, that's longer than one word, but I think the answer's yes.
Tommy Blackburn: Yeah, I imagine Heather, will concur. We’ll certainly let her speak for herself there, but I certainly concur, it is about being proactive and just taking control versus falling into a system that maybe gets us to the right answer. Maybe it doesn't.
Heather Szajda: Absolutely, absolutely. Everyone needs an estate plan. If you own a car, if you own a house, if you own anything in your own name, you need an estate plan.
John Mason: So, there's a myth out there, and I know we've all heard it. Contrary to what everybody believe, estate planning and trust planning is only for the rich or I don't need a trust because I don't have Brewster's Millions, I don't have a hundred million dollars, I don't have $25 million.
So, I'm just a simple person, federal employee. I've saved quite a bit of money, but I'm not a trust person and my kids aren't trust kids.
So, Heather, maybe you can elaborate on why, one, estate planning is not just for the rich and kind of like debunk that myth that trusts are only used for the uber-wealthy, for example.
Heather Szajda: I will, but first, I'm going to comment on the reference you made to Brewster's Millions. Have you seen that movie?
John Mason: I have seen that movie.
Heather Szajda: I'm impressed if you have.
John Mason: It's amazing. It's so funny. I forget how much money he inherits, but he has to spend it all in like 30 days and he buys an iceberg and then there's like a drought somewhere and then the iceberg triples in value. It's so fun.
Heather Szajda: It's great reference. I'm pretty pleased that you know it.
So, there are a lot of things that an estate plan does that have nothing to do with how much money you have. For example, a will is the place where you name a guardian for your children.
So, if you have a child and they're under 18, you absolutely need a will so that you name a guardian for that child in the event that something happens to you and the other biological parent of that child before they turn 18.
Without that, the court is just going to listen to whoever petitions to who happens to want that child. So, I think as a responsible parent, you'd absolutely need to have a will.
But most often, what I'm accomplishing in drafting an estate plan with a client is not, how do I pass on their Brewster's Millions or how do I tie up their trust? It's how do I protect what they have for the next generation, get it to the right place, and how do I avoid the probate process?
If you don't have an estate plan, most states do a fairly decent job of figuring out who should get the money or who you would want to have the money had you done an estate plan.
But their solution is bureaucratic, costly, and timely. So, if you have a few kids and you have a few assets, you want those kids to have those assets and have access to them for what they might need without a whole lot of red tape.
So, a lot of what I'm accomplishing in my estate plan has nothing to do with tax planning or squirreling away the millions and millions of dollars. It's really just avoiding the court process and the probate process for my clients, so that if the worst thing does happen, we've got the easiest possible solution we can use.
Tommy Blackburn: Such great information. I think a couple things that if we can, I'd like to touch on there, is just that whole guardianship, John and I were talking a little bit before we all got together here.
And we were wondering, we know we name guardians in our wills and I think at probably every state, but we know we do it here in Virginia, and do the courts have to honor that, is one question we were curious about.
And then another is talking about probate, I thought that was all great. The thing that I thought of was the public nature of probate as well. Many times, when I think about particularly financial planning, like responsible Middle America, you got life insurance or something in place when you should, when you have minors, if something were to happen to you.
And not having that be public information, somebody's sitting out there, maybe even while we're in a place where the court's overseeing it, but as soon as they turn 18, I realize this is a dire scenario I'm presenting, but I think it's another benefit to avoiding probate, is just keeping it private.
Heather Szajda: That can be definitely a huge benefit. Let me go back and touch on your guardianship question, because that's a really good one. Does the court have to honor your nomination of a guardian within your will?
And the answer is no, because the court is always going to do what's in the best interest of the child. So, doing estate planning is unlike any other area in the law. I'm going to draft a document that's going to take effect at some time in the future. I don't know when that's going to be, I don't know who's going to be alive, I don't know what the assets are. I don't know anything.
It's a shot in the dark. It's not like a business contract where I am buying and selling something and I know exactly what it is I'm buying or selling and I know how much it costs, and I know the identity of the seller, and I know when it's going to occur. I don't know any of that with an estate plan.
So, when you are nominating a guardian under a will, it could be 8 or 10 years later that you actually pass away and that provision takes effect. The court will hear evidence brought by another petitioner, that the named guardian may not be in the best interest of the child because of some reason.
Some of the reasons that come up are the named guardian is in jail, the named guardian has died. The named guardian is now divorced or the named guardian refuses or they're having financial difficulties. I've heard the gamut — it doesn't come up much, but it does happen.
I will say that this is one of the things that I find is the biggest roadblock for young parents to get past in order to complete their estate plan, is who do we name as guardian of our child?
And I certainly appreciate that, because I've changed my mind several times in the last 20 years since I had a child. And I think that that's normal, as your child ages and as the guardian ages, different life circumstances come up and you just make a different choice.
But the courts are always going to do what's in the best interest of the child and that may or may not be the biological parent as we know in situations of divorce. And that may or may not be who you nominated as guardian 10 years ago in your will.
But I think there's a high standard of proof and I think the weight of the parental choice of that guardian in their last will and testament carries a lot of weight, in that determination.
Tommy Blackburn: Well, thank you for that. That was my suspicion as you were going, is that, I imagine the court will want to honor your wishes and that hopefully, it is a high bar as you said, to kind of go against your wishes.
And maybe hopefully, it almost sounds like it's the circumstances where, “Yeah, I forgot to update some things and maybe we do want my wishes to not be complied with here, because I dropped the ball somewhere.”
Heather Szajda: And you can do all kinds of things in an estate plan with respect to naming a guardian. You could name a married couple and include in the will, if they divorce, then I want this married couple, if it's important for you to name a mother and a father figure.
You could name an older couple. For instance, I could have named my parents which I did, but I also put in an age restriction. I said, “I name my parents, unless they have attained the age of 70. And then I name my sister and her husband.” Because I just didn't want my older parents running around some very energetic eight-year-olds.
And so, you could be creative and that's where going to see an attorney who specializes in this is helpful, because they can help you figure out how to get from A to B on that very hard point. It's a hard point for my clients to overcome.
With respect to the public disclosure piece that you were talking about, Tommy, that's a big piece that most people don't think about. And now, that we have sort of the era of the internet, I will call it, what goes on a matter of public record in the court system is, I would say, combed by people who don't always have the best intent.
And so, whatever you can keep off the public record, such as who stands to inherit, how much they inherit, what age do they inherit, the better off your beneficiaries were going to be because I see a lot of very nefarious behavior by different groups combing the internet.
Especially when somebody dies intestate, that's the worst, because you've got to list the ages of the kids and you've got to file an inventory and an accounting. And everyone is going to know just by pulling up that court record how much they inherited and when they're going to get it.
And so, even if it's not that much money, an 18-year-old who doesn't have necessarily all the life skills yet that a 25-year-old has, is just going to become very vulnerable to people who have less than stellar intentions when it comes to those types of victims, I should say.
And a simple estate plan can avoid all of that. We can put a pour-over will on record that just says, “My sister serves as my executor, and my sister is going to be the guardian. Everything else goes to my trust.”
The trust never gets recorded on public records. So, no one's going to see how much your kids stand to inherit, at what age they're going to inherit it. And that's just offering them the same protection you would want. And I think the same urge we have to protect our kids now with things like cell phones.
Like, “No, you can't do that until you're 13.” And “No, you can't put your public identity and information out there.” This is exactly the same thing.
Tommy Blackburn: Well, thank you. That's awesome. I know John and I, just probably because of where we are in our life with a young family, we're very passionate about young families having these estate planning documents in place.
I know my wife and I, we had ours done with Heather before our daughter was even born. That's just a financial planner in you that's saying like, “No, we got to take control of this for all of these reasons we're discussing.”
John, I know you were exactly the same, of having those documents in place well ahead of time. And I know it blows our mind personally when we meet young families or just families in general really, and they're like, “No, I don't have any estate documents.” And it's like, “What are you doing? Like you love these people, like you need to take this action.”
John Mason: Well, I don't know the exact stat and hopefully, none of our listeners … or either one of you guys like really correct me too bad here. But I think 50% or more of the United States still doesn't have a simple will. And to that extent, probably even a higher percentage doesn't have the necessary documents that we've been talking about.
So, it's time to act and I think all of us would agree that it's important to understand that your estate plan is an evolution. And that the plan that John and Tommy designed for our respective families with minor children, is going to be completely different when our kids are 25-years-old and hopefully, responsible and have left the nest and are doing great things, we'll still be young and vibrant. So, we probably won't be too close to the end of the line yet.
So, what we're solving for at 55 or 60 is different than what we're solving for now. And then one day we're going to wake up and we're hopefully going to be 85 or 90 and now, all of a sudden, end of life is closer, the documents have a little bit different meaning than they did before.
So, it will naturally evolve as you get older, as your family dynamics change, as you have children and grandchildren. So, this is not a one and done, “I have my estate plan, I never need to revisit it again.”
We often encourage our folks if there's a life change, revisit. If you move, revisit. If nothing's changed and you haven't updated your power of attorney or advanced medical directive in seven years, maybe get a new one, just so the banks and people don't yell at us for having one that's stale.
There are things that we can do over time to just make these documents consistently stay up to date. Fees are reasonable. Efficiency was one of the words guys, that Heather said that really stuck out to me is that we do not do estate planning to avoid the death tax. We do not do estate planning for 99% of the people out there to pay estate taxes or the death tax.
We're doing it to be efficient, we're doing it to avoid probate. We're doing it to make sure that our kids don't inherit money at 18. We're making sure that our executors and trustees don't have to go to the court every year and waste a bunch of time and resources to do that.
And then you both alluded to it, and I'm just going to call it out one more time; we get to be creative in these.
So, for example, I believe Heather is a very qualified estate planning attorney. So, maybe I want to name her as trustee and executor and I want to name my mom, my healthcare power of attorney and I want to name Sarah, my financial power of attorney. I could do that inside of the estate planning documents.
And same thing with your kids. You may have a guardian that's a great fit, but maybe, you have a family friend who's a better manager of the money. So, we can get outside of the box.
And then we want you thinking two or three layers deep on all of these. So, I know Heather, when you meet with clients, it's not just who is going to be the trustee, it's who's primary, who's secondary. And if you have a tertiary, let's make sure we have a couple people on the bench waiting to be called up.
Heather Szajda: That's right. A good trust agreement, yeah, or a good will for that matter is going to think, “What happens if all of the people my client named in this document pass away or unable to serve?”
And so, there's your backup, then there's the backup to the backup. Then there's a mechanism to find a backup if no one is left standing. And it does come up, it happens a lot of times. And so, we always want to make sure that we can get a fiduciary or a power of attorney in place without having to go to court.
A well-drafted document is going to go down all that rabbit holes with you. It's going to figure out how to solve all of those what ifs.
John Mason: And Heather, before I met you, before Tommy introduced me to you and your firm, I would help clients get will-based plans and I would help them get trust-based plans, and I think this is along similar thoughts.
And sometimes, if I thought the situation was a little bit more simple, I would gear them towards a will-based plan or if I thought it was more complex, I would gear it towards trust.
And the issue that I had, is that attorneys were charging drastically different fees for the will-based plan or the trust-based plan. And I can just say that like young families with a will-based plan, with testamentary trusts, probably not the route we want to go in.
So, what can you say to families out there who maybe have an old will or maybe have a will that has a trust in it, like a testamentary trust. Speak a little bit about how you guys are different and how they could find somebody like you. Because I think I firmly believe that 9 times out of 10, a trust-based plan’s the way to go as long as it's not seven times more expensive.
Heather Szajda: So, an important question to ask is obviously, what are your rates? How do you bill or how do you charge and what is your fee structure? I have seen and talked to other attorneys who have a fee structure based on the type of trust they draft and the provisions that go into that trust.
So, for example, if you wanted a plain revocable trust and you wanted asset protection and you wanted special needs and you wanted all of these, I'm going to call them add-ons, because I think that's what they're called in their fee schedule, you could end up with a trust that's 12 to $15,000, which is just ridiculous.
The ABA rules for ethics and the Virginia rules that attorneys are bound by, say that you really shouldn't charge for things other than your skill and your time involved in the matter.
So, my firm takes the position and I take the position that we charge you for the time we spend with you. And so, the time that it takes for me to talk to you about your estate plan and figure out what your goals are, make a recommendation, draft the documents, go through the signing, it's the same time whether it's a will or whether it's a will and a trust plan.
Most of my time, most of the value is coming from the advice I give you and me helping you navigate all of the questions you didn't even know you had until you sat down and talked with me.
Pointing out all of your various options and you kind of sitting there stewing in them, for lack of a better word. It's kind of like when you go to an eye doctor and he's like, “What about this one? Is this one better? Is this one better?”
It's the same process that I go through with my clients, “Have you thought about this? How does that make you feel? What if we made these types of distributions for your kids? Would you want that type of thing in your trust?”
So, as I said, there's, there's not a real difference for me in terms of cost, when a client comes to me and says, “I just want a simple will.” Probably, they're going to end up in Virginia.
Once we talk it through, they're going to want to avoid the probate process, and they're going to want to make things as simple as they can for the people they leave behind. So, that means they're going to have a trust.
I would avoid firms that use CAN documents or standardized software and don't customize anything. I think it's really important as an attorney that I'm drafting only what my client needs. So, most of that, I can probably accomplish, in under 20 pages, I don't need a hundred pages to do that.
Tommy Blackburn: So much of what you just said resonates with us and the recommendations we make with our clients. So much of you said, the value you bring and the value of your time and your advice and the questions you ask, that's how we feel like we approach it with our clients as well.
From a financial planning perspective, we're not billing you by the page for a financial planning report. It's about the advice and the customization, the individualized advice, and making adjustments as we go.
As we're talking here, yeah, we've actually got a red book in the room right now, that somebody dropped off the other day, that unfortunately we haven't got them over to you yet, Heather.
And this thing has got to be three inches, four inches thick. To your point about like keeping it customized to you and simple, and this is one of the things that we sell your firm, to clients all the time, is it's like not only are they great and they're going to ask you questions you need to think about and give you solid advice.
But the documents are digestible, they're specific to you. Every time I look at one of these things, like I'm a financial planner and a CPA, and I don't know if I can understand everything in that book. Like how in the world is somebody coming behind you supposed to do it?
John Mason: It's impossible. It's impossible. And I loved Heather, your point about, software is great, but it's kind of like that crap in crap out or bad info in, bad results. And I think you guys draft your own documents and the language in your documents has been approved by a panel of experts at Virginia Estate & Trust Law.
And my hunch would be if you pulled a lot of attorneys who use software and use red books, they wouldn't probably necessarily understand why they're printing the things they're printing. And that's scary.
We love that you're not charging by the word, we love that you're adding value, not charging based on how much paper you printed or how many words that are on the paper.
And estate planning is just one of those things that we believe everybody has to have. We believe it needs to be simple, we believe you need to have what you need to have and nothing more. And I'll leave this kind of segment with one quick story.
I don't know if you remember this, Tommy, and maybe I shared it with you too Heather; is I found a discrepancy in one of these red book trusts. And I read article four, and then I read article eight and that was like a hundred pages later.
And article eight was in direct conflict with article four. So, I called the attorney, I said, “Well, which one wins?” He said, “What do you mean?” I said, “Well, they say different things. Which one wins?” He said, “Well, four comes before eight, so let's go with that.” And I'm like, “Are you kidding me?”
Tommy Blackburn: It doesn't sound like I want to rely on that. Maybe, yeah, that's a little concerning. And I remember a much simpler example though, but with a similar type of firm where there was a question about rental income passing through the trust and so forth.
And their response was, “Oh, you don't have to report it.” And so, at this point, we're kind of getting outside of the estate practice area. This is more into tax, but most estate planning attorneys are versed in taxes.
And I was like, “Well, how did you get to that answer? Because I'm pretty sure the instructions from the IRS say if we have like over $600 of income, we're supposed to be reporting this. So, how do all of a sudden, do we just skip that?” And they're like, “Oh, well that's what I was told.”
And that's more of also just a professional. Like if you're going to speak with authority on a subject, like you should know the rules, not just shoot from the hip.
John Mason: Well, guys, let's wrap this up a bit, because it's been an awesome episode. Heather, we're going to have to have you back for another one too. But let's tackle implementation really quickly and then maybe conclude with some action items, which we always think are important.
So, let's say Heather, that somebody has come to you or somebody at your firm, they have these beautiful documents that are digestible. You can read them; we can understand what's in them — is their work done or do they have more work to do and why?
Heather Szajda: They have more work to do. They need to take the additional steps to make sure their accounts and assets are either titled in the trust or their beneficiary designations are to the individuals that are named in the trust or the real estate, or the business interests are in the trust. The pour-over will's going to make sure it gets there in estate administration anyway.
But if you can avoid any part of the court process, then you're saving yourself some probate tax and a lot of time.
So, I usually go through my client's financial sheet with them and give them detailed information on how I want the beneficiary designations to read and how I want the deeds to be titled and how I want the LLC interests to be assigned.
A lot of time, they want my help with that work. A lot of time they might be using another attorney to do some of that work that they already have a business relationship with, if it's more of a business interest.
But it is definitely the next step. And it's probably something that clients should be reviewing with their financial advisor every year, because you are going to do your will and you're going to stick it in your nightstand or your safe at home or your safe deposit box and you're going to forget about it.
And in between that time and the next seven years, you might buy a beach house, you're going to buy and sell cars, you're going to accumulate more assets, you're going to take out a new insurance policy, you're going to change jobs, and you're going to fill out all those forms through HR again, and you're going to forget to title those assets appropriately.
So, every year when you meet with your financial advisor, you should be saying, “Is there anything I need to do with my estate plan with these assets?”
John Mason: As always, concise to the point, everything that you just said, I'll just echo, is you have to actually use it now. Like now that you have it, you have to use it. And every time you do something, you need to think, “Now that I have a trust, what do I do with that? I'm buying real estate, I'm refinancing, I'm buying a collector automobile, I'm changing jobs. My 401(k) provider just switched from ADP over to Fidelity.” Guess what? Those bennies probably didn't move over with it.
So, Heather, wonderful points about actively monitoring, actively using, communicating with your financial advisor. I know Tommy and I love that you give us a one or two-page action list that says, “Do this with your house, do this with the IRAs, do this with the life insurance.”
And I think it's really important for our listeners to know that each asset class has a different recommendation. So, for example, insurance policies, we may beneficiary direct to the trust, whereas IRAs, we may beneficiary direct to spouse than children, depending on the circumstances. Not a recommendation, just a description or an example of how we might do things.
So, not only do we have to get the documents in order, each specific asset class should come with a unique recommendation from somebody like Heather that allows your assets to work in conjunction with your estate plan.
Tommy Blackburn: And a lot of that is because then we're starting to layer in income tax concepts or potentially, maybe even the estate tax, although hopefully, we've dispelled, that's usually not a driver here.
So, we kind of start, I think with, this is what I want to accomplish. And then how do we do it most efficiently? And efficient, it is partially avoiding probate, trying to make people's lives easy, as well as being aware of the specific income tax ramifications on how things pass, because that's a whole another matzo ball there of considerations.
And so, that's where a professional comes in, where a professional who understands these areas and can give you the proper advice and then help you implement it.
John Mason: So, we're going to go around the room a couple times with any closing action items for our listeners. Tommy, why don't you go ahead and get it kicked off.
Tommy Blackburn: Well, I think the first one is if you don't have an estate plan, you need to get one. And if you do have one, has it been 5 to 10 years? It's probably time to dust them off and see, do they still reflect your current life situation?
Maybe even shoot them over to that estate planning attorney you work with, assuming you trusted that person and they didn't give you a red book and are looking for a way to bill you again, so that they can put eyes on it and see have any laws changed that we need to adjust for?
Heather Szajda: I think the first step is to get a new balance sheet, Tommy, when you're sending those documents out for review. Figure out what's changed asset-wise, financial-wise, and family wise.
I'm always going to ask my clients for some basic information about their family primarily, and this is no lie, just to make sure I spell everyone's name correctly.
But that's the first step because I want to see what you have in place, if anything, and also, a little bit of information about you, so that at our first meeting we can talk intelligibly about the planning process, the probate process, and any options you want to discuss. Or anything that you place importance on, we want to start from there with enough information to go forward.
John Mason: I like that a lot, Heather, I really like the balance sheet. And then I'll just add on, put a second column in your Excel worksheet or on your notepad that says, “Beneficiary and joint ownership.” That way as you're reviewing those assets, you're seeing, “Okay, do I have a joint owner? If not, who's the beneficiary? Do my bank accounts, are they jointly owned, is there a beneficiary?”
So, I think that's a really good recommendation.
Tommy Blackburn: I was going to say, Johnny, you can probably toot our horn a little bit there in how we streamline this working with attorneys like Heather, because we do this.
And this is part of that annual strategic planning meeting that we're going to produce. Here's your balance sheet. For many reasons that's a good thing to have and most people enjoy them, but it's good to see from an estate planning perspective, here are your beneficiaries, here are the insurance policies.
So, that's part of hopefully, what a good advisor is doing for you as well.
John Mason: Well, guys, it's been an awesome episode. Heather, thanks again so much for joining us. You added tremendous value. We knew you would, but you added tremendous value, not only for us, but for our listeners. For that, we thank you.
Before we wrap it up, again, any closing comments from you would be greatly appreciated and maybe just a quick blurb again on the easiest way for our listeners or any audience member to reach out to you and your firm if they're interested in hiring you guys.
Heather Szajda: Sure, I was glad to participate. It's always fun talking to you guys.
I can be reached at Virginia Estate & Trust Law. Just google it. A list of our attorneys on our page will come up. Feel free to email me or call me with any questions that you have.
Tommy Blackburn: Okay. And hopefully, in our show notes, we're usually pretty good about putting links to our website and hopefully, we'll include those for your firm as well. So, just try to make it a little easier on our audience.
John Mason: Absolutely. So, it's Virginia Estate & Trust Law, that's vaetlaw.com, victor, alpha, echo, tango, law.com. And so, be sure to check them out if you have questions.
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