Episode 126 - Legal Documents: The Basics

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It's very often that we meet with couples that have children who say, oh yeah, I've been meaning to get our legal documents done. God forbid anything ever happened to them. The main motivation for people to get these completed is so that their family isn't left with a financial mess while mourning their loss of a loved one. Funny enough, your legal documents are something you get done for many reasons. One of those also includes making things easier for your children when you do pass away, even if it's at the age of 105. Today, we're going to give you the basics around common legaldocuments that clients get and what we see when working with them to accomplish the task. So the big question is this. How do veterinarians like you who live demanding lives?

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You never seem to have enough time, able to achieve balance, and take control of your finances with confidence. That is the question, and this podcast will give you the answers. We are Florida Veterinary Advisors, and this is the Smarter Vet Podcast ORG. Hey, SmarterBet ORG. Welcome back to the SmarterVet Financial Podcast ORG. This is Tom Seiko and C.J. Burnett, your host and financial advisors that work with veterinarians, practice owners and the veterinary community across the United States and owners of Florida Veterinary Advisors ORG.

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Our mission is to provide a different way of thinking to make financial decisions easy so you can spend time doing other things. Please make sure to check out all of our other great resources available on our website, such as complimentary race CEs, masterclasses, assessments, videos, and articles. You can find them by visiting FLVetAdvisors.com. And if you're finding this podcast to be helpful, make sure to rate and review us on Apple ORG or Spotify ORG.If not, give us a rating on the Smarter Vet Financial ORG Facebook page and follow us there. So this episode is for those of you who are curious about legal documents. Probably thought about getting them. They've been on your to-do list for a while, sometimes even years, just haven't gotten around to it.

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If you're like most people, they said, I was supposed to do that two years ago, three years ago. It's been on my to-do list. I'm going to get to it in a couple of weeks. And I will say, depending on your circumstances, what's interesting about legal documents is they're not actually that hard to get done. Some people think they're like everly challenging and very complicated to do. And, you know, knowing which ones to pick and which ones to get done. Some people think they're like everly challenging and very complicated to do. And, you know, knowing which ones to pick and which ones to get, because your, your circumstances are going to be really going to dictate which ones you should have. But the bulk of society,there are ones that you should be focusing on and implementing into your finances, which we're going to, we're going to take some time to talk through some of those to hopefully help you be able to take that next step. If you are one of those people that has been kind of dragging their feet, usually, what is it, nine out of ten out of ten people we talk to are usually still trying to figure it out.

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And I've never had anybody tell me that it wasn't important. Like they've all said, oh, no, this is important. We really want to get this done. But I think some of the, like you said, Tom PERSON, the ambiguity of it, like, what is that next step? Is this going to be a long process?Is this going to take six months? Like, I think it's going to take a long time. And sometimes it actually is a quite easy and painless process. But no matter what the case, we're hoping this episode takes a little, a lot of the mysticism that exists with how legal documents work, what are they for? And maybe whenever you go to meet with an attorney, this episode has gotten you kind of 10% of the way there, at least so then whenever they start talking legal jargon,you go, oh, yeah, I remember that from the podcast.

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And our planning process, as we work with people, this is actually a topic that we talk about very frequently. It's like at the very beginning of our conversations, because one is we want to make sure that we're addressing risk because sometimes people think risk is also just like insurances. However, legal documents is also a big part of that equation here.So, and, you know, there's different ways that attorneys will refer to this, but the most common attorney you'd want to talk to to get your legal documents done is through an estate planning attorney. And, you know, just before we jump into some of like what the documents are out there, what's very fascinating about being able to start this process is that literally there are certain questions that you're going to want to have to answer along the way to be able to create your legal documents. And there's a whole questionnaire that you would end up getting from the attorney. You'd fill in certain blanks and answers to certain questions, which we'll talk morespecifically around what's, what are some of the answers you're going to want to have. And then you go through a drafting process. And then when you're happy, you go and you execute them. And it's usually it can be done in like as little as two weeks if you really put your mind to it. Depending on how complex your finances are or how quick the attorney works, you know, could take a little bit longer. So they're depending on just keeping that in mind as we talk about this. And just also

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remember that estate planning attorneys, like one of the reasons why you go to an estate planning attorney is because just like you wouldn't want to have a brain surgeon doing like a surgery on your liver. Like you probably really want to pick the attorney that does this over and over and over again. They understand probate law in the state that you're in. They have this down pat. So it's good.Like go to an estate planning attorney. Some other attorneys can do it. It's pretty simple. They might be able to kind of work their way through it. But an estate planning attorney is going to be the best person, the best type of attorney to have this done. And also know that the more complex your family life is, it's going to addcomplexity inside the plan. So if you've been married once and you only have kids from one marriage, it's probably going to be fairly basic. If you've got four different marriages and two kids from each marriage and four businesses and like it's going to be a little bit more complicated, right? So the family situation does play into that as well. Now, the first document that we'll talk about is a document that a lot of people have heard of before, and a lot of people will even, there's a nickname for certain people like trust fund babies, right? They talk about trust funds.What is a trust fund? Well, funny enough, a trust fund is really just a fund that's in the name of a trust. So the first document that we're going to talk about is a trust. A trust is basically setting up a document that kind of enacts as like almost like another individual. It's like another person.It's another entity. And when you set up a trust and let's say it was in your name only and then you die, then all of your stuff that is in the trust gets distributed to your beneficiaries via through the actual beneficiary. It doesn't go to probate. And probate is what happens is whenever you die and you don't have a trust, your stuff goes to probate court. And then the courts decide on how your assets are going to be divvied up to the people that you left behind your heirs.The most common trust that we see a lot of people set up, like the bulk of society, what they do on how your assets are going to be divvied up to the people that you left behind your heirs.

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The most common trust that we see a lot of people set up, like the bulk of society, what they do is what they call a revocable trust. And basically what that means is when you're alive, you have full rights and can make amendments and changes to that document of how money is going to get distributed, what gets put into it. You are what they call the trustee. You're the one that's basically following the guidelines. And if you have a spouse that's also on there as well, like let's see,you have a joint trust, then you both are trustees. And that transition eventually when you two were to pass or if it's just you having the trust, now it becomes irrevocable, which there is, when it comes irrevocable, whoever now has to follow the guidelines of your trust you created, now you have designated a follow-up trustee or another person who will now go and basically follow your instructions that you have there, and they cannot ever change it again.There are ways to create irrevocable trust while you're still alive and they can be used for certain estate things. We're not going to really get into too much detail around that because of just the complexity that I can create. But basically, it's like having the ability to designate the transition of your assets and your belong, not necessarily just your belongings, but like your home and investment accountsand life insurance proceeds and all these things, you can have it to where it's spread out over time.

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And you can put, so just like Tom PERSON said, you can put assets inside the trust. And one of the main benefits of a trust is that, again, it avoids probate. Because if all of your stuff has to go through probate courts, then there are fees associated with that attorney's fees that are associated with your stuff going through probate courts. And so a lot of people use a trust in order to avoid paying a lot of those fees. And then the second benefit to having a trust is that whenever you die and you leave yourstuff behind, no one knows who got your stuff. When it goes through probate, if you don't use a trust and it goes through the probate courts, then now all of where your stuff goes is public knowledge. Like it's written in public documents and people can literally see who got your stuff.

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Well, one third benefit too, I think that needs to be added in here is like if you have children or minors, it can help also avoid what they call guardianships and an easier transition of money to your children, but also when they do turn the ripe age of 18, whatever money is there, it doesn't just get dumped on their head. You can sort of kind of divvy up how that works. So like the trust can be very helpful.I mean, CJ PERSON and I, we are a little bit like, we believe a lot, like almost everyone should have a trust. But then sometimes it comes down to, well, how much assets you have or what amount of life insurance you own. So these are questions, of course, you'd want to be asking, which this leads to one of the most common documents.A lot of people talk about creating it. And one of the most common documents. A lot of people talk about creating it. And what's insane about it is there are a lot of celebrities and popular people out there who ever never actually create this document. It's called a will. So like a will is basically a catch-all for your stuff. So think about it. Like you have animals and you have cars and you have certain belongings and especially if you own a home and bank accounts and everything and you didn't have a trust.Or let's say your retirement accounts, you did designate people to receive them as a beneficiary. Basically, what happens is that those would go right to the people, but everything else, well, how does that get distributed? Who gets what? And each state has their own kind of, like, let's call it a pecking order that they follow to how it would get distributed in the event that you passed. So like if you have animals and you don't want, you know, this one person to get it, then you might designate itinside of your will that that's what you want to happen. Or if you have children, like who's going to care for your kids in the event that something were to happen. Yeah, most people know about

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a will, how it works. And if you have a trust, you will still have a will, but you just have a pour over will, where whatever didn't make it into the trust will then go through the will, which then goes through probate. If you have a will, everything still goes through probate court. But now the will should catch everything that didn't make it into the trust and then push it back into the trust.So that's helpful to know when you go talk to an attorney. You say, hey, you know, I may not need a trust. I don't know if I need a trust. The attorney will help you decide whether or not you need a trust. But the will, you know, obviously most people, whenever they go get an estate plan done, even if they don't need a trust, they oftentimes will get a will.Another document that gets thrown into the mix.

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And we consider more of a basic document, is what they call a living will. And we joke around a little bit, CJ PERSON and I when we talk about this, because, you know, really the whole idea is if you're ever in a vegetative state, really, it's like, are you a chance of ever coming back recovering or not? And, you know, what we have written in our living wills is basically, if we're on lifesupport, can they unplug us for maybe 60 seconds and then plug us back into the wall to see that we kind of respond or not. But it's really what it's designed to do is designated to like, do you want to be kept on life support or do you not want to be kept on life support? And Terry Shibow PERSON is a very big thing that was out there. If you've never heard of this event that happened, they actually have a movie on it that I found out not too long ago. This went on for like over a decade to where basically the Terry PERSON was left on life supportand there wasn't any designation of how that would be handled.

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So getting a living will, it's, you know, pull the plug, don't pull the plug, when to pull the plug, all those questions. And then also inside of a living will, you can designate what they call a healthcare proxy, also known as a healthcare care surrogate, which is basically saying, hey, in the event that I'm in a vegetative state, then I delegate the responsibility of making decisions for my health to a specific person or persons, because you can actually have a backup to that person.And so having a health care proxy gives the doctors the knowledge and the ability go, oh, we need to fill in the blank for this patient, but we don't have anyone to consult. Who do we consult? Well, in that document, it says clearly, consult this person, whether it be a spouse, a parent, a sibling, right? So at least the doctors know where to go to get the answers that they need in order to be able to do the work that they need to do and make sure that you make it on the otherend of whatever it is that you have going on health-wise. And by default, so like if you are married,

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usually what's going to happen if something happens either of you, you will be basically by

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default like the health care proxy. I mean, that's how it would be designated in most instances.

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However, it's like, let's say something happens where you're both incapacitated.

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And now you need to have someone making decisions on like your healthcare treatment.

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You'd really want to outline that in there. And sometimes you might have family members that you really do trust when it comes to medical stuff. Maybe you don't fully align with your spouse on what you would want to happen on that end, which then you'd designate that in there. And then there's the other side of when it comes to your finances. Like what happens next in the event that you're incapacitated and you can't make financial decisions or handle your affairs, pay your bills, cover your mortgage? And this is what we call a power of attorney. So there's many variations that there's called a durable power of attorney. There's an unlimitedpower of attorney. There's an unlimited power of attorney. There's depending on what kind of level you want to provide people of being able to handle your finances.

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A lot of times people think a power of attorney is kind of like a health care circuit only for your finances. So you're delegating the power to be able to pay your bills and do the things that you would be able to do if you weren't incapacitated, let's say in the hospital, you're delegating that power to somebody else so they can do it. And a lot of the times it's a spouse. You say, okay, I'm have my spouse be the designated power of attorney. So that way, like, at least if I'm incapacitated and in the hospital because of a car accident that I, you know, someone like semi rearended me or something, even though I'm still alive and at least gives Erica PERSON my wife the ability to say okay I'll pay this bill I can pay that bill like she has full access to all of my accounts to be able to make sure thatthings move smoothly and and as if I was even there like it it does the there's no interruption

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there is no perfect time to start anything. Maybe you should consider starting now. We created a brief 10 question quiz that will give you a financial checkup to make sure you're addressing every corner of your finances. This includes how you're protecting yourself from risk, how much money you're actually saving for your plan, and building up a balanced asset portfolio that can help you today andover time. Take the quick quiz now by clicking on the link in the description of the show or visit our website at FLV veterinary Advisors.com ORG.

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So there are many different types of trusts. And depending on your net worth, your family situation, especially and how you own assets will depend on what kind of trust you need. And there's literally, I think if you Google trusts, you'll get, you'll find out that there's, there's grants or trust, there's non-granter trusts. You can even find things about islets and grats and slats. I mean, literally too much to go through in one episode of a podcast.But again, just know, like, yes, there's multiple types of trust. So even though we talked about a revocable trust earlier, like, yes, there's multiple types of trust. So even though we talked about a revocable trust earlier, that was just the most common thing that we see, the traditional family today going out and even talking to an attorney and especially in the state of Florida GPE where probate is somewhat complicated. And a lot of people try to avoid the probate fees that are associated with it. A lot of people in Florida GPE will get a trust to avoid thatand make sure that their assets pass to their beneficiaries privately and nothing is made public.

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A good way to remember a lot of these documents, too. So if you're really curious, you're walking with, because we've thrown a bunch of things at you, the best way that I've liked to categorize in my own brain is that you've got your basic documents. These are your wills. You're living well with your health care proxy, your health care surrogate, your power of attorney. Those are your core documents that, like, ultimately everyone should have them createdand implemented. And every five years or whenever there's major life events or changes that happen, like you should be getting them reviewed, getting them updated, laws change. And then on the flip side, there's more of the advanced side. And this is the trust that C.J. was just talking about. There are so many. The most common one is revocable. It tends tobe the most flexible for most people. But this is, of course, something you should be consulting a little bit with your estate planning attorney that you work with as you draft up your documents. And there's something that gets brought up a lot as we talk with people is around, you know, life insurance and how it fits in my estate. And, you know, what are some of the things that people usually, we're talking about with them on CD about?

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When it comes to life insurance and how life insurance is owned, even that can be somewhat complicated in how even sometimes people put life insurance inside of trusts. And so it's not just about investments and how I own investments and which trust is in here and which trust, you know, which trust owns what. But I think when it comes to life insurance, it's even more so tricky. And I, the last thing I'd say about, about this just particular piece of it, because advanced planning does, advance the estate planning does get very tricky.And even, I think the last few years, it's made, it has made less of something that people really felt like they wanted because the estate few years, it's made, it has made less of something that people really felt like they wanted because the estate tax exclusion is way high right now. As of the recording of this episode, I think when it comes to the estate tax exclusion, currently it's at $13.61 million per individual. Meaning, if your estate is under $13.6 million, you really don't have to worry about an estate tax that your heirs would have to pay.But that is scheduled to sunset at the end of 2025 and revert to roughly about $7 million per individual adjusted for inflation. So just keep in mind that the maximum federal estate tax rate still remains to be about 40%. So keep in mind, if you're somebody who's listening to this and you are a practice owner and the value of your practice is even above $7 million, it's probably very good idea to call an attorney and start getting your estate plan figured out. And hey, like if you need help on the back end, even with from us, feel free to contact us through our website. And I'm sure we can get you some sort of resource of what you need to start thinking about looking at your estate plan and recognizing that you have a potential estate tax issue for yourheirs that you may want to start looking about figuring out to do something with. And keep in mind also that those numbers when you're married, they can't actually be double. So the 13.6.1 million is actually, if you're married, is actually, you know, double that. So 27.2 million. At some point in the future, there is a lot of people who believe that Congress may one day bring that estate tax exclusion down where it might be $3 million or $4 million per person. So even a practice owner, let's say, who has one practice, maybe even just one location with a couple of doctors,they may actually have enough where it becomes an issue, where if Congress ORG in the future decides to start changing things, and now all of a sudden they need advanced estate planning, it becomes not really just something that, because right now they don't need it at all, but if it becomes something that they need, well, now it's even more so of something that as you're listening to this episode, I'm hoping that you're filing that in the back of your mindso that when you go out there and you read on the internet, something about Congress ORG changing the estate tax exclusion, you go, oh, wait, what was that episode of the Florida Veterinary Advisors when they went through that in the Smarter Vet ORG podcast? Like what was that again? And then you at least creates the curiosity where you can know that there, if somethingchanges in that world, then maybe perhaps you should also be going, hmm, it's about time for me to call an attorney. We're glad you here.

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And we hope you love our show. If you do love our show, we could really use your help spread in the word. Take this episode or one of your favorites, share with a friend two or maybe three, and let them know about the great content that we're offering. This is C.J. Burnett. And I'm Tom Seco PERSON.

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Wishing you a lifetime of financial success.

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podcast releases, short presentations, and articles that we publish. Make sure to like us on Facebook, follow us on LinkedIn ORG, and subscribe to our YouTube channel. C.J. Burnett and Tom Seiko PERSON are registered representatives and financial advisors of Park Avenue Securities LLC ORG and financial representatives of the Guardian Life Insurance Company of America, New York, New York. C.J. Burnett's and Tom Cicco's California licenses are 0K-766 and 0K-8-0141, respectively. Security products and advisory services are offered throughPark Avenue Securities LLC, a registered broker-dealer, investment advisor, member of FINRA ORG and the SIPC, and a wholly owned subsidiary of Guardian. Florida Venture Advisors ORG is not an affiliate or subsidiary of Park Avenue Securities or Guardian ORG. This podcast is for information purpose only. Guest speakers and their firms are not affiliated with or endorsed by Park Avenue Securities, Guardian, or Florida Veterinary Advisors ORG, and opinions stated are their own.This material is intended for general use. By providing the content, Park Avenue Securities LLC ORG and your financial representative for not undertaking to provide investment advice or make a recommendation for a specific individual or situation or otherwise act in a fiduciary capacity. All investments contain risk and may lose value. Past performance is not a guarantee of future results. The individuals associated with Florida veterinary advisors do not maintain specialized licenses or qualifications for the financial servicesprovided to veterinary professionals. Florida GPE veterinary advisors is not registered in any state or with the U.S. Securities and Exchange Commission ORG as a registered investment advisor.

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