The Estate Planning Mistake That Tears Families Apart (Jimmy Buffett's $275M Lesson)

Hey everybody, welcome to another episode of The Business Lunch. Um, and I am here with the now available after, uh, a crazy schedule, Ryan Deiss. Uh, what's going on, Ryan?

I don't even know where to start, man. It's been, it's been an adventure.

I don't think we have time. Our whole podcast would basically be taken with you saying what you've been doing, man.

The trials and travails. Um, what I will simply say is that, um, it has been a rough go of just like a lot of different, like, nonsense happening from car crashes to dropping off college kids to dealing with aging parents. And I know anybody who's in that generation knows, in that phase of life knows what that's all about. But I'm very thankful to you and to Richard for all the grace that you've given me over this time when I've had to deal with personal stuff. I'm just also thankful that as crazy as it's been, my crappy week is still pretty amazing.

Yeah, it's pretty nice when the problems you have are quality problems. That's a good thing.

I was kind of being a little whiny baby about how hard my life was, and I was like, man, you got it pretty freaking good.

Is that what WLB stands for when you say that? Whiny little baby?

It's usually not baby, but yeah, you get the idea. Editing a bit for if our younger, any young, anybody's listening to this with kids in the car. But yeah, and I'll tell you, dude, just also like, Having a business, I know this isn't the topic of what we're covering, but like having a business that still works even when life is happening to you, because we don't just get to pause life sometimes. And so the fact that, um, you know, again, our business is structured in such a way that, that I could be incredibly distracted for over a month. Um, and it just happens. It happens to people. Stuff happens.

So again, uh, it's almost like that business operating system stuff that we have out there works. Yeah.

Definitely put it through its paces. It does work. I'm my own freaking case study.

It's really cool because all of this and some discussions I had and some exits that are happening right now kind of led me to think that maybe a good topic for today would be to talk about how do you structure things for when you're not there? You weren't there and we have this business operating system, which kind of covers the You know, you're not there because you don't want to be, or you're on vacation, or things are taking you away for a period of time. But when we talk about the you're not there that we all ultimately head towards, which is that we're not going to be alive at some point, none of us so far has figured out how to, how to get out of this thing alive. How do you structure things in a way that allows the people that are going to be there after to, um, to have the best shot of, you know, going along in a happy, non-conflicted way. And what really kind of, uh, made me think about it—

So this episode, the topic of this episode is the slow march towards death.

Yes, yes, yes. It's, uh, I think it's going to get a lot of views just because of that, because everybody wants to think about that. But no, I mean, it, it's really, um, important. No, you're right.

This is important stuff.

It's a super important topic. And, uh, it's highlighted because something's in the news right now. And this is actually, uh, my, my, Wife and her friends were talking about it and it just made me think, it's like Jimmy Buffett died. His estate now is in turmoil. There's a $275 million trust, and I'm not going to get all the details right because I'm highlighting, but really there's a fight between his wife of 46 years and a business manager. And what was presented to me that came from social media was, The wife and the kids are fighting and that the kids said, you know, fuck you at some award ceremony or something like that. And I don't know whether that happened or not, but what I did do was just, I was like curious. So I looked into it and it's like, it's not the wife and the kids so much. That's the big to-do. It's that there's 2 separate lawsuits, one in Florida, one in California, filed by, I think, respectively, the business manager and the business slash financial manager slash trustee. And Jimmy Buffett's widow, and they're fighting over $275 million. She's saying, you know, you paid $6 million plus in legal fees over the last little period of time. I'm only getting $2 million a year from a $275 million estate. Something's wrong. And they're spending millions of dollars on both sides to fight, it creates all kinds of turmoil in the family and everything else. And then kind of looking at it, there's another case that James Brown, who died, and specifically when I dug into it, it was kind of interesting because I guess there was a picture of his widow rattling the gates to their estate where they lived. And they had been together for years and years as well. And it was like, you know, she's locked out and, you know, that's, he left everything to scholarships and to, you know, some of his kids and cut her out completely.

Interesting.

Then you find out that she was actually married at the time that they got married. He didn't know that. Like a few years later, he finds out he's kind of upset with it, you know, and tries to get the marriage annulled and then basically writes, you know, they, she had a, he had a prenup, he had like 4 different documents. Um, from the beginning of the relationship through the end, but ultimately somehow continued to live with her at the, at the end of the relationship for years. But, um, but she got cut out of everything and she and, uh, I think the kids and a charity or foundation that they, he left everything to for scholarships for underprivileged kids in, uh, I think it was Georgia and Carolina, um, basically all got tied up for years and years and years. And I think 15 years.

Yeah.

In the, one of the judges observed, he said, you know, the only kids who've been able to get a scholarship from this case have been the children of the lawyers, of the attorneys, whose the fees from the trust has funded their education. And I had it happen with a neighbor too, who, you know, who we did a couple of deals with. And he lived across the street and, you know, as I got to know him and his wife, I found out that his, he was a widower. His wife had died. They had built up a company together and sold it and did all the typical estate planning things. And it was put into trust when she died. Some of the assets were in a trust that was her trust, which is pretty typical for estate planning, and it was irrevocable. And the children were beneficiaries and had an interest. And one of his daughters, was married to a gentleman that together they decided that they didn't like the way that the husband was managing the investments. He's an entrepreneur, he's doing things that they don't understand and maybe they were good, maybe they were bad. I don't know. But for me, the bottom line comes down to, and I'm really curious to get your opinion on it, There's so many recommendations from experts to set up these complex structures. And in the end, very often they give someone other than you, if you're the person that set it up or your spouse, the ability to control your money and your life and your decisions by having a power of objection, you know, standing to sue is what we say legally. And so my philosophy has been and continues to be, I don't think it's worth it in most cases. And it's important for our entrepreneurial audience to think that there's something like $100 billion or $100 trillion. I don't know. It's a ridiculous amount of money that's going to be transferred over the next several years as Boomers die and Gen Xers die, you know, and their children come into the massive wealth that they've built, assuming it doesn't all get spent on healthcare. And how, how, what I want to talk about eventually is, is how do you do it the right way? What I wanted to get from you was kind of your thought, because mine is basically, I don't care what my kids get. I feel like anything they get from me is a bonus. I want them to have something. I think that would be nice, but I'm not going to give up control to them by transferring assets into trusts that they're beneficiaries of and have them have potentially the ability to stop me or in any way. I'd be so mad. And I just feel like the trade-off of the destruction of the family relationship, which can't be recovered, is not worth the savings of the 40% estate tax. Especially now that right now there's a $30 million combined exclusion on the estate. Like you can leave $30 million to, you know, to, to of your estate with no estate tax. Why would you transfer money out of it? It makes no sense to me. So that's the general overarching thing I wanted to chat about.

Your thoughts? Yeah. Well, I mean, I think so it's worth pointing out, and you said it there, when you think about a lot of these complex estate maneuvers, estate planning maneuvers and things like that that people get themselves into, it really is only relevant if you have in excess of $30 million in assets, right? Because like, as you said, you can transfer that tax-free. And so this whole idea, and I see this happen to business owners all the time, they'll have good businesses, but I mean, they basically have, let's say they got a couple million bucks in assets. Maybe they sell their business, throw in another $10, $15 million. I'm not saying it's an insignificant amount of money.

Yeah.

It is, but they've been sold on this idea, you know, usually by somebody who is just, you know, selling that stuff. Attorney or just, yeah, somebody whose business is to—

We would say someone who's selling a product, right?

Someone who's selling a product of some sort. And it's this whole like, oh, well, this was the planning mechanism of the Rockefellers. And it's all this, like, guess what? You a freaking Rockefeller chief.

And the laws are different.

And yeah, and everything so much has changed now. And so anytime I hear somebody pointing out this, like, super complex estate planning thing that's going to protect your assets and it's going to save it from taxes. My first question is always, do you have an excess of $30 million that you're worried about? Because if you do, then let's have a conversation about that. If you don't, then you don't need any of that stuff. Now, all disclaimers and caveats. I'm not an attorney. I never was. You're not presently. You were, you can speak to this with far more expertise than than either of us can. But I think it's just worth pointing out, this is not legal advice or anything like that. It's just us talking about what we do and what we have done. And I think the mistakes that we've had people make. But yeah, I get into it the same way where I'm like, so many times people want to get into these complicated things because they've either been sold on something they don't need or they just want a big ball. They want to brag about, and I hear people do this, they're like, they're bragging about their complex structures. I remember looking at you and being like, you got anything like that? And you're like, hell no. So yeah, so I don't, and, and, and to, like you said, even if you're north of, of, of $30 million, like you said, is it worth it? And I think you gotta be way north of $30 million for it to become, uh, for it to become worth any of this stuff. I take a very, I take probably a different approach than most people, maybe even a different approach, um, than, than you might take to how I, I think about passing on stuff to the next generation. Yeah, let's talk about it. But, but yeah, I mean, I do think it's worth pointing out that, that for the most part, unless you're over $30 million, you don't need any of this crap.

Yeah. Like, how likely to be, you know, if you're, if you're, if you think that you're likely to hit, you know, over $30 million when you die, because obviously, ideally, you're not doing this, you know, from your deathbed, but, um, but that's currently the number and it's indexed for inflation too. So it's going to just go up until somebody else comes into power and changes it all.

Who knows, another administration gets in, other groups get in, and maybe it drops way down and it goes way up and everything we're talking about changes. But for right now, it's pretty generous in terms of the ability to pass on. Yeah, I mean, you want to get into kind of like philosophical—

Yeah, let's talk about it because I think it's cool to share that here and let people hear what our thoughts are. And then I like having the conversations with them as well.

Yeah, you want to go first? You want me to?

Go ahead.

You go ahead.

I kind of, I think I kind of said mine.

Yeah, I, yeah, you, in terms of like not caring at all about the next generation, screw 'em, let 'em figure it out on its own.

That's basically what you're saying. I mean, well, I mean, no, not quite that, but, but no, I, my, well, okay. So just to summarize very quickly, to me, I feel like I want to get, help my kids get houses. I want them to have an education. And then I feel like anything after that, my obligation's done and they should be able to sustain themselves. They shouldn't be waiting for me and my wife to die. They shouldn't be looking to us to fund their, you know, their world. If we want to be generous and do things for them, we can. I'd way prefer to invest in experiences that we all get to share together while we're all alive and healthy and can do that. And then when we die, I don't want there to be any fights while I'm alive where they have control or arguable control. I don't want to create contention. I don't want to set up a structure that Creates opposing interests or conflicts of interest. And when we die, should anything be left, I think there will, I think it'll be a lot. Then I don't really care what they do with it in terms of like, I'm not going to try to control them from the grave either. We'll leave money to, you know, to the grandkids or, you know, education for them and stuff like that. But other than that, so I don't, I don't really care. And so I'm not going to create the potential for conflicting agendas or views or property claims to where any of them has anything they could do that would poison our relationship because I would hate them forever if they did it. And if it costs me 40% of the amount over $30 million to do that, I think that nobody should care. If your kids are fighting, like you've got 2 kids in my case, and each of them gets $15 million first. And then there's, I don't care. Yeah, there's a billion more than that. And $400 million of it goes to taxes. I don't care because I think they ought to be pretty good with it. Yeah.

And I think, and so just to clarify, because I know what you mean by this, but when you say I don't care, what you're saying is you're not worried about, to your point, like from the grave, Perfectly restricting how the money is going to be spent after you're dead. You're like, they're going to get what they're going to get, and they're not going to throw a fit, or they will, but it's not like you're not going to do what. And and and I guess the the counter to this are people who will have these complex trusts, and it's like well, they get this much when they turn eighteen, but only if they've graduated. You know, only if they're enrolled in college, and at this point they get this much, but only if they're married, and they get this much, but only if they've done it. And it's and it's all like this kind of drip feed. And it creates this challenge where you have to perfectly anticipate the future and the needs and the character and all aspects of the next generation for this to work out really well. And you— Yeah.

And we're talking, we're talking, I'm, the theme here was primarily estate tax, but since you mentioned that, I do believe and have seen as somebody that did estate law for about 12 years, I do believe that if, I don't think it's good to try to rule other people's lives based on what you want for them. I think they need to go find their way. I do believe that it is wise to split it up into 3 installments or some installments so that, because I did see children inherit money that hadn't been used to it and blow it all. And then It was structured so that they got like a third on death, a third 5 years after, a third 10 years after. So they got 2 more chances to be responsible and learn a lesson, man. If they hadn't learned it, then I just think let 'em do what they want to do.

Hopefully they'll at least have a good time while they spend it all. Yeah. So I mean, in terms of philosophically how Emily and I think about it when it comes to our kids, I start with the initial kind of principle that none of it is mine. Yep. You know, so, and this goes to just, you know, my faith and stuff like that. And so I think that nothing that I have is mine. All of it's been a gift from God and it is my job to be a good steward of it. Right. So I see it as inherently a stewardship activity. And so all when I'm thinking about the next generation, what I'm thinking about is I want to make sure that it goes to the best steward of that. Now, I will tell you, I don't think that the US government is necessarily the best steward of money. And so am I excited about them getting—

That surprises me, but okay.

Yeah. Am I excited about them getting 40% of everything, of anything? No, no, not necessarily. Um, but as it relates to kind of that, that, but, but, but I also think that at some point, like kind of the laws are the laws and do I want to try to create, like you said, or risk the idea that there's going to be tremendous tension and put my kids in a place where they've got to deal with stuff just to not pay the government. I don't think that that's a good stewardship activity either because you're just leaving a tremendous burden on the next generation. So again, there's kind of—

You're not only leaving it on them, you're inviting it into your relationship with them while you're alive. That's to me, that's the giant challenge.

Absolutely. And so I like to think that I've got a good number of years left on this earth. And so I've got a bit more time, I like to think, to figure this out. But in terms of the way that things are going right now is obviously if anything happens to Emily or I, the other one gets it and has control over it because we trust one another to be good stewards of that. And as far as the kids are concerned right now, because only 2 of them, 2 of the 4 are now legal adults, but neither of them would I trust to be good stewards of that. We have another individual who I do trust who will be kind of the acting steward of that for their benefit. That's the way that the will and stuff like that is structured. Now, as the kids get older, to me, it's very binary. If I believe that you're a good steward, then congratulations, you're in. If I think that you're not, and specifically if you're a destructive individual, who you receiving this is going to amplify your destructive powers and abilities, including not just on the world, but to yourself, then it's really simple. You get nothing. Right. And I've told my kids this.

So you get nothing as opposed to setting something to take care of their basic needs. So they're not living out in the street behind a dumpster.

It like, so for right now, it is like that at that point, the siblings, Like, do what you can to, to, to take care of your, you know, of your sibling. And that kind of sucks because I know that does put a burden on them, but it's always a burden because it's freaking family. That's just the reality.

But that's, that in the law, we would call that precatory language. That is a, we hope you're going to do that, not a, you have a requirement to do that, which would then set up an entitlement.

Okay. Correct. We hope that you're going to do it. And, and that, that puts a tremendous burden on the family, but that burden I think is going to be there. And I do think that that burden, if you have somebody who's truly troubled, Is there no matter what, just like if you had somebody who was, you know, ill, you know, they were sick, no fault of their own. As a family, we should rally around that person and help them out. So if we've done a good enough job with at least a few of them, then hopefully, again, I got 4 kids, then hopefully that's the case. But to me, the thing is always, how can we approach this from the perspective of good stewardship? And what are the entities that are going to be the best stewards of what what gets passed on. If I do my job right, if Emily and I have done our job right, then I hope that that is our children. And if that's the case, then I am excited for them to receive the full amount without any sort of restrictions placed upon it. Now, does it make sense for some of that to be placed in some kind of a trust where it's managed in such a way? Yeah, maybe fine beyond a certain amount, but That's roughly the approach that we've taken to that without getting into specific, the specifics of structuring and things like that.

Yeah. Yeah. Yeah. I mean, I, to me that, that it's very similar, right? Just, it's, it is the thought, the, like the main thought here would be that whatever you do, because I have also seen in my practice where people created foundations and charitable trusts to help them structure and pay less in taxes while they were alive. And I've been through all of that. Like the me of 30 years ago, you know, or so was structure all that stuff, you know, and I was an estate type attorney. So I knew it all. I practiced it all. I, you know, helped set all that kind of stuff up. I believed in it, but then seeing it in practice and seeing how the theory goes into the action. It, to me, like people that set up charitable trusts, you know, took out money that they needed to live and then the charity came after them, you know, for taking that. You know what I mean? I can't even imagine how mad I would be about that. It's just so outrageous to me. It's outrageous for your children to be able to decide how you spend your money in any circumstance and that they have, they should have no entitlement to anything. But you, if you set up something that gives them the entitlement, It's literally called an entitlement. It's a property interest. They have it. You did it. You got the benefit. You beat the tax people, but you destroyed your family. And it doesn't always happen. Obviously, as an attorney, you see more of the things that don't work out than the ones that do. And I would say as a percentage, it was a low percentage where it happened. But to me, for there to be any chance of it, because you're really just hoping that the, that not only your kids, but the people that influence their lives, Or maybe your kids, and then your kids get married, and then the married, the spouse has opinions on things and influences them in a way. Maybe your child dies and has some right that they're entitled to that now passes to their spouse that hates you. I mean, it's like those are the situations you are thinking about here. And the real basic rule I felt like that I kind of thought of after thinking about the Buffett thing and all the other things that we have been talking about is that you just are better off to never create an estate plan that gives people that you love standing to sue each other. Just don't do that. Don't create that situation and then you avoid everything. And what that might mean is that Your estate has taxes. Now, the people that are going to, especially the professionals, are going to be like, well, you can protect against that with contracts. I mean, my experience is that if somebody's got a right to sue, they've got a right to sue and you can't stop them from doing that.

Well, protect against it with contract means is that you might win in a lawsuit.

Yeah.

The other thing important might, but the imperative there is lawsuit. Like there's going to be, and that's what I think. Conflict. Conflict.

Yeah.

That's what we're trying to avoid. And I think so much of it comes down to just, and you said this earlier, like what I have said to my kids is I said, you should assume that you're not going to get anything. Your mom and I do very, very well. We built up tremendous assets, but the world is There's a lot of uncertainty out in the world. And so tomorrow, could it all be gone? Maybe, like, probably not, but like, you know, there's, there's never that. I said, so for you to depend on that is like, and so what we've said that we're going to do for our kids, and they know this, is they get a free education. So we're going to pay for their college. They will have no, they'll have no student loan debt. They will get a free car when they graduate and we will help them to your point with a, you know, with a down payment. So that they can get into a home, you know, when they're, when they're ready and it's appropriate. And by the way, if they want our money, we're going to be someone involved in that decision, right? We get to vote then. So like, they don't just get to go buy some like stupid property, you know, or whatever. Like, if we feel like, again, they're a bad steward and they're making a bad decision, then we're not going to give them our money to do that. And they know all of that. I said, now, what you get when you die, when we die, is irrelevant to you. Because we are not that old. And so you're going to want to actually have an adult life.

You may end up having to care for us.

Yeah. You're going to want to have an adult life. And if you're just sitting around waiting for this money to arrive, you're going to wait an incredibly long time. So you're going to have to make your way out in the world. And I'm not going to help you do that any more than what I've already done. Because my job as a parent is to raise adults, not children. So if that's their expectation and if we've done our jobs right, then hopefully they're good stewards. But I really should be able to dictate most of it. And what I've said is like, my goal is to spend as, not as much as I can, but to spend generously while I'm alive on the experiences that matter, including us going on trips together.

Amen.

So I don't have as much wealth right now as I know I would have if I didn't have a beach house that we spend a lot of time with, especially when the kids are young, if we didn't go on arguably extravagant vacations, right? If I didn't pay for my kids' colleges and things like that, if I just said, go figure it out. Like, I mean, I'm spending that money now because I want to actually enjoy it while I'm alive. And I think so many people spend so much time thinking about what's going to happen to this when I'm dead. And I'm kind of like you, man. I don't want to say I don't care, like I'm just flipping about it, but I'm gonna be freaking dead. All I want to do is not leave these little, like, it reminds me of when I was a, when I moved out of my house, like moved house when I was a kid. And I remember I had a gerbil for like 6 weeks and the gerbil ran away and we never found the gerbil. Who knows what happened to the gerbil? But I remember after we were moving out of this house, I kept finding these little turdlets all over the house. of like little gerbil turdlets, like behind things. And I just don't want to leave turdlets for the next generation. I'm more concerned about—

to discover.

Yeah. I'm more concerned about that than making sure that they're left with some giant pot of money that if I do my job right, they're going to be, you know, in their 60s or 70s before they even get to it anyway.

Yeah. So let's, let's talk about some of the pushback that, that people might have, including professional advisors. One would be, yeah, but you have a business. And that business would likely have to be sold to pay the estate taxes, which would destroy the value of the business and, you know, maybe even be a fire sale and you'd, you know, diminish the value of the estate and then your kids wouldn't have the opportunity to work in it. Let's talk about the non-legal thing before I talk about the legal thing. So how would you respond to that?

So I have no expectation that my kids are going to inherit a business. And so as I'm, again, marching towards, like, I can see the slow march towards death. I want to sell as many of the assets that I can do appropriately. Like, obviously you don't necessarily want to do that with a house, for example, and have a, not allow for the step-up and the transfer that you'd get and things like that. But when it comes to a business, I have seen families torn apart because You have some kids that want to run the business, some kids that don't. My feeling is if somebody wants to run the business, then they should buy the business. And you can figure out how to do that in a favorable way, but they should figure out how to buy the business so that the people who don't want to run the business can receive the present value of their portion of what that business is based on how they own it. But I wouldn't just want to leave a fully functioning business just to go and then be the beneficiaries. Maybe if it's a massive corporation that is truly run and its dividends are kicking out and stuff like that. But for just a private company that's closely held, let's try to liquidate as much of it as possible before you die. I feel the same way about a lot of property.

But what if you were, what if you and your wife go down an airplane? Now, tomorrow?

Yeah. I mean, well, obviously we've got a, you know, partnership agreement that's like, there's gonna be some type of, of value in life insurance and things like that to help to, to—

So, so let's say they get, they, they get the, they basically get bought out of the business. Let's say that that's all in place. Um, but they don't have the business at that point and one of them wants to run it.

Uh, that sucks. Okay. Do you, do you believe, I mean, that's how I feel about it. Like it's, it's not, well, here's the question.

Do you believe that they need to be treated equally? Like to me, if, if one of them's into the business and the others don't care about that asset and you've got enough assets that they're all getting a bunch of money, do you feel like they have to be treated equally?

The, I think if somebody really believes in the business, then they should believe in the upside of that business. And so if the other people are passive partners in the business, Then, you know, it, it, I guess a lot of it depends on how long has that person been working in the business? Like, do you have a kid that's been working in the family business for 15 years and has grown it? And you got, let's say you got 3 siblings, one that's been active for 15 years and, and the other 2, then no, it shouldn't be equal. Right. That shouldn't be equal.

I'm not talking about they worked in the mailroom for a summer job and, you know, therefore they're like, ah, I should get all that.

Yeah, no, no, no. But again, the way that you would take care of that is the way that you would take care of any executive leader of a company. They should get additional, some additional stake on the cap table beyond what the estate gets as a result of the work that they've done at the company. So they essentially get to kind of double dip like that. There's the passive piece that the estate has that's represented on the cap table, but then you represent that particular family member's contribution on a separate aspect of the cap table where they likely own it personally or through their entity.

Yeah. So, so I think that, that, that makes sense. I don't feel like there's a need to treat equally. I think I want to, but if there's like, like I have things that different, you know, that, that one of my kids likes because they have that interest and I have a whole lot of money invested in that. I don't really think I have to take half the value of that out of the remaining estate. I think I can leave those things to that, you know, to that child. If you've got, you know, jewelry or collectibles or, you know, wine collection or, you know, a car that one of them particularly likes or, you know, any of those kinds of things, to me, I feel like that all comes off the top. You know, if I know you have an interest in that, I'm going to give it to you so you can enjoy it. And I'm not going to penalize you from that. By making you now make a decision that you have to sell part of it because, you know, you don't have enough money.

Yeah, certainly if it's stuff, like if it's stuff, if it's illiquid, the thing that's hard about a business is there's potentially so much value there that I would want to feel like if one of the kids was getting all of the company to run, that there was something showing up somewhere else for the, you know, for the—

Unless you had $100 million outside of that.

I mean, that's what I'm saying. If you have more outside of it, then they're going to be fine no matter what. But like, I mean, I could tell you right now, I mean, we're dealing with this a little bit as a family right now where Emily and her siblings are, again, through the drama of the past month, as alluded to earlier, and they're talking about it and it's like, you got a grand piano, right? And one of the kids, one of the siblings really wants a grand piano because they love piano. They love a piano and they play piano and we don't need another grand piano. So it's like, Sure, take the piano. And we're not going to say like, well, what's the value of the piano and how do we make sure that everything— it's like, you love that, you want that, you should have that. Like, that's fine. And if somebody else just wants, you know, a, a watch that has sentimental value, but it's valued way less, we're not going to get into that, into that whole thing. This, by the way, though, is why I think it's important. Give stuff away while you're still alive.

Yeah.

Like, give it away, especially if you're not using it as much. Like, give it away to the people who you know are going to enjoy it so you can watch them enjoy it.

Right, right.

I like that.

Like, do it, do it now.

Don't wait. I mean, I think a lot of that simplifies a bunch of decisions.

So with the, and it also, you know, to the extent that at the time you give it away, it goes out of your estate. That is a way to do estate planning. Now, if you're waiting until it's appreciated a lot, you know, because you're hanging on until you don't want it anymore because you happen to enjoy it, then You know, you are going to pay, you're going to increase the value that, you know, might be subject to estate taxes. But here's a few things to think about. One is that there's generally a rule that you can pay the estate taxes on a business over 14 years after the death. So it doesn't have to be immediate. Maybe, you know, that at least worst case gives you the ability to find a partner, fund a sale, you know, pay in installments, or even work a payment plan, you know, to do it. There's a lot of options that you have there where You wouldn't have to sell the business tomorrow. You definitely wouldn't have to fire sell it. If you can't sell it over 14 years, it's probably not worth much anyway, which would argue towards what the value is, you know, for estate tax purposes, which you do also get to do, by the way. Right. And then, um, the other would be, uh, ILITs. So irrevocable life insurance trusts are the perfect way to fund what we were talking about with respect to one, one of your children is working in the business and the others aren't, then fund the ability for that child to buy out the interests of the others at your death. And then that's easy because nobody's going to get into a fight over a term life policy that has no value that's in a life insurance trust and you've created the funds, but the funds don't exist to fight over until you die. And they're not going to be fought over because your trust has provided they're going to buy the other person out and they get the money. A couple of other things to think about would be—

For the record, by the way, Roland, just on that, the reason I think that that is so smart to do is because now there is a, you're going to get this much when I die for your portion of the business.

Yeah.

Because that's what I've said it's worth right now.

And here's the formula.

Yeah, exactly. And here's the formula and here's the thing. And, and it just goes to the whole, if you, if you love your family, talk about this stuff before you're dead. They should not find this out after you die. And not that there is like a formal reading of the will like they do on TV. That's a TV thing. But, um, they shouldn't find out about this stuff after you're die— uh, after you're dead and, and now some probate attorney's like, hey, so here's kind of what's working and there should be no surprises.

Yeah, I agree. I think that's important. And I think that's the simplest way to do it. Like if you've got time to do it and you can fund it with an ILIT, that seems like a very, very simple, nobody's getting standing to sue anybody else. Nobody has anything to really fight over. You're providing for a mechanism to get, you know, whatever equal distribution or whatever fair distribution you're trying to get. And that to me, that kind of works really well. The other thing that I think is important is, and this would be applicable, this I think could have eliminated a lot of the fight in the cases that we mentioned in at least 2 of them. And that would be like, if there is a trustee, like you said, you have someone that you trust, Don't forget to give your beneficiaries the ability to remove that person and replace them with someone else that is determined by a court. Because you, if, if you get somebody that's in there, because, you know, I mean, $6 million in fees sounds like a lot to me. I don't know what all they're doing, but, you know, $1.7 million over one year would, you know, that, that sounds like a lot, but it's a $275 million trust. So maybe it takes, You know, a team of 30 to work on it. I don't know. It's, you know, the headline sounds bad. The reality might be you actually got a deal, but let's just say that in certain circumstances, I have seen people who were trustee-type people take advantage and you're basically locking your family in a cage where somebody else holds the key to the finances, and that's a terrible position to put them in. So the easy solution to that is rather than them having to file an action and go to court, remove them. Give them the right to do it. Give them the right to do it like once a year, you know, if it need be. So that way it can't be just like, you know, excessive. But anybody that is, that they're not happy with, they don't have to say, well, we don't like it because they took too much money and now we have to go to court and prove that they were mismanaging and breached their fiduciary duty and all that stuff. That's again, setting up a fight. Rip it all out and just say, you know, hey, person I trust, you're it, but I've given Emily, I've given my wife the right to remove you. I've given my kids the right to remove you if a majority of them want to do that, or for their respective trusts to replace with somebody else. And then you can suggest someone, and if they don't like that, then they can just go to court and ask the court to appoint an independent trustee. That's a one and done, no fight. Like thinking about those things that you can do to avoid the things that are going to create the conflict and stop everyone from going about their lives and be living in this legal nightmare. I think that's really a, that's just one of the simplest things you can do that I think is so smart and so often overlooked by attorneys that are setting these kinds of things up.

Yeah, that's a good one. I wasn't, I hadn't thought about that one. I'm going to definitely make some phone calls and get, get that put in place. That's, that's smart. You're pretty, you're pretty smart, Roland. You ever, hey, you ever think about, um, just leaving all this business stuff behind and going back to being a— oh my God, that sounds terrible. But you couldn't see this unless you were watching it on YouTube, but Roland literally did just vomit in his mouth right now. I can see him choking the bile back down.

Oh man, that sounds horrible. The other thing that I wanted to mention that is important is When somebody dies, you might be under the threshold to file. Like if you're married and one person dies, you may well be under the threshold of having to file a 706, which is the estate tax return. If you don't file it the way the law is right now, within, I think, 9 months of death, then you lose the spouse's $15 million exclusion. Because the way it works is if everything goes to the surviving spouse, which it usually does, there's an unlimited marital deduction. So there's no estate taxes when the first person dies. But then the question is, well, now the, it used to be $30 million between the two of us. Now one of us is gone. So is it now only $15 million? And the answer is no. If you file the 706 and check a box, But if you don't file the 706 and check the box within the 9-month period of time, you know, which subject to change and I could be wrong, but within that period of time, then it goes away. You just lost it. So you've added $6 million, 40% of $15 million under the current regime, right? Of taxes that you didn't have to because you didn't file that simple form and check that one box. So don't forget that there is a 5-year late filing option. But the thing is, is that very often, you know, usually the man dies first and the wife lives longer than 5 years. And so even there, you would've missed, you know, you would've missed it. So that's really something to think about. And then when you do that, the $15 million gets locked and the surviving spouse is getting indexed. So maybe theirs goes from $15 million to $20 million, and now you've got $35 million when that spouse dies. So like, So that's something to know, I think, as well. And then as you mentioned, you can always get under that threshold. If the, you know, if somebody's died and you don't need all the money and you want your kids to enjoy it and stuff like that, then give some of it away. If you've got, if you've got so much money that you have the rest of your life taken care of and then some, why not consider giving some of the then some to the kids now? So you get to experience it with them. So they get to enjoy it. So you get to see them enjoying it. And, um, and at the same time, you're stopping the government from taking 40% of the excess value. I mean, that, like, all of those things to me make total sense. It's just the, we're going to stop the government from getting any money from us. Uh, and we're going to set up all these complicated structures and it's going to create rights that you're probably not even understanding you're creating when you do it. Um, and then you have to count on the entire family to get along and see things on the same page. and not be influenced by any outside sources. And that just doesn't always happen.

Yeah.

The number of people I've seen drop 6 figures on fancy trust setups, um, who, who have a $10 million or less, or a $5 million estate or a million dollar estate.

It's like, man, I, and not to be weird, but like, I know you, I've been working with you for a long, we've been consulting together for a long time. Like, dude, you, you're going to be fine. Like good news, bad news, man. Like you're going to be fine. You don't, you don't need all that stuff, but Um, I think that there's this posture around, um, around just, I don't want the government to get it. And look, I get it. I do. Um, but what you also don't want is for an unscrupulous attorney to get it because they sold you something that, that you don't actually need.

Do you know what though? I, I, I will say because of being the attorney, And I felt like I was pretty scrupulous. The, I don't think, I don't think they're thinking about it that way. I don't think most professionals are doing anything other than what they've been taught. They've been taught you should reduce. I have this, you know, with our mutual friend Grant, I have this spirited debate because he's like, you know, yeah, and they can do a GST, a generation-skipping transfer trust and this and that and the other. And I'm like, Man, I hate all that stuff, you know, do charitable trust. But that's what you're taught. That's what you're taught. And you're advocating to help this person minimize their taxes because that's what they come to you and say they want. I think what is missing is the human side and the experiential side of living through a few of these things and actually saying, well, hey, just so you know, if you do this, Here's what could potentially happen. And so you need to ask yourself, are you making a conscious decision that you're, you value the tax planning more than the potential family disruption? That's like, that's what it comes down to.

Yeah. Let's, let's not spend money today to simply create more reasons for the people we love to fight tomorrow.

Yeah. But especially, wouldn't it be nice if a lot of them said, I'm looking at your estate right now, it's $7 million, it's going to have to 4x before you even get close, plus it's going to be indexed. Why don't we revisit that part then? And we can, you know, we can do it then because it's a, it's a combined thing like the estate and gift tax, right? So you could just elect when you're getting to 28, million, you could say, hey, I'm going to transfer some of it now so that it brings it down. It's going to be indexed, so it's going to continue to go up. So as the value goes up, you know, you can play that. Then you're at least actively monitoring it and saying, I'm just going to try to keep it right under that threshold. That, like, if you're, you know, if that's important to you, I think you can definitely do that.

But it's only if you're kicking it right at the threshold.

Say again?

Certainly if you're kicking it right there at that threshold, which let's be honest, most businesses, um, like this is, this is a luxury problem that a lot of people, um, don't have. Uh, and, and so if you do, then, then it's stuff worth, worth looking at. If your assets are well in excess of $30 million, okay, then let's, let's talk about, let's have those conversations, figure out what that is. If they're substantially less than that right now, then please just focus on making more money. Yeah. Focus on making more money.

Like, let's create— Focus on creating this problem.

Yes. Let's create the problem, then solve the problem. You don't have to, you don't have to have everything perfectly planned and structured today. I love it.

Well, I hope I, anything else you want to say on it?

No, I would just, I love the distinction there is always be careful of all advisors. Um, and lawyers do this, accountants, CPAs, finance people, wealth managers.

Yeah.

Yeah. All of them are going to give you the right answer based on what the spreadsheet says. You're still the one that needs to sleep at night and, and there's still the human element there. that they're not going to take into account most of them, and they won't even ask you the question because they're just like, this is the right way to do it. Paint by numbers. And I don't say that in a disparaging way. They're just doing their job and that's kind of the scope of their job. So if nothing else, go and ask the questions and say, if we do this, what are the risks that after I'm gone, the people I love the most are going to be in conflict? And how do we avoid that? Even if it means costing, paying more in taxes. Put that scenario out there in all of these things. Like what's the potential downside that we're not considering and how could we avoid that even if it means creating this additional risk that I know we're trying to mitigate? That just that question is going to get the advisors that you have thinking a bit more creatively and holistically about your situation.

Yeah, I agree 100%. Very cool. Well, I hope you guys got something out of this. Please, please, please, you know, think about your estate plan. Think about that clause that we talked about giving beneficiaries, the ability to remove the trustee. Think about asking your estate planning attorney who is charged with filing the 706 to be sure that we get that unused spousal exemption. I think it's DSUA is what they call it. Deceased— no, DSUE, deceased spouse unused exemption. Don't forget to check a box that costs you $6 million. And, um, and then think about all, you know, funding things through life insurance trusts to provide, um, for whatever liquidity is going to be needed at your death, because none of those things create standing between 2 different people who you love. You don't want to create standing between you and someone you love. You don't want to create standing between people you love, and you don't want to create standing between any third party and you or people you love. That's easy to do if you think about it, but easy to forget when you're just following the normal advice. The status quo advice is not designed to think about the human aspect. It's designed to think about, as Ryan said, the numbers in the spreadsheet. So hope that was helpful. If you guys found it so, let us know. If you didn't, you know, then let us know too. And, um, we will see you next time on Business Lunch.