Ep 001: EstateEp 001: Planning Jason with Morris Jason Morris Estate Planning: The Financial “Must Do” that Most People “Just Don’t” Attorney and estate planning expert Jason Morris gives listeners concrete takeaways on topics such as why a trust is essential, the consequences of not putting one together correctly, and the importance of keeping your trust up to date.

I’m Greg Hughes. I’m with but they just haven’t kept it up never good? Is never good for Hughes Private Capital and to date. And that can cause a you?” All too often, as estate I wanted to welcome Jason lot of issues in and of itself. planning attorneys… we’re Morris today, who’s an really like… we’re the last in the attorney with Woodburn and Well, that sort of dates me line when it comes to folks and Wedge, right here in Reno, because my kids went to their financial preparedness Nevada. And is it pretty fair Galena so... I don’t feel like and their financial planning. to say that you specialize in Galena has been around long And so oftentimes, we’ll estate planning? Is that what enough for you to have gone see folks come in with their you do for the most part? there and my kids to have gone insurance guy, their financial That’s right. Yes. there. Well, you had sent me a adviser, their CPA, and then PowerPoint that had given me finally, they’ll come in to us as Why don’t you tell us how long some highlights on some of the the estate planning attorneys, you’ve been in the business things that we’re gonna talk if at all. And all too often, it’s for? And tell us a little bit about today. But, I really like something that folks think that more about yourself. this... this one of the first slides they can just put off entirely Sure. So I’m a local boy, I was in here. It’s a picture of a guy, and, quote-unquote, “The kids born and raised here, attended and he’s on the phone and will work it out.” Which is one Galena High School, and I went it says, “No, Thursday’s out. of the worst ideas and worst away for school. I’ve been How about never? Is never plans, if you can call it that practicing now with Woodburn good for you?” Now tell us, because all too often, the kids and Wedge for ten years. So I why is that slide in there? don’t work it out. And even if it was happy to come back to this Yes. I used that comic because is a happy, harmonious family, area. I love Northern Nevada. all too often I feel like the things just don’t work out, if And I really enjoy helping folks gentleman in that comic. that’s the default plan. with their planning. When I He’s trying to schedule an first came out of school, I was appointment with someone Yeah. Things really change doing quite a bit of litigation. and they’re saying you know, when a death occurs in the And so I saw some of the on the other side, the party’s family. And money’s at stake downsides of what can occur saying “Thursday’s out, I can’t and everything else and even if you don’t plan properly. Or make it.” And so, you know, the though everybody seems to frankly, if you’ve done planning caller’s saying, “Well, fine. Is get along, it doesn’t. You but it’s very outdated, which we see more and more these days. We find people who have done planning at some level,

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probably see that all the time, Absolutely. I mean, it’s the Yeah. It’s a big pain in the rear, right? old trade saying of Nike, “Just right? I did my trust when Certainly. Certainly. And I see Do It,” right? Their marketing I was probably twenty-five that with, you know, various slogan “Just Do It.” And if years old. So, I mean, I did it creeds, religions, faiths, it does there was one, I guess, nugget at probably a pretty young age not matter. It really doesn’t. to take away from this would for most people. And my dad And all too often people say it be to just do it. And I guess, went in to do it at the same will work, we’re a good Catholic add onto that, to kind of tack time. But my dad, still to this family…we’re a good Mormon onto that piece of advice or day, does not have a trust. family. Whatever it may be, recommendation is to do it with And I’m not really quite sure you label it, and that will never someone who specializes in this why, Right? And obviously, be us. No, no, it will be you. area. I like to use the medical he’s older and probably needs And I see it. And I see… I’ve analogy, right? You know, if you it more than I do; although we worked in this long enough to have a sinus infection, if you’re, all need one. But I always felt where I’ve seen the plans that you know, clogged up in there… a sense of planning on it. You we’ve created and how the kids in the sinuses, you’re not going know, you have to stop and react once mom or dad have to go to your podiatrist, right? think through things, and I passed away, and it definitely If you have some heart issues, think that’s a little bit of what changes and alters the way you’re probably not going to go is really kind of a challenge they treat each other and their to an orthopedist. You know, with people, right? So, what inability to get along. for some reason in the law, we would you say if you’re Middle see a lot of people who would America? You know, you’ve done okay for yourself, you got “If you have a sinus infection, you’re not some assets. How many hours going to go to your podiatrist, right? We see have you got to put into this a lot of people who would go to the guy who thing? How much time do we did their divorce, then [let them] do their have to spend talking about it will…their trust. That’s really not very and doing it? sensible. As much as we like to encourage them Yeah. You know, if you kind to ‘just do it,’ just do it with someone who of have an idea of where you specializes in this arena.” want your property or assets to end up, that really helps the Well, and it’s…it’s also not just go to the guy who did their process. That’s the number the kids, right? Because the divorce, to then do their will… one most difficult thing for kids now are married, and they their trust. The person who our clients to determine is have kids, you know, or maybe helped on their business deal how they want their estate grandkids, and…and so on, or when they broke up with distributed. Who ends up with and so on in all of this, right? their business partner, they’d your stuff, okay? So, if you can So you’ve got a lot of other go to that guy for their will or come in and prepared with influences that are all around their trust. That’s really not that very crucial decision point, having to deal with that estate very sensible. And so, as much then it will really streamline on a whole deal. So, is that the as we like to encourage them the process. I guess because I biggest challenge that you see to just do it, just do it with work in this arena, I’m always out there as people just put it someone who specializes in this flabbergasted or taken aback off over and over and over? arena. by how many people come in

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and just don’t know where they Absolutely. I mean, there’ a But in a way, you can almost want the assets to go...where lot of confusion between a look at it that way. they want it to end up. trust and a will. And what’s That’s a fair way of doing it, the difference, why do you yes. I like the analogy, yes. An They just...they just never need it? For a trust, we create thought of that, right? this agreement. It’s basically If you die Exactly. They’ve never taken a contract in effect. It’s a with assets the time to ponder, “Where contract between the party do I want the assets to go?” creating it, oftentimes called a outside of So, if we can not have that “Grantor” or “Trustor,” and as the trust, in discussion...If you can come in the party creating it, you can prepared with that idea, it does also act as the “Trustee.” your bare save on the time and it’ll save name, you’re on the cost frankly, because I For your own trust, right? bill based on the time it takes For your own trust. gonna fall and so, if folks can come in Importantly, you are going to into a form of prepared with that important choose a successor trustee, decision, it’ll really save a lot someone who will step in and probate. of time. Well, overall, I mean, administer the trust after you we’re looking at several hours are deceased or incapacitated. LLC or even an IRA. And in on the client end because they But, you take title in the name an IRA, you can hold various need to gather their asset of the trust to all of your titled forms of investments or assets. information. And deliver that assets. And so it becomes sort Similarly, a business entity can asset information to our office of a wrapper or an umbrella for hold various assets, just like because with the trust, we’re all of your assets. All of your a trust can hold assets. The going to change title to your assets are under this wrapper virtue of the trust is you can assets. We’re going to take of the trust name or under the move assets in and out of it. title from your name or your umbrella of the trust. They don’t have to remain in joint name with you and a the trust. We prefer that they spouse, into the name of the Would you ever call it an do because if you die with trust. And so we need the entity? It’s not truly an entity. assets outside of the trust, in client participation. We need the client communication to provide that documentation to our office. Why do I need a will?

Right. And so there’s a little • Directs the disposition of your assets bit of work to be done there • Names a guardian of young children too, right? So if I’ve got my • Provides backup protection for assets house, and I want it to be in • Useful for Naming a personal representative The Hughes Family Trust, and (Executor) of your estate other assets, as such. Let’s • Vary the consequences of the Simultaneous? talk that. Do you want to talk Death Statute and allows you to condition a about what a trust is and how bequest on the beneficiary’s survival for up that works? to 6 months.

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your bare name, you’re going to And so the court comes in and fall into a form of probate. says, “You’ve got a file X, Y, Z, Everything becomes public at So the biggest advantage and beyond, with us, to make that point, right? of having a trust is probate sure that those assets end up in Yes. avoidance. As an attorney, the correct place.” These days I love probates. Okay? All in Washoe County, probates So all your dirty laundry gets to attorneys love probates. take probably about a year’s be put out in public. time and at least $5,000 in That’s right. And these days, Tell us why you love probates. attorney’s fees and costs. you know, when a celebrity I thought you did trusts? dies, and a will is lodged into Yeah, exactly. And I do... we do That’s a minimum? court, within minutes it’s trusts, but we’re going to catch That’s, I mean, and that’s if all available on whatever sites you you in one way or the other. goes swimmingly well. want to pick up. With that I mean, a probate is necessary -- It is that even, like, a very small You had mentioned to me estate, too? the other day when we were You can’t avoid it? Basically, So that’s the irony. It doesn’t talking about this, wasn’t one way or another? necessarily matter on the size, Prince one of them? I mean, Exactly. Yeah. So, the probate per se. It’s more the warring many of them, right? is necessary if you die with title parties, the beneficiaries Michael Jackson is one. assets in your name. And even fighting, disagreeing. Or, if the Prince, and his estate is a total having a will, does not mean will has been drafted poorly nightmare because there are you avoid probate. and it’s left for interpretation multiple competing wills. There or subject to the whims of is a lot to be resolved in that “Probate takes the parties named in that estate. probably about a will. So, size does affect the year’s time and type of probate. Once your So in other words, all those at least $5,000 in assets exceed $300,000 in become public information at attorney’s fees...and value, under Nevada law that point. that’s if all goes you are subject to what’s Exactly. On the contrary to that swimmingly well. ” known as a General Probate though, a trust is private. And Administration. Which is that so, you have another advantage Okay. Even though the will year’s time and $5,000 at a of the trust. One, you avoid says, “This is what I want minimum. the probate hassle - as I’ll call to do,” you still have to go it. You avoid reaching me and through probate. Okay. First Okay. And just tells us what my colleagues in the legal field. of all, what’s probate? What the $5,000…Who’s that And it’s private. It doesn’t ever does that look like? paying? Is that paying you? Is have to be disclosed. Provided Sure. Probate is the court. I it paying the court? you transfer your assets into mean, in saying, we want to Yeah, that would be attorney’s the trust name and the trust make sure that Greg’s assets fees. And the court cost would can provide for the disposition go to the rightful parties. And be anywhere from about $500, or distribution of your assets. so we’re going to oversee plus there are publication fees the administration of Greg’s because you have to publish Okay. So, I want to come estate...Greg’s probate estate. notice. back to what kind of assets

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we transfer under the name. was under undue influence But before we go to that, let’s or incapacitated when she go back to the probate for a created the will. And the will, second and a look at a couple admittedly, is poorly written. It of things. So first, if $5,000 is a wasn’t done by someone who hundred and fifty thousand in minimum, what’s the average? specializes in this area. And so fees. I mean, you know, again, let’s it’s led to this cascading series use kind of typical Middle of undesirable results. Okay. So one of the things America, you’ve done alright, with probate, and the assets, you own your house, you own I’ve heard so many times that and that sort of stuff – it’s not these other things. And now, the money is even greater than like it’s all just sitting there you died, and you have your that. I mean, I’ve heard in a in cash, right? It’s not just in will, right? I mean, this is hundred thousand dollar mark. Wells Fargo and everybody assuming you have a will, but Is that really unusual then, for takes their little divvy part. you’ll still go through probate the most part? It’s different. It’s their home, at that point. What do you Not necessarily. If your estate it’s their cars, it’s the vacation think? is large enough, and there’s homes, and then probably, Yeah. I would say we tend to enough to fight over, certainly. a lot of times, like you were stick close to that $5,000 figure. We have a matter right now just saying, kind of different I would say, generally speaking, where the gal died with about types of assets. And they have that’s probably right about it $16 million. No one’s really to make all these decisions in the wheelhouse. Anywhere fighting, but she had really odd based on “do we sell it, not in that $5,000 to $7,500, is and unusual holdings around sell it.” How do you split up probably the going rate, I guess the country. And so liquidating the asset that can’t be split up you would say. But I have those holdings and then making among the three siblings or some very modest estates…I’ve disbursements out to her whatever? Give me any kind got one right now where our heirs…I mean we are well in of an example on some of the fees and costs are almost excess of a hundred thousand things that you’ve seen. $20,000. And it’s because the dollars in fees. I have to go Sure. Sure. I’ve come to parties are fighting. They can’t back and look at the billings. not really like commercial get along. They think mom We’re probably pushing a properties, just because they’re harder to sell. Typically, they’re a larger dollar figure, right? That’s one of the kickers in What assets should all this. You know you want a go in my trust? big estate, you want to grow your assets, but the larger an individual asset, the more The key assets to go into the trust are title difficult it is to find buyers, assets: vehicles, homes, bank accounts,? right? I mean, you have a 1.5 investment accounts, and business entities or 2.5 million-dollar property; such as LLCs, S corporations, and C frankly, there aren’t as many corporations. Anything with a title to it prospective buyers for that type should be held in the trust name. of property. And so, certainly

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that’s the case, we will see all like to have in the trust name. the ownership is in a trust it types of different assets. And Folks will go so far as to specify becomes a little more murky, one of the most difficult ones to things like: my fraternity ring, as to who the drivers might be. transfer, sell, etcetera, would be my knitting collection. We see And so you see some issues closely-held businesses, right? people get really specific and with insurance companies Particularly when the decedent really down into the weeds. on that end. So that’s what was the manager, the owner, That is unnecessary. But if we do the end-around of an the operator of the business that’s what the client wants, assignment where we convey entity. Once that individual that’s what we’ll do. And we’ll your interest to the trust. dies, it’s hard to retain that do assignments or transfers, same value that the business and conveyances into the trust. So, I’ll admit something to had when he or she was you right now. So, I’ve been alive and running it. And so Okay. So mainly titled things. poor…I was great about getting that becomes really, really So let’s just say that I don’t my trust done, but over the problematic. And these heirs, have my vehicles in my trust. years I’ve been not so great these children, believe that that So now I die. I have all my real at getting it back and making business should be dollar for estate, and everything else is sure all of my assets were in dollar the same, the day before there. Do I have to go through my trust. It literally sits on my the individual died and the day probate for my two cars? desk at home. I’ve pulled the after. You know, vehicles are sort list out, at times, I looked at of an exception. And IRAs or it and thought, “Okay, I need Right. Right. So let’s go back any beneficiary designated to do this.” I just don’t get to what you put in a trust. You account and we’ll come back around to doing it. Because it said the assets. Do I take my to that in just a minute. So, is, I guess, not a priority at the Fitbit that I’ve got on my wrist vehicles are difficult because time, right? And you must see and, and make sure that’s it’s such a hassle to put them that all the time. But you just in The Hughes Family Trust? into the trust through DMV. have to do that every…What Where do you draw the line on Oftentimes what we do with would you say? Every two to all this stuff? vehicles is do a separate stand- five years? The key thing for the assets to alone document whereby we Yes. go into the trust are title assets. assign the vehicle interest to So vehicles, homes, bank the trust. So, we’re not gonna You still need accounts, investment accounts, go change the title on the to do both but also business entities, LLCs, vehicles. What we’ll do is an “Vehicles are sort assignment where you declare a will and of an exception... and state your intent to have a trust...The Oftentimes, the the vehicles in trust. And it insurance companies becomes difficult too for those will acts as a aren’t real keen on who have teenage drivers in backup. their homes. Oftentimes, the insuring the vehicle insurance companies aren’t real if the vehicle’s owned keen on insuring the vehicle I know probably depending on in a trust name.” if the vehicle’s owned in a the situation too, right? S-Corporations, C-Corporations, trust name. Because they’re Yes. Definitely. Definitely, as anything with a title to it, we’d insuring drivers. And so when you acquire new assets, that’s

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the time to revisit everything. of your assets that are in the Yes. And those are part of But the seminal life events, trust. Such that the will could the package when we create we say birth, death, divorce, be totally inapplicable. It would the estate plan. Those are marriage. And that honestly, have no bearing or effect on definitely documents that for you as an individual client, your estate after you’re gone. become part of that overall your heirs and beneficiaries Provided everything is titled planning package. In these too, if any of those events in the trust name. So, we days, with the advances in come up, then we start to still need to do a will with the medicine and technology, revisit planning. And as part At this point they are a quarter of that review or update, we examine the asset list and make million in fees, and it all sure that the assets are titled could’ve been avoided if he had appropriately in the trust. just come in and signed it. And you help people to get trust. Because what’ll happen we’re seeing more and more that stuff titled and all of that, is someone like you will form individuals who need those right? a trust at age 25, and kudos to documents, right? We’re Certainly. you for doing it at that young keeping people around a age. But they’ll go out with lot longer, but they don’t I mean, it’s probably part of their life, acquire new assets, necessarily have their mental what your services are. properties, a building like this, faculties or ability to make Certainly. new vehicles, and they won’t those decisions for themselves. put them in the trust. And so And so those Powers of Make it easier for them. And the will acts as a backup to Attorney are becoming more remind me because I’ve now have those assets corralled over and more crucial. spent long enough, but you or transferred into the trust… know, I have four kids. And If they are not. Got it. I probably need to with the four kids, of course, change mine. I think I want it’s very important who were If I remember correctly, it to be frozen. I think that will to take over for us if both my was more in the will, where work out a lot better. Wait till wife and I were to die. Was I gave my medical type of they come up with something that in my trust or was that in answers – Do I want to be right…Yeah, no doubt. As that my will? resuscitated? Do I want to be stuff continues to change, and There should be one in each. on life-support? Those types it changes what we’re doing. Under the trust, it’ll be known of things, is that the case? Or Alright. You’ve talked about as the Successor Trustee. And is that the same thing; does it a little bit, but I really would under the will, it’ll be known that go into both? love for you to tell us more as the Executor, or under Actually, so those decisions on a probate type of a deal Nevada Law now, it’s Personal now are a separate stand-alone because I think there are some Representative. Executor and document that is known as a real horror stories out there Personal Representative are Healthcare Power of Attorney, and you probably have had synonymous. But under the or Living Will, or Advanced to see some of them. And I trust, that Successor Trustee we Directive. want to talk more about what hope, takes the biggest burden the trust can do. Is there in so far as everything, the bulk So that is a Living Will, right? something more specific that

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you’ve dealt with? That you were told, “The ambulance is And it must just tear families just said, “I can’t believe if this here. It’s not looking good. He apart, into where they would person would’ve just gotten may not make it.” And surely, have probably been fine if that a trust done, all this family’s he did not make it. And so his was put together. But maybe anguish...” You’ve already lost estate fell into probate. And they can’t heal those wounds a loved one, right? You’re at I’ve not been involved in that once that happens, for the rest that point in the game. probate, but I’ve caught the of their lives, right? Well, that’s Yeah. One I can think of tail-end of it, and it’s been a the big reason to not make it occurred last year. We had a total nightmare. The kids can’t “Never.” Let’s do it already. gentleman who knew he was get along. The three kids who Let’s get it done. Just do it. ill. He knew he was battling were not participants in the This has been kind of a great some issues. He owns a series business don’t want the one overview. You want to get into of businesses in this area, a big child participant to be involved. just a few more of the specifics estate…big, large estate, and They don’t want the child to and some of the advantages of has four kids. One of the four have any say in management doing this. kids is involved in the business and operations of the company. “If we keep the and the other three are And it has just been chaos. At assets in the estate pretty resentful of that child’s this point as I know it, they’re until date of death, involvement in the businesses a quarter million in fees and it you will receive because dad is sort of taking all could’ve been avoided had what’s known as the child on as a project, he just come in and signed ‘Step-Up in Basis’ wanting to try to help the kid it. And so, I stay up at night to the fair market along the way. When dad came worried over those individuals value of the assets.” in to do the trust with us, he where we have sent out draft took a long time getting us the documents and they just sit Yeah. I think that basis step-up information we needed to do on, sit on, and sit on. And we is an important concept. And the planning. Ultimately, we pepper them. Email them, call I’ll just talk about the paradigm received information, sent out them, try to get them -- that we’re offering for now on the draft documents. He sat on estate planning. Right now, the draft for a month. The day You do everything you can do. we have the largest estate he was supposed to sign the Yeah. I’ve had a couple tax exemption on record. An documents, he passed away. instances like that where individual can pass up to 5.49 an individual had the draft million dollars, free of estate Wow… documents, they just didn’t get tax. I kid you not. We called to the around to signing it. And so home and said, “Hey, we’re then we fall in this expensive, And does that just mean me? I waiting for you. You’re late for time-consuming probate. mean, does my wife have the the appointment.” And we same thing? Your wife has the same thing. Right now, we have the So, as a couple you could largest estate tax exemption transfer almost 11 million dollars, free of estate taxes. So on record. An individual for us as planners, we used to can pass up to 5.49 million think we have got to shift all dollars, free of estate tax. the assets out of an estate. We

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have them and just get rid of As long as it, in your estate dies. the assets in life so that they generically, whether it’s in a don’t face the estate taxes. trust, will, or not in either of Okay. So, if it’s worth $700,000 Well nowadays, we’re thinking, those devices, you will receive at that point, and she still has it’s more advantageous to that step-up in basis. One of it. My wife dies then, okay. So keep the assets in your estate the advantages of a trust for it just continues down the road until date of death. Because a married couple is that upon from that standpoint. Okay. the estate tax probably won’t the death of the first spouse, all That’s a huge advantage. reach you or reach most of the assets can be stepped- It’s big. It’s really big and what individuals. The reason being, up in basis. So, under our we see all too often is mom or if we keep the assets in the community property laws in dad wants to gift some assets estate until date of death, you the state of Nevada, a surviving to a child during life, and at will receive what’s known as spouse, can receive a step-up in this point, we’re trying to talk a “Step-up in Basis” to the full basis for all of the assets in the them out of that. But it’s for fair market value of the assets. trust. tax reasons, for the most part. What do I mean by that? You “In the state of But it’s really odd that we see a bought this building, let’s say Nevada, a surviving lot of individuals think that they you paid $200,000 for it ten spouse can receive a should gift their home to their years ago. It’s appreciated to Step-Up in Basis for children, or stick their child on $500,000. If you were to gift all of the assets in title. this building to a child, during the trust.” your lifetime, it would take Because that’s what they think your carry-over cost basis in the Even though they both hold is the right way to do it. building of $200,000, what you those same assets? If I were But it actually can; it can be paid for it. You now have a big to die, and this building was lesser tax results. built-in gain in this property. worth $500,000, and my wife Right. In this case, it’s probably They’re exposed to the tune were to get it, she’s got the better to wait until you have of $300,000 and a potential Step-Up in Basis. And if she the estate and then you got gain. If they’re gonna sell it at sells it, because now I’m dead that Step-Up in Basis. $500,000, the fair market value, and she doesn’t need the Yes. Yeah. And so, again, they’re gonna pay tax on that building anymore, she’s at because of this large exemption $300,000 gain. Whereas, if you $500,000 as well for herself? amount or exclusion amount leave this building to the child Exactly. of $5.49 Million, we’ve in a will or trust, etcetera, it really shifted from being too will instead receive a step-up So it doesn’t benefit just the concerned about the estate tax in basis to the full fair market kids, then? consequences to the income value, at your date of death of Exactly. And then there will be tax consequences. So we’re $500,000. Such that when they a subsequent step-up in basis doing a lot more income tax go and sell the building, they’ll when that surviving spouse planning to help the overall recognize little or no gain. “Because of this large exemption or exclusion amount of $5.49 million, we’ve really shifted So just because it’s in the trust, from being too concerned about estate tax to as compared to being gifted? the income tax consequences. So we’re doing For the step-up in basis? a lot more income tax planning to help the I should be clear about that. overall family’s after-tax results.”

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family’s after-tax results. Sure. This is tough to do Spousal Unused Exclusion without graphics honestly – Amount. So that’s a mouthful. Okay. So, just to take us a little this portability. The concept When you think about what bit further that last statement. behind it is great. There are that means, the deceased So you’ve moved from estate some funny consequences that spouse didn’t use up his or her to income tax planning. Just can result from portability. exclusion amount to five and a give a good example. What are But basically, you have your half million. That can be ported we talking about on income $5.4 million; your wife has her over to the surviving spouse. tax planning? $5.4... Primarily, the Step-Up in Basis, Which makes sense because all that’s probably the largest one. Let’s just call it five and a half those assets were being held It’s just making sure that people million. I know it has got to by both husband and wife at understand this basis step-up be exact. That’s five and a half that time. concept. million per person. And so yeah, it is a sensible Yeah. What used to happen provision. We just didn’t Just explain this to me, so I’m is, if you died, and we didn’t have it up until 2012. Now, sure that I’m clear on this. allocate assets to a special trust one of the kickers in this is What do you mean by income upon your passing, that five the possibility of, as we call tax? I mean, if my business and a half million – poof! It was it, “DSUE journey.” We have is worth, let’s say a million gone. kind of given it this label. The dollars today, and I’ve got basis Deceased Spousal Unused along $200,000 in that, does So, if I don’t have a trust, it Exclusion journey, which that do a step-up basis as well? goes away? means, you passed away. Your Had you gifted that business As of the end of 2012, Congress wife remarries. You died with or already gifted that business, enacted this portability $3 million of unused exclusion your child – whoever receives provision which allows the amount. She could port over the business as a gift – they surviving spouse to port or that $3 million, stack it on top have to pick up the sale of that take the deceased spouse’s of her five and a half. That business on their income tax exclusion amount. They call it would be eight and a half. Let’s or their federal income tax DSUE, D-S-U-E, or the Deceased say she remarries, a pauper – return and pay an unnecessary amount.

I see. I think I misunderstood a little bit what you were saying. You’re talking about; you actually tried to move things out of the estate to try to avoid some of the estate taxes. And now you don’t have to do that so much anymore. Correct.

Okay. Alright. Good. Do you want to talk about portability?

with Greg Hughes THE EDGE -10- Ep 001: Estate Planning with Jason Morris

most anyone would be like a guy. Just like you said, I think that pauper compared to you, right? Well, I’ve joked when I make out of fairness, it makes sense. these presentations on this A lot of surviving spouses didn’t Sure. topic. I say, “You know, if you’re take what the deceased spouse So, she remarries. Her looking for love and you still didn’t use. But also because of individual assets five and a half have your full DSUE amount, this portability, a lot of people million. How much do you you might wanna advertise do not need what are known as think she would then have? that on match.com or whatever AB trusts or ABC trusts. dating sites... She could add it all up then. “Nowadays, with Okay. She’s got her five and a half. portability, AB And yesteryear, with our lower He’s got his five and a half. and ABC trusts are exemption amount, or lower Plus the 3 million. largely unnecessary. exclusion amount, we really – Congress is not that that good. we didn’t have portability. With And so, I would You have a lot more faith in the lesser exclusion amount, just encourage any Congress, Greg. So, she gets so we needed to use that audience or listeners the five and a half from the new deceased spouse’s exclusion that know that they spouse. She loses the three amount. Nowadays, with from you, okay. So, she gets have an AB or ABC portability, AB and ABC trusts to port over the five and a half trust, to have it are largely unnecessary. And from the new spouse. Leaving reviewed.” so, I would just encourage any her with the eleven million. Absolutely. They should have audience or listeners, that know Having said that, during her a little checkbox. that they have an AB or ABC remaining years married to this So, like I said, certainly, we trusts to have that reviewed. gentleman – second spouse – don’t know if there are cases It may be unnecessary. And she can transfer assets during where this is occurring. But frequently, we’re seeing it. life and use up his entire five we think it’s out there. It’s a We’re undoing AB trusts. We’re and a half million. Let’s say she possibility. doing various trust to take away outlives the second husband; this AB provision. Largely due he dies, she remarries another It’s a possibility. If people to this portability. gentleman with the five and really understand and know a half million. She would what’s going on with that. Is And if I’ve got my trust done, now have another five and a there anything more you want and it’s time to review it, from half million to stack on top of to go over on that part? what I can see, it’s obviously her five and a half million. In effect, you just turn your way The beauty of that “Annual through spouses and transfer assets out to various heirs Exclusion Amount” is that and beneficiaries. So, like I there’s no filing say, we’re calling it the DSUE journey. qualifications. Nothing to report. It doesn’t get listed Right. Now, this is a little bit like the Black Widow thing. All on your returns; it doesn’t get of a sudden, you can get your listed on their returns either. DSUE if you marry the right

with Greg Hughes THE EDGE -11- Federal Gift Tax thousand a year, it’s very clean and very easy. Current annual exclusion amount: $14,000 per year per done Let’s go back. And I don’t want to make you try to come up with costs because I know Current maximum lifetime exemption? (in every one of these is going to addition to annual exclusions): $5,490,000 be different. But let’s just talk about it. About how much Current maximum gift tax rate: 40% time it takes. Can we talk a little bit about how much these things would cost? Well, I’ll let a lot easier the gift to. And it you take it from there. to do. Little tweaks can be anyone. It doesn’t Yes. So for the Trust Package, here and there. And worth have to be family. I would say were looking every amount of time that you And to drive that point home, I at about $2,500, for most spend and penny on that. always tell audiences, I will act scenarios. Certainly, there are Exactly. as the donee of your gifts, free scenarios that would be double of charge. that cost if it gets down to it. Federal Gift Tax. Just real quickly. Let’s just talk about Right, right. Which is very Does it go a whole lot less that that. What’s that? nice. $2,500? So the Federal Gift Tax is That’s my gift to you, my Certainly on the reviews, the actually right now coupled, or service to you. And I say that updates, the addendums. tied, to that exclusion amount. to drive home that point. That Sure, they’re far less than that. So we can all transfer up to it is anyone. There’s a big We’re talking about an hour 5.49 million – round that to misconception that it has to or two of my billable time. five and a half – up to five and be family members, relatives. My billable rate is $300 an a half million during life. That Not the case. You can give hour. And so, it really varies number, you can either utilize that $14 thousand to anyone. on the situation. But for a that exclusion during life or in And for a married couple, you new planning package – where death. So we have this five and can do $28 thousand. So for we’re creating the trust, the a half million we can use up by you and your wife, with your will, the powers of attorney, making gifts during life or after four kids, you guys can pretty helping you fund the trust, death in terms of an estate. quickly whittle down your move all the assets into the And you can’t use five and a estate. If you wanted to gift trust - $2,500 is probably the half during life and another five $14 thousand to your kids just starting point when we’re and a half during death. It’s like that. The beauty of that looking at that situation. When all unified. It’s a unified credit. “Annual Exclusion Amount” - as we’re looking at an update or a You can only start diving into it’s known – is that there’s no refresh, you can be safe to say that five and a half million if filing qualifications. Nothing that it’s going to be less than your gifts exceed $14 thousand to report. It doesn’t get listed that. per year. on your returns; it doesn’t get listed on their returns, either. Right. $500 or $1,000; a lot of Per person that you’re giving So if you don’t exceed that $14 times. Which is so much less

with Greg Hughes THE EDGE -12- Ep 001: Estate Planning with Jason Morris

than all of the hassles that of succession, and that’s just you would have to go through. Well, it cuts into their not how life works. So just do All the effort and time that Facebook time, you know? it. Get it done. Adding onto goes into it. And probably, Haha yes, it does. that, do it with somebody who everything sounds like it’s a lot knows what they’re doing. worse than it really is. Once You’ve got to move from you get going, with it, it’s not Facebook over to your browser Right, exactly. Worth near as bad. Yeah, you’ve got to look at your accounts and all every penny. Just a single to do some things to get it that stuff. mistake can cost way more. done. Like you said, probably You’ve got to have time to Well and most of the time collection of all your assets and listen ti the podcasts you guys people probably aren’t even just thinking it through, and produce. So yeah, it’s tough. saving money. They could seeing all of the different stuff be spending more money that you have to get put in, Alright, so tell me, what do because they are working with right? you think? What’s kinda the somebody that is not doing it Yeah, what we’re finding is number one piece of advice every day on top of that. that these days, with so much that we’ve talked through all Okay. done electronically, no one this stuff. What would you say receives paper statements to people? Well, we kind of knew that anymore. It used to be very I sort of alluded to it earlier. It that was going to be your easy, where we’d have people would be to just do it. Get it advice to everybody. But it’s drop off their paper statements done. Don’t delay it because important. Okay, so we’re to their various accounts, you never know what life’s going to have a little bit of and we’d have the info we going to do to you. To take fun to finish of this podcast, needed. Nowadays, just to get it to a little bit more of a the show. I’m going to ask people online, find out where somber tone, I lost a spouse you a few different types of they’ve got to click to find the as a 26-year-old. My first wife questions. Nothing to do with statements…Then we tell them, passed away from leukemia. trusts whatsoever. But we you can email it to us. You And you just never know what want to know just a little bit know? Download and email it life’s going to throw at you. more about Jason, alright? So to us. You don’t have to print And you don’t know what I want you to tell me, what’s it and hand-deliver it. So, that’s might lie ahead for you. You one thing that you do that sort of the hangup that we find. think everything’s fine and other people think is just crazy. Most folks can’t figure out how hunky dory, and everyone’s What would that be? to access their statements. going to die in the natural order This is the worst question ever “I lost a spouse as a 26 year old. My first wife passed away from leukemia. And you just never know what life’s going to throw at you. And you don’t know what might lie ahead for you. You think everything’s fine and hunky- dory, and everyone’s going to die in the natural order of succession, and that’s just not how life works. So just do it. Get it done. Adding onto that, do it with somebody who knows what they’re doing.”

with Greg Hughes THE EDGE -13- Ep 001: Estate Planning with Jason Morris

to come up with one thing Yeah, and that’s proven to be to use the product. You know, because there’s a whole litany the case. I’m a new…first boat you pay this money. And in of items I could go on and I’ve owned. And third day out and of itself is sort of betting. on about. Um, I’m definitely and I’ve already dinged up the It’s essentially gambling. Here a person who likes to stack propeller. So yeah, my wife also we are in Nevada right? It’s papers. Whether in my office, is not a big fan of this endeavor. essentially betting that you’re at home, you name it. I would She hasn’t warmed up to the going to need this service. And just create stacks of paper. In idea. But, well, we own it. then when you do need it, it’s fact, I’m sitting here to today a major hassle and harang. with a stack of them right here You have to take care of And so that drives me insane, in front of me. it. Where do you like to go I’ll be honest. I’ve had some boating most of the time? – unfortunately – need to use It makes you feel comfortable? So this year, Lahontan actually insurance this past year. It’s For some reason, I’ve stuck a has some water, and it’s a little been a process. little fortress around me, for warmer out there than most of some reason. But that drives the other lakes. That’s so true. It’s very my wife nuts. She files things; irritating when you’ve paid she knows where things go. My How about Lake Almanor? and paid and paid and paid, assistants – it drives them nuts. Have you ever been out there? and then something happens, Put it in the file, put the file I haven’t been out there. and you have to fight the back. I realized that is a major insurance company because annoyance to those around me. You need to. Go out there of that. Alright, great, well when you get a chance and I’ve got one more question for So, if you could have it your spend some time out there. you. So, you don’t say you’re way, you’d have stacked So I thought you were going to an ‘attorney’ or an ‘attorney paper all around your office. say - you know the old saying of law.’ You say you’re an Everywhere and every once – “your best day is when you ‘esquire.’ Right? Why is that? and a while, just to feel good, bought the boat, and the best What’s the difference and do you’d go through and really day of your life was also when other people that have your make sure it’s nice and neat you sold the boat.” But I’m exact same degree and pass and stuff. with you. I love boating and the bar say different? Do you I know where it is, and have had a boat ever since get to choose? that’s all that matters to me. I was 18 years old. It’s only Yeah, you’re trying to stump Unfortunately, everyone else been about the last five years me with the last question. doesn’t. that I haven’t had a boat. No, there’s really no rhyme or Alright, so now tell us. What reason behind it. The esquire That’s awesome. That’s a good absolutely pains you to spend thing is almost sort of an inside crazy. So what do you spend a money on? joke with my brother. I have silly amount of money on? This is probably going to sound a younger brother that went This is easy. I just bought a boat bad, but insurance. Because of to law school. We just, we this year. And you’ve heard the the hassle every time you need acronym for b.o.a.t.? Bust Out Another Thousand?

Oh no, that one I didn’t hear before. THE EDGE with Greg Hughes Ep 001: Estate Planning with Jason Morris think it’s sort of a silly title. So writer for us on what we’re I’ve always put it on my email sending out there. And talk a signature, and it’s just sort of an little bit more about this. So we inside joke with brothers, and we can get it out to everybody. Well think it’s just silly to be called as good. Thanks so much for coming esquire. As if it connotes some today, Jason. This was terrific to greater degree of authority. have you here and some really There’s truly no purpose behind it. great information. I appreciate it. Good, you cleared all that up for us. Well why don’t you tell us, how do we get in touch with you? Sure. You can look me up on our firm website Woodburn & Wedge. My phone number is 775-688-3000. Email is jmorris@ woodburnandwedge.com. I’m happy to take a look at plans that are in place, or sit down with folks for new planning and getting those estate plans put together.

You have, also, I see here, another website. Do you want to just tell everyone what that is? Yes. We have a little blog that we’ve created. Not as well maintained as it probably ought to be. It’s nvplanningandprobate. woodburnlaw.com and that has – I actually use a lot of posts on that if people have questions regarding probate or portability. I’ve done posts on those topics. So I’ll just shoot out links to those various blog posts. It helps orient them and gives them an idea of what lies ahead with probate or what we really mean with this portability concept.

Well, great. And people can look there for also some articles. I know you’re going to be a guest

with Greg Hughes THE EDGE -15-