Estate Planning Attorney Explains What Actually Happens to Your Money When You Die

Elizabeth Schlesinger [00:00:00] Missouri as well as several other states recognize what's called no contest clauses, which you can put in your will or trust to essentially say that if you contest to the provisions of my estate plan and you lose, you're cut out. So if you're gonna shoot at the Kingdom, miss, I'm Miriam Hoffman, a full-time college student living in Carbondale, Illinois, and you're listening to the Vance Crow podcast.

Vance Crowe [00:00:28] Welcome back to the podcast. I'm glad you're here. Today we do part four of the Memento Maury series reminding us all that one day we will die. Today we have Elizabeth Schlesinger, who's an estate attorney that sits down with me to discuss what happens to all of your wealth and property after you're gone. It's an interesting and fascinating conversation to really think about what is it that you're allowed to do to the world? How can you impact it from beyond the grave? We're gonna get to that interview in just a moment, but if you are thinking about doing a legacy interview and you want a chance to have this for you to be able to watch with your family over the Thanksgiving holiday, you need to schedule that right now. We are booking up and time is extremely limited. So if you're interested in having me interview one of your family members to record their life stories, the wisdom that they've accumulated, and have a way to pass values down to many, many generations in the future, go to Legacy Interviews dot com. Alright, without further ado, let's head to the interview with Elizabeth Schlesinger. Elizabeth Schlesinger, welcome.

Elizabeth Schlesinger [00:01:36] Thank you.

Vance Crowe [00:01:38] So if somebody dies, at what point do their people get their property?

Elizabeth Schlesinger [00:01:44] That question can depend on how their property is titled. I think the first and most important thing to establish is that someone actually is deceased. And the way that that is proven is by having a death certificate. So my first piece of advice to anyone who is inheriting or managing an estate is make sure that you have enough death certificates on hand because you're going to need to present them to any institution that manages assets that you need to move out of the decedent's name and into your own name. Beyond that, there are broadly three categories of assets that can pass those that are titled in an individual's name alone, that pass according to someone's will. Those that are titled in an individual's revocable trust or a living trust that they've established that will continue to pass according to the terms of the trust and those that pass according to beneficiary designation. This can be a life insurance policy, retirement assets, a pension. It can also be like a bank or brokerage account. If you fill out A TOD, which means transfer on death or POD, which means pay on death line on that account, those assets will transfer by those beneficiary designations once a death certificate has been submitted.

Vance Crowe [00:02:58] It's funny for, to even hear you say like, go get more death certificates because you think of this as being like there is an official death certificate, but people go get death certificates.

Elizabeth Schlesinger [00:03:07] So some institutions require an original death certificate, which has a raised seal on it. It has kind of like an old fashioned stamp and you can feel it. Other institutions will accept a copy. Now so much is done electronically where you kind of can DocuSign and scan in forms. So more institutions will accept a scan or a copy of a death certificate, but you can request multiple original death certificates with the raised seal from the Health and Human Services department.

Vance Crowe [00:03:38] And so where does the death certificate even come from? Like how does that even get created?

Elizabeth Schlesinger [00:03:43] So when a person dies, their physicians will need to attest to their death, their time of death, their cause of death. All of this will be captured in their death certificate. Oftentimes a funeral home can help you get a death certificate as well. And it's not an immediate thing. You know, doctors don't walk around in hospital rooms and call time of death and then fill out the form. They are catching up with their paperwork and it's an administrative matter as well. So it can be, you know, several days a week before a death certificate is available longer if an autopsy is performed and the cause of death is not immediately determined. But a death certificate is also important because it sets out if someone is survived by a spouse, it sets out if someone has, has themselves survived a spouse, it's sets, sets out their domicile. Wait,

Vance Crowe [00:04:33] So it's not just like this person is dead. It is. It has other information in it.

Elizabeth Schlesinger [00:04:38] It has the person's name, it has their address as of their death. It will have their date of birth, it will have their marital status. It will indicate if they're survived by a spouse, it will indicate what their cause of death is as well.

Vance Crowe [00:04:50] And all of that information useful to people that are dispensing the property because

Elizabeth Schlesinger [00:04:57] The information is less useful. The formality is useful. You know, you're, if you have a retirement account or a life insurance policy, you can't just call on the phone and say, oh by the way the insured is deceased, I am here to collect a million dollars. They need some way of verifying this. Death certificates are a pretty uniform way of doing that.

Vance Crowe [00:05:14] And when somebody gets this death certificate issued for them, like who gets to go pick that thing up? Like who gets to can, can just anybody go to this? That's

Elizabeth Schlesinger [00:05:25] A good question. I honestly am not sure if there are restrictions on who a death certificate can be released to. Very often a funeral home will order death certificates for a family kind of as part of a package and and hand them off to a surviving spouse or the surviving children. But that's a good question that now I wanna know about. Like, could anyone get a death certificate? I don't know.

Vance Crowe [00:05:48] You know, you're in the world of estate planning and so that puts you in this like kind of a, a weird thing because a person can be dead and yet they can control some little part of the world, like where their money goes. Yes. Or how things get distributed.

Elizabeth Schlesinger [00:06:02] People like that idea.

Vance Crowe [00:06:04] Yeah, I mean like I, I can understand, right, because you wanna be able to pass your wealth on, but it feels a little odd, right? That somebody can be dead and yet still be controlling things on it. Yeah,

Elizabeth Schlesinger [00:06:13] It's like a, a little control freak to be determining who inherits what and when after your death. But a lot of people have certain stipulations that they wanna put on inheritance. Like I don't think anyone should have all this money until they turn 40 or it's really important to me that my assets be prioritized for paying for education or healthcare. You know, I think there's, especially in America we have this rugged individualism, this idea that each generation pulls themselves up by their bootstraps. And a lot of people who have a lot of wealth definitely wanna make sure that their kids in grandkids are taken care of and comfortable, but they want them to work for a living as well. And the way that you structure your estate plan can, you know, pass on your values around wealth to future generations in addition to passing on the assets directly.

Vance Crowe [00:07:09] Say more about that. How do you, what does that mean to pass on your values through the way you put push the money down?

Elizabeth Schlesinger [00:07:14] Sure. So kind of like I was saying earlier, some people could say, you know, I don't want you to get the money until you graduate from college. Some people could say, I don't want you to get the money until you reach a certain age. Some people could say, I want this money only to be able to supplement your own earnings in an emergency case. Or I want this, we have a vacation house and I want the vacation house to be maintained and I'm gonna put money in a fund to maintain it. And this can be your vacation, but you're responsible for your day-to-day living expenses, things like this.

Vance Crowe [00:07:50] And so when you think about the estate planning, can anybody be named, can you pass your money on to anyone or anything?

Elizabeth Schlesinger [00:07:58] Pretty much there are a couple of places that you can get cut up around naming international individuals, non-US citizens as your beneficiaries and some kind of tricky tax structures around when money leaves the country. But you know, barring getting, you know, really into the weeds on international estate planning, you can name your family members, you can name friends, charities, anyone. There is a presumption in every state that a surviving spouse has a certain entitlement. In Missouri it's 30% of your assets. So if you leave your spouse 20% of your assets, your surviving spouse could go to court and say, I am really entitled to 30% and get that extra amount. A lot of our estate planning laws are built around public policy that goes back to the founding of this country that could best be summarized as widows and orphans. Nobody wants to leave a widow or an orphan out in the cold. So there are these presumptions built into our estate planning laws, our Missouri trust code or Missouri probate code that say a spouse is really entitled to 30%. If you leave no estate planning documents, your spouse would get your money, otherwise your children even certain technical alternatives. If you have remarried and your spouse is not the parent of your children, then your spouse and children should share in your assets.

Elizabeth Schlesinger [00:09:31] Some of these presumptions you can overcome with your own estate planning documents. But that 30% spousal elective share is, is I would say it's very hard in the state of Missouri to disinherit a spouse.

Vance Crowe [00:09:44] So then, then that that brings up like why does it matter whether or not something is considered, somebody's considered married or who's able to get married to one another?

Elizabeth Schlesinger [00:09:53] Yes. Because

Vance Crowe [00:09:53] They have those rights through the through through your death.

Elizabeth Schlesinger [00:09:57] Exactly. To be a legal spouse, both according to state law for purposes of these inheritance rules as well as for purposes of federal law, who can be entitled to your pension if you're a government employee who can receive survivorship benefits under your social security who can make certain decisions for you are all matters of federal law as well. There are actually 1200 federal benefits that flow from the legal designation of marriage. So being legally married is very important if you want your spouse to have these benefits. Some states recognize common law marriage, Missouri is not one of them. But not only having your estate planning documents in order, but having your relationships legally recognized is very important too. So being married, if you're raising children, being their legal parent through adoption, all of these designations become very important.

Vance Crowe [00:10:52] It seems really relevant right now because there's so many people. I mean not only in our lifetime did we see gay marriage being passed. So it wasn't just between one man and one woman. Now if you've had two partners that are together, they can get married. But I see more and more now people being worried about divorce and so saying, I'm never gonna get married. But I've not really thought about the the downside of it. Right. The upside is, hey, the government's not involved in my relationship. If we decide to part ways, I get to dispense the property that I own. But there'd be a downside too in that the way your property could be dispensed to your spouse.

Elizabeth Schlesinger [00:11:27] Exactly. And there are a lot of these benefits that you can contract around through sophisticated estate planning. For example, same-sex couples being able to pass wealth to one another prior to marriage equality. But you need a really robust estate plan in order to cover everything that you can. And even then you can't cover everything. For example, retirement benefits, if you have an IRA or 401k, your legal spouse is the only person who can roll over the benefits Oh yeah. Into their own retirement account. If your children inherit retirement assets from you or a romantic partner who is not a legal spouse, that benefit is not available to them. For example.

Vance Crowe [00:12:09] And you know, we talked about you're being able to reach your hand into the future and and drive things. What is the amount of time that somebody's able to, you know, drive the car on earth while they're, after they've been departed?

Elizabeth Schlesinger [00:12:22] Yeah, so that question varies by state. All estate planning documents are really instruments of state law. Every state has, you know, a trust code and a probate code that determines these things. In Missouri, you can establish a trust that runs perpetually. It technically could function forever as long as there are assets in the trust, there are beneficiaries of the trust living to receive the assets and there's someone around to manage the assets. Other states are subject to a very technical part of estate planning law, which is called the rule against perpetuities, which is a rule against perpetual trusts. Just with the idea that when these trusts go on forever, they become unwieldy. There are too many beneficiaries, it's too hard to administer and no one should really be able to lock up money for hundreds and hundreds of years. So some states have a perpetuity period of, for example, 360 years, other states apply a formula, but in Missouri there is no rule against perpetuities at this time. And you could establish a forever trust here in Missouri.

Vance Crowe [00:13:32] It feels so weird. It like it's, I remember when I was learning about like copyright law and, and there was Disney at the time when they started, it would be like, you know, a certain number of years after he died then, then whatever his art was got put into the public domain. But it's been extended and extended. Is that kind of what's happened in this law as well?

Elizabeth Schlesinger [00:13:51] I think it's kind of a similar public policy presumption that whenever anybody sets this up, they couldn't possibly have understood the world that was going to be, you know, occurring when the assets were being finally administered. And it also becomes a practical matter, you know, very often when assets are passed down from generation to generation, the class of beneficiaries grows exponentially, right? You have like a decedent who maybe has two kids and then each of those two kids has two kids. You know, you're down below the grandchild and great-grandchild level into such a broad class of people that the assets get diluted in value. So is it really worth the cost of administering a trust for 16 different people as it was when there were just two of them? And, and can any trustee really know all of these individuals have a relationship with them to be able to manage the money or administratively would it just be more practical to write each of them a check and say goodbye

Vance Crowe [00:14:50] And, and that is an option at some point that you could do that

Elizabeth Schlesinger [00:14:53] At some point? It is. Most states have a statute that allows trustees to dissolve a trust when the assets are considered di minimis around one or $200,000. If you have a corporate trustee or an institutional fiduciary who you're paying fees to to administer the funds, that becomes a consideration as well. You know, how expensive is it to keep this money in trust and at which point does it just become practical for an outright distribute distribution to be made and for the beneficiaries to take their money.

Vance Crowe [00:15:24] So when people are, you know, sitting down to, to start planning about their estate, what is, what is the thing that they come in and want to talk with you about?

Elizabeth Schlesinger [00:15:34] Yeah, I think most people coming in come in very focused on who is going to inherit which percentage of their assets. You know, they have three kids and they want it to be equal, they have two kids but you know, one is well off, so they want it to be, you know, give a little bit more to the one that needs more help. People get very focused on the amounts and the beneficiaries. My practice and you know, my value in this proposition is helping people think not just about who gets what, but when they will receive it, on what terms they will receive it and who will be in charge of distributing it. So a lot of the ways that I guide the conversation with clients is not just who your beneficiaries are, but who your decision makers are going to be. Who can distribute the funds after your death, or in the event of your incapacity, who do you trust to carry out your wishes, not just what are your wishes?

Vance Crowe [00:16:30] What have you learned about trust in, in being in your role as an estate planner?

Elizabeth Schlesinger [00:16:37] I about trust specifically. I would say, I have to say that among the many families that I've worked with most are lovely both to one another and to us I think that there's this presumption that, you know, really wealthy families are always at odds with each other. You know, you watch succession or other shows and that has not been my day-to-day experience. I think a lot of people understand the value of trusted advisors and they have not only estate planners in the picture, but financial managers, insurance people, you know o other industry peers of mine who are helping guide this process. Who they introduce to their spouses and their children so that the beneficiaries can trust us going forward. And I think the most important thing to establishing and maintaining that trust is open and consistent communication both about your own wishes and about who your team is, about your, your family members need to know who you trust in order for them to be able to trust us as well.

Vance Crowe [00:17:42] Oh, that's an interesting perspective on that.

Elizabeth Schlesinger [00:17:44] Yeah, some people have the sense of, you know, I don't want my kids to know how much money I have or you know, my spouse isn't involved in the books, but they're going to, they're gonna end up knowing and they're gonna end up needing to make decisions and the time in which they end up knowing and the time in which they make decisions inevitably are because something bad has happened to you. And this is not when people are really in the head space to, you know, take on big responsibilities. So existing relationships with estate planners and financial advisors is really important. Even if you think your kids don't care, even if you think your spouse is not well suited for it, at least knowing who the team is and having a comfort level with us is very important.

Vance Crowe [00:18:28] What is the shortest will that you think a person could reasonably make?

Elizabeth Schlesinger [00:18:36] Well, if a person establishes a lifetime trust and titles their assets in their trust and has beneficiary designations on their retirement plans and their life insurance policies, their will really only needs to say anything that could possibly be left in my individual name, send it to my trust. This is Susan charge. So you can get it done pretty fast.

Vance Crowe [00:18:57] Okay. Yeah. And so when you're putting those assets in there, this is like something you would do ahead of time, but that's not considered a part of your will. These, these trusts,

Elizabeth Schlesinger [00:19:06] It is considered part of your overall estate plan, but establishing beneficiary designations on the assets that you can title is a very effective part of your estate plan to transfer those assets at your death. Putting assets into trust during your lifetime. A revocable trust or a living trust is a way to manage the assets both during your lifetime and upon your death. That avoids the need for an extensive will. And then in turn, the probate process, all wills are subject to probate, which is just another word for the process by which assets are distributed under a will and probate is overseen by the probate courts. So when a person dies, if they have a will, their will needs to be submitted to the probate court for the court to approve it. In Missouri, you have one year to file a will with the probate court. So it has to be done within that timeframe

Vance Crowe [00:19:58] Who has one year.

Elizabeth Schlesinger [00:20:00] Any anyone who has a copy of the original will, the beneficiaries or the personal representative, kind of anyone responsible has one year to file an original will with the probate court. The probate court then determines that the will is valid and they will appoint a person and executor another word for that is a personal representative to distribute the assets according to your will.

Vance Crowe [00:20:23] And then, you know, I've only ever seen this on tv, but like they have like a reading of the will. Is that a real thing?

Elizabeth Schlesinger [00:20:29] It can be. I think that that's something that's, you know, gone a little bit by the wayside. You know, in, in my 15 year career I have never overseen a reading of the will, but back to my earlier point, it is very rare that I work with a family where someone dies and the beneficiaries have no idea what's coming to them. So you know, my recommendation would be to read your own will to your beneficiaries during your lifetime so that you know, your estate planning attorney or whoever is designated as your personal representative isn't delivering the surprise to your surviving spouse and your children.

Vance Crowe [00:21:01] I, it sounds really good in theory, I would imagine that is a frightening prospect. I mean there there's definitely at least a part of our culture like you, the will is something to be kept kind of hidden away.

Elizabeth Schlesinger [00:21:12] Yeah, very much. And I think that there are a couple of cultural forces at play. You know, first of all I'll say people don't really like coming to my office to meet with me because they have to about dying and then in pretty short order they have to start making decisions about who will make decisions for them and their family members. And these are really hard decisions for people to make. If you die while you have minor children who will raise and take care of your children, which of your children it has priority for maybe making healthcare decisions for you. So I often joke that I get to know people really well really fast because within an initial meeting I know exactly how much money they have and essentially which of their kids they trust the most. But once that's out on the table, everything else kind of naturally follows and because of that we end up with, you know, very close and trusting relationships with our clients.

Vance Crowe [00:22:02] You know, it you, you bring about the point about children and kind of like how all that, like who, which ones to trust and how that all works. Like what, what have you seen people make those decisions based on?

Elizabeth Schlesinger [00:22:18] I think the best decisions are ones that are revisited. I think it's really important to revisit your estate plan not only in terms of your assets but in terms of your decision makers as time passes. You know, you don't know who your kids are gonna be when they're little and then when they grow up you don't know who they're gonna marry. And then, you know, I think it's really important to to kind of keep taking a look at these things over time. And you know, it's been, we represent multi-generational families and I've, you know, worked with people since they've been basically teenagers into adulthood and seen people go from essentially, you know, the black sheep of the family too. The most trusted descendant based on you know, their own decisions and how their life has gotten in order. So I would say it's really important not to count anybody out and just, you know, stay, stay in touch with your family and be paying attention to the shape that everyone's life is taking as time goes on.

Vance Crowe [00:23:15] So it's not just like people's personal property, you have like things like businesses that need to keep going because just because the head of the business dies, how does all that work with estate planning?

Elizabeth Schlesinger [00:23:25] Yeah, exactly. Family business succession planning is a really big part of our practice and something that requires a sophisticated estate plan to accomplish. I think that it becomes really important to understand the landscape of who is in the family and who else may be in the business. If one business owner has partners, for example, who are outside of the family, the business may be structured with some kind of buy sell agreement or cross purchase agreement because the other partners may not wanna be in business with somebody's spouse or kids and there's some sophisticated estate planning that you can do to manage that. Some people have life insurance policies for example, to provide liquidity to pay for a buyout of their partner. So if you are a business owner with someone outside of your family, something to think about is do you want the whole business yourself or do you plan on being in business with this person's spouse or children in the future so you can make your own plan.

Vance Crowe [00:24:25] What happens if you don't do that? What happens if there's nothing written down? You know, I die, my business partner keeps his half and now my wife is in charge of my half.

Elizabeth Schlesinger [00:24:34] If you're married, it would be, if you're married and you don't have any estate plan, it would be your spouse. If you don't have a spouse, it could be your children or if you have an estate plan, it would be whoever you designate to be the beneficiary of your business interests.

Vance Crowe [00:24:49] And do you, you must see it where things happen where people haven't done these things ahead of time and becomes a a mess. This

Elizabeth Schlesinger [00:24:56] Is why I like to talk to people while they're alive as opposed to their kids when they're dead.

Vance Crowe [00:25:00] So let's talk about these things I hear about all the time revocable irrevocable and what's the difference and like why do people do those?

Elizabeth Schlesinger [00:25:11] Sure. A revocable trust is a trust that as the name implies maybe revoked or amended. Another word for a revocable trust is a living trust that you create during your lifetime. The reason that someone might want a living trust is to kind of aggregate administration of all of their assets. Instead of you having a checkbook that says, you know, the John Smith checking account, you would have a checkbook that says John Smith, trustee of the John Smith trust. Your investment accounts could be titled in the name of your trust, your house could be titled in the name of your trust, your business interests could be titled in the name of your trust, your real estate could be titled in the name of your trust. And kind of back to the first question you asked me, how soon can a beneficiary get their hands on that assets after someone dies? When you have assets in a trust, immediately on the death of the creator of the trust, the next phase of the trust is already written in. The trust will designate who the successor trustee is to divide and administer the assets. The trust will designate who the beneficiaries are and on what terms they receive the assets. So a lot of people set up a revocable living trust during their lifetime for that ease of administration. I'll get to your irrevocable trust question, but the, the alternative that most people think to revocable trust is, oh, I'll just have everything passed by my will. When you have assets passed under your will, they need to pass through the process that's called probate.

Elizabeth Schlesinger [00:26:45] Probate is overseen by county courts. So if you die and you have a will, someone needs to submit your will to the probate court and your will will say who is going to be the executor or another word for that is personal representative of your estate. And the court has to basically validate the will and say okay, this provision that appoints your brother as personal representative is valid. We are going to officially appoint your brother as your personal representative to distribute the assets according to your will. That can be a time consuming process and in that case the beneficiaries will not be able to get the assets until after the court has appointed the personal representative. So, and

Vance Crowe [00:27:33] When you're saying court, I'm imagining, you know, like what I see on television where there's like a person in robes and they go up and they sit on the chair and you know, with the desk above high above everyone, that's what has to happen.

Elizabeth Schlesinger [00:27:45] That is what court is like and it is, you know, probate courts are separate from, you know, if you're picturing like law and order and you know, exhibit A and I object, this is not often the case in probate court. Probate courts can be part of the family court system or they can be part of the civil court system. But a probate court judge does need to issue an order that says that the person that you name is your personal representative is entitled to service such. So that can be kind of a time consuming and cumbersome process.

Vance Crowe [00:28:19] Do people fight to become the executor of the, of the estates

Elizabeth Schlesinger [00:28:23] People fight not to it. It can. Oh

Vance Crowe [00:28:26] Really?

Elizabeth Schlesinger [00:28:26] Well it can be a big job and a big responsibility to make sure that everything is administered properly. Whoever is designated in the will is really given a lot of preference by the court. But say you name your brother and that person has predeceased you, the court will have to determine who an appropriate personal representative could be. In that case, someone could petition the court to say, you know, I'm the nephew, I, you know, am a logical next person to serve in this role, but you will need to have a lawyer and go through this whole process.

Vance Crowe [00:29:01] And you know, as I'm thinking about the, the executor also there's the issue of like your children, like what happens if you die and you have young children? Is this also something that your role takes care of or writes down what should happen?

Elizabeth Schlesinger [00:29:17] So in Missouri, as in many states, you cannot contract for child custody. You can't set out child custody in a prenuptial agreement, for example, if you get divorced, you can't set out child custody in a will if you die while you have minor children. But what you can do in your will is give your recommendation for who you would like to serve as the guardians of your children. No kidding. And the court will take that into consideration.

Vance Crowe [00:29:45] Okay. But that's not true in all state because my impression of it is, is like I get to go write it down. In fact, you know, I, I did estate planning right and my impression was that I got to choose, but all I'm doing is putting forward a recommendation.

Elizabeth Schlesinger [00:29:58] I think in most cases the court takes that recommendation very seriously and follows the terms of the will. But as a point of fact, it is not written in stone who will get custody of your children if you die while they're minors. If you put it in your will.

Vance Crowe [00:30:12] Who would have sway over that in that circumstance? Like who could come to the court and be like, no, no, no, that shouldn't go to Sally, it should go to Frank.

Elizabeth Schlesinger [00:30:21] So we're getting a little bit outside of my area of expertise and a little closer to family a lot. Okay. But you know, other surviving relatives could be involved. This is where, you know, if if you know, and these situations only occur Tre you know, orphans are inherently tragic. Like their parents die young. Very often there are grandparents in the picture who may come to the court and say, we live in the same city, we are better suited, we have more, we live in another state, but we have a bigger house. We can maintain their lifestyle. So these are the kinds of things that come into play. The term for this role varies, you know, state to state and jurisdiction by jurisdiction. But kind of the idea of a guardian ad litem could be appointed someone who represents the interests of minors in the court system could also be involved to kind of determine what would be in the best interest of the child.

Vance Crowe [00:31:14] And what, I mean, I don't even know the right question to ask other than what are considerations people should have when they're, when they're putting this stuff forward?

Elizabeth Schlesinger [00:31:24] Yeah, so you know, I think a big consideration is disrupting the lives of their children. Who do you know who lives in the same city where you live, where your kids can go to the same school, keep their same friends, you know, not have their whole lives uprooted. But another consideration is who has a lifestyle comparable to yours? And you know, if something happens to you and your kids move in with your brother and sister-in-law, do they have a much smaller house? Do they not take the kind of vacations that you're used to taking? Are their kids going to public school and your kids are used to going to private school? So something that some people do sometimes is build in a financial benefit for the family of the guardians so that their own kids can be maintained in the same lifestyle. Ah, you know, for example, whoever is raising our kids, all of you should get to take these kind of vacations. All of you should have access to the arts or things that, you know, our kids are used to. So that can be a consideration as well. Well I've

Vance Crowe [00:32:26] Never made that proposed before, but that, I mean, that makes the most sense. Not to mention the fact that like, you know, it's a way to not necessarily compensate, but like give back to the people that are caring for your own

Elizabeth Schlesinger [00:32:37] Children. Right? Yeah. You know, and especially if you know the best choice is your, you know, brother and sister-in-law and they have a four bedroom house and then they're gonna end up with two more kids, you know, can, will there be money for them to add an addition onto their house so that your kids aren't all of a sudden sharing a room. Things like this people can take under consideration.

Vance Crowe [00:32:57] So as you think about like the, the estate planning, right, you have, you're kind of in this world of like thinking about death a lot, right? Thinking about like what happens afterwards? What does somebody like you think about death that maybe normal people don't?

Elizabeth Schlesinger [00:33:14] Hmm, that's a good question. You know, I think that one thing that this work has made clear to me is that unexpected things happen and it's really important to be prepared and have a plan. You know, I have a lot of clients who have lived very long lives and have been able to communicate all of their wishes to their children and grandchildren and you know, there's this family legacy and understanding of philanthropy and the family's values. There are unfortunate situations that occur every day when folks die unexpectedly or you know, much younger than they intend to. And that leaves a lot of questions, not just about who inherits, but you know, what someone would want done with the money and the way that people would want their children raised. So I think the most important thing, two really important things, number one, get your estate planning in order. Have the documents signed so that it's clear you know, how the money is transferred and who is in charge, but also have really hard conversations with people in your life about your own values and what you intend your spouse, your adult children. If you have minor children, your own parents should know your wishes for end of life healthcare. They should know if you wanna be on a ventilator, they should know if you want feeding tubes. They should know if you don't want heroic measures at all because no one is making those decisions on someone else's behalf on a good day. And you want them to have as much information from you about what you would want ahead of time before they're faced with those difficult decisions.

Elizabeth Schlesinger [00:34:49] And also have really meaningful conversations with your spouse, with your children, with other people who could inherit from you about your own values around your money, what's important to you if whether it's philanthropy or maintaining a family business or maintaining a vacation home or you know, the family homestead. Make sure people understand that if you, you know, invested a long time ago in one asset and it's done really well for you and your financial advisors have always advised you to diversify, but this has worked for you and you wanna stick with it. Those are really important conversations to be having with people. Like no one really, there's so much that goes unsaid that are really important decisions that people make that make it very difficult to act on someone else's behalf later on.

Vance Crowe [00:35:38] Yeah, I mean like you, it seems like your legal training is only part of the, of what you would have to be to be ready for. I mean like to be able to sit down with somebody and be like, let me give you all of the scenarios under which you could become incapacitated and we wanna be able to write down in, in enough detail that somebody could execute it what you want done.

Elizabeth Schlesinger [00:36:01] Yeah. Like

Vance Crowe [00:36:02] What have you seen in this, in this life of yours that you're leading?

Elizabeth Schlesinger [00:36:05] You know, it's, it's a lot to think about and I think that, you know, it's important for clients to understand that we can't cover every contingency that, you know, people's wills would end up being 150 pages long and you know, you, you can't go to the ends of the earth to make sure that everything is covered. But you can think through a couple of likely alternatives, what would happen if I die and my spouse is living, what would happen if I die and my spouse is already deceased? What would happen if I die and my children are minors? What would happen if I die and my children are already 70 years old at that point, you know, I live a long healthy life. Do I still need to have all these restrictions? And I think that's why it's important for people to continue to revisit their estate plan and the decisions that they've made during their lifetimes. I think very often people when they have young children are actually a little bit ambitious about their own children's potential and they think to themselves, oh yeah, by the time my kids are 35 or 40 they'll definitely be ready to inherit from me. And then when the kids turn like 32 I get a call and it's like, oh no they are not ready. Like let's push it back, let's push the age back. So I think it's really important to revisit when you know who your kids are, revisit when you know who your kids are marrying and who else may be involved in inheriting from you and revisit as well as your own assets evolve. You know, if you own a business you may have very different considerations when you set up your estate plan than 25 years later when you've sold the business and you have, you know, all investment assets.

Vance Crowe [00:37:40] Yeah, I remember when we were setting up our estate plan, we were, it was before we had children

Elizabeth Schlesinger [00:37:45] And

Vance Crowe [00:37:45] Then you have children and all of a sudden one your mind is blown 'cause you didn't really know what you were getting into. But two, like all of a sudden you realize like, no wait, the person that I was imagining would be here is like not the person that's here and that's not a negative thing at all. But like I can only imagine how much that amplifies is the children are getting older and

Elizabeth Schlesinger [00:38:05] Yeah. Wait until your kids are teenagers. Yeah,

Vance Crowe [00:38:07] That's right. Then

Elizabeth Schlesinger [00:38:08] Gimme a call.

Vance Crowe [00:38:09] And so what happens when things go wrong with estate planning? Like you hear about people contesting wills and things like this. How, how can a will even begin to be contested? Sure.

Elizabeth Schlesinger [00:38:20] Well there are a couple of avenues. One is if you are a beneficiary and you believe that the person who set up the estate plan either didn't have capacity to make those decisions at the time or was under some undue influence and incapacity and undue influence are closely related. So you may say, oh this person had very severe health issues and was like in the hospital and you know, my bad brother flew in from out of town and shoved this documents in front of my dad and got them signed and you know, he was on morphine and didn't know what he was doing. So that would be, you know, a matter of incapacity. The other matter of undue influence is, you know, oh grandma lives with this one daughter, she's taking care of her. She is, you know, feels that she's owed and you know, it's just because the other siblings live out of town or something like this that maybe that daughter is all of a sudden getting a bigger share because she's been saying every night at dinner, well you know, grandma, don't you think I deserve more? So that could be a matter of undue influence.

Vance Crowe [00:39:29] Oh really? Yes.

Elizabeth Schlesinger [00:39:30] Even

Vance Crowe [00:39:30] If, even if grandma wasn't incapacitated but you coaxed her into it

Elizabeth Schlesinger [00:39:35] Unduly.

Vance Crowe [00:39:36] Oh interesting. And then that becomes a matter of like definition, right? It becomes like what does the court see as undue influence versus building a relationship that, right.

Elizabeth Schlesinger [00:39:47] And did grandma maybe do this under duress? Did granddaughter say, well if you wanna keep living here you need to do something for me.

Vance Crowe [00:39:56] Fascinating.

Elizabeth Schlesinger [00:39:57] Yes.

Vance Crowe [00:39:58] And so I would imagine that like fighting over a will could just be like a divorce where at the end of the day you've just, you've just obliterated whatever wealth was there in order to be able to stop the other person from getting it.

Elizabeth Schlesinger [00:40:11] Absolutely. I think that's a really important consideration for anyone considering contesting an estate plan is at the end of the day you're spending your own money and, but for some people it is more important that their siblings get less than all of them get more. And this is an, you know, an unfortunate scenario and I think kind of goes back to what I was talking to you earlier is it's really important that people have conversations with their family members when they're alive, that people understand the decisions that are made, that there's no presumption that one child is being favored over another. If a practical decision is made, for example, a business interest to pass to one child and investment assets of equivalent value to pass to another, that people understand these decisions and don't try to go back and rewrite an animus into it. One thing that's interesting is that Missouri as well as several other states recognize what's called no contest clauses, which you can put in your will or trust to essentially say that if you contest the provisions of my estate plan and you lose, you're cut out.

Vance Crowe [00:41:18] Oh wow.

Elizabeth Schlesinger [00:41:19] So if you're gonna shoot at the king, don't miss basically.

Vance Crowe [00:41:23] Whoa. So wow. And have you seen those executed before?

Elizabeth Schlesinger [00:41:26] Yes.

Vance Crowe [00:41:27] How does it go?

Elizabeth Schlesinger [00:41:28] So I would say that mainly a no contest clause can indicate to the beneficiaries that the person setting up this document knew exactly what they were doing, was very serious about it and wants to minimize any future disagreements over it. The person who's setting up the estate plan documents has said, this is what I want each of you to have. If you start fighting over it, you risk losing it all. And I think that that sends a message to the beneficiaries that someone really didn't know what they were doing and that kind of could close some of the doors to these claims of like duress or undue influence or incapacity.

Vance Crowe [00:42:04] So I love this. Yeah,

Elizabeth Schlesinger [00:42:06] It can really be kind of a shield, if you will, toward future, you know, arguments over who gets what. Now some jurisdictions don't recognize no contest clauses in Florida, for example, their void against public policy because you know, the Florida law wants beneficiaries to, you know, if they do feel like they're entitled to more of their share, be able to fight for it.

Vance Crowe [00:42:32] So does it, does it matter where you die as to how your estate gets dispensed?

Elizabeth Schlesinger [00:42:38] It matters more where you lived than where you die. So someone's legal domicile is their residence during their lifetime and that will be the state law that governs their estate planning documents as well as the administration of their assets. You know, for example, we're sitting in St. Louis, Missouri where a stones throwaway from Illinois, an Illinois resident could die in a St. Louis hospital or nursing home. That doesn't mean that all of a sudden you're dragged into a Missouri probate and a Missouri State administration.

Vance Crowe [00:43:11] Oh yeah, that'd be a nightmare. 'cause people would be like crawling across the border to die in one state

Elizabeth Schlesinger [00:43:14] Versus

Vance Crowe [00:43:14] Another.

Elizabeth Schlesinger [00:43:15] Yeah. So it really, it really matters more where you live than where you died.

Vance Crowe [00:43:19] And what about, you know, during COVD, all these people moved from New York down to Florida or maybe they have a Florida home if they had these non-tested in there, is it like 51% of the days, right? Like and then all of a sudden you're a Florida resident And

Elizabeth Schlesinger [00:43:36] So the, I think that's, it's an interesting question and it really values varies jurisdiction to jurisdiction. Your domicile can be determined based on a number of things. Your income tax status is very determinative. Like what state you file income tax returns in is a big factor for where you live, your permanent address, where you're registered to vote, where you receive mail, as well as some other kind of softer factors like do you, are you affiliated with a religious institution and where do you have club memberships and where, so a lot of clients who may have a vacation home or something like this need to consider like do they belong to a church where their vacation home is? Do they belong to a golf club there also, do they receive mail and subscriptions at their vacation house? And can all of these things, can all of these factors kind of lead to the presumption that they have, have perhaps moved there and surrendered their other domicile.

Vance Crowe [00:44:35] Fascinating. The so does, does where you die have any impact on all this stuff that we're talking about?

Elizabeth Schlesinger [00:44:44] So I, I am not prepared to say that it has no impact, but I would reiterate that where you live matters most.

Vance Crowe [00:44:51] And are there states that people prefer to, I mean outside of like, oh I like living in the state of Missouri. Are there certain states where people are like, it's, it's more beneficial to me for the way my estate is set up than to be in another place? I

Elizabeth Schlesinger [00:45:06] Think it's less determinative specifically about estate planning, but more about tax planning, asset management and tax planning. Like there are states that don't have an income tax, there are states that don't tax retirement benefits. There are states with higher and lower property tax values. So all of these things come into play when people are deciding either where to live and where to retire.

Vance Crowe [00:45:30] Well, and I wonder if it also, the competence that we were talking about before, can we like, can we go into the, the idea of somebody being declared like not capable of managing

Elizabeth Schlesinger [00:45:41] Incapacitated

Vance Crowe [00:45:41] Incapacitated. What does one, what, how does one get described as being incapacitated?

Elizabeth Schlesinger [00:45:48] So it will be a, the determination by that person's attending physician and the physician will determine are they capable of making decisions for themselves and carrying out the tasks of their daily life? And there can actually be a slightly different determination for incapacity for financial decisions than incapacity for medical decisions. It is, it is a slightly different standard and it is possible that someone could be declared incapacitated for purposes of managing their financial affairs, but a physician may still believe that they understand what's going on with their medical care and could make decisions in that way.

Vance Crowe [00:46:32] At first I find myself repelled by this idea, but you can't imagine somebody saying, look, you're not capable of figuring out how to set up your taxes in this complicated structure, but at the same time you can decide do you want more morphine administered?

Elizabeth Schlesinger [00:46:46] Exactly.

Vance Crowe [00:46:47] Do you wanna, do you wanna pass on without, you know, interventions?

Elizabeth Schlesinger [00:46:50] Exactly. And that's why these, these decisions are between doctor and patient and also why it's important for people to think about who the right decision maker is for them in different scenarios. Very often someone will name one person or set of people to be their decision maker for medical decisions in their, in the event of their incapacity and a different individual or set of people to be decision makers for them in terms of their finances in the event of their death or incapacity. For example, kind of back to something we talked about earlier, you, your child who is a physician may be too busy and not inclined to you know, manage your stock portfolio, but they would be the right person to decide what medical care you should get. Meanwhile, your child who is themselves an investment banker or you know, a business leader may not really have what it takes to make end of life medical care decisions for you, but they absolutely are the right person to manage your financial assets.

Vance Crowe [00:47:50] What are things about managing the end of your medical care that people should think about that they maybe wouldn't just in ordinary life?

Elizabeth Schlesinger [00:47:58] I think that people should really consider their own values and the impact that their end of life care will have on their loved ones as, and a lot of these decisions are determined by people's faith traditions. Some faith traditions provide guidance, for example, provide heroic measures, don't provide heroic measures. Once artificial nutri nutrition and hydration have been provided, certain faith traditions would frown on them being withdrawn. That that would be like a determination to end life that you know, individuals should not be making. There's, you know, a higher power to make those decisions. So if people have questions and are about their own feelings and are trying to guide their own thinking if they ascribe to a faith tradition, I think speaking with leaders in their tradition is helpful to kind of understand if there's any guidance there that may be useful for them as well as potentially to provide a comfort to their spouse and their children for understanding the decisions that they have made.

Vance Crowe [00:48:57] It's such an interesting thing, like so much of what you're talking about legally has been the, like the faith area. Like I don't know about the eastern religions, but all of the western religions, the Abrahamic ones, you know, the way inheritance worked out is like way early in their books, right? Like how are you going to pass down these things? But I hadn't thought about how much your faith tradition would impact your end of life medical care, but largely like the the Catholic faith having very strong feelings about things.

Elizabeth Schlesinger [00:49:25] Yes. And the decision to withdraw treatment is where these decisions come into play.

Vance Crowe [00:49:32] Oh, interesting.

Elizabeth Schlesinger [00:49:33] Yeah.

Vance Crowe [00:49:33] So

Elizabeth Schlesinger [00:49:33] Like once you have a feeding tube, once you are intubated, withdrawing that care is at odds with certain religious traditions.

Vance Crowe [00:49:43] And you could imagine where if somebody said like if it wasn't clear, if some, if somebody said, hey we're trying to preserve this life 'cause that's what we're oriented towards doing and it wasn't made clear that they didn't want those things, now you have to go back and reverse them. Probably becomes very messy.

Elizabeth Schlesinger [00:49:57] Right, exactly. So I think really talking to the people who are important to you about your own wishes on these topics is a very important thing to do while you are healthy.

Vance Crowe [00:50:07] So what are things that I wouldn't even think to ask about estate planning because I'm not in in the business but that people should be kind of considering?

Elizabeth Schlesinger [00:50:16] Hmm, let's see. Some things that come up that people don't often think about are unique assets like art. If people have large art collections, maintaining current appraisals and also wishes for, you know, is it really important for this piece to remain in your family or if your kids really don't care about sculpture or whatever, can they sell it?

Vance Crowe [00:50:40] You can make it so your family could own something but not be able to sell it.

Elizabeth Schlesinger [00:50:44] You could definitely indicate that it is your wish and desire for them to maintain it. But you know, ju our real estate investment assets are all assets that you know, should be balanced in accordance with, you know, prudent investing. So if someone inherits a disproportionate amount of art, their instinct is going to be to liquidate some of it, to diversify the holdings.

Vance Crowe [00:51:07] Yeah.

Elizabeth Schlesinger [00:51:08] But if you know there's a painting that someone brought from, you know, the old country or whatever that you really wanna maintain in the family, you certainly can indicate that that is your wish.

Vance Crowe [00:51:19] One of the things that I hear with, like I often go speak out with farm groups is somebody could be gifted a whole lot of farmland, but if they're taxed and they owe money on that, then they have to sell that land in order to be Yes or sell part of that land. Talk about that. Like that, yeah.

Elizabeth Schlesinger [00:51:37] Gotta

Vance Crowe [00:51:37] Be a complicated thing. It is.

Elizabeth Schlesinger [00:51:39] So let's take a step back and talk a little bit about the wealth transfer tax system in this country. Just as a brief primer, under current law, individuals can pass about $12 million of assets cumulatively during their lifetime or upon their death without incurring any transfer tax. Married couples share this exemption so spouses can pass a total of about $24 million without incurring tax. Once transferred

Vance Crowe [00:52:03] Spouse can pass to whom, like if they anyone have 24 million between the two of them to their children or to whomever they want

Elizabeth Schlesinger [00:52:09] Inside, outside the family, there's no restriction on relationships. And

Vance Crowe [00:52:13] That's in total. So if they have three children, then 24 divided by three eight, is that right?

Elizabeth Schlesinger [00:52:20] Yeah.

Vance Crowe [00:52:21] Okay.

Elizabeth Schlesinger [00:52:22] Yeah. So keep going to each child. In that case, without incurring any wealth transfer tax, any assets that are transferred that exceed that exemption amount in value under current law are subject to tax at 40%. So let's just take a single person to keep the math simple. If a single person has $12 million and it passes a death, no tax, if a single person has $13 million, $12 million of it passes tax free and the remaining million dollars that exceeds the exemption amount subject to estate tax at death roughly of 40%, the tax bill is then $400,000. So $12.6 million total pass, $400,000 roughly. This is real like back of the napkin scratch math is paid to estate tax. Where this becomes into play is with, you know, farmers, large landowners where someone inherits this property, it's valued far in excess of the estate tax exemption amount and the consideration becomes where does the liquidity come from to pay the estate taxes? One answer perhaps is life insurance. A lot of people use life insurance to provide liquidity for their own estate taxes at their death. Another answer is thinking about how the property is arranged and is there part of it that lends itself to partition for sale so that the bulk of the property can remain intact, intact and one tract of it, for example, could be sold.

Elizabeth Schlesinger [00:53:58] There is an exemption that is not my expertise and I wish I had studied up, but there is an exemption about qualified use farmland that allows certain farmland to pass exempt from wealth transfer tax. But there are restrictions on it. There's a restriction there about who it can pass to it having to stay within the family. And there are also restrictions on the amount of assets that can pass. I wish that I had studied up on this before I came to talk to you, but anyone who's interested definitely should look that up or should find out more about the exemption for qualified farmland from the estate tax. And

Vance Crowe [00:54:37] If people are trying to preserve, say a business or a farm, are there things that they can do as far as like who owns that property while they're alive, that changes,

Elizabeth Schlesinger [00:54:48] What

Vance Crowe [00:54:49] Happens? How does that work?

Elizabeth Schlesinger [00:54:50] So one strategy for minimizing estate taxes at death is to begin to transfer the assets across your lifetime. If assets are going to be appreciating, for example, you have a farm right now, or any asset for that matter that's worth $10 million if you live 30 more years, if the market inevitably does rebound, that asset should be worth more than $10 million. At your death. At your death it's gonna be $30 million and subject to tax. So if you have the opportunity to transfer some assets during your lifetime, you can essentially freeze the gift tax value of them. I'll give you an example. I own a million dollars of stock. That stock is going to appreciate over the course of my lifetime, if I give that stock to another individual or to an irrevocable trust. Now I use $1 million of my gift tax exemption so that when I die, I only have $11 million left because I've used 1 million of my 12. But when I die, if that stock is worth $3 million, no one pays a estate tax on it. I have used $1 million of my exemption to get $3 million of assets out of my estate.

Vance Crowe [00:56:06] And then the irrevocable trust, part of that is because you're not allowed to change

Elizabeth Schlesinger [00:56:11] Exactly certain

Vance Crowe [00:56:12] Aspects of it. And so therefore you can lock in that savings and confirm who this is all going to.

Elizabeth Schlesinger [00:56:19] Yes.

Vance Crowe [00:56:20] Wow.

Elizabeth Schlesinger [00:56:20] Yes. Another you say lock in, I would, we would call it an estate freeze transaction. You are freezing the value as to your estate and getting it out of your taxable estate. The other thing that you could do is consider it a more aggressive approach is gift. A fractional share of an interest if you have a business, if you farm land, if you own a vacation home for example, that's worth $4 million. One fourth of that asset, the fair market value really shouldn't be $1 million because what can you do with a fourth of a house? There may be a valuation discount that could be applied by a qualified appraiser that says, for this minority ownership, it's really only worth 80%. We'll apply a 20% discount. So if I give away a fourth of my $4 million vacation house and I get an appraisal that applies a 20% minority discount, I've only given away $800,000 and used $800,000 of my own gift tax exemption.

Vance Crowe [00:57:26] Fascinating.

Elizabeth Schlesinger [00:57:26] I will note an aggressive, a more aggressive estate planning tactic and the application evaluation discounts is something that the IRS pay close attention to. So that's why I said numerous times qualified appraiser, this has to be well memorialized. It has to be really considered the fair market value of that minority asset because the IRS thinks that it's a little cute.

Vance Crowe [00:57:50] And what if, let's say you put a hundred shares of a, of a stock into your irrevocable trust and then you are you allowed to sell those shares or they are locked in and now no selling.

Elizabeth Schlesinger [00:58:05] So you are not, but the trustee of the trust is.

Vance Crowe [00:58:09] Okay, interesting. So if you've already named a beneficiary, they're allowed to be like, I think that we should sell 50% of this, this stock holding and instead place that money in this other thing and the money's not allowed to come out of the trust then.

Elizabeth Schlesinger [00:58:25] Okay. So important distinction, and I'm gonna kind of take apart and put that together what you said in the right order.

Vance Crowe [00:58:30] Of course. Yeah. When

Elizabeth Schlesinger [00:58:31] You set up an irrevocable trust, there are kind of four important categories to cover. Who is the creator of the trust? Let's have that be you. You could be called the setr or the grantor of the trust. When you put your assets into the trust, you are, as the IRS code would say, relinquishing dominion and control of those assets. They're no longer yours within the trust you designate who the trustee is who has the fiduciary duty to manage those assets for the beneficiaries of the trust who you have named when you set up the trust on the terms that you designate in the trust. So you could set up an irrevocable trust and name your brother as the trustee to administer the assets for the benefit of your children until they reach age 45. At which point they get distributed outright. If you put a hundred shares of stock in company A into the trust, the trustee has a fiduciary duty to manage those assets in a beneficial manner for the beneficiaries. If that is no longer a good investment, the trustee could sell those, sell that stock and invest in something else. Diversify the holdings, things like this.

Vance Crowe [00:59:52] And can the person that is the can, the grantor, can I, if I am unhappy with what my brother is doing, can I take him off as trustee or once I've named him, that's it.

Elizabeth Schlesinger [01:00:02] There are, it is possible for the grantor of the trust to sometimes have the power to remove and replace trustees. But the best case scenario is for maintaining the presumption that the grantor has no control over the assets would be for the trustee to have the power to appoint his own successor and resign in favor of another person. There are also institutional trustees like trust companies and banks that can be used assets. You

Vance Crowe [01:00:31] Just interviewed John Jen from St. Louis Trust Company just a couple weeks ago.

Elizabeth Schlesinger [01:00:34] Yeah. So St. Louis Trust company or other financial institutions can serve as trustee to make decisions about what kind of hold things and how they should be managed. And

Vance Crowe [01:00:44] Then that goes back to the, you can have a trust as long as you have people that are willing to manage it for you. And that, that would be like if you had a company that was willing to do that. And in

Elizabeth Schlesinger [01:00:53] Missouri that can be forever right now.

Vance Crowe [01:00:55] Wow.

Elizabeth Schlesinger [01:00:56] The other important thing to think about, getting back a topic in terms of taxation and assets. We just talked about the estate and gift tax implications of assets. I think it's also important for people to think about the income tax and capital gains implications of passing wealth. Every asset has a basis. The basis of an asset is essentially its value as of the day that you acquired it. If I buy one share of stock for $1, my basis is $1. If I sell the stock and it's worth $2 broadly, I would have a gain of $1 and subject to various exemptions, I may owe capital gains tax on that $1 of appreciation. Right now, under current law assets that are individually held, get their basis reset at death, it's called the step up in basis. So if I had

Vance Crowe [01:01:53] Whoa,

Elizabeth Schlesinger [01:01:54] Stock that was worth $1 and when I died it was worth a hundred dollars, my beneficiaries would inherit the stock at the, with a basis as of its date of death value. Their basis would be a hundred dollars if they turned around and sold at no capital gains. This is a pretty significant,

Vance Crowe [01:02:12] Yeah, you could really, that loophole that would, and how does that work? How does, how does one, how

Elizabeth Schlesinger [01:02:18] Do I

Vance Crowe [01:02:18] Get step up in basis? How would wanna do that a step up in basis

Elizabeth Schlesinger [01:02:21] In die owning things?

Vance Crowe [01:02:23] Okay.

Elizabeth Schlesinger [01:02:23] Yes. So kind of back to our discussion about, you know, should I be moving assets outta my estate during my lifetime, assets that are inherited at death, receive a step up in basis assets that are received by gift during lifetime receive a carryover basis. If I have my stock that my basis is $1 in and it's worth $3 and I give it to you for your birthday or for graduation, your basis is $1 and if you turn around and sell it, you have a gain of $2. If I leave it to you in my will or my revocable trust and I die and the value is $3, your basis is $3.

Vance Crowe [01:03:04] Yeah. And in a way that actually does make sense, it's not just like a weird, because like truly if it was given to you, your cost basis is actually $100 if, if that's what it, what it ended up being valued at. But I just didn't understand that. So there is some pressure on keeping things out of irrevocable trusts.

Elizabeth Schlesinger [01:03:24] I would say it's a balance.

Vance Crowe [01:03:26] A balance, yeah.

Elizabeth Schlesinger [01:03:26] A balance of estate tax planning and capital gains tax planning. I will note that the capital gains tax rates are increasing. The highest capital gains tax rate is less than the estate tax rate, which is 40%. So many people first prioritize estate freeze planning, like we were talking about, moving assets out of their estate because even if assets are subject to capital gains tax at death, it will be less than the 40% estate tax. So for example, if you have like less than $12 million of assets and you're not worried about estate tax, then dying, holding the assets so that your beneficiaries receive a step up in basis is a beneficial tax planning strategy. But if you have a taxable estate, you may consider moving some assets out of your estate during your lifetime to diminish the value of your assets that will be subject to estate tax, even if you know that it will create a capital gains tax for your beneficiaries because the capital gains tax is under current law charged at a lower rate.

Vance Crowe [01:04:37] And then at either, at either way, whatever you put into the irrevocable and what you gave them through your will

Elizabeth Schlesinger [01:04:44] Is

Vance Crowe [01:04:44] A total of $12 million as before it starts getting

Elizabeth Schlesinger [01:04:49] Correct.

Vance Crowe [01:04:51] Fascinating. So it really is, you would've to put that on a pretty complicated balance sheet and be like, how do we manage putting things into the irrevocable trust that then is gone but but not gone but out of our reach,

Elizabeth Schlesinger [01:05:03] Out of your estate, out

Vance Crowe [01:05:04] Of your state,

Elizabeth Schlesinger [01:05:05] But maintains carried over basis versus what remains in your estate, but will get the benefit of the step up in basis. And I think what a lot of people don't understand about estate planning, most people think that my field is very stodgy, that I just talk to like grandmas and grandpas all day, that if you've

Vance Crowe [01:05:23] Been fascinating,

Elizabeth Schlesinger [01:05:24] I don't think of you as stodgy. No one would

Vance Crowe [01:05:26] Think that.

Elizabeth Schlesinger [01:05:26] But truly it's a very progressive field in that the laws are constantly changing. Every time a new federal administration comes into power and they set their spending priorities, they need to raise revenue, they raise revenue by determining taxes, taxes are everything that we've been talking about. So over the course of my 15 year career, we have had, I would say probably three major upheavals in how the estate tax is structured. And it's something that comes into the public discourse as well. You know, in presidential election years you sometimes hear people talking about the death tax. This is another way of kind of sensationalizing the estate tax and the ways in which the estate tax applies the way in which capital gains taxes applies this step up in basis at death are part of generating revenue for spending. And they are part of each federal tax package. So

Vance Crowe [01:06:25] It's really unfortunate that it's so topsy-turvy, right? Like the, the, I mean you can understand why and the pol like the political situation, but like to be able, imagine, and you can probably have seen it where people have set up quite, quite elaborate plans thinking that they're doing the best thing and then a new administration comes in and it flips it on its head or causes them some pretty strong headaches. It

Elizabeth Schlesinger [01:06:47] Does, you know, in a way it keeps us in business because the rules keep changing. I will say as a personal level, as someone in the field, it really does, it really is kind of an equalizer and it requires everyone to continue to come to the table and be creative. I have partners who have been doing this for 40 years and they can't say to me, this is the way we've done it. This is the way we've always done it. Because the rules have changed and it keeps everyone on their toes and it keeps everyone working together.

Vance Crowe [01:07:15] So you came to me on a recommendation from a good friend named Rick Fox, and when the cameras were off, I was asking you, 'cause clearly you could do whatever you want, you're very like sharp, but, but why did you choose the, the law firm that you did?

Elizabeth Schlesinger [01:07:31] Sure. So I ended up at Brian Cave, Layton Paisner in St. Louis right out of law school. I'm originally from St. Louis, and I moved back to town to go to law school at Wash UI took a property class when I was a first year law student, which all students do. And there was one small part of the class focused on what's called future interests, which basically means inheritance. And that was the part of the class that everyone else was just like, please let us get through this. Like get, let's get back to a mortgage or an easement. You know, tell me about something that I care about. And I was super into the future interest part, which is rare. My professor kind of noticed that and suggested that I take a couple of classes around wealth transfer taxation and the more sophisticated elements of estate planning.

Vance Crowe [01:08:21] What, what about it was so alluring to you?

Elizabeth Schlesinger [01:08:24] You know, this is what I'll say. Law school is hard. It's hard for everyone. No one goes to law school unless they've been academically successful already. And it is still a major wake up call for everyone. And some things just click. I think it's similar to friends of mine who are in medicine or in other fields where you really get exposed to everything when you start out and you can't really explain why something just makes sense in your brain. And it's, you know, the one thing that you're not absolutely studying all night to hammer in. You read it one time and you're like, okay, that makes sense to me. So, so at, at the outset it just clicked. When I got into learning more about it and into my practice, I really enjoyed it. I work at a large corporate law firm. Many, many, many of my clients represent companies. And when they're on the phone with their clients, they're on the phone with someone's in-house counsel or the chair of their board. When I'm on the phone with a client, I'm on the phone with a regular person who has a question about their money and their family. And it's, it's personal and it's meaningful. And in many ways estate planners are kind of the quarterback of all of the legal dealings of families. There's a lot of questions I get that are outside of my expertise, but because I have such a trusted close relationship with my clients, I'm the first call that they get and I send them to, they need, you know, someone has a run in with law enforcement. I'm not a criminal law attorney, but I know this family, I know all the kids I can help get them to the right person.

Elizabeth Schlesinger [01:09:58] Along the same lines, we represent families who are business owners and they're getting ready to sell their business and they need real estate work done, or they're expanding into a different sector and they need regulatory and compliance work, or they're combining with an international entity and they need international legal advice. None of that is my bread and butter, but I have colleagues within my firm who do it every day, which is what makes me really enjoy how my practice is situated within our larger firm.

Vance Crowe [01:10:29] And and I interrupted you on your path to Brian Cave over. Yeah. Any other firm? Why this one?

Elizabeth Schlesinger [01:10:35] So I think I kind of got there myself at the end. You know, I really like being an estate planner in a firm where my colleagues have the expertise that my clients need. We do a lot, a lot of clients that are either estate planning clients end up corporate clients of the firm. Likewise, corporate clients of the firm end up estate planning clients. A small business owner may come to the firm when they're part of a deal of buying and selling a business, having a large liquidity event and whomever is representing them in that deal may say, do you have, this may be a good opportunity for you to have an estate plan and you know, let me call my colleague downstairs instead of sending you, you know, down the block or around the corner. So,

Vance Crowe [01:11:13] You know, I hadn't really thought about it until we spoke like, you're, you work so much of your life, you, you create things and like the estate really is what you pass on. I mean, outside of your values and, and what you're trying to teach your children, like you really are helping people create the thing

Elizabeth Schlesinger [01:11:32] The legacy. Yeah,

Vance Crowe [01:11:32] The

Elizabeth Schlesinger [01:11:33] Legacy. If you'll, yeah, and, and you know, as a practitioner it's really rewarding because we work with multi-generational families. I know people's grandparents and their grandchildren. I know which kids moved to California, I know who's getting married and who's getting divorced and who's going to college and you know, who really got their act together this year and you know, who might need a little more attention. And these are the very personal stories that, that we hear from our clients and that we have the opportunity to learn about.

Vance Crowe [01:12:00] And if you weren't doing this, if if they were like, Hey, we took your law license away, it's gone, what would you do?

Elizabeth Schlesinger [01:12:07] So truly I have always wanted to be a lawyer. Ever since I was a kid, I did not know that I wanted to be an estate planning attorney. I really had no exposure to this world until I got into law school and I started practicing. But I kind of always was focused on being a lawyer. I think that, you know, kind of that like, you know, runaway and join the circus fantasy that, that sometimes you have, you know, you know, late nights when when you're working hard. One of the other ways that I know Rick Fox is that I grew up horseback riding and competing. And that's something that I've kind of hung up a little bit as my life has has moved in another direction. But if, if I couldn't be a lawyer anymore or if I won the lottery and didn't need to need to have any kind of job, I would definitely be riding

Vance Crowe [01:12:56] Horses in the circus. Yes.

Elizabeth Schlesinger [01:12:57] Well, less the circus, but yes, definitely, definitely with a horse somewhere.

Vance Crowe [01:13:03] This has been fascinating. I had no idea, you know, there are so many estate planners out there I could have called anywhere. I'm really glad I spoke with you. Thanks. If people found what you were saying interesting and compelling and they live in the state of Missouri, how would they go about reaching you?

Elizabeth Schlesinger [01:13:19] Yeah, so my firm is Brian Cave Layton Paisner. I'm on my firm's website. The firm makes sure that if you Google my name, Elizabeth Schlesinger, my firm bio is the first thing that comes up. They've got that optimized. And I would also add that, you know, being a large international law firm, while I am licensed only in Missouri, I have colleagues and I have access to expertise in many jurisdictions. So if someone is listening who's in another state, they absolutely could still give me a call.

Vance Crowe [01:13:49] Well, Elizabeth Schlesinger, this has been a real pleasure. Thank you for coming on.

Elizabeth Schlesinger [01:13:53] Yeah, thank you so much.

Vance Crowe [01:14:15] Thanks for sticking around to the end of the interview. As a special treat, I'd like to play a little clip of a man named Doug Rushing, describing what it was like to be surrounded by his family as they watched his legacy interview for the first time. If you're interested in having me record the life stories, values, and wisdom of a loved one, go to Legacy Interviews dot com. I really enjoyed it and I thought it was fun watching their experience, their, their expressions and they laughed and you know, I think they'd heard some of those stories and then some of the things they said, I didn't know that about you. And so that was, that was pretty good too. The questions you asked me about early biotech days and when we were developing roundup ready soybeans and I was involved with the very first field trials. I mean, Sarah said, wow, I didn't know you were involved with that. And you know, she may have heard me mention it before, but it never really clicked. And so now that she's a little older, she can appreciate that. And so she said, wow, I never knew that.