The Elder Law Coach

Mastering Probate Avoidance: Expert Strategies for Elder Law Practices

• Todd Whatley

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This podcast episode emphasizes the importance of probate avoidance and explores various strategies to ensure smoother transitions of assets upon death. Todd Whatley discusses ethical estate planning practices, focusing on revocable living trusts, beneficiary designations, and joint ownership as ways to bypass probate.

• Understanding the pitfalls of defaulting to probate 
• The role of revocable living trusts in estate planning 
• Benefits of using beneficiary designations 
• Ethical considerations in presenting estate options 
• The risks associated with joint ownership 
• The necessity of trust funding and regular plan reviews 
• Strategies for keeping estate plans up to date 
• Encouragement to adopt probate avoidance practices

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Speaker 1:

Thank you. Specialized experience, Whether you're an established attorney looking to refine your expertise or an emerging lawyer seeking a successful foray into elder law, this is your masterclass. Now let's get started with the luminary in the field. Here's Todd Whatley.

Speaker 2:

That's right. This is the Elder Law Coach and I am Todd Whatley. Again, thank you very much for joining us. And today I want to talk about one of the areas that tends to be a little controversial among attorneys, but to me, I think it has just opened up my practice and it would distinguish you different than other attorneys, because just the normal thing is, everybody needs a will. That means you go through probate and that's just how everybody does it, and we're facing a lot of competition out there. It's amazing when you look at people's practice areas, they'll do just about everything, and doing this will set you apart.

Speaker 2:

And what I'm talking about is probate avoidance. Okay, even if you live in a state where probate is not that big of a deal, no one's ever been able to tell me that avoiding probate doing a trust or payable on death or joint ownership, whatever things we will talk about no one's ever been able to show me that doing that is going to be quicker than probate and keeping people out of court, being able to settle this at their dining room table or at your conference table without going to court, to me just seems to make sense. Even if probate's not a big deal, it's still a deal. Okay, and avoiding probate allows people to avoid court and again, it separates you from the other attorneys out there as being just run of the mill. Yeah, this is what everybody does. This separates you to say, hey, listen to me, I want to keep you out of court, and one of my key phrases that I use when I do presentations I always wear like khakis and a pullover button up. I'm not dressed up in a suit. I tell people I like to dress like this every day when I go to the office and I promise you you want me, as your attorney, to dress like this every day. You don't want me putting on a suit and going to court for you, because that's when it gets expensive, time consuming, it's a mess, and so my job as your attorney is to keep you out of court.

Speaker 2:

That is guardianship court and probate court. We'll talk about guardianship court later on, but it's basically POAs. Okay, sorry, I'm getting over an illness, so being able to present to people, hey, I'm different. I want you to avoid probates. Separate you from the group of attorneys out there that, yeah, come see me, we'll do it well, and then eventually we'll do probate and that's just how things are done. Okay, it's a huge benefit to the client. Clients will appreciate that and see you as different, okay, so how do you avoid probate? Well, one of the most common ways is revocable living trust, and I am pretty adamant in my office that we present to clients all of the options.

Speaker 2:

Okay, and one of the options that I want to talk about first is you know the beneficiary designations. Okay, that is very simple. If you have a very simple case a single person, one or two children, and she is not leaving much money to those children, the children aren't going to fight. I mean, it's just very simple. Beneficiary designations work for that person and you simply instruct the client. Hey, we definitely need to do powers of attorney. Okay, that's different discussion.

Speaker 2:

But to avoid probate, you simply name your children as the beneficiaries on your house, on your bank accounts, on your vehicles, things like that. At your death poof, it's gone to your children, they split it, they have it and it's very quick, very efficient, no court, and they don't even need to call me it, just it just happens. Okay, lots appreciate that and they're like well, how much does that cost? Well, nothing. You go to the bank and you tell them I want this payable on death. Now I may need to do a deed on your house and whatever you charge for deeds, you will get that revenue, but it is in the client's best interest and that person will go talk to others and say, hey, I went to see this attorney and, surprisingly, the solution to avoid probate was very simple and very straightforward.

Speaker 2:

Now, that doesn't work for everyone and you need to tell the client. You know, ask them, please tell people about me, but please understand your solution doesn't work for everyone. You can tell them what we did for you, but your situation is very simple, very straightforward, and this solution works for you. It may not work for everyone, so that they don't have people coming in all the time thinking you're going to do it and it's basically going to be for free. Okay, you know it works for some people and when it does it's very nice. Okay, but it works for some people and when it does, it's very nice OK, and I present that to basically every client, even the clients worth millions. But then I do go into it and say, but look, yes, this will work. You can avoid probate very simply without anything other than pebble and death beneficiaries.

Speaker 2:

But what happens is when this money goes to your children. It's their money, okay, it is their money. And if they are going through bankruptcy, divorce or lawsuits, this could be a concern. Now, when you have the sweet little lady with $35,000 in her bank account and basically each kid's getting what $17,500, you're not too concerned about bankruptcy, divorce and lawsuits over $17,000. But if they're leaving $3.5 million, that's a concern, okay. And it's like are you concerned that if, at the time of your death, your child is going to get, you know, $1.75 million, that's a concern and you don't want it to be subject to bankruptcy, divorce or lawsuits?

Speaker 2:

And a lot of times clients will bring up issues with their children. I'm concerned about my in-laws. I'm concerned about the way that they're going to spend money. I don't want them to be in control of it, or their minors whatever. That's a natural progression into okay, beneficiary designation doesn't work for you. Therefore, you need a trust and I like to tell people in my office when you come see me, you're going to tell me that you need a trust. I'm not going to tell you that you, I mean going to tell me that you need a trust. I'm not going to tell you that you, I mean I may tell you that you need it, but you will see why you need it. I always bring up beneficiary designations first, it's in the client's best interest and sometimes it works. But then they say that doesn't work for me. Okay, fine, let's talk about trust. I can definitely take care of all of your issues that you're concerned about, all of your concerns. I can fix that with a trust and it comes across to the client as that you are truly looking out for their best interests and you're not trying to sell them something. You want to get my blood pressure up it's.

Speaker 2:

It's when that first client that I talked about sweet little lady with next to nothing and she has one child, and she did a trust to leave her $35,000 to this child, who has no issues, no concerns whatsoever, and the attorney she saw, uh, only brought up a trust. I say did the attorney bring up payable on death being fishery? She said no. The only thing that they said I could do to avoid probate was a trust. That is unethical, that is not in the client's best interest and that is not appropriate. Okay, and so therefore, you mentioned beneficiary designations as a possible solution. It's not going to work for a lot of clients. But it's the client then telling you that doesn't work for me. What else have you got? We have trust and then you feel inside your head and your heart that you're doing exactly what the client needs. You're not selling them anything and you're doing what is in their best interest and at their request. Okay, so many times.

Speaker 2:

The revocable living trust is the cornerstone of probate avoidance. It allows you to be flexible. It allows you to have one document that defines what gets done, how it's done. It's very similar to a will, but it avoids probate. And I tell people I love to tell people if you'll take my advice and you'll avoid probate your children when they fly in for your funeral, they can literally, if they'll hang around for just a day or two after your funeral, get the death certificate. They can get back on the plane a few days after your funeral with a good portion, if not all, of their inheritance in their pocket. And that just blows people's mind. I said you won't even get a probate filed before the kids get on the plane and go back home. Okay, that process is so time consuming and delayed that even with a simple probate it's not going to get filed that quickly. It's definitely not going to be completed that quickly, but with probate avoidance, your children can get on the plane going back home after your funeral with a good portion of their inheritance in their pocket. That rings with people and they're like I need to go see this person, okay. So that's where I love to bring up trust and get this done so that it is quick and to the point.

Speaker 2:

All right, some other possible options on avoiding probate which works sometimes is joint ownership. Now, I don't love joint ownership, particularly when it's between parents and children. The typically the reason a parent will put their kid on their checking account, savings account are two reasons. Number one they want the kid to be able to sign checks and do things for them. If they can't, okay, well, that solution is our attorney, okay, people don't know that they can do a power of attorney and that immediately if it's immediately effective, which it should be allows your child to be able to sign checks. They don't have to be on the bank account with you, they don't even have to be listed as a signatory on the account because that legal document allows them to sign documents, and that's one of the reasons people put their kids on their bank accounts. The second reason people put their kids on their bank account is so.

Speaker 2:

Second reason people put their kids on their bank account is so that at their death that money will go to the kid as the joint owner. Okay, that makes sense. But a better way to do it is to list them as the payable on death beneficiary. That way, the child if it's a child that you're possibly concerned about taking money or doing anything they are obviously not the power of attorney and they are not the joint owner. They only get the money at the time of your death and therefore it's protected. And at your death you don't care what they do with the money anymore. That's when the money goes to them they're like, yeah, that's exactly what I want. Okay, well, you know banks will say, oh, just put your kid on your bank account, that'll make everything easy. And I hate that and I want to fuss about it because that is not a good solution.

Speaker 2:

There are times when you know, particularly with real estate, it is a good idea to put your kid's name on your house as a joint owner. All right, payable on death typically works better. Medicaid will sometimes recognize a jointly owned piece of property as a non-countable asset and it will go to them. Adding their name to it sometimes starts the five-year look back so you can make sure that it will go to the child. If they sell, the parent doesn't get all of the money, they only get a portion of it. I mean there are some benefits to joint ownership, particularly with real estate. But again, be careful and particularly those attorneys who want to quote, protect the asset from Medicaid and they completely give the house to the kid with the parents still living there. That just opens up all kinds of issues for the kid, kicking the parent out, getting a mortgage on the house and it's just, it's a mess. You also lose step up in basis. I mean there's just a lot of issues with a complete quick claim deed. That can be minimized or, you know, partially fixed with joint ownership.

Speaker 2:

I'm not a huge fan of joint ownership but it does avoid probate. Okay, I think you also should tell clients you know if for some reason something is stuck in your name at the time of your death and does have to go through probate, as long as it is under your state's rules for small estates. You know, sometimes a small estate is not that complicated. Now I know in my state there can be no debts. There's a dollar amount. In our state it's $100,000 or less and so there are some limitations. And so there are some limitations. But small estates sometimes are okay. If something gets missed or if the estate is very small, all right.

Speaker 2:

So what this does is, you know, look at holistic planning. It's doing what your client needs done and it's doing what is in the client's best interest needs done and it's doing what is in the client's best interest. I've never seen where doing a last will and testament knowing that your client's going to go through probate, the family's going to have to come back to you to do the probate, and doing that as a business strategy, I think is very, very shaky. Okay. I think that is not in the client's best interest, and I think you are. You are not fulfilling your role as an attorney just to make sure that you get future business. Okay, because avoiding probate is very easy and it's in the client's best interest, okay. Just some common pitfalls to be aware of.

Speaker 2:

If you do a trust, be sure and make sure. However you do it in your office, you have to make sure that the trust is funded. So many times trusts don't get funded and you need to have some mechanism in your office to either fix that problem or not. Let that problem fall on you as a liability, ok, so remind clients that creating a trust isn't enough. Ok, here's the trust, we've done it, but you've got to make sure that it is funded. I have recently, very recently, created a position in my office of a person whose job is to make sure that our trust gets funded a funding coordinator.

Speaker 2:

Also, warn the clients and it sounds kind of self-serving, but just tell them there are issues with outdated plans. You need to come see me. I say every five years, okay, even if nothing's really changed there. There may be some law changes that you're concerned about or that could be concerning to your estate, and I will keep track of those, but I'm I'm not going to call you and say, hey, you need to come see us. That is up to you, but there's some major life events like marriage of kids, divorce, acquiring significant assets Things happen about every five years that you really do need to come see us and don't let your plan become outdated. So implement this in your office.

Speaker 2:

If you haven't yet, if you make a living off of probate, I'm sorry. Okay, there will be plenty of probate business from people who did not come see you and will come see you to do probate. But I think your clients will appreciate greatly and I think you will sleep better and you'll know that you did what's in the client's best interest If you will start implementing probate avoidance in your office. Okay, it's a great way to get people in. They trust you and then getting them in for estate plans also kind of locks them in for future services and you should always do powers of attorney. With everyone who comes in your office. You probably need to at least do powers of attorney. Or if they have powers of attorney, I can almost guarantee you that they are not sufficient and we can talk about that in future episodes. But having a power of attorney will also ensure that they come back to see you for long-term care and when they need help with paying for the nursing home, doing this correctly, getting these documents in place and them trusting you will bring them back later on for that second phase of work.

Speaker 2:

Okay, all right, thank you for listening. As always, please subscribe, please share. If you know someone going through this that this can help, I would appreciate sharing you, sharing this with them and, as always, I would love to be your elder law coach. If you would like to implement this into your practice, I can definitely help you do that. And if you are kind of dabbling in elder law, give me a call. Let's talk about it. Let me get you in at full speed, full on, so that you feel comfortable doing it, and again I would love to work with you. You feel comfortable doing it and again I would love to work with you. Visit our website, the elder law coachcom, and there is a place there that you can schedule a telephone call with me. I would love to talk to you. Let's get you up and going to do the best job in the world. All right, see you next time.

Speaker 1:

Thank you for joining this episode of the elder law coach podcast. For those eager to take their elder law practice to new heights and are interested in Todd's acclaimed coaching program, visit wwwtheelderlawcoachcom. With Todd Whatley by your side, the journey to becoming an elder law authority has never been more achievable. Until next time, keep learning, keep growing and stay passionate about elder law.