Hey, everybody. It’s Tony from Gasima again. How are you? We are so excited to announce another segment in the series of podcasts to try to educate people on personal finance and why it’s so important to do certain blocking and tackling in your financial life. My guest today is Joe Lento from Perennial Estate Planning. Couldn’t be more grateful, Joe, for you joining us today. Thank you. Happy to be here. Oh, and I’m terrible at this, but let’s make no mistake. We want to say up front, for full disclosure, Joe and I aren’t partnered in any economic way. We don’t get paid on client referrals or anything like that. It’s purely for the help of our mutual clients that we’ve struck up this partnership. So make no mistake, this is unbiased as possible, independent results that you would get from talking to either one of us if we were to help you in any of your client needs. Just had to say that up front as a disclosure, Joe. So we’re going to jump right into it is what I usually do.
And Joe, if you’ve seen some of my segments in the past, I usually say we rip up the script. I didn’t even start the script yet, so maybe I shouldn’t say that quite yet, but I do love saying that. First and foremost, I love people to get a little sense of who you are, how you jumped into this. Hopefully, everybody, you all stayed with us for the 30 minutes. No offense to Joe, my partner here, but how did you get into something like estate planning, Joe? It’s not exactly a topic that rolls off the tongue. Yeah, so believe it or not, I was actually supposed to be a CPA, so I went undergrad in Northeastern in Boston, and they have a co-op program, so you go to ask for the big four. Right. Back-to-back co-ops. The second one around, I was like, you know what, busy season really isn’t for me. And actually, at the same time, my dad was doing his estate planning. He said, Joe, why don’t you meet with my estate planning attorney? Her name’s Lisa Rico. He’s a fantastic attorney up here. She actually writes a lot of the books on estate planning in Massachusetts. And she was a great mentor to me.
She walked me through it and I was like, you know what? If I do this, I can start my own practice right out of law school. And that’s exactly what I did. Got it. So that is an interesting thing to immediately dive into. You went right to being an entrepreneur as an attorney as opposed to going to some bigger firm and training at the knee of some storied guy in your field. How does that feel or how did you think about either path? Yeah, well, the first year was definitely not fun. And I did go back and forth on it. So once again, being in Northeastern for undergrad and law school, you get to work as you’re learning. So I got to work with three different attorneys and kind of learn their process and how estate planning works while I was in school. So when I came out of it, it was kind of like I already knew what I needed to know from at least the initial standpoint. And then the rest, you kind of learn as you go. You talk to other attorneys.
It’s a very helpful community here in Massachusetts and New Hampshire. So if you need help with something or learning something, there’s always another attorney there that kind of takes care of it, especially filling the gaps when you’re just, you know, going through the motions. Look, the topic for today and why I’d ask you, Anjo, is as we start to go through with people working on their investment needs, I started out as an institutional guy, both on the sell side and buy side of the investment world, and now we’re starting to work kind of hands-on, all-in with a lot of individuals, and it’s increasingly complex, even just for somebody who has two W-2s, a dual-income family, two kids, people that are planning on retiring. It seems like the topic of, should I have a will?
What’s this thing called a trust? Or just the words estate planning seem like a different language to people, and as we start to work with families, it just is becoming a topic that comes up and up and up, and that’s why I asked you to come on today, because I thought maybe at least give us the basics on the 101 of why should this be a topic? Why are people asking me about estate planning? What’s your take on that? It’s a great point and there’s so much confusion on it because it’s kind of the financial world too in the investment world. When you go on Google, you hear all this contradictory talk of, what is a trust? What is a will? What do I need for my family? A lot of clients start out with a pretty basic estate plan or basic estate needs, and then they kind of level up. But just to kind of clarify it for people listening in, most clients, at least in Massachusetts and New Hampshire, they really have four documents in an estate plan, right? You have your basic or vocal living trust, your healthcare proxies, financial power of attorneys, and then something called a pour over will, which really is just a safety net for the trust. And usually when you start with that, those four documents as the beginning of the conversation, you pretty much just pick away at what are the important roles in each document. And that’s usually how we start the process and start to learn really where the clients, because once again, coming into it, some clients, maybe they did a really old estate plan way back in the day with the basic will, and other clients, it’s brand new to it. So I kind of have to gauge the client’s understanding.
Well, I was just gonna interrupt you right there and say, we might already be getting over our skis and assuming that people know, why do you need a will? Why would you even need a trust? I’m finding a lot with people that just the education on the power and the use of these legal tools for their personal circumstances. Maybe you could speak specifically on that. The three key benefits really are, how do I avoid probate court, right? That’s number one. And what is probate court and why is that? Yeah, this is why I love having you here, because I assume these things, but you’re wrong. So pretty much the way it works is to go way back to the very foundation. If you die without anything, the state determines what happens. And most people don’t like that. They don’t want the government time.
What’s going to happen with their stuff, their property, their family? So really, if you just look at the very basics, the will just says, look it, when I pass away, this is how I want things to go. Okay, but the downside of the will and the reason why trust is becoming so popular now and virtually everyone’s getting numb, because the will goes through probate court. So in other words, if you don’t want the court having any involvement, even just to follow your instructions and cause delay, you get a trust and that allows you to do private wealth transfer. That allows you to stay completely out of the government process for the most part. And so that’s kind of the difference between the two and that’s the reason why so many clients are concerned about getting their documents done, because they just want things in place. They want to make this as easy as possible for their family and also, depending on where you’re at, where you’re living, you also want to avoid taxes or at least minimize them, but that’s also a big part of the process. And look again, shameless plug, if you will or not, that’s kind of why I have partnered with Joe because most of my clients are based in Massachusetts and the arcaneity of the law, state by state, believe me everybody, I just did it for my family as well, you have to deal with somebody who is an expert in that particular state’s estate planning laws.
It’s just crucial, right? And then the third point I briefly touched upon, protecting your children’s inheritance. A lot of clients overlook this, but pretty much the way it works is, if you have minor children, they can’t just receive the property outright, so you need something in writing saying what happens to it, who manages it for their benefit. But also, even if they’re older, and Joan, I think we talked about this briefly, with our other mutual clients we’ve been working on, how do you set this up in a way where, if my client inherits, or sorry, your children inherit the property, how do you make sure that if they get divorced, something happens to them, it doesn’t go to the daughter-in-law, son-in-law, or goes to the creditor? How do you do that? And that’s something we can do with the proper estate planning.
You know, that is actually a great point, and that has come up with some of our mutual clients. It just so crucial if you’re looking to, let’s just step back, if you have done well and you’ve created a plan and saved and invested, you now start to transition to what I call it’s the life cycle of investing, of not accumulating that wealth or figuring out how to spend it, but how do you pass it on, what you want to do with it. You work so hard, the last, everybody thinks you want to avoid taxes, that’s the kind of number one when people talk to you about this stuff, but really there’s a generational effect that can take place with the use of some of these legal tools, right? Yeah, and actually, you kind of touched on another great point of this is the reason why I love working with you, because now they have the investment and the tax piece combined, like a full suite.
A big part of this is when we’re gone, how do we make sure we have the right values in place for our kids to make sure that everything is in compliance? Because believe me, your kids don’t want to deal with it, you’re surviving spouses want to deal with it, and if you don’t do it right you might blow up the whole plan. So having that continuity in place with your advisors, having the investment and the tax one piece, and obviously them working with someone they can know and trust from the estate planning standpoint, that’s kind of the make or break for the proper estate plan. Well thanks Joe, that that is an expertise we have and we’re happy to help in any way for anybody who needs that. You know what I also think is important to what I’ve learned in this process and maybe you can educate us a little bit on is the type of trust you may want to pick for the result you’re trying to achieve. Did you speak to that a little bit? Once again I can only speak to Massachusetts and New Hampshire, I’m only licensed in these two states. Pretty much how it works is there are two types of trust, very broadly speaking.
There are revocable trust, meaning the creator of the trust is still in full control over it, they can change at any point in time. Then there are irrevocable trusts, okay? And you really only go towards the irrevocable, the ones you can’t change, if you’re in a situation where you want to protect a certain asset, and you’re okay giving up certain rights to those assets, okay? But with all that being said, most clients, at least when they first work with me, they start in the revocable trust realm. They start in the realm where they’re still in full control, and then between the two of them, if they’re married, they have to decide, do we want to do a joint trust, or do we do a split trust, either for what I call pre-marriage risk protection, and also for tax protection on those trusts?
You know, actually, that’s a great point, is you can start in one form of trust, and then you’re gonna start to realize, once you get any type of education on this, that there’s multiple ways to do this, and one is not perfect, and nor do you have to tear up the one that you did previously. Exactly, yeah, and I try to make this a big thing with my clients. Like, when we’re first meeting, especially the wealthier clients, less do I call it your base, your foundation, as they plant first.
And then we’ll add on the layers, as you get more familiar with it, you can have things marinate. Because I don’t know, Tronic, if you see this a lot, but in my practice, you see so many times trusting unwound, because they were put together too hastily, and especially the irrevocables, and now it’s actually causing other problems, other friction in their lifestyle. And that’s a big thing to kind of consider. What kind of problems come up? So for one, I mean, the biggest one, I actually see this too, I’ve been seeing a lot more of. So the first thing is this thing called a Q part, which is a Qualified Personal Residence Trust. So a lot of clients, what they’ll do is, they’ll transfer their home or secondary property to kind of save on estate taxes to a certain trust. But down the road, just because the way it restricts the access or how it works, they lose a step of cost basis. Right, right, right. They decide, you know what, that was a bad idea. I should have never done that. That’s one thing. The other big one, that I actually see even more common for virtually all clients of all asset sizes, is an irrevocable trust set up for nursing home protection. So once again, I don’t know Tony, do you see this a lot or you want to?
Well, yeah. You know what? This is interesting because I was going to say that for the speed round. This is where I can tear up the script. Talk about that. Elder care, irrevocable trust for senior living. Go ahead. Go ahead. Yeah. So pretty much the way it works is to bring people up to speed. The way it works is if you’re concerned about nursing home care or nursing homes essentially spending down all your money, leaving nothing to your kids, or you’re concerned with them placing a lien on your estate after you’re gone, what some clients do is they create an irrevocable trust. I’m not going to bore you with the details. Just know that you create this separate bucket. You give the property into that bucket. You no longer can access it ever again during the rest of your life for the most part. And then what happens is when you pass away or after five years have passed and you go to a nursing home, you don’t have to worry about the state taking the property. Got it? So the reason why you have so many people having issues with this is because they place the property in the trust and they don’t really from a retirement planning standpoint they’re not working with you Tony or whoever’s working on their retirement planning.
They don’t realize they need the equity in that home to fund their retirement or whatever else they might need in the future but now it’s locked up so that’s the biggest problem I see with irrevocables from my standpoint. Well you know what that is something that comes up where people number one they want all of their assets close to their chest they want control of their situations but they also you know death and taxes right they don’t want to have to pay for certain things down the road if god forbid they have to go to some type of care so that is a consideration for people but at the end of the day you certainly don’t want I just like to stress to people anybody taking control of your assets without or against your wishes and that’s truly the point that you have to make when you’re working with irrevocable trusts. Yeah and I am personally I’m like a troll freak I tell it to all my clients when I first meet with them.
It’s like, look it, I am so biased. I know I’m your attorney, I’ll do whatever you tell me to do, but I am so biased towards you to keep control because no one has the crystal ball, right? And you can work with your investment advisor like Tony to do the Monte Carlo simulations and all that fun stuff. So that gives you some certainty there. But from my standpoint, the legal side of things, we really don’t know how things are gonna go. So please tread lightly when you’re coming up with these plans or at least making these decisions. All right, good. So that is a good segue to the speed round actually. Is we did a little bit of your local trust elder care. That’s a little bit of the advanced course. That’s great. But let’s run down the list. And I already pre-baked some of these questions for you. How about a friend of mine who has seven K1s from different LP stakes in different real estate partnerships? Should he use a trust or is that just a waste of his money? Absolutely. And so, and once again, this is kind of this idea of how do you make things easier for your family?
Just imagine that’s held in your name individually, and you pass away. How is your estate administrator, your trustee, I mean you wouldn’t even have a trustee at that point, how are they going to figure out how to unwind this or get your assets or whatever distributions you are owed from those LLCs into your name to your kids. I mean it would just be a nightmare from a paperwork standpoint. So absolutely consolidate those. Once again you don’t need something complex. Just say the trust owns it all so that way if you’re gone, you’re incapacitated, your trustee can step into your shoes immediately. There’s no corn involved. Okay. Snowbirds, how about that? Or about to embark on the new adventure, can I drop the mic and retire? Close to home. New Hampshire, Massachusetts, they want to make six months and a day down here or not. They run a tire down the Cape. What’s that look like? Redomiciling? They own a primary residence up in the frozen north. What are you telling people to do?
Depends on their wishes, but generally, what are people doing? Yeah, and it’s kind of the same idea, this idea of multi-jurisdictional living, right? So every state has their own slaws, every state has their own probate process. So once again, if you can consolidate those, especially being in Florida, New Hampshire, there’s no estate tax, you should do that as soon as possible. You should also be aware too is, when you’re moving to, like a lot of my clients do move to Florida, because you know, why not? So they, I’m Irish, exactly, right? So, then they don’t realize is, if you, just one example, if you move to Florida, right? And you’ve proven you’ve redomiciled there, Florida is now my home. Massachusetts is no longer my home. I’ve proven it, I went through the whole checklist with Tony’s, her advisors, we know it’s right. If you still have real estate in Massachusetts that’s not titled the right way, you can still pay an estate tax in Massachusetts, even though you’re not domiciled there anymore. So it’s stuff like that people do not realize until they work with the right advisors.
And I know I’m coming off like I’m blown away, but I know that cold and it’s just this thing of people wanting to hold on to things or control. We talked about that before. I tell people, look, that’s what Airbnb is for. Just being honest. Just being honest. Yeah. I love the home you grew up in. I’m a Sox fan, the whole thing. But gee whiz, guys. There’s something called making sure that you set things up the right way because that’s what you want to happen down the road when you’ve gone. So how about more speed rounds? Special needs, something near and dear to my heart. People in your life, whether elderly or young, use of trust. Give us the 101. Yeah. So a special needs trust.
And you’ll sometimes hear this, this can be called the supplemental needs trust in some scenarios, but same concept. Pretty much the way it works is there’s two categories. There’s, you know, first party, meaning that the person who’s transferring the asset has these special needs or disability. And then there’s what’s called third party, meaning someone else creating the trust for their benefit. So like a parent, a grandparent, whoever it might be. And basically the way these trusts work is if they’re set up properly and funded properly, it would allow the person receiving government benefits to still qualify, but also still be benefiting or supplemented from that trust. So that’s kind of the broad framework of how they work. Naturally, the person receiving the benefits should not be the trustee of this trust. It should be maybe a sibling or another close trusted person. But that’s kind of how they work and how they shield your assets. And again, another shameless plug for myself is I have personal experience in this, everybody. And Joe is absolutely correct.
To protect certain governmental benefits, but remember, they’re peanuts at the end of the day. No one is making a ton of money by living off of Social Security benefits. You have to get the right plan in place in order to save property for your loved ones. And you used some verbs in there that I love also, Joe, is funding the trust. Just because you do the legal work, you actually have to accumulate the assets and invest them and do something with them in order for these trusts to work for your benefit. Right, Joe? Yeah. And the other thing that’s really important with these trusts, so because they’re set up in a way where the assets are inside of it and they’re generally taxed at the trust level, your advisor needs to have both the tax and the investment expertise to know how to allocate them in a way where you’re not going to get killed in taxes.
Because I’m kind of out of scope here, I’ll let Tony or his tax person talk with some more, but pretty much trusts have compressed tax rates. So I think around like $15,000 or something, if you’re over that threshold, you’re the highest tax rate compared to an individual or a married person. Just keep that in mind you’re doing these troughs, you really need your tax person, your investment person to work together, ideally in the same place as possible, because you want to make sure that you’re not going to cause other unintended consequences from a tax standpoint when you set them up.
Yeah, yeah, good point, good point. Maybe last part of the speed round, or just the punchline is, doesn’t everybody need, and look, we’re biased because we’re in the business, but doesn’t everybody need a plan? Doesn’t everybody need an estate plan? It’s not just like we were maybe, and that’s a big maybe taught years ago, oh, you need a will when you get married, or you got to buy some life insurance. The world’s just gotten more complex. Everybody needs to get an estate plan. I mean, and you don’t have to be wealthy to have one either. Yeah, I mean, the will hunting is probably the most common misconception, especially with troughs in particular, because really, it’s just the will making things easier for your family. That’s how I look at it, and that’s kind of my biggest push for is, do you want to make it so when you pass away, they can just do what, not only just what you want them to, but also in a way that’s not causing them all this undue burden, because who wants to leave that to a family member? It seems kind of, it just doesn’t seem right to me.
So that’s kind of my biggest push for it. Whether you’re wealthy or not, if you own something, or you want to give something to someone after you’re gone, put it in writing, and that’s really what it comes down to. I think that’s the brass tacks. That’s it, Joe. Look, know the basics, get the facts, call Joe or I, we’re happy to help. Just so grateful you came on today, Joe, and gave us some words of wisdom, man. Thanks for being with us, okay? So look, you hear it here first. Joe, cannot thank you enough for coming on. If you need help with state planning, anything, even just the education and why it’s just so important, get in touch with Joe Lento from Perennial Estate Planning. He’s at, as easy as that, www.perennialestateplanning.com, or call me, Tony, Gasima Global, www.gasimaglobal.com and check out all our socials.