Announcer: [00:00:01] You're listening to Advisers on Call.

Cheryl White: [00:00:07] Thank you for tuning in to our podcast. Advisors on Call with Greg Ramirez, Wealth Manager and CEO of Advisors on Call. I'm Cheryl White. Greg, this week let's talk about estate plans. We talk often about needing an estate plan, but what exactly is it and what comprises an estate plan?

Greg Ramirez: [00:00:28] Well, basically what comprises an estate plan is a trust. And then within the trust, there's three components. So first, you're going to have your powers of attorney for financial. Then you're going to have your powers of attorney for health care. Then you're going to have a pour-over will. Now, that consists of a trust, a part of estate plan, because what you do is your trust covers your major assets, it covers your homes, covers your 401(k) plans, your savings, any investment accounts that you have. Then when you get into the powers of attorney, now you can actually have two different powers of attorney. One power of attorney is going to be in charge of your financials. So should you become incapacitated where you can't do two of the six activities of daily living or a doctor would say, you can no longer make decisions, then you would have someone appointed as your power of attorney for financial. You need to know this the power of attorney that you have for financial. When you pass away, that power of attorney goes away. The power of attorney that has more power than that is called the health care directives. Now, the health care directives don't do anything financially, but what they take care of is your health care decisions. Do you want to be on a respirator? Do you want to have extended medicines if you're terminally ill? What decisions did you make? Depending on the decisions that you made that person who has your health care directives will carry them out.

Greg Ramirez: [00:01:40] Now, those powers will actually go even once you pass away, because once you pass away, how do you want to be buried? Do you want to be cremated? Do you want to be buried? Do you want to have a non-denominational burial? Do you want one that's involving with being Catholic, Christian, Buddhist, Islamic, whatever your religion is, the person that has the health care directives are going to make the decisions that involve anything that would be once you pass away. Are you going to have a casket and where is the event going to be? So all those things is what the person with the health care directives does. They control where the body goes. I mean, seriously, they do. And then the last component is the pour over will. So basically a pour over will is, let's say, for example, there's a family heirloom, maybe an old clock or maybe your grandfather's watch. Those are going to be put in the power of a will so that any small trinkets can be going to the people that they want that are supposed to get those.

Cheryl White: [00:02:32] Oh, I see. Okay.

Greg Ramirez: [00:02:33] And that's it. You know, now obviously there's more components to estate planning because the other question is when you have an estate plan, do you have life insurance? What kind of trust is it An A, B trust? It's a trust. And trust is an irrevocable trust. There's also trusts for people with special needs. There's many different types of trusts. So depending on what your needs are, you're going to have to see an expert for that. Now, I do want to say I myself, I don't practice law in regards to that, but we have referrals that we can send you. But I've been doing estate planning for a long time, and it's very important for you to have a trust. The reason why it's important because the decisions that you make in the trust are the decisions that your trustee is going to have to carry out for you. So what I suggest, folks, if you don't want to be on a respirator, if you don't want to be an organ donor, put those things in writing before you get sick because someone else is going to make those decisions for you and don't have the estate. Make the decisions. You make the decisions. You be in control.

Cheryl White: [00:03:27] Greg What happens if you have a sizable estate but you have not put together your estate plan?

Greg Ramirez: [00:03:34] Oh, well, first of all, you're going to have probate and lose up to as much as a third of the estate in probate. So it's very important people put beneficiaries on. Let's say, for example, you don't have a trust. You make darn sure that on your home you have another person on that deed so that when you go, that other person can get it. Number two, you have accounts. You want to have accounts with joint rights of survivorship so that when you go, the other person gets it. Or you can have what's called a TOD, which is a transfer on death. Once you pass away, the other person inherits. Because anything that you don't have a beneficiary on can go to probate. And the biggest issue that I've seen is I'll give you an example. I had a family that the father and mother passed away in different years. The house was owned free and clear. The son didn't get to update it. So now the son had to go through probate. Now the good thing is we found the pour over will and it was in the trust, so we were able to accept it. And the good news is he didn't have to pay all the probate expenses, but if he didn't have that trust or the pour over will to show that it was done but it wasn't put in there, he would have had to pay a substantial amount.

Cheryl White: [00:04:38] What happens with divorce or, say, a death of someone that you've listed as a beneficiary and you should have changed it, but you didn't? Is it just locked in?

Greg Ramirez: [00:04:48] A couple of things. If that person is dead and doesn't have any next of kin, then it would go to probate. However, if they haven't executed, let's say, for example, you were married and you and your ex-wife had kids and the kids would inherit it. Or let's say they got remarried again and then she was married to the other person at the time. But she was dead. Then he would get it. So unfortunately, you want to make sure that you make those changes to the beneficiaries.

Cheryl White: [00:05:14] And that's why you get together on a regular basis with your clients to go over these things and make sure that they are up to date.

Greg Ramirez: [00:05:22] Yes, at least annually. You want to go over it because sometimes you change your mind. You don't want to have that beneficiary and sometimes you may want to go back to who you had originally. You can change your beneficiary as much as you want. But remember this, folks, there's two types of trusts. You have a revocable and irrevocable. If you're someone that's going to constantly change your mind, you do not want to get an irrevocable trust because once you make a trust irrevocable, you cannot make the changes. And it's done. Okay? It's as-is until you die. If it's a revocable trust, you can change it every month if you want to.

Cheryl White: [00:05:52] But why would you want one that you can't change?

Greg Ramirez: [00:05:55] Because sometimes as you get older you can be taken advantage of. And if you did something as an irrevocable trust, when you're in the right state of mind, nobody can give you the undue influence at that time when you're vulnerable.

Cheryl White: [00:06:08] Well, that makes perfect sense.

Greg Ramirez: [00:06:10] Less expenses and less trials, less stress to the person. That is the trustee that has to worry about it. I have a personal experience with it. And probably one of the biggest regrets that I have is I have an aunt and I had her get a revocable trust. And the reason why I did that is I wanted no one to think that it was undue influence. She was very close to me, but I regret it because I had an uncle that came in and basically took her assets while she was at stage four cancer and in hospice when she was at home and everything was done behind my back. And because of that, had there been an irrevocable trust, but they were stupid enough not to do anything. They left everything in the trust. Eventually they paid the price, but it was very expensive. Took five years of deliberation in court. Save yourself that time.

Cheryl White: [00:06:49] I think that story probably resonates with a lot of people because people change when there's money on the line, don't they?

Greg Ramirez: [00:06:57] Oh, yes, they do. And any amount doesn't matter. You'd be surprised, right?

Cheryl White: [00:07:02] Hey, is there any way to minimize the tax on your heirs, The people you leave the money to?

Greg Ramirez: [00:07:08] Yes. You can buy life insurance. That's one way to make sure that your heirs are going to get more money. If you have multiple properties involved, then you may want to look at maybe having some LLCs. You may want to look at having corporations. These are mitigation strategies that we need to talk about. It's not something that I can just overall say because every situation is going to be different. You want to make some of the people part owners because that helps too, because then you have a step up in cost basis. But again, you'd have to call us so that we can talk about the plan individually with you. I don't want to be general and make it seem like it's easy when it's not.

Cheryl White: [00:07:39] What sorts of things, documents, would someone have to pull together? Do you have a checklist?

Greg Ramirez: [00:07:44] Yes. Well, first of all, do you have a trust? If you have an old trust, do you have an updated splintered in? If you don't, some people may have a pour over will bring in your accounts, bringing in all your statements, you know, the real estate that you own. How is it titled bring all that stuff in so we can evaluate for you and then tell you what we need to do. And that's just a starting point, folks, because the first part is trying to put together a plan. But we can't put together a plan unless we know all the assets you have. And don't be shy. You know, one of the biggest things I see is that I hate when people hide the ball because we're not going to be able to help you if you don't show us all your assets. And the only person that you're going to screw is yourself or your estate or your heirs. Show us everything we have. You know, we're not here to gather all your assets. And I understand if you have another advisor that you want to work with, but you want to work with some of the assets. I understand that. But let us know, because if we know everything that you have, it's easier for us to work with you so that there won't be a problem in the future in terms of your estate and what taxes are paid.

Cheryl White: [00:08:37] It is kind of natural, though, isn't it? You're revealing yourself, you're exposing yourself, you feel so I guess part of it is trust, correct?

Greg Ramirez: [00:08:47] I had a client, I call him Client 001. It took years for him to show me everything that he had. Literally for seven years. He would always come up with a different account. Oh, Greg, I found this old passbook. You think it's still active? Oh, Greg, I had this annuity I didn't tell you about, and it was comical because I'm like, What is he going to show me today? And then finally, after the seventh years, you know, Greg, my cupboard is bare. You took it all. I understand it takes time, but, you know, the one thing that client told me, he said, you know, Greg, because you're one of the only advisors that's ever made me money because I've been through a lot of people. He says, But you actually made me money. I appreciate that.

Cheryl White: [00:09:24] That is quite a compliment and endorsement. Yes. So thanks, everybody, for joining us for our podcast today. Advisors on Call about estate Planning. There's much more to it, of course, And if you would like to talk with Greg about the different components of an estate plan and how to put one together for yourself and your estate, you can call (562) 269-1007. That's advisors on call.

Announcer: [00:09:50] We know life is busy, but any time you have a question about your retirement, drop us a message online at advisorson.com. Investment Advisory services are offered through Greg Ramirez at Advisors on Call, a state registered investment advisor. Advisors on Call in this radio station are not affiliated. The investment ideas and financial vehicles discussed here should not be considered personalized investment advice, nor are these recommendations to buy or sell any particular investment or product. And the information you hear should not be considered tax or legal advice. Individuals should first consult with competent tax, legal, accounting and other professionals regarding the applicability and suitability of any investment ideas. Certain investment ideas contain substantial risk, are illiquid and may only be appropriate for accredited investors. Past performance is not a guarantee of future results. All investments will fluctuate and when redeemed, may be worth less than when originally invested. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products. They do not refer in any way to securities or investment advisory products. Fixed insurance and annuity product guarantees are subject to the claims paying ability of the issuing company. None are offered or sold through Greg Ramirez and Advisors on Call. Comments regarding a particular client's experience may or may not be the same as another client's experience. Do not guarantee future investment success and should not be indicative that any client or prospective client will experience the same or a higher level of investment performance.