June 4, 2025 • 8 mins
Why is estate planning a necessity for everyone over 18, not just the wealthy, and learn how to safeguard your assets and ensure your wishes are honored. We explore the critical components of estate planning, including the last will and testament, trusts, power of attorney, and healthcare directives. Dan shares real-world examples to highlight common pitfalls, such as neglecting to update plans after major life changes, which can complicate probate and lead to legal challenges. Regular reviews of your estate plan every three to five years are key to keeping everything aligned with your current life situation.
Dive deeper into the world of trusts, especially their role in Medicaid and tax planning. We discuss the importance of setting up and funding a trust well before applying for Medicaid, ideally five years in advance, to protect your assets. Dan also sheds light on the strategic use of irrevocable trusts for larger estates and the significance of "see-through" language to secure tax benefits for IRAs and 401(k)s beneficiaries. With these insights, you'll be well-equipped to navigate the complexities of estate planning and ensure your goals are met, making this a must-listen episode for anyone looking to secure their financial future.
Dive deeper into the world of trusts, especially their role in Medicaid and tax planning. We discuss the importance of setting up and funding a trust well before applying for Medicaid, ideally five years in advance, to protect your assets. Dan also sheds light on the strategic use of irrevocable trusts for larger estates and the significance of "see-through" language to secure tax benefits for IRAs and 401(k)s beneficiaries. With these insights, you'll be well-equipped to navigate the complexities of estate planning and ensure your goals are met, making this a must-listen episode for anyone looking to secure their financial future.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
You're listening to Simply Money, presented by Alworth Financial. I'm
Bob's funseller along with Brian James, joined tonight by our
estate planning expert, Dan Perry from the law firm of
Wooden Lamping. Dan, first of all, thanks for making time
for us today, and I know you want to talk
today about estate planning, the importance of having one, and
then maybe even debunking some of the more common myths
(00:28):
out there when it comes to estate planning.
Speaker 2 (00:31):
Yeah, that's right again, thanks for having me, happy to
be here. You know what I say is estate planning
is just real simply is about making a plan for
what happens to your property, whether that's you know, your money,
your home, your car, even your pets after you pass
away or if you can't make decisions for yourself. It's
(00:51):
not just the wealthy, and it's really for everyone over
the age of eighteen who wants to protect their family
and ensure their wishes are followed. And I like to
think of a state planning encompassing four key pieces, the
first being a last will and testament, and that's just
a document that says who gets your assets and who
takes care of your kids? If they happen to be
(01:13):
minors at the time of your death, and without a will,
a court is going to decide, which can of course
lead to delays and disputes. Another key piece is a trust,
and I like to explain trust as containers that hold
your assets and are managed by someone you choose to
avoid a court process called probate. Trust can also save
(01:35):
on taxes or protect money for your kids. A third
key piece would be a power of attorney and that
names someone to handle your finances if you're incapacitated, such
as after an accident, for example. And a final key
piece would be a healthcare directive, and that says who
makes medical decisions for you and what care you want
(01:58):
if you can't speak for yourself, such as if you're
in a coma.
Speaker 3 (02:01):
And thanks for breaking it down like that.
Speaker 4 (02:02):
That Really, this topic can get overwhelming, and Bob and
I are of course not attorneys, so we don't draft
documents or anything like that, but as certify financial planners,
these topics come up all the time and we help
people understand exactly how to arrange it. I want to
drill into one comment you made about trust, because I
think every other day I have this conversation with people
who had a trust written up, and it would makes
(02:24):
logical sense. I have a trust, I paid money for
it to exist. I should now name it as the
beneficiary of everything or the owner of everything, and.
Speaker 3 (02:31):
So that the objectives of the trust to be carried out.
Speaker 4 (02:34):
Where this comes up as an issue sometimes is when
we kind of knee jerk name the trust as the
beneficiary of iras or four oh one k's tax advantage money.
And that can sometimes make a mess in terms of denying,
in worst case scenario, denying beneficiaries their right to spread
that tax impact of liquidating that pre tax IRA or
four O one K over ten years. How do you
(02:56):
address that? How can we safely make sure a trust
can and serve its purpose as well as protect that benefit.
Speaker 2 (03:03):
Sure absolutely so, as you may know, as you probably
know that you know, the tax law has changed significantly
in this regard a few years ago, and a spouse
named as a beneficiary in IRA has the ability to
stretch that benefit out over their lifetime upon them reaching
age seventy two, but a non spouse beneficiary doesn't have
(03:28):
that right. And when a lot of clients want to
name their trust as a beneficiary, And the problem with
that is if it doesn't have special language in the
trust documentself, what we lawyers call it as see through language.
If it's not seen through the trust agreement to the
specific name beneficiaries, it can create a situation where the
(03:51):
non spouse beneficiary such as an adult child, can't withdraw
that benefit over a ten year period, and it can
create a much larger tax bull event when they inherit
that account.
Speaker 3 (04:03):
So see through is the keyword. I appreciate that.
Speaker 4 (04:05):
Is there a way obviously, you know, somebody who's concerned
about this should check with the attorney who drafted the document.
But is there a are they literally looking for the
word ce through in the document or is there a
special section where where is this language hidden?
Speaker 2 (04:17):
Usually so, the language is usually hidden in a article
or a paragraph that describes that says retirement accounts, and
the language is going to usually reference a section of
the Internal Revenue Code on how the trustee is going
to view these retirement benefits. So, if you're listening this
(04:39):
and wondering if there's c through language in your trust,
try to find a section titled retirement accounts and it
almost always will have the see through language and will
say see through to the individual beneficiaries something along those lines.
Speaker 1 (04:55):
Hey, Dan, I know you see all kinds of situations
come past your desk, you know, as part of your practice.
I know probably most of the listeners out there are
thinking of themselves, Hey, I've got some kind of a
state plan in some way, shape or form.
Speaker 3 (05:08):
I got this covered.
Speaker 1 (05:09):
What are some of the things their situations you come
across every day in your practice. Some of the land
minds out there that people might not be aware of,
you know, due to the fact that they just didn't
cross all the t's and dot all the ey's, you know,
in terms of actually implementing a good estate planning strategy.
Speaker 2 (05:27):
So the one I see the most is people that
believe that they're done when they complete their plan, because
you know, as we all know, life changes. You know,
there's marriage, perhaps divorce, kids, starting a new business, and
your plan needs to keep up with those changes, you know.
For example, I had a client who wrote a will
in his thirties and he named his wife as a
(05:49):
beneficiary of that will, and after their divorce, he never
updated it. However, in Ohio, divorce operates as what's called
a revocation of any provision going to the X Y.
But it can also create a situation of ambiguity in
the will on who is to receive the property that
was to go to the wife when they were married,
(06:11):
and that can create some problems.
Speaker 4 (06:13):
So that would send it back through probate, then, wouldn't
it wouldn't that result in them saying there's no beneficiary.
Speaker 2 (06:18):
Therefore it would either get it would either go back
to there's no beneficiary or this falls through what's called
the residuary cause of the will. But again that's ambiguity
that a court has to has to weigh out.
Speaker 4 (06:31):
Hey, one more question that comes up very frequently. A
lot of times we have we have clients come in,
they bring, you know, there, they bring their their stack
of papers and statements and trust documents, and they'll kind
of casually throw out while we set up this trust,
you know, because it's going to protect us in the
event of long term care needs or if we ever
need to be on Medicaid or something like that.
Speaker 3 (06:48):
That's almost like the just just.
Speaker 4 (06:50):
Thrown out there, and I know it is not that
not nearly that simple, if it's even possible at all,
Can you weigh in a little bit on how a
trust and whether a trust can truly protect in the
situation like.
Speaker 2 (06:59):
That, So trust can be designed to protect for medicaid
Medicaid planning purposes. In general, those trusts have to be
what's called irrevocable trusts, and the person who set up
the trust, such as a set lore is what they're called,
cannot act as the trustee of that trust. And more importantly,
(07:23):
for trust to really protect for medicaid planning purposes, the
trust has to be funded with the person's assets at
least five years prior to applying for Medicaid. So I
hear that a lot from clients as well, and it's
I always say, well, slow down, let's take a look
at what the trust actually says and what assets have
you funded to this trust?
Speaker 4 (07:44):
Okay, one more quick on in the last few seconds here,
what about nursing homes. What if it's not a case
where we're trying to impoverish to get to medicaid stage.
Speaker 2 (07:52):
If we're not trying to impoverish a person to get
to a medicaid stage, there's really no benefit for an
irrevocable trust for medicaid purposes. There could be a benefit
for ir vocal trust for tax planning if their estate
is valued over thirteen point nine million, for example, but
if it's for if we're just if we're not looking
(08:13):
at those two issues or any kind of asset protection,
an air vocal trust, in my experience, just as in
providing that benefit.
Speaker 1 (08:22):
A lot of good things to think about and consider
as we review our estate plan, and I think the
key point is is review it at a minimum.
Speaker 3 (08:30):
Of every three to five years.
Speaker 1 (08:31):
Great stuff from Dan Perry Our, a state planning expert
with the law firm of Wood and Lamping. You're listening
to Simply Money, presented by all Worth Financial on fifty
five KRC, the talk station
You're listening to Simply Money, presented by Alworth Financial. I'm
Bob's funseller along with Brian James, joined tonight by our
estate planning expert, Dan Perry from the law firm of
Wooden Lamping. Dan, first of all, thanks for making time
for us today, and I know you want to talk
today about estate planning, the importance of having one, and
then maybe even debunking some of the more common myths
(00:28):
out there when it comes to estate planning.
Speaker 2 (00:31):
Yeah, that's right again, thanks for having me, happy to
be here. You know what I say is estate planning
is just real simply is about making a plan for
what happens to your property, whether that's you know, your money,
your home, your car, even your pets after you pass
away or if you can't make decisions for yourself. It's
(00:51):
not just the wealthy, and it's really for everyone over
the age of eighteen who wants to protect their family
and ensure their wishes are followed. And I like to
think of a state planning encompassing four key pieces, the
first being a last will and testament, and that's just
a document that says who gets your assets and who
takes care of your kids? If they happen to be
(01:13):
minors at the time of your death, and without a will,
a court is going to decide, which can of course
lead to delays and disputes. Another key piece is a trust,
and I like to explain trust as containers that hold
your assets and are managed by someone you choose to
avoid a court process called probate. Trust can also save
(01:35):
on taxes or protect money for your kids. A third
key piece would be a power of attorney and that
names someone to handle your finances if you're incapacitated, such
as after an accident, for example. And a final key
piece would be a healthcare directive, and that says who
makes medical decisions for you and what care you want
(01:58):
if you can't speak for yourself, such as if you're
in a coma.
Speaker 3 (02:01):
And thanks for breaking it down like that.
Speaker 4 (02:02):
That Really, this topic can get overwhelming, and Bob and
I are of course not attorneys, so we don't draft
documents or anything like that, but as certify financial planners,
these topics come up all the time and we help
people understand exactly how to arrange it. I want to
drill into one comment you made about trust, because I
think every other day I have this conversation with people
who had a trust written up, and it would makes
(02:24):
logical sense. I have a trust, I paid money for
it to exist. I should now name it as the
beneficiary of everything or the owner of everything, and.
Speaker 3 (02:31):
So that the objectives of the trust to be carried out.
Speaker 4 (02:34):
Where this comes up as an issue sometimes is when
we kind of knee jerk name the trust as the
beneficiary of iras or four oh one k's tax advantage money.
And that can sometimes make a mess in terms of denying,
in worst case scenario, denying beneficiaries their right to spread
that tax impact of liquidating that pre tax IRA or
four O one K over ten years. How do you
(02:56):
address that? How can we safely make sure a trust
can and serve its purpose as well as protect that benefit.
Speaker 2 (03:03):
Sure absolutely so, as you may know, as you probably
know that you know, the tax law has changed significantly
in this regard a few years ago, and a spouse
named as a beneficiary in IRA has the ability to
stretch that benefit out over their lifetime upon them reaching
age seventy two, but a non spouse beneficiary doesn't have
(03:28):
that right. And when a lot of clients want to
name their trust as a beneficiary, And the problem with
that is if it doesn't have special language in the
trust documentself, what we lawyers call it as see through language.
If it's not seen through the trust agreement to the
specific name beneficiaries, it can create a situation where the
(03:51):
non spouse beneficiary such as an adult child, can't withdraw
that benefit over a ten year period, and it can
create a much larger tax bull event when they inherit
that account.
Speaker 3 (04:03):
So see through is the keyword. I appreciate that.
Speaker 4 (04:05):
Is there a way obviously, you know, somebody who's concerned
about this should check with the attorney who drafted the document.
But is there a are they literally looking for the
word ce through in the document or is there a
special section where where is this language hidden?
Speaker 2 (04:17):
Usually so, the language is usually hidden in a article
or a paragraph that describes that says retirement accounts, and
the language is going to usually reference a section of
the Internal Revenue Code on how the trustee is going
to view these retirement benefits. So, if you're listening this
(04:39):
and wondering if there's c through language in your trust,
try to find a section titled retirement accounts and it
almost always will have the see through language and will
say see through to the individual beneficiaries something along those lines.
Speaker 1 (04:55):
Hey, Dan, I know you see all kinds of situations
come past your desk, you know, as part of your practice.
I know probably most of the listeners out there are
thinking of themselves, Hey, I've got some kind of a
state plan in some way, shape or form.
Speaker 3 (05:08):
I got this covered.
Speaker 1 (05:09):
What are some of the things their situations you come
across every day in your practice. Some of the land
minds out there that people might not be aware of,
you know, due to the fact that they just didn't
cross all the t's and dot all the ey's, you know,
in terms of actually implementing a good estate planning strategy.
Speaker 2 (05:27):
So the one I see the most is people that
believe that they're done when they complete their plan, because
you know, as we all know, life changes. You know,
there's marriage, perhaps divorce, kids, starting a new business, and
your plan needs to keep up with those changes, you know.
For example, I had a client who wrote a will
in his thirties and he named his wife as a
(05:49):
beneficiary of that will, and after their divorce, he never
updated it. However, in Ohio, divorce operates as what's called
a revocation of any provision going to the X Y.
But it can also create a situation of ambiguity in
the will on who is to receive the property that
was to go to the wife when they were married,
(06:11):
and that can create some problems.
Speaker 4 (06:13):
So that would send it back through probate, then, wouldn't
it wouldn't that result in them saying there's no beneficiary.
Speaker 2 (06:18):
Therefore it would either get it would either go back
to there's no beneficiary or this falls through what's called
the residuary cause of the will. But again that's ambiguity
that a court has to has to weigh out.
Speaker 4 (06:31):
Hey, one more question that comes up very frequently. A
lot of times we have we have clients come in,
they bring, you know, there, they bring their their stack
of papers and statements and trust documents, and they'll kind
of casually throw out while we set up this trust,
you know, because it's going to protect us in the
event of long term care needs or if we ever
need to be on Medicaid or something like that.
Speaker 3 (06:48):
That's almost like the just just.
Speaker 4 (06:50):
Thrown out there, and I know it is not that
not nearly that simple, if it's even possible at all,
Can you weigh in a little bit on how a
trust and whether a trust can truly protect in the
situation like.
Speaker 2 (06:59):
That, So trust can be designed to protect for medicaid
Medicaid planning purposes. In general, those trusts have to be
what's called irrevocable trusts, and the person who set up
the trust, such as a set lore is what they're called,
cannot act as the trustee of that trust. And more importantly,
(07:23):
for trust to really protect for medicaid planning purposes, the
trust has to be funded with the person's assets at
least five years prior to applying for Medicaid. So I
hear that a lot from clients as well, and it's
I always say, well, slow down, let's take a look
at what the trust actually says and what assets have
you funded to this trust?
Speaker 4 (07:44):
Okay, one more quick on in the last few seconds here,
what about nursing homes. What if it's not a case
where we're trying to impoverish to get to medicaid stage.
Speaker 2 (07:52):
If we're not trying to impoverish a person to get
to a medicaid stage, there's really no benefit for an
irrevocable trust for medicaid purposes. There could be a benefit
for ir vocal trust for tax planning if their estate
is valued over thirteen point nine million, for example, but
if it's for if we're just if we're not looking
(08:13):
at those two issues or any kind of asset protection,
an air vocal trust, in my experience, just as in
providing that benefit.
Speaker 1 (08:22):
A lot of good things to think about and consider
as we review our estate plan, and I think the
key point is is review it at a minimum.
Speaker 3 (08:30):
Of every three to five years.
Speaker 1 (08:31):
Great stuff from Dan Perry Our, a state planning expert
with the law firm of Wood and Lamping. You're listening
to Simply Money, presented by all Worth Financial on fifty
five KRC, the talk station
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