Buzz Aldrin is in the middle of a battle with his family over the alleged misuse of his money. How could a revocable living trust have helped protect him? Learn about that this week.
Make It Last with Victor Medina is hosted by Victor J. Medina, an estate planning and Certified Elder Law Attorney (CELA®) and Certified Financial Planner™ professional (CFP). Through his law firm and independent registered investment advisory company, Victor provides 360º Wealth Protection Strategies for individuals in or nearing retirement.
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Victor Medina: Everybody, welcome back to Make It Last. I’m your host, Victor Medina. I’m so glad you could join us this Saturday morning. I am excited to share with you the information on today’s show.
Although, it’s linked to not a great fun topic, it’s actually important for you to get ahead of this. We’re going to learn a little bit more about the lessons that are being taught with Buzz Aldrin, his two children, and the craziness that’s happening over there. You’re going to listen to this show. You’re going to learn stuff from that so that you don’t get involved in the same scenario.
It’s related to trusts again and why trust‑based planning is so important. It gets me excited. Of course, that’s all I like to talk about as an estate planning attorney. Let’s talk about more and more trusts.
Before I get to that, I want to spend the first part of this show going over a couple of different things. The first is this is the last week for you to register for an upcoming seminar that we have on legal planning.
What we’re doing is we’re hosting a workshop at the College of New Jersey on July 18th. We’ve got two sessions. We’ve got a session at 12:30. We have a session at 5:30. They’re absolutely free.
What they’ll do is help you understand a little bit more about what essential core estate planning looks like. Specifically, how to make sure that you protect assets if you’re in a situation in which you might need long‑term care in the future.
If you’re somebody that is in retirement, nearing retirement, you want to make sure that your ducks are in a row. You want to make sure, if something were to happen to you, if you happen to be sick, if you need long‑term care, need to go into a nursing home, diagnosed with Alzheimer’s, something like that, that you have the proper planning in place.
This free workshop will help you do that. No obligation, no sales pressure, no nothing. Just education in the community. It is going to be at the College of New Jersey. It’s going to be at two times 12:30, 5:30 on July 18th. You do need to pre‑register. We have limited space in the rooms. We are starting to fill up. Only a few days left with this. I would like to see you there.
If you are interested in going, I need you to contact my law firm by sending an email to firstname.lastname@example.org or calling our number at 609‑818‑0068. Call the number and let us know that you’re interested in the seminar. Somebody on my team will make sure that you get there. Something you don’t want to miss.
We do them, I don’t know, every so often. I don’t want to say it’s once a month. I don’t have anything really on the calendar for August. This is something you want to take advantage in the low parts of the summer, get out of the summer heat, sit in a nice air‑conditioned college room, you can do that and learn about something important at the same time.
I promise you it is an educational and fun, interactive workshop. It is not just sitting and listening to a boring lawyer. You already know that or else you wouldn’t be listening to the show. I’m not a boring lawyer, that’s why I have a radio show or podcast. If you happen to listen to the podcast, or whatever the crazy kids are calling these shows these days.
The other topic I wanted to cover with you is the absolute death of the fiduciary rule but more importantly, the celebration by the insurance industry and the commission‑based advisors.
I was struck by this. I ended up getting an email from an organization that tries to get you to use their insurance products. Basically, it’s a sales pitch. They’re there with the skull and crossbones, with the parade in the streets because the fiduciary rule has died.
You people don’t understand this because you’re not in the industry. The people who work in financial services and are not fiduciaries or they’re looking to milk their clients for as much as is humanly possible, they are celebrating the death of this fiduciary rule.
Why do you think that is? Well, it’s because it allows them to continue to hide up, basically, make sure that they can sell you something that is theoretically OK but doesn’t work in your best interest. I see this all the time, specifically in the areas, let’s say, variable annuities.
I had a client come in where we were reviewing their financial picture. They had this variable annuity, and they had it with Thrivent Financial. If you don’t know anything about Thrivent, Thrivent is religiously‑affiliated to Lutheran Church.
There were a lot of Christian‑based people who do business with Thrivent thinking that they’re doing business with somebody that is credible, God‑like, is a God fearing organization. Therefore, they’re going to treat you the right way.
I am a big Christian. I go to church. I believe what I’m supposed to believe in that area, and I’m acting that way. I don’t think that having something that’s religiously affiliated is necessarily bad, but this organization was not doing well by their client.
They were not acting like a good Christian. When I looked through their account, what they had was this variable annuity that was invested entirely in a mutual money market. Basically, it was making a fixed amount. The fixed amount was one and a half percent and in today’s environment one and a half percent on a fixed amount with zero risk, that’s not bad.
You can’t get CDs with that much money and you already know they’re going to change the numbers. One and a half percent was great, but here’s the trick. It was wrapped in a variable annuity and when we read the contract private was taking 1.35 percent as an annual risk charge, a risk charge.
A charge that was there to help reduce the risk of the insurance company possibly losing money and having to pay out a death claim on money that was in a fixed account. Are you following me here? Essentially, this couple was only making 0.15 percent a year on their fixed account because of the embedded cost of the sales charge, risk charge, mortality expense charge, whatever you want to call it.
The contract was costing 1.35. Their guarantee was 0.05. They only made 0.15 percent annually on this money. That’s worse than what you can get out there. Of course, they didn’t know about it and they trusted that this was going on. I could tell you something. There’s no way that someone would’ve sold them that in an environment where they had to be a fiduciary.
If they had to be a fiduciary there is no way that that contract would’ve been sold to that client. Here I am. I am ranting once again. You’ve listened to another segment of me ranting about this fiduciary rule. The need for people to be working with a fiduciary because this is still information that you need to hear.
Maybe you are already working with our firm and you know that we work as fiduciaries and we’re held to a fiduciary standard, but I know you got friends that are not working with us and I know you know people. I don’t want them necessarily to come and work with us.
They may not be appropriate for us, we may not be appropriate for them, but I want you to share this information because they need to be working with somebody who is a fiduciary regardless of who that particular person is whether it’s me or somebody else.
They need to move away from that because this world that sells these commissionable products that are out there with free rein now, because this fiduciary rule is dead, dead, dead, are celebrating their opportunity to keep milking you for more money than they would otherwise be welcomed to get for not a lot of performance and here comes back my client with 0.15 percent.
I want you to be aware. I want you to be aware for your friends. I want you to share this episode again with them, share this show and show this concept because they need to know about it in order to help them protect themselves in the future.
Victor: When we come back I’m going to talk to you little bit about what’s going on with Buzz Aldrin and why that’s important for you to be engaging in trust‑based planning and hold those two things are linked. Stick with us. We’ll be right back on Make It Last.
Victor: Welcome back to Make It Last. We’re talking today a little bit about Buzz Aldrin, what’s going on with him, his battle, his two kids and how it relates to you and your estate planning. I’m not sure if you’re aware but Buzz Aldrin is 88 years old. Buzz Aldrin was one of the people that walked on the moon in the 1969 Apollo 11 Mission.
You probably remember that, but he has gone to court to try to prevent two of his children and a former business manager from taking control of his assets and his financial responsibility. According to published reports, the children, both in their 60s, are arguing that the father is suffering from dementia and should not oversee his own financial affairs.
These are messy family conflicts. They are there because there’s no clear set of instructions about what to do when there’s a scenario where people are disagreeing. What the children are trying to do is, essentially remove Buzz Aldrin’s legal rights to make decisions on his own, and that is called a guardianship.
When you’re going through a guardianship, it’s essentially a mini legal lawsuit, where somebody is coming in and saying that you no longer have the ability to make decisions on your own, and therefore, you should be stripped of that right. If you’re in New Jersey, laws are a little different in every state.
Every state is going to run a guardianship, because guardianship is a state‑run process. It’s not a federal process. There’s no federal laws on incapacity or anything like that. There’s no structure for it.
Remember, this whole concept of federalism. That, which is not reserved by the federal government for its own decisions, is left to the states and states’ rights. That’s how we get different states’ rules on stuff. Guardianship is one of those things. It’s left to the state, and so, each state’s going to run a little bit different.
Here’s how it works in New Jersey. If you’re in New Jersey, you go through a guardianship by having your loved one, or a state agency, or something like that, start a guardianship against you.
They file legal papers, and those legal papers basically say, “This person no longer has the capacity to make their own decisions. They don’t know what’s going on, and therefore, not only should we strip them of that right, but we should appoint somebody new into that role.”
The State of New Jersey has got a hierarchy for people who can serve in that capacity. It starts with your spouse, then it’s children, then it’s other family members, and then it’s a state agency. If you had an order of priority, if you had two competing people, you say, just your spouse and your kids, essentially, your spouse would win.
If you’re not married and it was between your kids and the state, your kids would end up having priority. When a little lawsuit is filed…it’s not a little lawsuit, it’s a major lawsuit. When the lawsuit is filed in New Jersey, what the judge does is appoint you your own lawyer.
This person is appointed to represent your best interest. If you want to contest the guardianship, it will do that. That person will do that for you. If you want to, that person will review your medical records.
That person, that lawyer, excuse me, is going to file their own report saying whether or not they agree that you’re incapacitated, whether or not they agree that the person who’s being nominated is the right person to be your agent. When that’s done, and that report is filed, the judge ultimately makes the decision.
What do we have happening here? We took the decision out of your hands, out of your hands, and we put it in a judge’s hands. Look, the judge is trying to do the right thing. They’re not there looking to make your life worse. They’re there looking out for your best interest, but they might not always know what your best interests are.
Look, there can be a battle. You could be trying to contest a guardianship saying, “You don’t need a guardian.” Then, there’s a medical report that says maybe you need a guardian. Then your kids are testifying, and this judge is trying to make sense of this mess that’s there, trying to make sense of it.
It may not be able to, may not resolve it the way that you want. Maybe they’re going to appoint somebody that you don’t want to be your guardian. Maybe you’ve got a preference if you have multiple kids on there. I told you the order of priority.
It doesn’t distinguish between the kids. It doesn’t say that the oldest has got better, more priority than the youngest. Maybe the judge is going to make a decision that’s not in line with what you want to have happened.
This is one of the reasons why you need to have your planning, not only, of course, done ahead of time, but thorough enough to consider these different circumstances. One of the documents that we talk about all the time, of course, is the power of attorney. We want a power of attorney.
A power of attorney is one of these documents that needs to be filed in a guardianship if you have one, because the power of attorney, if you have to go through a guardianship, will at least indicate what you were interested in, in terms of who you would name as a fiduciary, somebody who can make decisions for you.
It is a piece of evidence. If you’ve got an effective power of attorney, you might avoid a guardianship altogether. The other tool that you can use, the tool that we like to use, in addition to a power of attorney, is, of course, a trust.
A trust that includes an independent cotrustee, like a distant relative or a nonfamily member. Basically, somebody who is a more cold, dispassionate observer, that is not going to be self‑interested in what’s going on there.
If there’s any potential at all for children, or a second spouse to try to seize control of assets or business interests, basically, our recommendations is you put it into a revocable trust with a cotrustee. What is a revocable trust?
A revocable trust is a contract, an agreement between you and yourself, where you have the authority to amend it over your lifetime. That’s what a revocable trust means compared to an irrevocable trust.
A cotrustee or even a successor trustee is basically the person that you name in charge of this thing once you become incapacitated, or when you die. For tax purposes, for estate tax purposes, this revocable trust is basically ignored. It doesn’t do really a lot of planning in that area, but for purposes of who’s in legal control, this trust is respected.
To go back to Buzz Aldrin. Buzz Aldrin has got three kids, and he’s been married, and divorced three times. He has filed a lawsuit accusing his son, and his former business manager of misusing credit cards, and transferring hundreds of thousands of dollars from his business into their own accounts.
Last month, another one of his sons and daughter requested to be appointed as co‑guardians of his estate, basically, saying that he had had diminished mental capacity, or he had become incapacitated. My experience is that money brings out the worst in everyone. Everyone.
If you’re anxious about something, money will be like pouring gasoline onto the fire about it. One of the things that you want to make sure is that you’ve got instructions in place.
If you’ve got money, and you’ve got that access to that money, that using that money you think is going to bring out the worst in people, or you suspected, you want to bring somebody independent into that role, because that will help remove the conflict of interest that exists, by having that person involved in your planning.
Victor: I’m going to give you some additional tips on that, including how to determine whether or not that trust is going to be working when you need it. We’re going to do it when we come back from the break. Stick with this. We’ll be right back on Make it Last.
Victor: Welcome back to Make it Last. We’re talking today about Buzz Aldrin and the fight that’s going on right now between him and his family about access to his money and who can control it. We left that last segment talking about a revocable trust and why one would be appropriate.
I get a lot of clients coming in who get confused about what a revocable trust is and why they might want one. They think that the revocable trust is essentially a document, a part of a legal plan, that’s for rich people. Like, “Rich people have trusts.”
It’s been, historically at least, the case on TV that if you have somebody who’s rich, they’ve got a trust. A trust fund has been created for them. I’m here to tell you that that’s not really the case for a lot of different planning.
What I mean is when we see the majority of our clients, they’re not super wealthy. We don’t see the super wealthy. We see main stream, like regular people. They use trusts in their planning because what they’re trying to achieve with those trusts is a measure of control and certainty about outcomes depending on what life deals them along the way
If they become incapacitated, if they move to a different state depending on the assets they have, making sure their kids receive something that’s protected in form of an inheritance. Who’s going to be in charge afterwards? These are all control elements. They’ve really nothing to do with the amount of money that’s being protected.
If you’re having a hard time wrapping your head around what a trust is, I’ve got a couple of different analogies for you. You might want to think about a trust sort of like a bucket or I’ve got a new one for you. Trust is your refrigerator.
The refrigerator is there to keep things from spoiling and you want to make sure that you’ve got instructions for what happens on the inside of that refrigerator if you’ve got a recipe for what’s going to be done and who can access that.
Basically, the trust is a container. It’s a container. Because it’s a container it can be as big or as small as your assets. Maybe it just holds a home and your checking account. If that’s all that you’ve got, well, then the container is that size. It’s there to hold it.
The reason why you use one is as an organizational tool. If you put the stuff in the container, well, then your instructions about what happens to that container control any of the circumstances. You might say, “Look, maybe it’s a bucket.” Your buckets got a handle, OK? Maybe you give instructions about who can carry the bucket at any point in time. That would be helpful.
If you put in there the independent cotrustee you may get a harder for somebody that might become self‑interested to pick up that bucket and start pulling stuff out of it willy nilly, however they think is appropriate.
If we have that container that’s being carried by somebody else, it makes it easier for you to control or ensure that something won’t go wrong when you have somebody else dealing with that asset trying to help you.
You’ve got to be really careful about who you name because, as we’re seeing in the Buzz Aldrin case, access to this money it’s like trying to unring a bell. People ask me all the time, “Should I be naming my kids as my successor trustees, or as my power of attorney, or executor, or anything else? Should I put them on the account?”
My answer is I don’t know. I don’t know about your kids but let me tell you what I do know. I do know that whoever’s going to be in that role is going to have an awesome responsibility to manage money to your best interest if you’re incapacitated. They’re going to have access to your life in that scenario, so choose wisely.
You want to make sure that you’re choosing somebody that is going to be responsible with this money. You’re going to want to choose somebody that is trustworthy and financially savvy.
I don’t care if they’re somebody that is your age, younger, they live close by. I don’t even care if they’re related to you at all, all right? I don’t think that it’s important for that to be the case. That they be related to you or collocated with you or anything like that.
What I do think is important though, what I think is important that you’re comfortable with that person. Don’t make a decision out of a sense of an obligation because, “Oh, well they’re my kid and they’re the oldest.” Look, maybe they’re an idiot. I don’t know. You know. You know whether or not they’re great people to be in that role, but I don’t know that.
What I want to make sure it that we choose people that are responsible. They’re the kind of person that’s going to find a wallet outside the store and return the wallet back inside and say, “Hey, somebody lost some money.” By the way, they didn’t go through the wallet and see if there’s any cash that they can take out. That’s the kind of person that I want in the role.
You know instinctively when you’re about to nominate somebody in these positions whether or not that person that you’re going to nominate fits the bill or not. You’re going to know that. You’re going to know and get comfortable about whether or not that’s going to be somebody right for that role.
That’s why in the case of somebody like Buzz Aldrin where you’ve got…I’ve got another client and he runs a company. He’s got a trustee that he’s in the family for one set of assets, but he actually has a different independent special trustee for his business assets.
Now, in his case it’s because the nature of his business is so sophisticated that he needs to name somebody that’s not family in order to manage that because the other person’s not going to be able to make good decisions about that. They’re not savvy enough as to the business assets, so he has an independent special trustee.
I have another client still who’s got a business. It’s an alcohol distributor. The franchise off of it requires there to be an independent special trustee that is somebody that they have preapproved.
You’re getting a brief glimpse at the idea that you can have different people in these roles. You can have multiple people in these roles. It’s really just a matter of your creativity. Look, you don’t want to overcomplicate your planning, but you’ll know what circumstances are appropriate.
You might have one person in charge of a home, another person in charge of investment assets, or something like that. Maybe you don’t have anything as complicated as a business, but you’ll know when you need to have multiple people or when you need to have somebody that is completely independent from that. Somebody that’s not a family member at all.
Here we get to the last way that you can approach this planning is remember that I said the trust is a bucket. I had a meeting with a client, actually, yesterday, where we talked about why it might be beneficial to have more than one bucket.
One of the ways that we can help ensure privacy is if you have one bucket for a home and another for investment assets. The people that are in charge of those can be completely different, and they’re not allowed to see into the other person’s bucket.
In that scenario we actually created multiple trusts. I know that’s going to freak some of you out. You’re going to be like, “Oh my goodness, one trust is complicated enough. I certainly don’t need two or three or four.” Really, you need as many buckets in your life as make sense.
Maybe you need a bucket that’s there to protect assets. We might call that an irrevocable trust. I didn’t even get into that today. Maybe you’ll have a bucket that is for one set of assets and a bucket for another set of assets. Maybe you have a bucket for a particular beneficiary.
Maybe you’ve got a bucket for one of your kids. We use that kind of bucket a lot with a special needs trust or supplemental needs trust. When we’ve got somebody that’s got special considerations, we create a bucket just for them.
That helps you understand how you can have multiple buckets. Then we can have different people in charge of them. Maybe we have the same person in charge but different people that are beneficiaries.
Now, I respect that we’re getting into a little bit of a complicated area the more that I talk. Your head’s starting to spin, eyes are rolling back into your head, and you’re like, “Hold on. Maybe I don’t want this thing at all.”
Well, somebody who’s competent as an estate planning attorney will make this more straightforward for you. You’ll council with them so that you can be able to understand what we’re talking about. You’re going to understand why you might need more than one, how those will all work together, and why it’s important in your case to have more than one.
Even just having one and choosing the right people in it is going to give you leap frog advantage over somebody that just has a will and a power of attorney because as we’re seeing in Buzz Aldrin’s case that’s being abused. You want an opportunity in which you’ve got greater certainty and control, and a trust is going to allow us to do that, so I’m making the case for it.
If you’re interested in doing that and you’re interested in doing that with my law firm, you contact Medina Law Group. We can help with that. Wherever you go I want you to make sure that you’re in control of this planning and you can consider these concepts of a container or a bucket and who’s in charge of it. You drive the planning to make sure that you’re using that in your own planning. All right?
That’s the topic for today. Before I let you go, remember we’ve got that seminar that’s coming up on July 18th, 12:30 PM, 5:30 PM, at the College of New Jersey in Ewing. If you’re interested in learning more about estate planning and asset planning protection as you get older, register for that.
It is limited seating. I need you to contact the firm. Send an email to email@example.com or call us at 609‑818‑0068. Let us know that you’re interested. That is going to be on a Wednesday. We’re almost at capacity, but we do have a few more spots. If you’re interested, let us know about that.
If you know somebody that might need both a fiduciary working with their finances or this container‑based planning that we’ve been talking about, share this episode with them. You can go to iTunes. You can go to Spotify. You can go to any place you’ve got a podcast catcher and say, “OK, look, here’s the link. Go back. Listen to the episode,” and they’ll be able to learn more about this.
Victor: This has been Make it Last where we help you keep your legal ducks in a row and your financial nest egg secure. I’m Victor Medina. I’ll catch you next Saturday. Bye‑bye.