Does a will written on a napkin hold up?
Mindy: Hello, hello, hello and welcome to the BiggerPockets Money Podcast. My name is Mindy Jensen and with me as always is my still for informational and educational purposes only co-host, Scott Trench.
Scott: BiggerPockets has a goal of making one million millionaires. And that starts right here with us and a strong financial foundation, because we truly believe financial freedom is attainable for everyone, no matter when or where you’re starting.
Mindy: And once you become a millionaire, you’re going to want to protect your wealth. So today we’re continuing our conversation with elder law and estate planning attorney Jenny Rosell. Scott and I consider ourselves quite knowledgeable about money, and you’ve got some questions that even we didn’t know the answers to. Like, is choosing your oldest child to be the executor of your will the best option? Or just how binding is that promise made from your great Uncle Bob after six glasses of wine last Christmas?
If you are new to our show or didn’t catch Jenny’s first appearance on episode 532, you might want to press pause on this episode and go back and listen to 532 first. You definitely do not want to miss the three legal documents that Jenny says are the most important for your estate planning, no matter what your age.
All right, Scott. I trust you can handle this question.
Scott: When do I want a revocable trust versus a non-revocable trust?
Guest: Yeah, usually when you’re dancing into irrevocable trust world, it’s usually because of either asset protection purposes or tax planning purposes. And when I say tax planning purposes, what I specifically mean are things like estate tax planning. Taxes are really boring and I don’t think you guys want to get into it, but estate tax, the estate tax limit is pretty darn high right now. Um, and so you have to have a pretty significant net worth. It’s 13.61 million per person. So as a married couple, you get two of that. So it’s a pretty small percentage of the population that really cares about the estate tax planning side of things. But that is supposed, that number is supposed to drastically reduce at the end of 2025. It’d actually cut in half is about what it’s supposed to do. So you’re usually in irrevocable trust world, Scott, for asset protection planning purposes and tax planning purposes. If not really one of those, you’re usually in revocable trust world.
Mindy: You alluded to having a meeting with somebody to get an idea of what they’re looking for before you start working on their estate plan. How long should I expect the creation of an estate plan to take? It doesn’t sound like it’s a one-hour meeting. Like, am I unreasonable to think that it can be done in a week or a month or a year, or like what am I looking at?
Guest: Totally unreasonable unless you want to pay like an expedited fee for like a week. And unfortunately, I I know we’re kind of laughing at that, but we get a lot of phone calls too where people are, you know, have hours or days to live and now they’re thinking about getting or really their family is thinking about getting the estate plan in place. Most of the time that’s impossible. I mean, my my office and I’m sure most reputable estate attorneys’ offices, you’re not going to be able to, you know, swing that so quickly. You know, having an estate plan from start to finish, like through the process, start to finish, totally unreasonable to do within a week or two. The more advanced planning that you’re due, so like if you start getting into trust planning, that’s going to take at the very least a couple months because part of trust planning is also to take assets and move the ownership or beneficiaries to support the actual trust document. And you’re of course at the mercy of financial institutions and, you know, recorder’s offices to transfer property. So that’s going to that’s going to be a much longer process than a basic, you know, plan, you know, like the healthcare documents, power of attorney and a will. Um, we can have that, you know, from start to finish usually within a month-ish. Um, so from a kind of shorter time frame, probably about a month.
Mindy: Okay. And that’s, I mean, these are, these are facts. These are what they are. So I want somebody to be thinking, oh, I can’t just do this overnight. But Jenny, since you can’t take care of me overnight, can I DIY it? Is that still legal if I do it myself?
Guest: Sure. I mean, there there are people truly that do DIY their plans. Um, and the success stories of that, you don’t hear about. Um, or at least you rarely hear about. So I would be, um, I would be being a party pooper if I said like, oh yeah, if you DIY your plan, like you’re, you know, gonna, you’re just asking for trouble. Sure, if you tried to DIY your plan, the risk you’re running is that you just don’t understand what these documents are, what these documents do. It just comes with a much higher risk. Mindy and I, you and I were talking about John Grisham. You know, the John Grisham has all the, I’m in the middle of a book right now where this gentleman hand wrote his own will and you know, there’s, um, you know, all these stories about people handwriting wills and handwriting deeds for properties and would I do it? Heck no. But do people do it all the time? Yep. Do some of them work? Yep. Do a lot of them not work? Yep.
Scott: One other component for this that I feel like is really important, or at least I perceive is really important from what I’ve read, what I’ve talked to and all this, is how you behave around your family, heirs, these other folks in the context of this document. Like, alcohol influenced discussions at holidays create seemingly huge drama downstream, I imagine for people like you, when what was discussed after six glasses of wine at Christmas three years ago is not actually, in fact, in the will. So can you give some advice there and do you have horror stories along those lines that you’ve dealt with or or disappointment?
Guest: Yeah, I mean, what I always tell people is I wish that I could make a blanket statement about like communication regarding an estate plan, but it doesn’t exist because sometimes people are much more private about this sort of stuff. So if someone’s like, you know, you think of like a lot of my clients that are, you know, call them 70s, 80s, they live in rural Indiana, they’re very private. If their kids dare ask them about their estate plan, they would be disinherited as quick as you could blink. I mean it’s like, it’s just you don’t touch it. Interestingly, the kids often know not to touch that conversation. They know that it’s, you know, dad, mom, whoever, we just don’t have that conversation.
I personally and professionally am a big fan of communication. I think it does eliminate an immense amount of headaches down the road and immense amount of miscommunication down the road. So I would prefer people be more communicative and transparent about their estate planning and what they’re doing and the kind of documents they have and, you know, who mom and dad decided to put where. Sometimes people decide to have that conversation with their family. I would not recommend doing it after six glasses of wine at Christmas, but if you do you, I guess if that’s what your family, if your family loosens up and after six glasses of wine at Christmas and that will be best for them, um, I guess that’s best for them, but I would not recommend that strategy cuz that also would fuel lots of emotions. I’d probably start crying after six glasses of wine.
Mindy: Should you keep it fair and equal when leaving money to multiple people? We’ll be back with more questions and Jenny’s awesome answers right after this quick break.
Welcome back to the show.
Scott: How about unequal treatment, right? Because what is fair is not agreed upon by heirs in I’m sure many, many instances. And is not just as simple, I think in most cases, I would argue, or I would be willing to bet, as everybody, if there’s three kids, everybody gets a third. Um, it’s like, well, which kid had the more expensive college education and which kid lived at home? like what, what were the, the, um, I think The Millionaire Next Door calls it economic outpatient care components that the parents deliver to the children during life and how that factors in. So like, how do you think about fairness in the context of this for someone, you know, who’s, who’s passing on an estate?
Guest: My first reply is fair is not always equal. Sometimes I’m working with a family that has like a farm that is passing down and, you know, there’s one child that maybe has been doing some sweat equity. Um, or you think of a business owner that maybe a child has expressed interest in taking over the business. What I would say is most of the time, people will kick the can down the road. Most of the time they’ll just say, I just want to go equally to the kids, equally to the beneficiaries and I’m just gonna, you know, regardless of if, you know, Little Bobby went to Harvard and Little Susie went to a community college. Like, most of the time people don’t put, at least from my experience, most of the time people don’t kind of dangle that carrot over kids’ heads. Um, they’ll just say, you know, when I pass away, it goes equally to my beneficiaries.
But trust me, there definitely are people that, I have multiple clients, multiple families that I can about expect to see them after every holiday season because at least one of the kids has made them mad and now it’s time to decrease their share and it’s a, it’s a very uh, interesting psychological experiment sometimes, um, to see how people kind of think through how they are leaving things to their beneficiaries. But I’ve had honestly, and I I don’t I probably shouldn’t share them um, in public, but um, I’ve had some cases where I very much disagree with reasons that parents are disinheriting their children, um, for very personal reasons that it, those are the kind of things that as an attorney keep me up at night because it makes my heart break. And those kind of people very much exist. And at the end of the day, it’s their estate plan. Um, they can do whatever they want with it. It allows them to be put in the driver’s seat.
Mindy: This is a perfect segue into my next question, which you didn’t even know about, but how frequently should I be reviewing or updating my will? Besides apparently every year after Christmas when I have a big fight with someone.
Guest: Um, you know, if you ask 10 different attorneys this question, you’re probably going to get 10 different responses. There’s a lot of attorneys that will say like, you need to update your estate plan every five years or every ten years. I usually anchor to life events. You know, of course, if you want to pull that baby out once a year and just like double check it, great. I’m gonna be your biggest supporter in doing that. But I always have clients anchor to life events. And what I mean by life events are like new, uh, kids, new grandkids, uh, people getting married, people getting divorced, people dying, people experiencing like, you know, personal issues. You know, those kind of life events, those are the things that are usually going to impact someone’s estate plan. Estate plans don’t like expire. So like, if you did an estate plan at 23 and it’s still the estate plan that you have at 63, if nothing, like if your wishes and goals haven’t changed, then it’s sure, it’s really old, but it’s not expired. It’s not, you know, game over, you have to start again. So I say to answer that question to focus on life events, and it’s those, you know those life, like your belly, your gut knows those life events that I’m talking about. And it’s those ones that you need to be like, oop, does this impact my estate plan? Let me pull out my documents and look.
Scott: You you’ve mentioned the word divorce a few times here, and I have observed in some wealthy families a desire to protect family estate from a future divorcee of child. What are, if that is that a common fear of people who in in estate planning and what are the mechanisms that are used to alleviate that fear?
Guest: Yeah, I mean, I think that we would all be putting our hand or head in the sand if we didn’t, you know, realize the divorce rate. Um, if you think about it, if if a beneficiary receives an inheritance outright, so, you know, say Scott, you’re my beneficiary and I die and you are my beneficiary that you’re going to get your inheritance outright, you get that inheritance, you know, tomorrow, and your spouse files for divorce the day after tomorrow. Well, that inheritance is going to get dragged into that divorce proceeding because it’s now in your name. And so what a trust does when a beneficiary receives their inheritance into a trust is it provides that separation between them personally and them in this trust entity type of thing that allows for them to gain asset protection against a divorce for their inheritance.
Mindy: So, if I am understanding you correctly, Jenny’s trust that is left to Scott Trench personally, doesn’t belong in the marital assets?
Guest: If if he, in that example, inherits a trust. So you can have an estate plan set up where my estate plan, my trust creates a trust for Scott’s benefit to gain him asset protection against divorce, creditors, lawsuits. It’s it’s used quite frequently for a lot of different reasons, divorce being one of them. But the the the difference there is that it’s not in his personal name. He doesn’t get a check when I die. He gets a check into a trust that gets created and that keeps it out of his personal estate.
Mindy: Oh, interesting.
Scott: The trust is a person. It’s an entity, right?
Guest: Kind of.
Mindy: That’s an interesting way to phrase that. Okay, so to uh, muddy the waters a little bit more, should you review your estate plan with your family or should you kind of keep it close to the vest?
Guest: I mean, it it’s kind of that same, that same line of thinking of, you know your family better than I do. Um, you know if your dad is going to get red hot mad if you ask him what his estate plan looks like. Or you know your mom will be very open and transparent and and actually respect, you know, bringing that conversation up. Like I said earlier, I mean, I’m always going to be a fan of communication and transparency. Where that will bite you in the rear end is if, you know, you have spelled out, you know, Bobby is your healthcare representative and maybe Susie is all things financial. If either one of them, like if your relationship with either one of them or both of them become strained or estranged, there there could be a little bit of backfire there where, you know, now they know what’s in your, you know, part of what’s your estate plan looks like, what it what it consists of, and now we have a strange relationship with a, you know, someone that maybe we didn’t want to have that information.
It’s probably the theme you guys are picking up on here is that there there’s rarely like a like a clean blanket answer for anything. It’s annoying, and maybe it’s just my lawyer brain that I just can’t give clean answers. Maybe that’s more what it is. But it’s just, it just depends on the personalities and relationships involved. Uh, my husband, who I own the practice with, he’s an attorney as well. He says it best, he said estate planning and like estate planning documents are easy. It’s the personalities and the relationships that make it difficult. And I always think of his that little saying that he just came up with because it’s so true. It’s the relationships involved and the personalities involved are what’s going to make an estate planning venture really successful or not.
Mindy: Well, and I think that it depends is a valid answer. I like how you’re going into, well, you could do this, you could do this, you could do this. It depends. Like, this is really helpful because you might live and breathe estate planning law, but we don’t.
Scott: And and it probably it depends, then it evolves, right? Like there’s no right, like the answer that’s right for me for now is not going to be right for me when I’m 60 and not going to be right for me if I’m lucky enough to live to 90 either.
Guest: Yeah, and and and everything evolves, right? Like something I was thinking about earlier, you know, I think a lot of people out there think that there’s this magical big brother that, you know, when someone passes away that we can, you know, knock on Big Brother’s door and find out everyone’s assets and that big brother doesn’t exist. And so you think from a place of communication and transparency, the more you’re communicative and transparent about this sort of stuff that it it’s helpful because that at the very, you know, end of the day, if someone needs to step into these roles, they know a little bit about what’s going on, uh what they’re stepping into rather than, you know, surprise, something happens and, hey, you’re my power of attorney. Guess what? And you have no idea what assets are out there. There’s there’s plenty of families that don’t share with their person that they’re appointing that they have listed them in these documents and then it’s like surprise.
Mindy: Up next, we’re going to talk about what to do when you don’t want your inheritance, right after this quick break.
We’re here with an estate planning and elder law expert. But don’t forget about our community of experts in our forums, which is a great resource for getting your questions answered fast. Go to biggerpockets.com/forums.
Scott: Aside from missed like mismatch between expectations and reality, can there be a negative consequence from an inheritance? So for example, could I inherit a property that has debt on it that is underwater for example? How does that work? Can you give us a quick framework there and any gotchas in that in that world?
Guest: Yeah, yeah. I mean, yes, you could to answer your question. If you said, you know, if I had in my plan, I want Mindy to inherit my beautiful Michigan cottage, and you know, I think it’s the most beautiful thing ever and then I passed away and Mindy goes to Michigan and she’s like, this is a hunk of junk. And oh my gosh, there’s a, the it’s upside down and in a mortgage. Um, that stuff does happen. And it it there’s different strategies around when those kind of things happen. Like, you know, in that example, I would be, if I was Mindy’s attorney, I would say, okay, well you’re going to disclaim your, you’re going to wave your interest in that what she thought was a beautiful Michigan cottage and it’s not worth anything. Beneficiaries can disclaim and say, I don’t want it. And so, you know, if if a listener ever finds themselves in kind of a little bit of a pickle of like, gosh, like, wait, what? what am I walking into? Like, what did I, what am I supposed to receive? Be sure that you understand that as a beneficiary, you’re also entitled to seek your own attorney’s advice if you want to. Kind of the the fun part of my job is coming up with like strategies and options. So, you know, there’s, there may be options that someone has no idea exist of like I just said, like if if I left Mindy my, you know, terrible cottage and then Mindy goes over there and she’s like, I don’t want this thing, then and then Mindy calls the attorney, hopefully the attorney is like, okay, well, here are your options. You could take over the cottage and maybe, you know, put some money into it and rehab it and and turn it into a Airbnb or you could say, I don’t want I don’t want it. I’m going to disclaim. I mean, there’s different strategies often in my world that people can explore to uh, make sure they’re doing what’s best for themselves.
Scott: So if you’re paying attention and have a reasonable attorney in this, you’re not going to be able, you’re not going to just all of a sudden realize like, I inherited stuff and now I’m $100,000 poorer as a result of it. So that that’s that’s not just like something for folks to realize, but if you’re not paying attention, that could absolutely happen um if you’re unlucky and and uh not not on top of things.
Mindy: Okay. Do I, as the inheritor, the person getting the the cottage, do I need my own attorney? Can your estate attorney advise me on my options?
Guest: So it’s it’s a little bit of a gray area because I, uh, when I represent, when I help someone after someone’s passed away and I am representing the executor or the trustee, I am a very Kumbaya kind of person where I’m like, okay, if beneficiaries have questions, like direct them to me because that’s that allows me to, first of all, keep a pulse on people, um, but also kind of control communication and what’s being delivered. So there’s a certain amount that the attorney that is kind of navigating through the administration process. Um, they can share information and help you explore options, but their duty in all technicality is to the executor or to the trustee. So if they kind of start sniffing around and they’re like, oh, this could kind of get sour quickly, then they may say, you know, Mindy, I hear you and I respect you and I respect you so much that I’m going to say that I cannot help you explore those options. I want you to seek your own legal advice to make sure that you are, you know, understanding fully what your options are. So it’s kind of a gray area because they, you know, an estate attorney can kind of help with that communication. Um, but it does, is a little bit of a gray area merely from like an ethical standpoint of who’s the client? And technically in those cases, the client is the executor or trustee, not the beneficiary.
Mindy: Okay, and that’s, well, that’s good to know, um, especially for our listeners who may be on the verge of inheriting something as an heir, Scott, or creating their own their own, uh, estate plan.
Scott: Yeah.
Guest: What about the napkin will written at the last minute to override the painstakingly built estate plan? Is that a thing?
Scott: Oh my gosh. Oh, there’s so many, there’s so many cases about that from law school of like people write like taking a, I forget what kind of tool it was but there was some like like very famous case in the estate world where he took like a tool and like scratched on like the side of like a truck, like his estate plan as he was, you know, I there was some kind of accident and he was like using this tool and writing on the side of a truck. Um yeah, please don’t do that. Please don’t. Please don’t. Like Mindy and I know, that’s that’s the stuff that happens in John Grisham books and those books are 500, 600, 700 pages of reading for a reason because there’s usually litigation involved when that happens.
Mindy: Oh, oh, oh, oh. Okay. In one of those John Grisham books, he’s put in his will, anybody who can test this will is instantly out of the will. Is that a thing that you can put in your will?
Guest: Yeah. Yeah, it’s called the no contest clause. Um, a weird fun fact, my state of Indiana is always like one of the last states to do everything. Um, Indiana was the second to last state to pass the no contest clause. So at this point, I think most states have it. What I always tell people though is that is a very real thing that you can incorporate into your estate plan to say, if you try to contest this estate plan, it is essentially the way it works, it’s it’s like you’re not even, you’ve predeceased. Um, so you kind of get skipped over. But there’s always going to be ways to attack an estate from a different perspective of like, if there’s legitimate concerns about like, were you of sound mind? Were you, you know, influenced in a way that you shouldn’t have been? If there’s legitimate concerns around that, that no contest clause is going to get thrown out the window. But if someone’s just grumpy pants, then they can just be grumpy pants and I’d recommend that they not hire an attorney because they may have some serious consequences to that.
Mindy: That is, that it’s good to know. I, you know, I, like I said, I’ve read all these John Grisham books and I’m like, “Oh, I could just do this and this and this.” It sounds like what you’re saying, I need to get an estate attorney to help me with my estate plan.
Guest: I just want more people to have these estate plans in place. I think the statistic I heard was like 50 or 60% of people die without an estate plan and that’s way too many people.
Mindy: Thank you, Jenny so much for your time today. This is so much fun. And we will link Jenny’s information in our show notes. We invite you to post your follow up questions in the BiggerPockets forums, which can be found at biggerpockets.com/forum. All right, Scott, that was Jenny Rosell and I learned that there’s a lot of gray areas in estate planning and that DIY is probably not going to serve me best. Um, I really, this is something that my estate plan needs and I’m now going to go back and revisit my estate plan. How about you? What did you learn from this show?
Scott: It’s the laws of the state where you pass away, right? Um, um, and there’s like no right answer is what I learned to all of this. The right answer is to have a plan and it’s a, it’s just a process you have to go through and and think through and no substitute for a professional to walk you through all that.
Mindy: I really do believe that the DIY plan is only good for when you don’t really have anything to protect. You don’t really, protect isn’t the right word. When you don’t have a ton of assets, you know, you’re 18 years old, you own a car, and you have $1,000 in the bank. Okay, great. That’s a great DIY time. Um, I don’t think it’s a good steward of your money to hire somebody to craft a plan that says my mom gets my car and my dad gets my thousand dollars.
Scott: Yeah, and I like how Jenny didn’t, you know, Jenny corroborated that. You know, maybe use one of these online platforms, which I think is great and I think you know, we should search those and maybe look look at some of those at some point here. But yeah, you don’t need to build a trust and have all that stuff set up when you’re 18 to 23 and have very little in asset in the way of assets there. But you just, you do need to think through some of these things. It is good to have those in place and everyone should check that off the list.
Mindy: All right, Scott, should we get out of here?
Scott: Let’s do it.
Mindy: That wraps up this episode of the BiggerPockets Money Podcast. He is Scott Trench. This is Mindy Jensen saying, where there’s a will, there’s a way. Don’t delay. BiggerPockets Money was created by Mindy Jensen and Scott Trench. Produced by Hajar El. Edited by Exodus Media. Copywriting by Nate Weintraub. And lastly, a big thank you to the BiggerPockets team for making this show possible.
