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Transcript
Scott
Hanson:
Nearly half of all Americans pass on without a will or an estate
plan in place. That's good news for the tax man and probate attorneys,
but a sobering statistic for anyone interested in providing for
the people they love and the causes they support. Hi, I'm Scott
Hanson...coming up, all the information you need to begin planning
your estate because, like it or not, you can't take it with you.
(OPEN)
Scott
Hanson:
As a financial planner with the Sacramento firm of Hanson McClain,
I've seen hundreds of clients, from every rung on the economic
ladder, benefit from good estate planning. For the next half hour,
with help from our community's leading experts, we'll be discussing
the essential elements of the process, from basic information
everyone needs to know, to advice on selecting an advisor and
communicating with your family, and the rewards of leaving a legacy.
At the end of the program we'll have a web site address with links
to a wide range of planning resources and a full transcript of
this broadcast. Before I convene our first panel of experts, KVIE's
Pat McConahay has prepared a brief introductory segment to help
us kick off the conversation.
(PKG)
Scott
Hanson:
Joining me now are CPA Steve Olds, estate plan attorney Mark Drobny,
and estate plan attorney Kay Brooks. I guess the main question
is who needs a will or trust, do half of those people who die
without it, do they need one... I mean...who needs a trust?
Mark
Drobny:
I think everybody needs a plan - whether you're young and starting
a family and looking at who should be the guardian of your children,
or you're acquiring assets and you're making sure they won't be
subject to probate or taxes, or um, how old someone's going to
be before they inherit something. There are different phases of
your life that require different sorts of planning, but I think
that we all need some sort of plan.
Scott Hanson:
Alright...and....
Kay
Brooks:
I agree with Mark. I think of it as three categories of people
who need planning...one would be if you have anyone who is dependent
on you. You want to make sure they're taking care of, whether
its minors or older family members you're helping. And also if
you have wishes about how things go. If you don't get those in
place, it's not going to happen naturally. Finally, if you care
about having someone help you if you were unable to manage your
affairs, you need that in place too, so pretty much everyone falls
in one of those categories at least.
Scott
Hanson:
When is the best time to begin. You know, I might say that I'm
a young man, life expectancy is at 77 years, I'm healthy, what's
the point...why don't I just wait until I'm about to die?
Kay
Brooks:
Well, I think the older you get and the more complicated your
family is, or the more assets you have, each of those things make
it a greater priority, but honestly, once you're an adult and
you have any of those issues, you should look at your own situation
and see what you need.
Scott
Hanson:
Issues such as children, and those sorts of things?
Steve
Olds:
Yeah, I've found that usually there is a life event that occurs
that the topic arises when I meet with clients. For example, the
birth of a child, the death of a parent, uh, that type of event,
uh, leads to a client asking me, "What's involved in estate
planning?"
Scott
Hanson:
Well, let's say that someone doesn't have a will or trust in place
and they die....what happens?
Kay
Brooks:
The state gets your assets in most cases, but there is, you are
left with a default plan that the state has for you.
Scott
Hanson:
Which is what?
Kay
Brooks:
Everyone in California is bound by the California probate code
and that has a plan for you if you haven't put your own plan in
place. The problem is so often that plan is so not what you would've
chosen if you had done it yourself, so you can greatly improve
upon the plan just by a little bit of advanced work
Scott
Hanson:
Well, what is probate?
Mark
Drabny:
Probate is the orderly administration for an estate, it is a process
that has evolved over a long period of time in our legal system
that puts safeguards in place to make sure that your wishes are
protected, that your heirs are protected, that your creditors
get paid, and so there is just a nice orderly procedure that needs
to be followed and in a lot of cases it's an antiquated system,
it's an unnecessary system, but in the default mode, like Kay
said, there is that system in place.
Scott
Hanson:
I think people think that if they have a will, they've avoided
probate, but a will, actually, if that's the basis of your estate
plan, you will go through probate and -
Scott
Hanson:
Is that expensive?
Kay
Brooks:
Probate?
Scott
Hanson:
Yeah.
Kay
Brooks:
Probate is expensive. The minimum estate size of a $100,000 and
that's just fair market value, gross value, sends you to probate,
and people are there.
Mark
Drabny:
And the fee's $8,000 on the first $100,000.
Kay
Brooks:
So you can do a lot of estate planning for the cost of a probate
if you hadn't done that planning in advance.
Steve
Olds:
You know what's interesting too is probate is a public process,
it's open..
Scott
Hanson:
It's like an open book
Steve
Olds:
It's open for public inspection, that's correct, where if you
do see an attorney set up a trust, that becomes a very private
matter.
Scott
Hanson:
Well, setting up a will a will help to reduce some taxes at death.
I know some people are concerned - they inherit some money, and
I get those questions all the time
I get a lot of questions about estate taxes, you know, very basic
questions, what's the difference between an income tax and an
estate tax, what how about-
Scott
Hanson:
What is the difference?
Steve
Olds:
You know the income tax is something we pay every year...
We've got the gas tax, the car tax, the sales tax, the income
tax, social security...
You do...I guess the only good news about the estate tax is that
it's a one time tax - you pay it just one time.
Scott
Hanson:
And it's after you're gone so you don't feel the pain.
Steve
Olds:
that's right, you don't feel the pain yourself.
Scott
Hanson:
Now Mark and Kay, you may not be aware of this, but some people
do not have the most favorable impression of attorneys.
Mark
Drabny:
I'm shocked
Kay
Brooks:
How can that be?
Scott
Hanson:
I mean, don't take it personal, it's just ...uh, do you need an
attorney, does someone need an attorney?
Steve
Olds:
There are a lot of do--it-yourself books and online assistance
available for individuals, but if you do your own will or trust,
you won't be around to see the results of that and uh, I would
suggest if you are going to do it yourself, that at least you
have an attorney view the work you've done.
Kay
Brooks:
A good attorney can help you anticipate a problem and avoid it.
And I would add to what Mark said, to not only work with someone
who does this, but work with someone who does it a lot. I think
it's worth it to find someone that this is a big part of their
practice.
Scott
Hanson:
What is a trust and what's the difference between a will and a
trust and what kinds of trusts are out there? I mean, we hear
these words but what do they mean?
Mark
Drabny:
A will is a document that speaks after you die, and by law it
will be administered under the probate system if the total value
of your assets is $100,000 or more. A trust is an umbrella that
you put over your assets. You as the trustor create your trust,
you take your assets and you put them into the trust, and typically
you'll name yourself as the trustee.
Scott
Hanson:
So you still have control, right?
Mark
Drabny:
You are managing your assets under the umbrella of the trust for
the benefit of yourself. In the next phase, it would address who
would be the trustee of your trust in the event of your disability.
In the final phase, it talks about who would be the trustee and
the beneficiaries of your estate when you die.
Scott
Hanson:
If you look at statistics, there is a good chance that particularly
in a family - someone's going to be incapacitated for a period
of time either because of an accident, or it's at the latter stage
of our life, we just can't make the decisions that we made when
we were younger and healthier. How can estate planning help in
that area?
Kay
Brooks:
I think that it's easy to overlook that as part of estate plan
because we focus at time of death as the critical time, but as
we're all living longer, incapacity is really becoming an issue
for more people. And it's what brings a lot of people to doing
planning. Um, just as we're planning for time of death, you want
to make sure that you have people authorized to help you if you're
unable to manage your own affairs.
Scott
Hanson:
And some people say everyone needs a living trust, and some people
say, no, living trusts are only if your assets are such to such
size that there are going to be estate taxes. What is a living
trust, and who are they for?
Mark
Drabny:
A trust is simply, a trust is simply an umbrella that you put
over your assets to protect them from the time and expense of
probate to provide for some orderly administration of your estate
if you were to be incapacitated at that time.
Steve
Olds:
That's right. And while you're alive, the trust and you for income
tax purposes are one in the same. So you don't have to worry about
filing a separate tax return for that trust. You are...You and
the trust are one.
Scott
Hanson:
So let's say that I don't have an estate plan in place, I say
"Oh my gosh, I've got to do something quick," What's
it gonna cost? What should someone expect to pay for some estate
planning, for a will or trust, is it $500, $5000?
Mark
Drabny:
Prevailing number of firms in this town are on a flat-fee basis,
but I think that range goes anywhere from, you know, a low of
$1000 to a high of probably 5.
Kay
Brooks:
That's exactly what I was thinking. Um, and that's just something
that you ask the attorney up front - how does this work, you ask
all of those questions, we're used to that. We work on an hourly
basis, you find out exactly what's included - whatever system
you're using, and you should have an engagement letter that sets
that out at the beginning so there won't be any surprises later.
Scott
Hanson:
I think that's what someone's always afraid of - what kind of
surprise to get - "What another bill for something here!"
Well, I appreciate having you guys on here, Mark, and Kay, and
Steve, thanks so much for coming and sharing some of your thoughts
with us. And for access to estate planning resources, please visit
our website at KVIE.org/estate planning, and stay tuned for a
look at how local non-profit organizations can turn even modest
bequests in to significant benefits for the donor and the recipient
alike.
Scott
Hanson:
But before we talk about leaving a legacy, we're going to delve
a little deeper into the human side of estate planning. I'm joined
now by certified financial planner Elfreena Ford, and estate plan
attorney Kay Brooks to talk about finding professional help you
can count on, and the sometimes delicate matter of family communications.
Glad you guys are here. We find out that more than half of Americans
never do any estate planning and they tend to always procrastinate.
Why is it that people procrastinate this issue?
Elfreena
Ford
Well, there's mental and emotional barriers. Mental, you know,
who do I go to do this, how does it work, it might be too hard.
Emotional barriers like you know, I don't want to think about
dying, I don't want to think about my two kids don't get along.
Just issues in the family that we're going to have to deal with
if we're going to make this successful.
Scott
Hanson:
How do we get through that because this is an issue - I'm worried
about the kids, and you know.
Kay
Brooks:
Well, all of these decisions...the process is designed by people
who do it all the time to help you through those decisions. So,
that's part of what we do, we go through and whatever it is that's
hard for you to decide, whether it's the guardian for your children,
how to distribute your money - if one of your children has more
than another, do you give them all the same? Each family has different
issues that might be tough for them, but to us, we work with this
all of the time, so we're accustomed to helping you through it.
Elfreena
Ford:
And you know it's amazing, people don't think that certified financial
planners, or estate planners, CPAs, are actually counselors. That
we talk about these issues and really get to the heart of emotional
things as well as technical things.
Scott
Hanson:
One of the big things is if someone's younger and still has children
in the home, how do you go about choosing a guardian for the children?
How does that process work and I know a lot of couples will disagree,
and how do you get through that whole mess?
Kay
Brooks:
Well, that's a tough one because if the couple each has different
ideas about it, they've probably had a hard time talking about
it at home. The good thing is that when you bring in a third person
who's accustomed to this conversation, I point out things to the
clients such as, well, which person would continue the lifestyle
that you're accustomed to, which would be easier for the child.
So, the guidance of a third party, I think, helps to ease that
decision.
Elfreena
Ford:
You want to pick someone who is trustworthy and who will most
clearly reflect your values.
Scott
Hanson:
Estate planning sometimes needs to involve the whole family. But
how do you deal with, quite often you'll find someone who's quite
private about their finances. They never wanted to let the children
know what there is - how do you deal with this now?
Elfreena
Ford:
Well, that's really a good point because we find there are two
types of people - those who want to be private - they don't want
their children to start counting on their inheritance before they're
gone, because they might need the money. Those people can have
all the privacy and do it that way and even do the documents so
that even after they're gone it's still private.
Scott
Hanson:
So the children don't need to know if Mom and Dad have a $100,000
or 100 million.
Elfreena
Ford:
They don't, they don't. Sometimes what we do is have mom and dad
do a family financial philosophy that states what they value,
why they're doing what they're doing, that can be read after they're
gone. But then there's the families that want to be open. And
there are two kinds of openness. One, we're going to do this planning,
mom and dad, and we're going to share it with the kids, or we're
going to have the kids be part of the whole discussion.
Kay
Brooks:
But I think the important thing either way, whether you're private
or not, you're having the wishes in the document so the family
knows them ultimately is so important because it reduces so much
negative emotion at this time of grief when someone passes away.
Scott
Hanson:
Let's say a family knows they need some estate planning How do
they put a team of people together?
Elfreena
Ford:
You want to look for people with...you know, you get with someone
and you just feel comfortable talking to them vs. it being difficult.
Just that free consultation that many offer to go in and discuss
things to say "How is the chemistry between us?" in
terms of our communication styles.
Scott
Hanson:
And so how do you find an attorney? Where's the best place to
start?
Kay
Brooks:
Refferals are excellent because that means that someone you know
who has values similar to you was pleased with that person. That's
a great place to start. You know, people sometimes are timid,
but we realize that many people have never needed an attorney
before. So, I'm very accustomed to getting questions about, "Well,
how does this work. Tell me.
Elfreena
Ford:
And usually people have a financial planner or a CPA already that
they can ask about an attorney, or vice versa.
Scott
Hanson:
What are some warning signs that you might have the wrong guy
or the wrong gal as your attorney, I mean, they're sitting there
trying to sell you some annuities... I mean, what are...cause
you know, we see it all out there, there are all kinds of different
estate planning professionals...
Kay
Brooks:
Well, I think you have to watch out when the price is too low.
Because people, this work, it's customized and it's important
to get it right. So, if the price is too good to be true, you've
gotta keep your eyes open. Do they move into this whole discussion
about annuities or some financial product? It's a good opportunity
to discuss your financial assets with you and they might really
be just trying to sell you something and make their money that
way
I know I've seen....
That's a big warning sign.
Scott
Hanson:
I know I've seen somewhere where it's kind of a package deal...
Well, here's the cost, but if you invest this with us, then the
cost is reduced or eliminated...
Kay
Brooks:
I would always watch out. I would go to the financial planners
for the advice on that, and then go to the lawyers for your legal
documents.
That's to keep them separate.
Elfreena
Ford:
I think another thing to watch out for someone starts telling
you about an estate plan before you actually have a chance to
say "Here is what I want. I want to make sure my kids get
along at the end." Whatever your goals and your wishes...make
sure that person is listening to you and your desires before they
go off into different things that you can do in the planning process.
Scott
Hanson:
Alright, so someone's went through this process. What have you
guys have found to be the benefits to the family members, maybe
both while they're living and after they're gone through this
estate planning process?
Kay
Brooks:
Oh, the peace of mind. People actually feel good. I used to do
corporate law and that was fun, but when people leave and they've
done their estate planning, I mean, they thank me, they're happier,
they think that doing an estate plan...they were not looking forward
to doing it, they were worried about it, but that sense of relief
that you have everything in place, that's very rewarding.
Elfreena
Ford:
And stewardship of that you've worked so hard to put these assets
together, that you're actually now going to see a plan where those
assets enhance your family, enhance the community, your charities
that you're interested in and that you really can feel good about
what those assets will do after you're gone.
Scott
Hanson:
So, people need to get going with this, if they haven't already.
Yeah.
Kay
Brooks
Get started, that's the key.
Scott
Hanson:
Well, Kay Brooks, and Elfreena Ford, we greatly appreciate you
being here today. Next on our agenda is a discussion about how
even families of relatively modest means can benefit from turning
their financial success into lasting significance. But first,
KVIE's Pat McConahay spoke with local organizations about the
"why," the "who," and the "how"
of planned giving.
(PKG)
Scott
Hanson:
For a discussion about planned giving, I'm joined now by attorney
Mark Drobny, John Koch, a consultant who works with non-profits
on planned giving programs, and Bob Lew a financial planner who's
very active in the Leave a Legacy movement. It's nice to have
you gentlemen here. What does the term "planned giving"
mean?
Mark
Drabny:
Planned giving can mean leaving a gift to a charity in your will,
or trust. It can mean more complicated arrangement like a charitable
remainder trust, giving life insurance, uh, naming a charity as
a beneficiary in life insurance, and there's the typical situations.
Scott
Hanson:
So, does planned giving refer to a gift that's going to happen
after we pass away?
Mark
Drabny:
Exactly.
Scott
Hanson:
So it doesn't have anything to do with while we're still alive?
Bob
Lew:
Well, planned gifts most often are designed for when a person
passes away, but in many cases also used when a person wants to
give something at a later date. The person wants to plan, or the
family wants to plan to make a gift at some later date
Scott
Hanson:
So, do you find that a lot of people who do the planned giving
is that for a variety of reasons, that they don't want to part
with the assets today, but would like to see some charities have
the use of it down the road?
John
Koch:
Some of the benefits of planned giving is that the donors can
make steps today to take action today to establish a gift that
will ultimately benefit their organization, their charity, but
receive income tax benefits, sometimes life income benefits immediately.
Mark
Drabny:
And that typically takes the form of a charitable remainder trust
where we see clients who have highly appreciated real estate or
securities and they're looking at it "I'd like to liquidate
those assets, but I don't want to get hit with the capital gains
taxes." And the charitable remainder trusts provide the perfect
vehicle to do that. So, the big benefit there is you're going
to get an income tax deduction today for a gift that isn't going
to happen until you die. You're going to pay no capital gains
taxes on the liquidation of those appreciated assets, you're going
to control the management of the assets, and you're going to get
all that income for life, but when you die, it goes to the charities
of your choice....it's a powerful tool.
Scott
Hanson:
Is planned giving for only the affluent?
Mark
Drabny:
Not at all. Most major charities have pooled income funds where
you can take a small block of stock and put it into a pooled income
fund and they will liquidate the assets for you...you'll have
your own account, you'll enjoy the income for life. So you can
do that with a very small or modest gift. You don't need to have
a large asset or portfolio to do that.
Scott
Hanson:
And Bob, I know with the Leave a Legacy movement, do you find
that most, it's mostly the affluent that do the planned giving,
or how do the typical family that doesn't have millions...
Bob
Lew:
Actually Leave a Legacy is a program to educate the general public
to basically say to them you don't have to be worth millions in
order to give. You can make a difference in society, you can leave
a legacy by choosing to, in your will, in your living trust, leave
one to five percent of your estate.
Scott
Hanson:
why is the planned giving so important for non-profits? Obviously
they need to have revenues to operate, but do most of the revenues
come from this sort of thing? Or do most come from people writing
a check when their annual fund drive kind of thing?
John
Koch:
This is as we pointed out in the piece before, we're seeing cutbacks
at local, state, federal levels that organizations used to receiving
funds from those sources are now looking to diversify their income
sources. Most gifts do come from individuals so they're looking
to offer these opportunities to their donors.
Scott
Hanson:
So what kind of benefits, I know you briefly touched upon a couple
of things, what kind of benefit can a donor have today to doing
some sort of planned giving? You mentioned some charitable remainder
trust, and annuity income pools, and these sorts of things, what
are the basic benefits right now then for...
Mark
Drabny:
The first benefit's got to come from your heart. I mean, most
people give money to charities because they care about that cause,
so that's what your primary motivation is, and taxes come secondary.
Scott
Hanson:
Well, a lot of times people care about the cause, but are worried
about outliving their money. Right, so I'd love to be able to
give to you, but you know...
Bob
Lew:
That is so. Most of the people that I work with. They want to
help the non-profit, but at the same time, they're afraid of losing,
running out of money before they die.
Mark
Drabny:
Long term care costs.
Bob
Lew:
Long term care, people are living longer, we may run out of money.
So, a planned gift will allow a family to set aside money for
a charity, but not actually lose the use of the money. If necessary,
if emergency requires the use of the money before they die then
so be it.
Mark
Drabny:
And when we sit down with our clients and do their will or estate
planning, it's nice to see how many people do name charities in
their will and their trust. They're looking at, you know, life
has been good to me, I've got certain causes that I feel good
about, my kids have grown up - I've educated them, they're on
their own, and I'm going to give something of significance to
my kids, but I'm also want to take care of my community. Large
number of people will name charities in their will.
Scott
Hanson:
Hey, John, I know you deal a lot with some charities that deal
with this planned giving Right.
What are some of the options that people can set up for trusts
or annuities where they can say "I'm concerned about outliving
my money, but boy, I certainly care about this cause"?
John
Koch:
There are a variety, and we tend to lump them into a category
called, one of the categories called life income gifts. In those
life income gifts are gifts like pooled income funds, charitable
gift annuities, and several varieties of charitable remainder
trusts.
Scott
Hanson:
And does life income mean that you get an income for life? Is
that what the life income means?
John
Koch:
A life income will mean, yes, exactly that.
Scott
Hanson:
So, how come most people don't set up things like this?
Mark
Drabny:
They don't know about it.
Bob
Lew:
That's the reason why Leave a Legacy was started. It just educates
people and basically tells them about programs like this.
Mark
Drabny:
Charities need to get the good word out, people need to tell their
friends about it, more financial advisors and CPAs and attorneys
need to be aware of it, so they can get that information out to
their clients. But, it's a great tool, it's been around for a
long time, but it's kind of a well-kept secret and it shouldn't
be a secret anymore.
Scott
Hanson:
Bob, I know you spend a lot of time educating people on the benefits
of giving. Are there benefits at times when it's just better to
give the money, leave the money to a charity, versus the kids?
Bob
Lew:
Well, I ask the parents. I try to get the parents to answer the
following questions. What type of lifestyle do you want to buy
for your children? Instead of just assuming that the entire estate
whether it's 50,000, 100,000, or 55 million dollars should go
to the children, the parents really should answer, "What
is it that we want to buy for Johnny?" what I determine is
that most parents come up with a figure or a lifestyle and that
lifestyle would be connected to a certain value, a certain amount
of assets. In most cases, it's less than the entire size of the
estate. At which time the parents could meet their family obligations
and help society.
Scott
Hanson:
Do you find in that once the family discussion starts happening
and mom and dad talk with the kids and say this is what we're
doing, do you find there's reluctance on that end, or do you think
typically children say, you know mom, dad, that's great, doing
something for the community and we're all for it.
John
Koch:
I think in most of my experience has been "That's great,
mom and dad, we love what you're doing, it's going to make a difference."
You do see some of the other, you know those that are wanting
to hang onto every penny that's there. And that's really just
cross-section of society.
Mark
Drabny:
And when you do see that hesitation on the part of the kids, that's
sometimes enough for the parents to get to the other side of the
fence and realize that if that's the way my kids feel about my
wealth, then that's going to make it easier to give part of it
to a charity. That brings out a certain side of the kids they
didn't see before and that's the final straw.
Scott
Hanson:
Bob, I know you've spent a lot of time with Leaving a Legacy.
Is there anything else to add today about just, kind of the, obviously
you got involved in this process of educating the public on leaving
a legacy for a reason. Was it more for the charitable aspect or
what it does for the person with the assets, or a combination
of both?
Bob
Lew:
A combination of both. We have a tremendous amount of wealth that's
going to be passed from one generation to the next sometime in
the next 25 years - huge amounts of money, and what we're trying
to do is educate people and say just a small percentage of that.
You don't have to have complex planned giving tools, just leave
a bequest in your will...we're going to leave $10,000. If each
family can leave $10,000 to charity and give charity an opportunity
to build an endowment so that they will have a fund large enough
to produce income every year, take the stress off of raising today's
dollars, dollar after dollar, because most charities are raising
money today and they need to spend it today. Planned gifts if
done right can help a charity build an endowment and help it to
grow.
Scott
Hanson:
Alright, well thanks Mark Drobny, Bob Lew and John Koch. It's
been a real pleasure spending time here with you. Before we go,
a reminder...estate planning, like any form of financial planning,
is a highly personalized process. For the last half hour we've
discussed some of the basics, but arriving at a plan that's right
for you will take some research and some degree of professional
consultation. But the rewards for a relatively small amount of
work and expense will be enormous for you, for your loved ones,
and the causes you care more about. For more information and access
to local resources, visit kvie.org/estate planning. I'm Scott
Hanson. Thanks for joining us.
Kimberly
Cox:
Hello, I'm Kimberly Cox, Director of Major Giving at KVIE, your
local Public Television station. I hope you found this program
both informative and educational. As part of your gift planning,
I'm sure many of you think about the college you attended, your
church or other local non-profit organizations. In fact, this
concept is a new and additional way for you to support KVIE. If
you'd like additional information about planned giving or a free
videocassette if this program, simply give me a call at 916-641-3595.
Thank you.
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