Transcript 

Ben Smith:

Welcome, everyone to the Retirement Success in Maine Podcast. My name is Ben Smith. I'm joined by my colleagues as usual, is Curtis Worcester and Abby Doody the, LL Bean and Renys to my Marden’s. How are you guys doing today?

Curtis Worcester:

Doing good.

Abby Doody:

Good, how are you Ben?

Ben Smith:

I'm good. I'm good. Always like to dig into new topics and new things always on the show but one thing that I think with our clients, there's just always a lot of questions around estate planning and early in our shows we actually had two estate planners come on and they talked about the importance of having an updated estate plan, right? That's something we see every day is people come to us for the first time, do you have an estate plan? No.

Ben Smith:

Of course, that's something in our experience as financial planners, we're trying to get things organized and structured and I think that's something, for us, we want to make sure that those sorts of things are up to date in terms of estate plans and wills and, again, sometimes they don't have them or maybe they even date back 30 years ago when we had kids or things along those lines.

Ben Smith:

We all know that we need to come them up to date but what we don't know is maybe there are some common mistakes that we, as in Mainers, may be making by not executing an estate plan or maybe there's an old will that doesn't keep up with our wishes or state law. Perhaps we don't share some of the information or all of the information that's pertinent with our estate planning attorney so that they can make the best plan for us, including our wishes and what our families want.

Ben Smith:

We really want to have that process about post-death, what happens, but also how things can go right with our estate plans and how things can go wrong. That's really the premise of today's show.

Ben Smith:

Enter someone that has helped her clients prepare themselves and loved ones for life events by designing personalized legal documents so that they can carry out their wishes and protect their assets. Our guest, she's on the executive committee for legal services for the elderly in Maine, the Maine Justice Action Group, and she's a member of the Academy of Special Need Planners and advisor to the Peaks Island Fund, which is a Maine Community Foundation fund.

Ben Smith:

She also teaches elder law as an adjunct faculty at University of Maine School of Law, and is a member, attorney of Maine's Center for Elder Law, LLC, which was prior to the center merging with Perkins Thompson in September of 2019. I'd like to welcome at this time, Barbara Schlichtman to the Retirement Success in Maine Podcast. How are you doing today, Barbara?

Barbara Schlichtman:

I'm good. Thanks for having me.

Ben Smith:

Yeah. Well, thanks for coming on. Again, as what we always like to do with our guests is get a little bit into you in terms of your history, your background. Could you just share with us just your story about growing up?

Barbara Schlichtman:

Sure. I grew up in the Bread Basket. I grew up in Missouri, right in the middle of this great country. I moved to Maine about almost 22 years ago. I moved directly to Peaks Island because when we were moving here, we learned that people lived on islands, and having grown up in Missouri, in our minds, we were thinking, "Who wouldn't want to live on an island?" That's what we did. I moved to Peaks Island and I've been here ... I've come back and forth a bit with jobs but I always come back to Maine. I feel like it has a rubber band effect. It's just a beautiful place, it's got a great quality of life. I love the landscape, the mountains, the ocean, and I'm happy to call Maine home. Yeah.

Ben Smith:

I love that because, again, I think we're ... The consistent thing we see with a lot of our guests but also our clients and people that we talk to is Maine just has a really great gravity to it. The people and four seasons and there's lots of ... I know there's things that people don't like about it, of course, but there's lots of positives here, which is why we're all here. It's a really great place to live and work and play.

Ben Smith:

Love to hear a little bit about your path towards law. Right? Why law? When did that start? Why did you go that path?

Barbara Schlichtman:

Yeah. I think like most people, we all have a winding path to where we end up and so I did my undergrad at the University of Missouri, which has a great journalism school and I studied journalism but I knew I wanted to get a graduate degree of some sort and I wasn't sure what to do.

Barbara Schlichtman:

A couple of my advisors had law degrees also and so they encouraged me. They said, "Go ahead and go to law school. You'll have your graduate degree and you will also have a law degree that will always be useful." My goal, and I did do this for quite some time, was to work as a reporter and work in journalism, which I did.

Barbara Schlichtman:

When CNN went online for CNN.com, I was ... There was a woman who designed and got it started and then I was the first editor they hired for CNN.com/law. I've had some ... The law degree has dovetailed with journalism and gave me some great opportunities in terms of teaching and working. I did that for about 15 years.

Barbara Schlichtman:

Then I was ready for a career change and that coincided with wanting to get back to Maine full-time. Journalism jobs, they were being cut back and I was ready for a change anyway. I decided I would practice law. This is about 12 or 13 years ago. I had to take the bar exam in Maine, which anyone who has gone to law school knows, that's quite an undertaking, especially a decade after law school but I did it. Studied for a year.

Abby Doody:

Good for you.

Barbara Schlichtman:

I settled on elder law, which is what I've been doing for 10 years, which is a lot of dealing with capacity issues and special needs issues, in addition to traditional estate planning, which we'll talk about.

Barbara Schlichtman:

I think that came about ... I was doing some lay ministry work through the Episcopal Church, which had me in nursing homes. Those two things dovetailed together and I realized it would be an area of law I would enjoy, just talking with people, and I mentioned journalism because I think that also plays into my current work. A lot of what I do is listening to people and having to learn about people and it's probably similar with financial planning. You have to hear what people's stories are, you have to tease out what they really want and what their desires are, and so in estate planning that's a big piece of it. You also have to be able to identify these trouble spots where potential problems could arise.

Barbara Schlichtman:

I sometimes feel bad that I am pointing out people all the things that could go wrong but I point out to them that that's my job, right? I'm supposed to be able to identify the worst case scenario and then know how we are going to deal with that worst case scenario or how to prevent it.

Barbara Schlichtman:

Yeah. I feel like journalism played into that, that I'm comfortable talking with people, asking questions and then distilling it down to a really manageable group of information to work with.

Ben Smith:

I like that because I think with our team as we try to approach it too is ... I think from the financial planning and we spend a lot of time with that similar thread that you just pointed out is let's spend a lot of time on the bad scenarios and the worst case scenarios and let's think about strategies that we can help minimize that and sometimes you just can't eliminate those potentials but you can minimize that and let's spend ...

Ben Smith:

If we spend a lot of time there then I think you're leaving a lot of the upside room to happen as well. That allows us now more flexibility going forward because we've avoided some of the disastrous outcomes to allow for here are where things are. That's where Abby and I just got off a meeting this morning with a client, that was a lot of what we talked about is the downside but now we're gone forward and things are maybe a little bit better than what we had hoped. Now you can reverse plan that, right? Maybe there is a higher level of income needs ...

Ben Smith:

It ebbs and flows, right? In all these things. I really like what you said there. One thing I want to point out and we had a guest on a few episodes ago, her name is [Elissa Spain 00:08:34], and she was talking about a lot of people as we go through our career they navigate their careers, and it sounds like you've gone through this career 2.0, right? "Yeah, I got the masters degree, getting the law degree, getting into journalism" but those skills perfectly then go to this new practice area where, "Yeah, I'm doing elder law" which is where I want to be but all those things add up in our lives, which is a really cool element that we see is for all of us in our experiences together.

Ben Smith:

Kudos to that. I know that's always a tough change is it's scary, it's new, can I do it? I'd love to hear a little bit about what do you love about your job today?

Barbara Schlichtman:

That's a good question. I find my work is very satisfying because I work directly with my clients, I have a lot of face to face client interaction. In estate planning, you often have many clients. Some areas of law you have just a few very big clients but in estate planning, you have a lot of clients so it's kind of a high volume work.

Barbara Schlichtman:

With that, you get to know a lot of people. Yeah. I like talking and interacting with people but it's also very gratifying when I help people get some peace of mind or resolution for issues that are keeping them up at night.

Barbara Schlichtman:

With estate planning, we really are dealing with the issues that are most important to people. We're dealing with who is going to take care of their family after they die, how is their money going to be managed, especially if there's somebody in the family with special needs and that could be a child with special needs or a spouse who has developed a diagnosis like dementia, Parkinson's, multiple sclerosis, or acquired brain injury. I can list all kinds of things that can go wrong.

Ben Smith:

Sure.

Barbara Schlichtman:

You know, those are the issues that we hold dear to our heart. Who is going to take care of these people I love? How will I know they're going to be cared for and have a quality of life? Through estate planning, we do that. In addition to planning for the people, you're also planning for the stewardship of what people have earned and created throughout their lives. People pour life into their savings, their businesses paying for their houses, and they want to make sure that that is curated in a proper way and that their family can benefit from all of that hard work.

Barbara Schlichtman:

I find it very satisfying, even just after an initial consultation, people have been struggling and, say, they're a caregiver and they're worn out, they don't know what to do, they don't know how they're going to pay for a nursing home and all these questions in one meeting to be able to make somebody feel better and let them know that they are answers to these questions and they're not going to be impoverished and there is a way to do it, it feels good to be able to give that type of emotional relief over such big issues.

Ben Smith:

Yeah. Especially where I think we're ... Again, even just being part of those meetings in terms of sitting down with somebody and coming to an estate planner's office, is this ... You can just feel the weight of the world on their shoulders when they come in. They're really big issues and maybe they have a spouse that became incapacitated in some way or they have to make decisions for them. Maybe they've never had to make decisions for them before, right? Maybe they've always been not making decisions in that part of their life.

Ben Smith:

All of those things and they just don't know what to do, they're really paralyzed by it, so I've seen the two, this big sense of relief when they walk out afterwards of, "Okay, I now know what I need to do. I now know I have someone to talk to when I need to work these things through" and it just allows them I think to move forward themselves. It feels like they're in that moment themselves and they're just paralyzed and it's the only thing that's on their mind and they just can't come to conclusion.

Ben Smith:

I want to really dig into the show topic today, Barbara, is to really get into this sense about estate planning, kind of a 2.0 for us, is you've kind of covered the basics, what's an estate plan and a will and power of attorneys and that. We just want to go in a little bit more advanced, a little deeper today, and one of the things we've seen from our clients and the biggest issues around incomplete and non-existent estate plans is really the amount of family fighting that happens after death. It can sometimes really break up a family permanently.

Ben Smith:

Can you talk about how you've seen that play out as someone passes away? Really, again, the concept of it doesn't mean that families can't be fighting regardless because I think we all do that in terms of we all love each other but we can love each other in different ways. I'd love to hear this structure of if it's not really complete, how it can worsen the outcome?

Barbara Schlichtman:

Yeah. Yeah. Well, just as I was saying earlier, that we're dealing with issues that people hold most dear, right? Caring for their families. If somebody dies, and a child feels insulted or that they were treated unfairly, that's very, very hard for people to come to peace with because the person they need to come to peace with is gone. Right?

Barbara Schlichtman:

It's hard to get resolution if there's nobody to get resolution with. In the cases that get difficult, I don't feel like they just come out of the blue. I feel like if it's going to devolve into a contentious administration of the estate or trust, there is already stress and there are already warning signs. I think that's something very important for people to think about when they're designing their estate plan. If those warning signs are there, you need to plan for them because what can happen is if you have siblings who one of them feels like the other one is treated as a favorite and then the estate plan plays out that way, you get like a 20/80 split or something, it's just concrete evidence that what they always suspected is true.

Barbara Schlichtman:

To get to your question, ways that this plays out, it can play out with siblings being very ugly to each other. For a while, they'll get really volatile. I literally, coincidentally, about 30 seconds before we launched this call, I just took a phone call from someone where one of the siblings wrote a really long, awful diatribe about the surviving sibling but those issues were going on beforehand.

Barbara Schlichtman:

What happens is it's kind of hard to file a lawsuit on this. Ways it goes bad are if you've got a sibling, say, with mental illness, that's a big warning sign to watch for. If somebody has mental illness, they can cling to these estate administration issues or they can create ... It gives them food to culture their paranoid thoughts. Like information is being kept from me, I'm not being treated fairly, I'm not receiving what I'm supposed to receive. They can really just take that and feed paranoia and then the person to blame is, say, their sibling who is trying to administer the estate.

Barbara Schlichtman:

It can also turn into people doing like a mad dash grab right after somebody dies. You get that somebody dies, everybody's in town for the funeral or whatever is going to happen, memorial service, and, inevitably, somebody gets into the house and gets away with all the good stuff. That's bad. Tangible stuff with emotional value creates a lot of fights. Sometimes even more so than just the money.

Barbara Schlichtman:

Ways it plays out, people try to file a lawsuit, people try to grab more things, just tangible items. People get impatient. They don't want to wait for the process to play out and for things to be distributed fairly. Then that's how it can turn ugly. Or on the other side, the child doing the distributing of the estate can move very slowly and drag their feet. Say, they've been living in the house and then the parent dies and the house is supposed to go to all the kids. Well, nobody is going to be highly motivated to give their house away where they've been living, right? That creates a big problem.

Barbara Schlichtman:

I don't know. Is this kind of getting at what you’re…

Ben Smith:

Yeah. Barbara, I'll say, again, I guess from what we've seen is there's been a lot of differences around what the definition of fair is, right? I think what you're pointing as a theme is that we all kind of feel like we're unfairly treated and it might be because it's timing, that things might be a little bit longer or shorter or whatever, but to your point of, "Hey, if I'm living in that house and now I have to give that away" then maybe I feel that, personally, that's unfair to me that I now have to settle an estate where the asset that I'm living in has got to go away and I have to figure out a new place to live, maybe that's perhaps in the middle of a COVID-19 pandemic, which is probably not the easiest thing to be doing.

Ben Smith:

Absolutely. I think that's where we wanted to go was how do these things kind of start breaking up of families in a way or how do they start fights? I think what you said was true about fights probably don't just create from anything. There's a genesis there that probably was there before this event probably happened. I appreciate that. I think that's great.

Barbara Schlichtman:

Yeah. Can I just add something to that? When I was teaching, one of the topics that I studied and taught was conflict resolution. I gave a lot of lectures and we did a lot of exercises on how to resolve conflict. It's kind of funny. I crack myself up a little bit because toward the end of it, I really decided I don't believe in conflict resolution, I don't think you can resolve it and make it go away.

Barbara Schlichtman:

I really think it's more accurately named conflict management. I think that's what we're talking about. When you have these family dynamics, you're not going to get everybody around the table and then everyone is going to walk away saying, "I feel great now." That's not going to happen.

Barbara Schlichtman:

What you can do is you can manage the expectations. You can manage how people are going to react and that's where good estate planning comes in. Good communication is key to managing all of these conflicts and that's how you're going to keep it from going to court, you're going to keep it from exploding, you're going to keep these family dynamics from eroding.

Ben Smith:

I think to your point on conflict management, we actually had a previous episode where we had a communication expert come on, talking about how do we have difficult conversations. Of course, one of them is, "Hey, if we're saying what our estate plan is ..." That's one of the things we've mentioned in previous episodes is, obviously, a future estate plan you can do with it what you will, you can communicate pieces that you want to or not, but if you're able to express why and where and have it ... Maybe after you're gone, it allows, at least, that part to be somewhat at peace. It doesn't mean that they understood it or liked it or whatever but there is a chance for that conversation to be had.

Ben Smith:

That's what we were trying to go to. This lady was named Amy Kate Hutchins and she does career coaching but also communication coaching. She was giving some tips about saying, "Here's why I'm feeling the certain way I am" and, "Here's maybe some ways to express it" that is direct but allows room for negotiation. That it's not just, "I feel like you've done this to me, Barbara" and it becomes accusatory or hurtful in the way we say things.

Ben Smith:

We like that it was a ... We have an episode that goes to where you're saying there in terms of, again, conflict management, maybe not necessarily like conflict avoidance or conflict resolution but, again, I thought that was a really good point.

Abby Doody:

You touched on this a little bit earlier but the idea of a complaint or possibly filing a lawsuit, if somebody doesn't agree with how the estate is being managed or the trust is being handled after somebody passes away, can you talk a little bit about that process? How somebody goes about doing that? Where do people get hung up on this process?

Barbara Schlichtman:

I'm going to give just a little bit of context so people understand the procedure.

Abby Doody:

Perfect. Yeah.

Barbara Schlichtman:

We often get phone calls and the phone call will be something along the lines of, "My father died. My brother is administering the estate. I'm not getting anything that I'm supposed to get. I'm supposed to get the house." Okay?

Abby Doody:

Yeah.

Barbara Schlichtman:

The first thing that we do is look up on a ... Here's a great resource for people. They can just go to the internet and go to Maine Probate.net. You can go there. You pick a county, you can search for a name, and you can look to see if a probate matter has been opened on somebody. That's the first step, to see if probate has even been opened. Probate is not always necessary.

Barbara Schlichtman:

I feel like to answer that question, people need to know a few things. When we die, and if you've already covered this in other segments, you can…

Ben Smith:

No, go ahead.

Barbara Schlichtman:

When we die, we have two categories of assets. We have what are known as probate assets and those are the assets that pass under our will, right? "To my spouse. If my spouse deceases me, to all my children." Those are probate assets.

Barbara Schlichtman:

We have non-probate assets and as financial planners, that's what you probably deal a lot with are non-probate assets. Those are assets that are passing by what's known as operation of law. What that means is any asset that has a joint owner or a beneficiary or, in the case of bank accounts, transfer on death instructions, those assets are not going to pass under the will.

Barbara Schlichtman:

What people don't realize is sometimes probate is not even necessary. If somebody dies, spouse number one dies, they own the house jointly, right? The surviving spouse automatically owns the house, they had an IRA and joint bank accounts. All the bank accounts go to the wife, the IRA pays out to the beneficiary designation, there's no need to probate. Every asset passed either through joint ownership or beneficiary designation.

Barbara Schlichtman:

Okay. Then surviving spouse dies and, again, the IRA, she setup new beneficiaries so IRA goes to the beneficiaries. But she didn't have a joint owner on her bank accounts now and the house is in only her name. In that case, the house and the bank accounts become joint assets and what that means, what probate means, is you have to go to the probate court and turn in an original death certificate, the original will, you fill out forms, and the judge looks at the package and says, "Yes, all of this seems to be authentic. I am now going to appoint a personal representative to gather and administer the assets."

Barbara Schlichtman:

I say that because it might seem obvious but there's a big misunderstanding that if you have a will, probate is not necessary. That's completely wrong, right? Because a will is what probate is all about. If you don't probate the will, the will is meaningless. The will is meaningless until somebody dies also because we can change our will up until the day we die.

Barbara Schlichtman:

Then if somebody wants to file a lawsuit, first, they have to figure out if they're even entitled to something. Okay? At a minimum, they're entitled to some information because they're an heir and if you're the biological child of somebody, even if you are estranged, if you're a biological child of somebody then you have a right to know if probate is opened, you have a right to see the will, you have a right to notice that probate is being opened.

Barbara Schlichtman:

Let's say no probate was ever opened. Then it gets a little trickier. Let's say they had everything in a trust. That's one of the reasons people use trusts and we can talk more about that later if we have time.

Barbara Schlichtman:

One of the reasons people use trusts is because it carries more privacy with it. It's not a public process. It doesn't become part of the public record that people can look up on Maine Probate.net and see the will and see who's getting what and what the will says.

Barbara Schlichtman:

If they're not a beneficiary of the trust then they don't have a right to see what's going on with the trust. You have to be a beneficiary and you have to be a qualified beneficiary, which means you're entitled to receive something at that point to get information.

Barbara Schlichtman:

To bring a legal action, let's say probate is opened, let's say a will has been submitted, let's say there are assets to pass under that will and a child has been disinherited and the will says, "My child is disinherited. Even though, I love her, nonetheless, she gets nothing." Well, then they have to go back and be able to prove that at the time that document was signed, the attestor, the person signing the will, didn't have capacity or understand the impact of what they were signing or what they were doing. That's a very hard thing to do. Or they have to show that it was done under duress or through fraud.

Barbara Schlichtman:

To go back in time and to be able to establish that, it's complicated. That's something that caregivers should be aware of because if an estate plan is redone in favor of the caregiver, that can raise suspicion. Like was there duress? Were they enticed into doing this? There are little safeguards that people can do when they're doing their estate plan. One is talking privately with the attorney.

Barbara Schlichtman:

Whoever is in place to be enriched by the estate plan should not be in the room, should not be part of the conversation. It really should be between the attorney and the client, the individual. It's even better, even further safeguards would be to go so far as don't be the person who drives them to that meeting, right? Have somebody else take them to the attorney. Things like that.

Barbara Schlichtman:

But to file that lawsuit, if somebody does ... Number one, they should just get a consultation with an attorney and figure out if they're even entitled to information and then if they are entitled to information, get that information and then if the information still supports that they may have a lawsuit on their hands, then they would need to find an attorney who practices litigation.

Barbara Schlichtman:

I point that out because all attorneys don't litigate and file lawsuits. You would want somebody who specifically does probate litigation, which is kind of a little niche practice. It's not that ... I'm going to say it's not entirely common because it's not that often that these cases are worth litigating. They often can get resolved in a different way earlier and that's through the information gathering to see what the person's even entitled to.

Barbara Schlichtman:

Then once that happens and you're in court then you've got just a regular litigation court where it's a matter of gathering evidence and presenting it and going through the litigation process.

Ben Smith:

Barbara, I want to ask a little quick followup question to that then is ... What you're saying is, basically, if you were complaining about the will and you're complaining about what was left there, establishing some sort of level of proof that, essentially, say, my mom was not really of capacity when she made that will, how would ... You said it was, obviously, very rare. That sounds like it would be a really difficult thing to actually provide proof, that there's something she was not of capacity when she made this document and she always told me for 40 years every day that I was going to get the house and then I got the will and then I didn't get the house and I could see where that's a really tough thing to say but also to then prove.

Barbara Schlichtman:

Yeah. You're right. What they have to look at is called testamentary intent and the standard for testamentary intent is fairly low. It means that the person needs to understand that they're signing their last will and testament, they need to understand what they own, what their assets are, and they need to understand who they're giving their assets to.

Barbara Schlichtman:

If they understand all of that when the document is signed, then they've met testamentary intent. Let's say somebody has dementia that comes and goes, capacity that comes and goes, if they're in a good place ... Or mental illness is another example. If they're in a good place and at the time of the signing, they understand what they want to do, they've met it. Even if the next day, they've forgotten they even went to the lawyer's office yesterday or what they signed.

Abby Doody:

Interesting.

Curtis Worcester:

Yeah.

Barbara Schlichtman:

Yeah. It's a very hard thing to prove. I think to prove it you would have to have ... Well, what would be very helpful, if you have other examples where they were taken advantage of or encouraged to make gifts that were out of character for them.

Ben Smith:

Or, say, you had a medical diagnosis that happened three days prior and that the doctor was saying there's something about their capacity that was not there maybe, it was something along those lines.

Barbara Schlichtman:

Yeah. I know. It gets tricky because dementia has such a range from beginning diagnosis to severe dementia. That's where it's tricky even for doctors. It's a whole shades of gray kind of thing and it's hard to figure out at what point do they no longer have that capacity to meet that testamentary intent.

Ben Smith:

Got you.

Barbara Schlichtman:

Just a doctor's letter saying, "This person has dementia", I feel like that would require a lot more evidence and a lot more explanation.

Curtis Worcester:

Barbara, I want to circle back and dive in on a topic you brought up a few moments ago, you gave us a great transition here, and that's trusts. I think a common thread the three of us always hear is, "My assets are in a trust so I'm safe. My kids can't fight over it." Can you just ... Is that true? Based on your reaction, I think I know the answer to this but can you elaborate on the truth in that?

Barbara Schlichtman:

Kids can fight over anything. That is one of our superpowers.

Curtis Worcester:

Yeah. I guess can you just go down this road of trusts, they're not just free and clear and out of the way, clearly, and how do trusts still go bad with these family relationships.

Barbara Schlichtman:

I am a strong believer and supporter of trusts. I think they give people much more control over the estate plans so I can understand why people say that. I think they are right. If they've got a trust, they have taken steps to create more rules and guidelines for things to play out the way they want them to play out. You cannot just set and forget a trust. You need to revisit it. You need to revisit what is actually inside the trust.

Barbara Schlichtman:

I'm sure in your work, you see this a lot where people will create, say, a living trust and then they don't follow through with the funding piece and either assets are not in it or beneficiary designations have not been updated so the assets completely bypass the trust.

Barbara Schlichtman:

You guys are all nodding your heads. You know exactly what I'm referring to. What this means for our audience is you can create a trust but unless you get those assets inside the trust, the rules of that trust are not going to take control. The way things get into the trust are, one you retitle them while you are alive into the name of the trust, or you have a beneficiary designation setup to where when you die, the assets will pay into the trust.

Barbara Schlichtman:

That can just be so important to check beneficiary designations. Let me just talk about trust a little bit before we go into beneficiary designations, which I think would be a very important topic. In terms of litigation and fighting, it's a little easier with trusts because, like I said, only beneficiaries are entitled to information about the trust. You kind of narrow the field of who can get into the fight to start with, especially in the case of blended families.

Barbara Schlichtman:

Trusts are ways if you've got blended families, you can certainly do some sophisticated planning. Let me back up a bit. The overview, if you think of trusts as the umbrella topic, trusts can be designed to accomplish just about any number of things. The word trust is not ... It's only a description of what it is. You can have trusts to hold your guns, you can have trusts to take care of your pets after you die, you can have trusts to protect your assets in the case of nursing home costs, you can have trusts for special needs people to retain their government benefits, you can have trusts to preserve family wealth for generations, you can have ...

Barbara Schlichtman:

The most common is living trusts. We'll just talk about that for a minute. A living trust is revocable living trust, meaning the assets still belong to the settler, the person creating the trust, and what they're doing in that case, they are, one, avoiding or minimizing probate, which can save money and time, and they can also setup planning for a spouse, say, it's a second marriage, you can say, "My spouse gets to use any of this while my spouse is alive and then when my spouse dies, the remainder will go to my biological children." That's called ... You can use a Q-tip trust.

Barbara Schlichtman:

We're not going to get too technical here but you can do these things to keep your money in your lineal descent. You can also create gatekeepers to manage assets if somebody has trouble managing money for whatever reason, mental illness is often a reason, bipolar is a common reason to setup trusts for kids, because you can setup asset management.

Barbara Schlichtman:

The thing that people fight about with trusts would be, one, if they're unhappy with the distributions and they want to fight with the trustee about the distributions, they want more, and that's where I would say be careful about naming family members as trustees because it changes the dynamic between, say, siblings. If you've got a sibling as trustee over another sibling's assets, they kind of lose that familial relationship and it becomes a business relationship that can turn sour.

Barbara Schlichtman:

I think that's an important consideration, especially when mental illness is the motivation because if somebody has mental illness, they need that family support and if it's evolving into an adversarial relationship because their sibling is also managing their money, that's hard because they lose that family support and they're at battle with their sibling to make distributions and manage their assets.

Barbara Schlichtman:

I would say just because assets are in trust, it does not guarantee there won't be fighting. The most important thing when people have trusts is, I'm going to back-check and say this again, confirm things are retitled into the trust or confirm beneficiary designations are correct, because if assets don't get into the trust, the trust won't do any good.

Ben Smith:

Yeah. I'll echo that point, Barbara, is I think one of the best relationships that we have with estate planners and tax professionals is when there's feedback loops, because sometimes any one of us can discover something with a common client and it's okay, now what we go to do is we got to work with you to then say, "Hey, you've created this really beautiful estate plan. It's got a will, it's got a trust, it's got all of the necessary pieces in that" but sometimes it's best when it's like, "Okay, now here's your to-dos", right?

Ben Smith:

You already have your inventory list of assets, we need to retitle all of these assets into the trust, here's all of the things we need to do and then us, as the financial planner, that is maybe overseeing some of the assets, is like, "Okay, if we know now that here is the trust that you want to place these assets in" then it kicks off a whole process for us to then journal assets from your name over to a new entity, open up a new account, a relationship with that entity that owns these assets, so we're able to get these things done and also be the task master on, "Hey, have you done that part yet?" Or, "I just heard you bought a new vehicle. We talked about vehicles being part of this trust too. Have you also titled that vehicle to that trust?"

Ben Smith:

All of those things where we're being tactical and strategic, all three parties together, it feels like when someone set up those relationships and they have really strong relationships across all three, I think that's when it feels like the strongest outcomes happen I guess within our opinion.

Barbara Schlichtman:

Yeah. Yeah. I agree.

Ben Smith:

I want to ask another question here because if we're establishing a trust ... One of the things that we hear sometimes is going through the people that would administer this trust if I pass or I'm the second to pass of me and my spouse then to what your point is that maybe there's nobody that could be the trustee for this trust or I'm really hesitant to put these two son and daughter or my kids against each other in that relationship as you described, right?

Ben Smith:

Enter kind of this, "What other options do I have?" I want to just go through this topic of independent trustees, somebody outside of the family relationship that can step in and serve as a role. Can you talk about how that works and who they are? Is it the friend? Is it an organization? Is it somebody independent that does this work?

Ben Smith:

We're just seeing firms that are launching these services so I'd like to ... I think from ... I guess the question I want to ask is from an independent party perspective, some of the concern we hear on the other side is, "I'm concerned about paying an independent party money to do a lot of this work and if it is a lot of work, and then draining the assets for then eventual distribution to the ultimate beneficiaries."

Ben Smith:

I guess my question is ... I want to start with a basic, independent, how do these work? Who do you go to to figure that out? Then some pros and cons.

Barbara Schlichtman:

Okay. I advocate professional trustees, I think they are a good idea. You can go to ... There are some individuals who will serve as professional fiduciaries, just individuals, some small organizations, or you can go to banks. Banks have trust departments and they're willing to serve. They typically have a minimum asset level that people need to meet for them to serve as trustee.

Barbara Schlichtman:

The reason I advocate using professional trustees is they're going to do a good job, right? They know what they're doing and the service you're paying for can save money down the road, for one. It can prevent fights down the road. If a lot of this is about how to create an estate administration that will not result in litigation and fighting among kids, then have a professional do the job because then nobody can blame each other for doing a poor job or invading the trust when maybe they shouldn't.

Barbara Schlichtman:

A trustee, you're responsible for proper distributions, you're responsible for investments in managing the assets, you're responsible for filing the taxes on the trust, and responsible for getting the forms out, K1s out to the beneficiaries. There's quite a bit of administrative work. I think it's money well spent.

Barbara Schlichtman:

In hiring a professional, I do think it's important, understand what you will be paying. Before entering into the arrangement, have a written engagement agreement, understand what the fees are, and professionals are required, we're supposed to do that for our clients. There shouldn't be surprises.

Barbara Schlichtman:

As an attorney, and I suspect you guys face this as financial advisors, people want to sometimes, often, many times, feel like they want to do it on their own, and they also feel like, "I just have a quick question" and they don't feel like paying for it. Well, I guess my sort of response to that is that we, professionals, we spend a lot of time, money, and effort learning about what we do and when people say, "I'm going to be my own trustee" or, "I'm going to manage my own money" or, "I'm going to download my estate planning documents from the internet", you don't know what you don't know.

Barbara Schlichtman:

It's money well spent to hire professionals to do these jobs. These are complete industries and people dedicate careers to doing things like being a trustee because it's not something easy, it's not something you can go into blindly, it's the kind of thing you can click along for a few years and think everything is fine and then you've been doing something wrong and somebody picks up on it and then a liability arises that then goes back and captures all those years where you thought everything was fine. You're just setting yourself up or a loved one up for a potential liability, a potential conflict, and that could be avoided by hiring a professional to manage the assets.

Ben Smith:

Barbara, I want to make a point too. I know you were talking about different parties that can do that level of service and I think what I've been seeing more is law firms doing that sort of service as well. You made the point about some bank channels doing that. That's where I came from. I came from the bank trust channel. I really like that they can do that service and there's a lot of situations where that makes a lot of sense is that I already have a relationship with this financial institution that's been around since 1845, it's all those things are part of that relationship.

Ben Smith:

I think there's also times that it does make sense to split out the asset management part of this from the independent trustee work because…

Barbara Schlichtman:

Oh, yeah. Definitely.

Ben Smith:

I think that when you start going, "Hey, I really made this decision because of the stability of the organization" and what you can sometimes find is one service or the other may not be holding up the bargain at times. It's really tough to make that change when they're bundled together.

Ben Smith:

Yeah. I think from a financial advisor perspective one thing we say to our clients is, "We need to be easy to hire and easy to fire." If we're not doing our job, we shouldn't be working for you. You shouldn't be continuing to pay. We don't do that work, I want to make that point there, we don't do the independent trustee work, but that's why I think having some independence around the parties allows things to be interchanged if things are not working out. I think that's an important point I want to make.

Barbara Schlichtman:

No. That's a very good point. When I said that the trustee manages the assets, in my mind, that's where the trustee is responsible for, say, hiring somebody like you all to manage the assets and make sure it's being taken care of.

Ben Smith:

If this is a trust that lasts 40 years and organizations and stability around process and things are going to change and maybe one year it doesn't fit, it allows that trustee the ability to go, "I can go put this back out" and, "I can make a change" and, "I can find a better fit." I think that's important. I wanted to say that as well.

Barbara Schlichtman:

Good point.

Abby Doody:

What about putting something like a camp into a trust? Something that you want to last for generations and future use, so what are your thoughts around that? What are some mistakes that people make with this kind of asset preservation where it's a real estate asset and not just a monetary asset?

Barbara Schlichtman:

Yeah. Right. In addition to being real estate, it's got great sentimental value…

Abby Doody:

Exactly. Yes.

Barbara Schlichtman:

Yeah. This is a whole industry in the state of Maine, right? Preserving the family camps. I will also ... We should just all acknowledge that the term camp in Maine is a very broad spectrum.

Abby Doody:

Yes. It is. Yes.

Barbara Schlichtman:

Some people's camps are nicer than their houses. Let's see, yes. I do think trusts are a good mechanism to preserve camps for a couple of reasons. We'll start with one, asset preservation. I'll point that out. Say, for example, you have ... I work a lot with nursing home benefits also and so Congress has created that if you're going to do estate planning five years before you need nursing home benefits, you can do that.

Barbara Schlichtman:

Camps are something that they have such great sentimental value to people that if somebody needs to go in the nursing home, they may be willing to sell their house and spend down the equity in their house. Quite often, they still want to make sure the camp is available for the kids. You can't do that if the camp is an asset that ends up being consumed to pay for long-term care. A trust is something that can help preserve it against that.

Barbara Schlichtman:

Also, camps create a lot of family dynamics, right? With a trust, you can set the guidelines. It's fine when mom and dad are alive and mom and dad are in charge of the camp and they take care of the camp and they pay all of the bills and you just check with mom and dad to see when you can use the camp but then when mom and dad are gone, who is going to do all of that?

Barbara Schlichtman:

If you have a trust, it can spell out the rules on ... It can get detailed. The mistakes are if you don't address these questions but you can spell out, what's the rotation that people get to pick the week that they want to use the camp? How much money does everyone need to contribute every year to help pay for the camp? What happens if somebody fails to make their payment to the camp? How do you deal with that? What if somebody doesn't want to be part of the camp anymore so they don't want to pay money anymore, how do you handle that?

Barbara Schlichtman:

One thing that I have seen come up a couple times just in the past year, the parents went through all kinds of acrobatics creating a trust and locking it down so the kids would have it for generations and the kids live elsewhere. The kids didn't even want the camp. To them, it felt like they were being forced to own and pay for this real estate they really didn't want. That's another, once again, communication is key.

Barbara Schlichtman:

Number one, make sure keeping the camp in the family is even a priority for the family. Often, it is but just confirm it because sometimes it's not. Then work on a document. You can do a trust figuring out how are we going to resolve all these issues, scheduling, payment, who gets to sell, who gets to vote, right? You vote on things, like do we put on a new roof this year or not? Let's take a vote. You could spell out who has voting rights. The trust can take care of all of that and it can also give the asset preservation.

Barbara Schlichtman:

It's important because if we think about as each generation has children, the ownership pieces of that property become more and more fragmented and if it's not in a trust, that can become a real estate nightmare too where you have all these little pieces owned by people scattered all over the country. I think a family camp is a definite candidate for use in a trust.

Ben Smith:

Barbara, I want to ask a question to you about we've spent a lot of time on the trust side and on the estate side and probate and going a little top down. I think one of the things we get for questions is really are there certain family dynamics? Are there certain family situations that maybe are present in my life that should maybe lead to thinking about towards that a little bit more. When I really ask the question about what sort of common family situations, family dynamics, relationships, structures that you would see or that you would identify as being most likely to have a challenged estate?

Barbara Schlichtman:

If I'm sitting down talking to somebody and to kind of think about this, I would think about what are red flags for me? That I think we should address and talk through and make sure. I know I've mentioned this a lot but mental illness. If somebody in the family has mental illness, that takes definite planning. Planning because that person can often be disruptive to the rest of the family or disruptive to surviving siblings. Mental illness can come and go. If the person is in a good place, the parents might be like, "She's doing fine. I don't feel the need to do something" but then the medications stop and somebody drops down.

Barbara Schlichtman:

You need to have safety nets in place for when that person is in a low place to give them the supports they need until they get back up. If there's any mental illness, that's a definite red flag that needs attention. Special needs, if anybody is on any kind of disability or using Maine Care for health insurance, or they have a child with disability, that requires special attention. Not because it's going to be adversarial but because it can be a very expensive mistake to not plan around somebody's special needs. That could be its own topic even. There's a lot there. But because people are so dependent on Maine Care for health insurance when they've got a special need, you've got to make sure to plan around that.

Barbara Schlichtman:

Let's see, mental illness, special needs. If you've got ongoing adversity within the family, just people not getting along for whatever reason or you've also got where the parent does want to make unequal distribution and for very good reason, a common reason might be one child's in California, one child is in Maine taking them to all of their doctors appointments, living with them, cooking for them, parents often want to compensate for that kind of attention and care.

Barbara Schlichtman:

If it's going to be unequal distribution, that needs to be tended to and planned for because, again, there's the potential for the California child to feel slighted and that can create a problem.

Barbara Schlichtman:

Businesses, we really haven't talked about that but if there's an ongoing business, planning around what the kids' expectations are with the business, who is going to be involved, how that's going to be, if it's going to be wound down, how to wind it down, that can be another issue.

Barbara Schlichtman:

Oh, then lifetime gifting, that can be another red flag. Say, if a parent has been especially helpful to one child, then the siblings may expect that the estate will be equalized. Say, the child gets $100,000 to buy a house while mom's alive, well, the siblings may expect, "Well, when mom dies, they're going to get $100,000 less" and that's not always the case.

Barbara Schlichtman:

Everyone should be informed and have communications about how that's going to play out. It's good to do that before death so everybody doesn't have to do it when they're in this heightened state of anxiety after death.

Ben Smith:

I want to make a point, Barbara, I think it's something where probably the better medication lines are within the family, probably the less conflict there might be in some of these situations, and the kind of thing if we have trouble communicating with each other, especially where I'm seeing parents gift X number of dollars to a sibling but I'm not getting it but I assume that I'm going to be equalized, but maybe parent did not even put two thoughts into that. Right? Maybe they just thought, "Hey, well, they need help. I'm able to help them. I don't need the money right now. I can go ahead and do that but when things pass, it's going to be 50/50 and it'll be equalized."

Barbara Schlichtman:

Yeah.

Ben Smith:

Right? I think things ... Maybe we just don't communicate those things and it just comes up with that is a really fair point and I probably didn't even think of your vantage that way. Yeah. I guess the more we're communicating, you probably can avoid some of these obviously issues as well, right?

Barbara Schlichtman:

Yeah. Right. Right. Communication. Even one other thing that you just made me think of is end of life decisions, that can be a time when it breaks down, where kids are arguing about what kind of care their parent needs, should the parent stay in the home? Should the parent have in-home care? Is it time to go to the nursing home? How much is that going to cost?

Barbara Schlichtman:

These also create end of life stress that then spill over into adversarial relationships after death. Again, good communication can take care of that. Good planning on the healthcare directive, and just talking these things through as a family before you're in crisis, can prevent the breakdown.

Curtis Worcester:

Barbara, we have reached the portion of our podcast that is the end. We have one final question for you. We like to ask every single one of our guests this question. The name of the show is Retirement Success in Maine Podcast. I want to ask you, what or how do you define retirement success? What will be a successful retirement in your eyes?

Barbara Schlichtman:

I like this question. Retirement success, for me, would be I think to have big family dinners or big family meals, to have ... I've got two boys. If they end up staying within a reasonable distance to me to be able to have big family meals and have them around and then when we can travel again, do some traveling with my husband, I think just some nice big family meals because I like to cook and have my kids around and some traveling. That would be a successful retirement for me.

Ben Smith:

Barbara, that sounds perfect. You'll have to invite us over for that dinner. Thank you, again, for being on our show today. Again, for us, even personally, learning a lot more about the estate planning process. Again, kind of this estate planning 2.0, in our eyes. Really helpful to get even a little bit more advanced knowledge. Again, appreciate your expertise and what you're lending to our show. Thank you for coming on and we'll talk to you next time.

Barbara Schlichtman:

Great. Thank you for having me. I enjoyed it.

Ben Smith:

Really happy to have Barbara Schlichtman on the show today. Again, kind of this ... For us, I think for our show, a little bit of estate planning 2.0 or 2.01, however you want to term it, but good to get a little bit more in-depth, right? Another just advanced kind of level of estate planning, trust administration, trust conversation there, what are they and how they break.

Ben Smith:

Love what she brought to the table here because I know ... Obviously, you hear it from her side, the level of expertise, the things she's working on on a day to day basis, so want to, as always, highlight things that we think you might want to take away from this show, so perhaps, Abby, you want to start with a takeaway that you have?

Abby Doody:

Yeah. Definitely. I really liked her conversation about the importance of actually putting assets in a trust because if assets are not in a trust then the trust doesn't really exist. Your planning and all of your setting up for the trust really goes out the window unless you put assets in it, whether you name it now or as beneficiary when you pass away.

Abby Doody:

I think that's something really important and we see it a lot in our business is people not putting things in the trust. I really think that was a good point that she made and just wanted to emphasize that again.

Ben Smith:

I'll use a little sports analogy here, it is literally like pitching a shutout for eight innings and then all of a sudden you start giving up home runs in the ninth.

Abby Doody:

Exactly.

Ben Smith:

You do all the stuff to win the game and then you shoot yourself in the foot to lose it. It's not that hard of a thing to do but it feels like once I have a signed document in place, that now I'm done. Right? It feels completed. Honestly, there's still some more work to be done. That was a really good takeaway. Curtis, from your side, anything that you thought was a really good thing to highlight today?

Curtis Worcester:

Yeah. I really liked an overarching theme here with Barbara is she was just talking about, I think she opened with it, was the importance of just planning for the worst. It may not be fun but to think about all of the ways things can go wrong, whether it's while you're sitting down that first day trying to get your will written and get an estate plan made or as you progress throughout your life and there's adjustments that may or may not need to be made but just to ...

Curtis Worcester:

Again, it's not fun to think about ... It's easy to say, "My kids would never fight. They love each other" but I think she really emphasized how important it is to say, "Well, what if they do? How can we make sure it goes smoothly if some day they don't get along or there's other people in the mix?" There's spouses. There's remarriages. There's all these things that can go wrong. I think it's really important, as she stated, to take those into consideration. Even if you don't think right now they apply.

Ben Smith:

Yeah. Life happens, right? I think one of the points she was making was let's try to plan for disastrous outcomes and try to protect against those things happening and things like really well crafted estate plans and really well crafted trust documents allow you to do that. Again, I think that's where those conversations between you and the estate planner are really important.

Ben Smith:

I think it's really tough to share that, "Hey, I am concerned about my son and my daughter who really don't get along." Well, the estate planner needs to know that. If you don't share those things, they're not going to plan for it. It feels very open. It feels very vulnerable. Trust us, we know that too. Those are necessary and important things to really point out to those professionals so that they can help you with it.

Ben Smith:

I want to highlight too is ... The idea we talked about was independent trustees on our trusts, right? Sometimes it's just very easy to go, "You know, the responsible one of my kids is this one and I think that's the one I'm just going to name to be the executor or the trustee of these things" and I think that can sometimes be the simple and easy answer and sometimes it's the right answer. Sometimes that's not the right answer.

Ben Smith:

I think one thing that Barbara really walked us through was that idea of an independent trustee and when they work and when they don't and just gauging that. Again, she's saying, "Look, it does cost some money because you're getting the expertise." They probably also might be doing things in a more expeditious manner. Right? Maybe if you hire the trustee who was the son or daughter and they've never been a trustee before, what if it takes them four or five hours to do something because they don't really know how to do all of this, they've never done it, versus you hire an independent trustee, maybe it takes them 15 to 30 minutes to get something done, but it looks like on paper that that's a more expensive thing.

Ben Smith:

Her point that maybe it isn't, maybe it does help avoid other conflict, maybe it does things ... I did want to make that point too is having somebody that is independent, maybe not doing other services for the trust, is maybe helpful as well. That if there's somebody like ... I've seen situations where investment managers really maybe are not doing a very good job in managing the money, they're not investing it well. Really tough to breakup the trustee and the investment management together because the trustee part is really set in stone and really structured in place. I kind of like having those separated out was something that I like that we were able to talk about today.

Ben Smith:

Good to obviously have all of this conversation. Again, I think we could go a lots of different ways with this. Even do a 3.0 at some point. For now, Barbara also gave us a helpful URL to look up some probate. We will have that on our blog and a few more resources, especially about Barbara and her practice, so to find more resources, you can go to Blog.GuidancePointLLC.com/39. Again, Blog.GuidancePointLLC.com/39. Find this blog there. The transcript, all of the other information you need. I'd love to hear from you. If you found this useful, let us know. Happy to get some feedback but appreciate you tuning in and catch you next time.