Updated: Jul 29
Planning for the “what ifs” of life can bring on a flood of emotions, but as real estate business owners we must put our emotions aside and get it done to protect our family and our business. Let’s take some time out now to get a contingency plan in place so we no longer have to worry about “what if.”
In this episode of Agent Exit, Renee Williams is joined by attorney Ariel G. Siner of Hoge, Fenton, Jones & Appel’s Estates and Trusts Group. Ariel assists clients with drafting complex estate plans to achieve their business succession and wealth management goals. Ariel discusses the importance of estate planning and how it can impact not only your business but your family as well. With a few simple documents, preparing for the future might be easier than you think. Tune in and get advice from an expert!
**** Episode Website****
**** Need hands-on consulting for your real estate business?
Schedule a "No obligation, No judgement, No fear" Strategy Session at http://www.Realbie.com
**** Follow and Subscribe ****
The Power Of Estate Planning For REALTORS® With Ariel Siner
Have you ever given any thought to what might happen to your business should you no longer be able to lead your business or be the head of your business? What about your plan after you exit? What's the plan for who's going to take over the business? What documents need to be in place in order for that to happen? Finally, what happens when we die? Nobody wants to think about that but inevitably, we have a business that is going to be left to someone. Don't we want to have control over that? If we do then we probably need to get some estate planning in place as soon as possible for the future. We do it now. We use it in the future. That's what we're talking about.
We have a great guest with us who's going to talk all about estate planning. Her name is Ariel G. Siner. She is an attorney for the Estates and Trusts Group at Hoge Fenton in California. She drafts complex estate plans and trust works with clients to achieve their charitable business succession and wealth management goals. She's doing a lot. She also works extensively on litigation matters, dealing in and out of court with trust and estate-related disputes. Why are we having her on? We are talking to Ariel about your estate planning and the most important things that you need to have for your estate. As we own these businesses and we consider transitioning, there are so many important documents that we need to have in place that are super important for our family, ourselves, those who are going to succeed us in the case eventually if we pass or heaven forbid we have an accident of some sort and we are incapacitated. All of those things need to be considered. I know it's hard to talk about but we have to have the conversation even if we don't want to. As business owners and professionals, we have to think about that first before we think about the emotion of doing it. Let's take off our emotional hats. We're going to put on our business hats and get down to business with Ariel G. Siner to talk about estate planning.
Thanks for coming on the show, Ariel.
It is my pleasure, Renee. Thank you so much.
Let me give a little bit of a backstory so people know how I found you. Let's tell everybody how I hunted you down. I started the journey looking for realtor retirement resources for myself like, “How am I going to retire? What does that look like?” That led me to the Center for REALTOR Financial Wellness. It is a part of the NAR benefit that I have. Through them, they provide these wonderful webinars. Guess who was on the webinar in December 2020? It was Ariel. When I saw you on there, the information that you were providing about estate planning, I felt was like an a-ha moment for me because there was so much rich information that I either didn't know or hadn't thought about. I thought for our audience, real estate agents, real estate brokers, team leaders who are experienced who've been in the business for a long time and maybe even for some newbies who might be reading, I'd like for you to share a little bit about estate planning. Before we get into that, can you tell us about you? Let's then dive into your company a little bit.
No two estate plans are the same because no two clients are the same.
I'm Ariel Siner. I've been an attorney for years. I grew up in California around lawyers. My dad and grandfather were lawyers. It was never my plan to be a lawyer. It was always, "Ariel, don't do what I do just because I do it. Find something new to do." In my world, my dad and I are very close. I grew up asking him a lot of questions, being very curious about what his job was and the way that he's able to help people. He does some estate planning as well among many other things. Once I was in law school, I got interested in the idea of being able to help people in a very personal way. Estate planning is extremely personal. It's sometimes a little awkward for me to ask clients like, "It's very nice to meet you for the first time. Does your family get along? What are your assets like?" At the same time, it's different than a lot of my colleagues here at Hoge Fenton. We're a full-service civil law firm. We do almost everything. We don't do criminal or immigration. We do everything else.
What that means is I have colleagues down the hallway who are busy suing another company and protecting IP. It's very company-based. People's business is important to them but what's more important is your family and how you're going to provide for them when you're unable to manage things yourself. Having that personal connection with my clients is what I love to do. Estate planning is also very much not one size fits all. It's personal. There's a lot of variety in what I do. No two estate plans are the same because no two clients are the same. No two families are the same. That's why I do what I do. I've been doing that as well as the other side of estate planning which is estate litigation. When things go bad, the plan doesn't work, it wasn't set up properly, mom's passed away, brother and sister are fighting saying, "That's not what mom wanted. She wanted me to have this. You always got that." Seeing the fighting helps me on the planning side because I can see what can go wrong. That's another way of being able to help people. You're fighting with your uncle and that's a weird situation to be in so please let me help.
What you do is beautiful because it resolves issues. Family is so near and dear to our hearts. Many topics are hard to talk about. I'm hoping that this conversation with you will be a catalyst for many of our readers to start having these conversations even in small ways within their own businesses or family. Can you tell us what basic plan or documents should every realtor have in place whether they own the team, the business or even if they're solo agents? What should we all have in place? As we approach 50 or beyond, what should real estate agents have in place?
A typical estate plan is four documents. It's going to differ somewhat from state to state. I'm in California so I practice California Law and it is very California specific. The four documents that everybody should have are pretty across the board with some variation in all 50 states. The centerpiece of the estate plan is called The Revocable Living Trust. I call it the magic box. You put your assets in the magic box. It comes with an instruction manual. You hand the box to the next person and there you go. That's the plan. Everything important is in the trust. The way it works at least in California and it's mostly the same across the country is when a person passes away and their name is on the title to something like their house, bank accounts or anything, you need a court to change the title for the beneficiary or whoever's next who's going to take that piece of property. You need the court to make that order.
That's a process called probate. In California, it is an expensive and more time-consuming process than anything else. The fees for it are statutory. That means that there's a percentage that goes to the attorneys, executor and whoever's taking care of things regardless of what the property is, how easy it is to manage, there's a percentage that gets paid. The other problem in California that we have is it's based on the grossest state. If you have a house worth $1 million but you have a $900,000 mortgage on it, those fees are based on the $1 million, not on the equity of $100,000. We like to avoid probate. The way the trust avoids probate is through the magic box. You transfer your assets to the trustee who's the legal owner of the assets. When you are unable to manage things yourself, your successor trustee takes it on. There's a new person as a trustee but the office of trustee still owns those assets. That's why I say you pass the box to the next person so it avoids needing the court process which is very helpful for most people. It's also because court proceedings are public records. A trust administration is a lot more private and takes care of things in a much easier way.
The other benefit too is for larger estates and because the world is always changing there's no way of knowing what the largest state is. A trust is the way you minimize state taxes. The estate tax exemption is $11.7 million per person which means that for a whole lot of people, it's not going to be a problem but Congress is talking about lowering it to $3.5 million which everything you own at your death could be easily over $3.5 million. If you have real estate, stocks, bonds, that's a pretty easy number to hit especially if you own your own business. A trust is where we can use various methods to minimize what that tax is going to be at death. That's the first important one. Trust is the big centerpiece of everything. The other ones are the wills, power of attorney and advanced healthcare directive. Everybody's heard of a will. At a very bare minimum, you need to have a will because if you don't, you have what's called intestacy where the law decides where your property goes.
If you pass away and you have nothing, let's say you have 3 children and maybe 1 has made some bad choices in their life, is estranged, you don't want a third of your property going to that kid who hasn't spoken to you in several years. If you don't have anything that says otherwise, everybody gets everything. If you have any specific wishes for what you want to happen you can put it in the will. If you have a trust you put it in the trust. In California, if you have minor children, you name your guardians for those children in your will. That's an important one and making sure that your kids are taken care of by the people that you want to take care of them if you're not able to raise them yourself. These are a lot of hard things to think about but it's going to be the flip point of if you don't have it planned, it is what it is. That's why it's important. The will makes sure that everything that isn't in the trust at your death goes to the trust so everything's distributed the same way.
Something is better than nothing. If you’re going to do something, you should do it right.
The power of attorney is a document that's used during your lifetime. If there's any reason that you're unable to manage your affairs especially as people get older, any issues with Alzheimer's, dementia, things like that or even physical infirmities can be hard to balance your checkbook when you're 95. It’s basic stuff like that. A power of attorney allows a person to sign your name on your behalf. If you're incapacitated, unable to manage things, it lets your brother, son, daughter, cousin, whoever you trust to take care of things. It gives them all the powers under the law to be able to do that for you. If you don't have one of those, we go back to court and we have a court-supervised conservatorship which as with probate it tends to be costly. It's public and time-consuming. It saves everybody a lot of headaches if you have the proper documents in place.
The last of the four is the advanced health care directive. That's essentially a power of attorney for your health care. During the pandemic, it's been an important topic of conversation. It is where you name your agent for healthcare. If the hospital can't communicate with you, who do they get consent from? Who do they have access to your medical records to have that information? Things like end-of-life choices. Under what circumstances do you want someone to pull the plug? Do you want to be an organ donor? Do you want to be cremated or buried? These are all things that you can put in an advanced health care directive so that when the time comes, someone at least knows what you want. They're not having to make that decision for you because that's a difficult position to put your loved ones in. That's your estate plan. You have a trust, will, power of attorney and advanced health care directive.
I have two questions. The first question is about the trust and the will. If I have a will, do I still need to have the trust?
Yes. The will still needs to be probated. Having a will allows you to determine who gets what but to make that happen you still have to go to court. To avoid that court probate process, you need to have a trust. The will is very important because not everything you would transfer to the trust at that time. Anything that's lingering out there in your name and noninterest name, the will says, “Put it in the trust.” You don't want things hanging out in the ether and saying, "What do we do with this one account that mom forgot about 30 years ago?" It's an important one.
My husband and I do have a trust. I also like it because if either of us is incapacitated. The will only kicks in if we die. If we don't die but we're not able to make decisions or if he's incapacitated, he can't sign anything. It's helpful to have that trust in place because now I can make decisions without him having to then sign everything. He can't. He's physically not able to. Unfortunately for us, we've had family members who have become incapacitated due to a car accident, a stroke or some other disabling type of event that nobody would have thought about this type of catastrophe and yet the person still lived. They had a will but it doesn't help to have a will.
The trust works for that circumstance as well as that durable power of attorney that allows your family to help take care of you. I had a client come in. She and her husband were in the hospital for an extended period of time. Her husband has dementia and can no longer live at home. She had surgery. She was out of it for three weeks. Her son was trying to take care of things. The only person that was named in her power of attorney was her husband who couldn't manage things for her. They had a lot of difficulty during that time. As soon as she was able to, she gave me a call and has a new power of attorney drawn up so that her son could be able to take care of things when she wasn't able to.
While we're on this same subject, do these things apply to my business? I'm an entrepreneur. I'm the sole owner of the business. Do I need to have these same documents in place for my business? Does the personal document cover the business entity as well?
It depends on how the business is held. If it's a sole proprietorship, the durable power of attorney will work for that. If you're the manager of an LLC, it may work for that. It depends on the state on whether or not that will work. Typically, an entity interest like a corporation, LLC or a partnership, the ownership interest would be transferred to your trust. It would be a trust asset. Most of the time in that circumstance, the trustee then can make those decisions for the business.
What if I'm not wealthy? I'm not rich. I'm an agent. I have a small team. That's just me and a couple of administrators. Let's assume I'm making net of $150,000 a year. This sounds like it's for rich people. Is this for me?
Yes. The more complicated tax planning stuff is for people in the 7, 8, 9 figures and above. The whole thing of, "Do you want your family to have to go to court when you pass away? Do you want to make sure that, ‘I have this certain asset on my business or something like it that maybe my daughter has been helping me with for years and I want that specifically to go to her.’” Do you have specific wishes at all about anything? You're going to need an estate plan because otherwise, the law will say, “What happens to what?” You don't have any control over it. One of the benefits is called the American System. It's very different in almost every other country. In the United States, 100% of what you own, you can decide where it goes. You can say that it all goes to one child and not to any of the others. You can say that 100% is going to go to the SPCA and help the animals. They may be fighting about it but it is your right to do. If you have any preferences at all then an estate plan is how you make that happen.
My second question was about video. Can I videotape any of these and have them be legally binding? In a room, let's say we're at Thanksgiving and we're all at the table. We pull out a video phone and say, "I want to talk about what I want to do with my business." Is that legally binding if it's just a conversation?
No. It can be very helpful in terms of intent. The law moves slowly, unfortunately. A lot of these things do have to be written. I'm not sure if it's in all states but at least still in California, everything has to be wet signed. You can't DocuSign your will. Everything has to be in writing and done properly but there's a lot of things that can be open to interpretation. For example for your business, if you say, "I want it to go to this person to continue running it. I want everything sold." Some of those details are things that could be open to interpretation, something like a video, a conversation at Thanksgiving with your family.
I always think it's better to communicate and have everybody understand what the plan is because that's how you reduce the fighting later on. Almost without exception, the cases I see in litigation where brothers and sisters are fighting because one of them was not in mom's life, didn't know what was going on. The son who was taking care of mom knew this is what mom wants but mom never told his sister. That's what the fighting ends up happening. If everybody knows what you want then everybody has the time to accept it and keep the peace which is good. Even though it's not legally binding, having those conversations or records of that somewhere is not going to be a bad idea.
Is it important to plan for different scenarios? How does that work?
One of the biggest things that we're seeing increasingly is blended families. In a second marriage, you have your kids. Your husband has his kids. Maybe you have joint kids or you don't. There are ways to structure a trust. Typically, a married couple would have a joint trust together. In California, we have community property. Everything earned during the marriage is owned equally by both spouses. It's not like that in every state but in community property states especially where everybody owns everything together. If you come into the marriage later in life maybe, you may have pretty significant assets you had before it that are your separate property. There are ways we can structure the trust so that at the first debt we have what I like to call His Hers Split. The deceased spouse's property goes into an irrevocable trust which means that those assets are available for the surviving spouse. If you need help covering the cost of medical bills or paying your mortgage, it's not like in a lockbox but the surviving spouse can't change what happens to it.
Communicating your plan to everybody and making them understand is how you reduce the fights later on.
That ensures that if the husband passes away first and he has three kids from a prior marriage, his property is going to benefit his three kids. His surviving spouse can then use her property to do whatever she wants and benefit her two kids. It ensures that evil stepmom can't take everything away. That's one of the most important things in different family scenarios. You have the flexibility to whatever exactly what you want to happen. We can make it happen for you as detailed and as specific as you want. I did a trust for someone whose son, unfortunately, has a drug problem and they don't want to cut him out. They want to be able to help him but he can't be trusted inheriting $2 million. We set up an ongoing trust for him so that a trustee is going to manage that money and pay his rent for him. Not just hand him the check and hope that he pays his rent, to be able to use that money to care for him and to make sure that he lives as good of a life as possible without giving him too much control and wouldn't be detrimental to him. Taking those specific circumstances that are so unique to every family situation, the plan can cover that.
I always take it back to owning a real estate business because that's the crux of who we're talking to. This can be put in place for your business as well. You can put these plans in place for the business for family members, succession planning, people who are already maybe working in the business. If you want someone to succeed with you within the business, can you put all of those things in writing? Is it separate from your personal?
It's going to be intertwined. A lot of the things with the business, you may have a buy-sell agreement or something in the operating agreement of an LLC that's going to cover some of that business succession but typically the ownership interest in that business is going to be part of your estate plan. Whatever you do on the business side is going to be very closely connected to the personal side. As we know, a lot of people own their own businesses, managing it themselves. That line between personal and business can be very blurred.
It's the same thing with the legal side of things. Planning the succession of your business is going to be very closely tied to planning for the succession of your personal assets as well. The other thing to think of too is my job has a lot of looking in the crystal ball, thinking what if, planning for the worst and hoping for the best. You could have all of the buy-sell agreements in place that you want in ten years' time have someone take over your business but God forbid, what if you get hit by a bus tomorrow? That time that you were anticipating having to train your success when things like that evaporate. That's where the estate plan comes in as a backstop to what would be done on that corporate side.
Help me in my thinking about the consequences of not planning. “Ariel, this all sounds great but I haven't put any of this stuff in place.” What would be the consequences for me for not planning?
I can take you through a hypothetical of, “What life looks like if you have no estate plan in place.” Let's say you, God forbid, get in a car accident. You go to the hospital. Who was your next kin? Are you an organ donor? Do you want to be kept on life support? Let's say your sister is the person that they call and she doesn't know. She's doing her best to guess what it is you want but then maybe you're in the hospital for three weeks and your bills need to be paid. Your accounts are being frozen because things aren't being taken care of. Your business is suffering because people don't know what they're supposed to be doing. No one has access to your bank accounts. They go to court and get a temporary conservatorship on an emergency basis. You have to go through the fees, paying for court filings, getting a conservator and someone who's going to be interviewed by the court to take care of all those things to make sure that everything's on the up and there's no fraud involved.
Then the dust settles, bills are being paid, things are being taken care of but maybe you don't survive and then you pass away. What happens to all of your stuff? The law is going to tell you what happens. If you have community property, that goes to your spouse.