Transferring Wealth: Estate Planning 101, Ep. 245

In the latest episode of the *Capitalist Investor* podcast titled "Transferring Wealth: Estate Planning 101," hosts Luke, Derek, and Tony delve into crucial aspects of estate planning that every investor should know. Here are the five hot topics discussed in this insightful episode:

1. The Importance of Beneficiary Forms
Tony opens the discussion by emphasizing the critical role of beneficiary forms in estate planning. Often overlooked, these forms can be the most efficient and cost-effective way to ensure that your assets are passed on to the intended recipients. Whether it's a life insurance policy or a 401(k) plan, keeping these forms up-to-date can save time, money, and legal complications down the line. Tony advises reviewing these forms during life events like births, deaths, marriages, divorces, job changes, and relocations.

2. Basic Estate Planning Documents
The hosts then move on to discuss the fundamental documents that should be part of any estate plan. Tony outlines the "basic suite" of estate planning tools: a will, a living will, a power of attorney, a durable power of attorney, and a healthcare power of attorney. Each of these documents serves a unique purpose, from specifying who gets your prized possessions to outlining your healthcare wishes in the event you are incapacitated.

3. Specific Strategies for Business Owners**
Luke brings a focused perspective on estate planning for small business owners. He highlights the necessity of having a buy-sell agreement, particularly if the business is to stay within the family. Further, he discusses advanced strategies like deferred sales trusts that can save significant amounts in taxes when transferring business property. This segment underscores the importance of personalized estate planning to fit diverse financial situations.

4. Advanced Trusts for Special Circumstances
Tony sheds light on more specialized trusts designed to address unique family needs. From spendthrift trusts that control how and when heirs receive their inheritance to special needs trusts tailored to protect children with disabilities, these advanced trusts can help manage large estates and ensure the estate is distributed according to very specific conditions. This topic provides a deeper look into how tailored estate planning can offer nuanced solutions to complex scenarios.

5. The Role of Communication
Derek wraps up the key points by stressing the importance of open communication in estate planning. He recounts a personal story where a friend wasn't aware of the tax implications of inheriting an IRA, underlining the need for families to discuss financial plans and wishes openly. The hosts recommend not only organizing your financial documents but also sharing the pertinent information with your beneficiaries to ensure there's no confusion when the time comes.


The hosts agree that having a comprehensive estate plan is crucial not just for your peace of mind, but also for the well-being and financial security of your loved ones. Estate planning is not a one-size-fits-all process; it requires a tailored approach depending on your specific financial situation and family dynamics. Consulting qualified professionals is a must to navigate the complexities and nuances of transferring wealth efficiently.

Transcript

0:00

Hello. Hello, and welcome to this week's episode of the Capitalist Investor. As always, you have me, diamond hands D, and we got the whole crew here. Luke Lloyd and Tony Zabigala. You're not coming out with our. I got a couple phone calls in the last couple weeks, and they're like, who is this? Anthony. Anthony fella. On my application here, I was like, is Tony the tiger? And they're like, oh, okay. So I noticed that we haven't said our last names a lot on the show, so. So there we go. Awesome. But, yeah. So how we doing? How we doing this morning, guys? We got a good one today. You know what? As I get older, allergies are becoming a real thing. Yeah, they really are. Like, they really wreck my life these days. Like, I never used to have allergies, and now I do, and then I get, like, cold, like, symptoms, and my throat stinks. And that's why I have a raspy voice today. It's awesome. It's that time of year. Fantastic. All right. I'm the same way, and I'm, like, half your age. Yeah. And you go camping with, like, a garbage bag and a bottle of water and. Heroic for some reason. It's been worse this year. The allergies, I don't know what it is. I think it's maybe pollen. Pollen levels? Yeah. I don't know. I don't know. Oh, weird, weird, weird, weird comment. So has any. Is, like, the lightning bug population decreasing? Because I remember when I was a little kid, they were everywhere. I saw one the other day, and I'm like, that's the first one I've seen in, I feel like, years. Talking about while I was camping, I saw, like, a little yellow light on the ground. It was pure dark, and it was, like, really yellow. Like, dug into the ground. Like, what the hell is that? I didn't have a phone on me, so my brother was by me. I'm like, hey, Kate, come here real quick. And trying to light on. They come to spot over here, and just the yellow light went away. He's like, Luke, are you crazy? You doing something that you're not supposed to be doing? Like, you imagining things over here? I'm like, no, it was right here. I think it was lightning bug is what it was, buried in the ground. That's the first time I seen one, a long time. It's sad. I used to. I used to like collecting and what maybe I do. Yeah. Is that why kill them all? It's. It's on me. Damn it. It's on YouTube. Okay. All right. Today we're talking on our financial planning corner is transfer of wealth. So as you work and collect assets and accumulate assets and go through retirement, you know, whatever stage you're in, this money, you know, the, you know, father time, right. Is always there. Right. You can't, you can't escape them. And eventually you're going to have to pass all this stuff on to the next generation, but it's also on you to get it right. So setting up the right documents, knowing which documents to set up, are the things that we're going to talk about today. And because at the end of the day, you want to transfer your assets that you've accumulated your whole life to the right people and tax efficiently, because it's that those two things, they're on you. And I would always say that, first and foremost, that your beneficiary forms, because most people have life insurance, qualified plans like 401 ks, iras, the beneficiary form trumps everything. It's the most efficient tax or estate planning tool you can use, and it's free. So if you haven't updated or looked at your beneficiary forms, you should, and you should do it on what I refer to as life events. A birth, a death, a marriage, a divorce, moving from state to state, you know, those are different things. Or retirement, right. Getting a new job, any of those situations always should queue for you to look at your beneficiary forms. Now, we can then dial up even more specific estate planning documents, such as, I call them, the basic suite. So if you work with an attorney, what you should get from him would be a will, a living will, power of attorney, durable power of attorney, and healthcare power of attorney. So what's the will going to do? I mean, I jokingly say this, but it's like, all right, who's gonna get my$5,000 lawnmower, right? You know, who's gonna get my baseball collection? $5,000. I know, right? Man, you know, go cut Jacobs Field with that thing. Or progressive field. Sorry, living will. Again, a basic way to say it is that if you're on life support, do you want, do you want to stay alive? Like, if you. Do you want them to pull the plug or not? Like that. It's more of you, your wishes, rather than a doctor's or, you know, your family. Like, what do you, what do you want to do? Power of attorney. Durable power of attorney. You know, a lot of that is just if you're in, you know, in a coma, like, a coma, state of. Incapacitated. Yeah, incapacitated can't function, things like that. You have somebody there to speak for you just on general life decisions and also the durable power of attorney's financial and then the health care. Again, you know, and I. The healthcare power of attorney, I feel is actually very important because if you want, if one of your, your significant other, your family members go to the emergency room, you want that because you want the doctor to be able to talk to you, you want to be able to have input, you want to be able to just know what's going on. Without that, they may not because of HIPAA rules. And I always tell people that I sit down with, I'm like, hey, how, you know, I'd like to know, like, how old your kids are, because if your kids are, you should have durable power of attorney on your children, too. I mean, obviously, if they're your children, that's not a big deal because you're, they're still a minor and you'll be able to talk to the doctor, but what if they go to college and now they're more adults and things like that, and they're at college and they have a mishap and you call, you know, 500 miles away, they might not talk to you. Right. So those are, those are the, those are the, that's the basic line, you know, I guess the baseline of this conversation today. You guys have any. I want to go more niche, like, into, like, just because recent conversations I've been having with small business owners, like, you know, a lot of small business owners will either need a buy sell agreement to liquidate that from an estate planning standpoint, or they'll need some sort of buy sell agreement to keep in the family. Maybe a son or daughter is taking over the family business. Right. And you got to make sure you're doing that the right way. But then the conversation becomes even deeper into that. Like, what strategies can you utilize to protect, maybe the real estate? If you own real estate within the business? You know, is there deferred sales, trust, things like that that come into the equation that could see, save you hundreds of thousands, if not millions of dollars of taxes, basically putting the real estate into the trust and not having to pay some of the taxes that you would have been having to pay on the full liquidation of that business coming into the capital gains. I mean, talking like a business owner, what if you own, like, ten houses, rentals? Each one of them should be in their own LLC, right? And there's different ways to structure that, right? So, I mean, this is where we can't talk about every single individual situation on this podcast, but that's where my mind goes, just because of recent conversations I've been having with the small business owners from an estate planning side that are 70, 80 years old, looking to pass on that business to the next generation, but doing it from a tax efficient basis and making sure that the five or six other kids that you're not passing the business on to also aren't frustrated that they feel like one person's getting the, the best kind of estate planning out of, you know, the situation. Yep. Another thing is someone maybe like, advanced, you know? So that's good. I'm glad that you brought that up because I was kind of talking on the individual basis, but, yeah, if you're a business owner, there's definitely legal, legal things that you can set up to protect you and your family. So you bring up a really good point. Thanks, Tony. The other, the other thing I'm thinking about are some of, like, more the advanced trusts. So, like, if you've created a nice estate plan, have a lot of assets, and you couldn't trust your children with $20, let alone hundreds or millions of dollars, there's special trust, spendthrift trust, making sure that once this money is passed on, they just don't get a big check. You know, maybe that money is divided and distributed over every three years or every five years, or maybe they can only, they can't touch the principal, they can only spend the interest that comes from the accounts. Right. Special needs trusts. You know, the one thing you want to do is, you know, if you have a special needs child and you pass away, last thing you want to do is give that child money because there's a good chance that that child may be already be on some type of disability. And if that child were to inherit a lot of money, the state could come in and just take all that money. So again, we want to make sure we understand all the situations because there is a solution to most things, right. And you can document it through some type of trust. And that's where a trust comes into play. A lot of people are like, do I need a trust? Do I not need a trust? In my opinion, I don't think many people do, because a beneficiary form can resolve a lot of those issues. But now, if you want special things to happen from the grave, then, yes, a trust would come into play. Well, it's sometimes interesting, too, in our business. I was talking to somebody a couple weeks ago, and they're like, can you give me some advice on, we're talking about special needs, trust and things like that. And I'm like, well, I need to know all about your situation. You need to tell me every single detail so that way I can fully understand your situation to give you any kind of, as a fiduciary, like, like good advice. And then they're like, well, maybe I don't think, you know, I don't want to open up about everything. And I'm like, well, I can't give you good advice. Then it gets interesting in our business, like, you know, we are one, your personal CFO, right? We're also, like, there to give you that good advice on your situation. We need to know everything. And sometimes interesting how people do hold back. I'm sure you've seen a tony over the years, and, you know, sometimes we don't know everything, and that's where, you know, we can't give you good advice if we don't know everything about your situation. Yeah, yeah. You know, I'd say just a couple, you know, talking about this stuff. It brings up recent conversations I've had as well. You know, I think the taxation is a big part, you know, talking with a friend. Actually, they were getting ready to buy a house, and their dad was going to give him some money for the down payment. Long story short, the dad didn't really even fully understand that all of his IRA money was going to be taxable to his children when they inherited. He basically just figured that out through that process. So it's important to talk about this stuff as well. Coming from the repressed irish catholic background, people don't talk about money, right? And they certainly don't talk about what you're going to get for an inheritance, right? Yeah, that's what I would say is the complete wrong way to go about things. It's much better, especially with the person, you know, with the assets they're passing down. You want to make sure your wishes are met, right? You want to make sure it happens how you want it to happen. So it's important to talk about this, talk about it with your family to set this stuff up properly so everything passes as it should. Yeah. You know, I think the very first page of your estate planning document form. So when I had my estate planning documents, I got a nice little folder, right. The very first page should be something that maybe you create so that if somebody opens it up because you passed away, it says, here's your, here's my financial advisor, here's his name. Here's his phone number, here's his card. Call him because he knows everything that's going on. If you're, you know, and then also maybe have, like, just a, you know, a net worth statement, you know, kind of like where everything is, what's going on, and, you know, what type of accounts you have, how much might be in each account, things like that. So I just got something popped in my head. Oh, man. Give it to me. Let me use the example that I've talked about actually, lot in our classes. You know, even if you today's world, like, with bitcoin cryptocurrency, if you have a flash drive that nobody knows where it's at, or the 52 whatever encryption code to get into, like, you got to have that somewhere. Mark that down. Yeah, I just know that's becoming more and more popular. You know, if you have these flash drives with, then thousands, maybe hundreds of thousands of dollars on it, like, make sure you're counting for where that's at and how to get into that again. That's. That's why crypto is just so. Oh, man, it's such a. I know. I don't want to go down that avenue, but, man, it's such a. It's such a complicated investment. Yeah, but anyway, make sure that's on your network statement. True. Yeah, I mean, it should. It should. Especially if you have a ledger and you have your coins on that, on that, quote, unquote, you know, thumb drive that holds your bitcoin called ledgers. Yeah, definitely. So. All right. Well, again, at the end of the day, it's. It's about having a plan and, you know, not just about you having enough money to get through retirement, but, like, what are your wishes afterwards? You know, making sure that, again, transferring to the right people and making it most tax efficient for them. So take us home. D. All right, well, thanks for listening to this episode. If you guys have any questions or show ideas, hit us up at info, and we'll talk to you next time. The opinions expressed in the podcast are for general informational purposes only and are not intended to provide specific advice or recommendations for any investment, legal, financial, or tax strategy. It is only intended to provide education about the financial industry. Please consult a qualified professional about your individual needs.