Episode 347:

What happens to our agencies when something happens to us? No one likes to think about the day that they’re no longer around, and it’s no secret as to why. The conversation can feel more than a little uncomfortable. But as agency owners, it’s one that’s far too important for us to avoid or ignore. If we want to ensure that our businesses —and more importantly —our people will be taken care of should the unexpected happen, then we need to make sure that we have a plan in place that allows our agencies to keep living on even after we’re gone.

On this episode of Build a Better Agency, I sit down with attorney Andrea Shoup to start the conversation and hopefully, to help you all do the same. Andrea holds a depth of expertise in both estate planning and business law — making her the perfect person to help us wrap our heads around this tricky but critical subject.

During our conversation, Andrea offers up her invaluable insights into navigating different succession plan options, learning how, when, and with whom those plans need to be created and communicated, and what happens when we don’t have a contingency plan in place.

A big thank you to our podcast’s presenting sponsor, White Label IQ. They’re an amazing resource for agencies who want to outsource their design, dev, or PPC work at wholesale prices. Check out their special offer (10 free hours!) for podcast listeners here.
legacy planning

What You Will Learn in This Episode:

  • How legacy planning can protect your business —and your people— should something happen to you
  • The key differences between a will and an estate plan
  • Everything that goes into a contingency plan — and how to get yours started
  • Who needs to be involved in your contingency planning, and how those plans should be communicated
  • How long it will take you to gather the information you’ll need for your plans
  • What happens when we DON’T have a contingency plan in place
  • When is the “right time” to start planning your agency’s succession?
“I think the biggest thing is understanding what happens to our business when something happens to us.” @AndreaShoup Click To Tweet “As business owners, it is up to us. We can’t leave it to chance. We can’t leave it to the state to make decisions for us.” @AndreaShoup Click To Tweet “As an executor, you don’t have control. You don’t have decision-making power at that point. It’s gone.” @AndreaShoup Click To Tweet “Who steps in? Who’s responsible for making sure that payroll happens? Who has access to the business bank accounts?” @AndreaShoup Click To Tweet “You need a trust whenever you own any real property.” @AndreaShoup Click To Tweet

Ways to contact Andrea Shoup:

Speaker 1:

If you’re going to take the risk of running an agency, shouldn’t you get the benefits, too? Welcome to Agency Management Institute’s Build A Better Agency podcast, presented by White Label IQ. Tune in every week for insights on how small to midsize agencies are surviving and thriving in today’s market. We’ll show you how to make more money and keep more of what you make. We want to help you build an agency that is sustainable, scalable, and if you want down the road sellable. With 25 plus years of experience as both an agency owner and agency consultant, please welcome your host, Drew McLellan.

Drew:

Hey, everybody. Drew McLellan here from Agency Management Institute. This week, coming back to you with a really great episode for the Build A Better Agency podcast. I know that this is going to be an episode that you listen to more than once. I know and I believe so strongly that this topic is underexposed, that we don’t talk about it, that it makes people uncomfortable, but when we ignore or push aside this topic, we put ourselves, we put our agencies, and we put our families at great risk. So I am bringing this to the forefront to you because I know it’s too important for us to ignore, and it’s easy to do.

So before I tell you more about the topic or my guest, I do want to remind you, of course, that at AMI, one of the things that we have going for us is we have this amazing Facebook group of podcast listeners just like you. There’s over a thousand agency owners in there. So all you have to do is go to Facebook and search Build A Better Agency podcast and you’re going to find the group, and it’s a private group. It’s locked down. I’m not letting vendors or other people in there, and you have to answer three questions. Do you own an agency? If so, what’s the URL so I can make sure you actually are an agency owner or an agency leader. You don’t have to be an owner to be in there.

What is the biggest challenge you’re facing that maybe we should talk about in the group, and will you behave? Will you be nice? Will you be kind? Will you be helpful, all of those things? That’s it. Answer those three questions, I’ll let you in. If you don’t answer the questions, I can’t let you in. So head over to Facebook and jump into the conversation. People are sharing resources. They are helping each other find freelancers. They are talking about everything from bonus programs to where they’re finding employees, to new SEO strategies. It’s all being covered in this group. So don’t miss out on it because it’s pretty awesome.

All right. Let me tell you a little bit about my guest and the topic. So my guest is a attorney named Andrea Shoup, and Andrea is an interesting attorney in that she has a depth of expertise in two interwoven topics. One is business law and the other is estate planning. Her premises is, what she teaches her clients is that estate planning is a whole lot more complicated when you own a business and the risks of not doing it at all or the risks of not doing it well are exponential for those of us that own a business.

If you’re listening and you don’t own the agency but you’re at the leadership table, this is a conversation you should bring, too, because the risk passes on to the employees if something happens to the owner and everything’s not taken care of. You may not, even if you want to, you may not be able to keep the agency alive for the surviving spouse or until the agency gets sold or to help everybody keep their job if things aren’t put in proper place.

So this is a super important topic. I hope that it’s not going to be an uncomfortable topic for you, and nobody wants to think about dying, but we all want to think about the people that we love, both at work and in our families, and the causes that we care about and all of the things that we can do with our legacy, and we can’t do any of that without estate planning.

So I’m really excited to bring this topic to you. I think it’s so important and I think by listening and doing some of the things that you learn, you can just avoid so much disaster. I have been executor of several estates. Some have been super simple, some have been a hot mess, and what made them either simple or the hot mess was the level of preparation the person had who died. So I know from personal experience how important this is, and none of those people owned a business. So theirs were the easy ones in comparison. So I want to jump into this topic. I want to introduce Andrea to you, and I want to really get you thinking about what you need to do to protect all the people that you love. Okay? Let’s do it.

Andrea, thanks for coming on this show. I can’t wait to talk to you about this topic because I think it’s important. So thanks for being with us.

Andrea:

Oh, thank you, Drew. I look forward to it.

Drew:

So give everybody a little sense of your background and how you came to have this depth of expertise in estate planning.

Andrea:

Well, when I got into estate planning, I realized that families really have a lot that they need to know, but what I realized is business owners have a whole slew of specific issues and concerns that most estate planning attorneys really don’t get into it because they don’t understand business law. So we really do estate planning business law because there is such a crossover, and just knowing and understanding the specific needs that business owners need to know when thinking of the estate plan, I mean, it’s critical to address all of those concerns.

Drew:

So when you think about all the things that we should know as business owners that influence estate planning, can you give me an example or two of some of the things that most of your clients when they come to you don’t know and you have to educate them about?

Andrea:

I think the biggest thing is understanding what happens to our business when something happens to us, right? I mean, if the last two years have taught us anything, I mean, the unexpected can happen at any time. So if we got unexpectedly sick, even worse, maybe we were sick for extended periods of times or maybe we passed away, well, what happens to our business in that time? Most of us, we do a lot of the business plan and making sure we have our marketing plan and planning for the business while all is well. Well, what happens to the catastrophe plan and the emergency plan? We’ve got to make sure we plan for that and make decisions, not just choices, but make sure that our choices can actually be carried through and followed through if that unexpected event happens.

Drew:

So when most people come to you for estate planning, I’m assuming they’re thinking about, “Okay. I’m going to be retired. I’m going to die someday. Who gets the money and the grandfather clock and the things?” What you’re saying is you have to start with the business side of it. Again, one of the things you just said that I hadn’t really thought about is business planning and estate planning isn’t just about after you’re dead. It could be that you are incapacitated or sick for a period of time and someone has to step into your business. So you would start with a business owner at that point. So okay, let’s think about the … So if you sat down with somebody like me, would you start with me with, “Okay. Let’s figure out the business stuff first, and then the personal stuff”? Is that the plan of attack that you would go through?

Andrea:

They really go hand-in-hand. So we start having a question of, “Okay. Well, what are the ripple effects of any event?” Let’s just say it’s an illness. Okay. So let’s make sure that someone can talk to your doctor. Let’s make sure that your spouse or someone can come in and access the bank account. Well, what about your business? What about your business bank accounts? Who pays payroll tomorrow, right? Who pays your vendors? Who makes sure that the door gets unlocked so your employees can stay still come in? Who is going to do that for you? Now, let’s make sure we have the tools in place so that they can actually do it. It’s one thing when we’re like, “Oh, you know what? Sally, she’s been with me for 10 years. Of course, Sally’s going to do it.” Yeah, well, the bank doesn’t know that Sally’s supposed to do that. Sally’s not doing it.

Drew:

Well, and Sally may not even know, right? You may assume Sally will do it, but Sally may say, “Well, I don’t know what he or she wanted. So I guess we’re just going to stay at home and not go to the office for a couple days or whatever.”

Andrea:

Right. Right. Exactly. Exactly.

Drew:

So as part of the work you do then also talking to the agency owner or the business owner about the conversations they need to have with employees, bankers, lawyers, family, all, because it seems to me that your work would trigger a lot of really important conversations.

Andrea:

It does. It triggers a lot of not just the internal dialogue, trying to figure out, “Okay. Who will do this?” but working out the contingency plan. So maybe it’s Sally. Well, what happens when Sally retires? Well, how do we have a successor to Sally? Making sure that all is not only figured out but implemented in such a way that if Sally’s not here, we got Sally number two as our second.

Drew:

Right. So I would assume that estate planning is more complicated just in terms of the assets and how they’re classified. It’s different to leave somebody a grandfather clock than it is a business. So talk about some of the complications that come with business ownership and estate planning beyond just you have to think about the business and how it’s going to keep going.

Andrea:

I think an example, let me give you an example. So we were working with a company and it was actually a construction company, but the business owner died in 2006 at the height of everything’s booming, construction’s going strong. Everybody’s building a house, right?

Drew:

Yup, yup.

Andrea:

His business was worth, I think it was $4 million, and he didn’t expect to have that heart attack. Well, he did and he passed away, and the probate court, because when we passed away and we don’t have an estate plan, we go through probate court, probate court couldn’t act fast enough. It took over four months to get access to the business bank accounts. Well, what do you think happens in four months? If your employees aren’t getting paid as much as they love you and as committed and dedicated and loyal as they are-

Drew:

Yeah. They have a mortgage.

Andrea:

They have a mortgage. They can’t go four months without a paycheck and still keep working to satisfy your clients. Well, what happens when your clients aren’t getting their work done? They go somewhere else and they start suing your business and they’re not paying you so the business doesn’t have any more money coming in. Well, then what happens if we don’t have any more money coming in? Well, we can’t pay our vendors and so we’re late on our obligations. The whole thing just powers down. It disintegrates. In four months, that construction company, yes, it had the equipment and all the rest of it. That’s all it had after four months. It essentially disintegrated in that time because nobody could step in fast enough. That’s what happens to businesses when it has to go through this probate process.

Drew:

So part of estate planning, so if you have an estate plan, then you don’t have to go through probate?

Andrea:

Exactly. So a properly drafted, properly prepared estate plan can completely avoid that court process, probate process entirely. Now, every state is different. Everybody has their own laws, but every state, every country has a way what happens when someone passes, what happens to their property. There are laws in place and planning ahead means you can avoid going to court, essentially.

Drew:

Yeah. So that’s one complication that comes with owning a business, and I would assume that this is also a highly emotional journey. I mean, nobody wants to think of themselves dying. I can remember when I was working, but everybody probably wants to have a lot of control over what happens. I can remember my attorney saying to me when I was doing my will and my daughter wasn’t an adult yet so I was controlling when she got the money and whatever, and he said, “You can only control so much from the grave, Drew.”

I was like, “Wait a minute. I’m going to control everything from the grave.”

Andrea:

Right. Yeah. It is definitely a very highly emotional, I mean, it creates … Nobody wants to think about … You’re thinking about your daughter. Nobody wants to think about, “What happens if I’m not here?” I got that, but there’s certain things that, I mean, truly just as adults, have to acknowledge, yes, this is not the most fun topic. Now, work with somebody who’s going to help you with it, get in there, address the issues, get it done, and then you don’t have to worry about it anymore, but it is. I mean, it’s definitely emotional. It’s emotionally taxing. It can be, at least.

Usually, I find that people come in a little unsure, a little nervous by 20 minutes into a conversation. They’re like, “Okay. Oh, yeah, this is what I want to happen. Oh, yeah. Okay. Let think about that. All right.” When once we get going, it’s fine.

Drew:

Yeah. So when we are thinking about, to me, an estate plan is not just about building out your stuff, but it’s also about protecting the business, your employees, your family. Talk to me a little bit about our responsibility because I believe a lot of people listening, maybe they have a very simple will that they probably did when their kids were little and they needed to designate who was going to be guardian if they went down in a plane crash or something, but they might not have owned a business then or their kids are now adults and they have grandkids, whatever it is. I don’t think this is something people are all whooped up about updating on a regular basis. So my guess is a lot of people listening either don’t have a will or an estate plan. Well, first of all, talk about the difference between a will and an estate plan, and then let’s talk about the responsibility we have as business owners to do this work.

Andrea:

Right. So an estate plan, really, it’s an umbrella term. Estate planning is making sure someone has legal access to do something, step in when they need to, and they have legal instructions, what must they do, what can’t they do, and they have to be legally enforceable instructions. Okay? Legal access, legal instructions. That’s what an estate plan in general does.

Now, there’s different tools within that umbrella of an estate plan, a will, a trust, a power of attorney, an advanced healthcare directive. They all provide different access and different instructions for different situations. I guess, let’s just think about it from a marketing perspective, right? There’s digital marketing. Okay. Well, that might be the term estate plan, right? Digital marketing. Well, how many different types of digital marketing-

Drew:

Right. Exactly. Yup.

Andrea:

There’s all these different ones in between. Well, so what’s the difference between, I don’t know, SEO and digital marketing? Well, that’s not a difference. It’s just but one part of that umbrella.

Drew:

Aspect. Right. Yeah.

Andrea:

So it’s that same concept with an estate plan is that umbrella, and a will is about what part. That will, actually, and I’m speaking for California specifically, in this moment in California, a will does go through that probate process. In California, a trust avoids that probate process. A properly drafted, properly funded trust will avoid that probate process. I know different states are different. I will say in different states I’ve talked to a lot of estate planning attorneys. I have clients who live in other states. I’ve done estate planning in consideration of other state laws. Sometimes they’re probate process, they’re like, “Oh, well, the probate process is very simple. So it’s okay to go through that process. Maybe it’s a week and a few hundred dollars.” Well, that’s very different in California where it’s two years and sometimes hundreds of thousands of dollars. So in California, we use a trust to avoid that probate process. Does that answer that?

Drew:

Yup. Yup.

Andrea:

Now, as far as I guess our responsibility, I believe as a business owner myself, I have a duty to my family. I got four young kids at home. I have a duty to make sure that I’ve prepared for them. I make sure they have dinner. I make sure they’ve got clean clothes. I make sure they have a place to live right now during my lifetime. Of course, I’m going to be concerned about that if I’m not here, if I’m not going to do it.

Same with my team. They look to me to make sure that I have the clear plan, I know where we’re going and, “Follow me. Let me tell you where I’m going.” Well, I have an obligation to them to make sure that their paycheck keeps going, they have somewhere to be. Well, I believe I have a duty to them if I’m not here as well.

Same with my clients. What we do for families is so vitally important. People ask me all the time, “Well, Andrea, if I get my trust set up with you, what happens if you’re not here?”

I tell them, “You know what? I practice what I preach. I have an estate plan. I have a succession plan. If something happens to me, this firm continues on without me because I designed that succession plan to make sure you’re protected.” As business owners, it’s up to us. We can’t leave it to chance. We can’t leave it to the state to make our decisions for us, and that’s what we do.

What we don’t realize is, “Oh, I don’t have an estate plan.” No, actually you do. It’s the government plan. In California, the fine folks up in Sacramento have made decisions for us.

Drew:

That’s right.

Andrea:

Well, many of us don’t like those decisions that have been made for us. So let’s make sure that we change it so that our company doesn’t disintegrate in four months.

Drew:

Right. Well, and it’s interesting. So I’ve been executor of three estates. My dad passed away in Florida. That probate was a pain-

Andrea:

I’m sorry.

Drew:

That was a pain in the neck. My mom passed away in Iowa. That was a piece of cake. My uncle died with no will, no anything in Tennessee, and that was a hot mess, right? So I totally understand what you’re saying, which is in all of those cases, because they were all prepared at different levels, in all of those cases, whatever they weren’t prepared about, then whatever the governing rules of the state were were what I and the attorney had to work through to get that estate closed.

Andrea:

Well, and you see it firsthand. I mean, you saw it firsthand with three different family members what a mess it can be afterwards. As the executor, you don’t have control. You don’t have the decision making power.

Drew:

No.

Andrea:

It’s gone, sadly.

Drew:

Well, and I think, too, and you’re dealing with all of this at a time when you’re really not at your best, right? I mean, you’re dealing with the loss and the grief and now you’re having to make these huge decisions and understand these complicated laws that … So I think about that part of the responsibility is not only that we’re taking care of our family and our employees, but also that we’re not strapping them with putting them into this quagmire that just adds to the weight of that loss for them in the moment because in some cases, as you said, you can be dealing with this for years and, by the way, it’s time consuming.

Andrea:

Right. Yes.

Drew:

All the documents and all the, I mean, and all the people I had to call to get stuff, and I think, “God!” and both of my parents thought they were well-prepared, right? So which gets me to what does prepared look like. So I want to take a quick break, but then I want to come back and start with … Okay. So let’s say somebody goes, “I got this.” I want them to be able to check some boxes as you talk about, “Yup, I do have that. Yup, I did do that.” So when we come back, let’s talk about what prepared looks like.

Andrea:

Sounds good.

Drew:

Hey, sorry to interrupt, but I wanted to make sure that you are thinking about how to connect with your clients by figuring out what they love and maybe a few things that they’re not so crazy about with your agency. So at AMI, one of the things we offer our client satisfaction surveys, we do both quantitative and qualitative, so an online survey, but also interviews with some of your key clients, and then we come back to you with trends, recommendations, what they love, what they don’t love, lots of insights around how you can create an even tighter relationship with your clients.

So if you have interest in that, you can go under the How We Help tab on the AMI website, and very bottom choice on the How We Help tab is the client satisfaction surveys. You can read more about it, but whether you have us do it or you do it yourself or you hire somebody else, it is really critical that you be talking to your clients about what they love and what they wish was different or better. So do not miss the opportunity to tighten your relationship with your client, whether we help you or not. All right? All right. Let’s get back to the show.

All right. I am back with Andrea and we are talking all things estate planning. Gosh, I hope you guys are taking notes on this because this is, I can tell you from personal experience how important this is, but right before the break, what I said to Andrea was that I’m sure some of you think you’ve done all of this in your set, and I know from my own personal experience with my parents, both of them thought they had done everything they needed to do.

My mom, who never owned a business, who never was a … my mom had it much more dialed in than my dad did, but in both cases, there were things left undone or boxes unchecked that I had to deal with. So Andrea, what, what does done look like for us? How can we rest easy knowing that our estate planning is good and solid, and our people both in the business and our family are well-protected and taken care of?

Andrea:

So from the personal level, making sure that we know what happens in our state, probate, not probate, do we need a trust? If you’re in a state that you need to have a trust in, you got to have a trust. A will just doesn’t do it. So making sure you understand, “Yes, I have.” Let’s say that, yes, you need a trust. Make sure you have it, but make sure all of your assets are now in the trust’s name.

When I talk to people I say, “Listen, for me, my house, it’s no longer in Andrea’s name. It’s Andrea as trustee of Andrea’s trust.” All assets, and I’m saying all, so your bank accounts, make sure that your bank account is titled in the name of your trust. Same with your business. Your business entity has to be titled in the name of the trust. If someone is a sole proprietorship, meaning they don’t have a corporation, they don’t have an LLC or anything like that, there’s no way really to do it. So that’s another thing. Keep in mind you can’t really do it if you just have a sole proprietorship, but if you have an LLC, you have a corporation, make sure that interest is assigned to your trust or you on those ownership documents it says your trust name. If it doesn’t, it’s not in your trust.

I see this all the time. They’ll tell me, they’re like, “Well, no, Andrea. See, there’s a schedule of assets. It’s right there.” No, it’s not. I mean, that’s a listing, which is great. Yes, have a listing of your schedule of assets, but that doesn’t mean that asset is actually in the name of your trust. You have to see for yourself.

When I’m doing this, I pull everything. I’m like, “Okay. Let me see your bank accounts. Let me see your corporate record book. Let me see title to your house.” I need to prove to myself, trust but verify. I have to see for myself, yes, it’s in there, yes, it’s done. So making sure personally that’s done.

Make sure it’s up-to-date. Read it. I was talking with a gentleman, gosh, about two years ago. We were going through and I said, “Hey, who’s Bob?”

He’s like, “Bob? That’s my old college roommate.”

I’m like, “Well, he’s a successor trustee.”

He’s like, “I haven’t talked to Bob in 20 years.”

I’m like, “Well, it’s a good thing we’re updating this.”

Drew:

Right. Right, because otherwise, Bob might have an unpleasant surprise soon. Right.

Andrea:

Yeah. Exactly. So making sure it’s up-to-date. Read it, take a look at it every two to three years or anything major happens, major life event, a birth, a death, a marriage, a divorce, anything like that. Just make sure it still reflects your wishes. That’s another one. Actually, on the topic of divorce, the fun topic of divorce, if someone’s gotten divorce, please review all of your assets. I get it. Once the divorce decree is final, you don’t want to think about it. It’s done, shut it away. Not quite yet. Make sure. Go back to your life insurance policies. Is your ex still a beneficiary? I have seen that happen more often than not. I just had that happen, and this lady, she got about $1.5 million of ex-husband’s stuff. Their divorce was final about a year. No, sorry, a month and a half before he died.

Drew:

Oh, no.

Andrea:

He got 1.5 million. He just spent three years getting all the assets. Guess who got it all back? It’s awful. There’s nothing we can do about it.

Drew:

Wow.

Andrea:

It’s awful, awful, awful. This happens all the time. So please, if there was a divorce, check your assets, check your beneficiaries. Make sure that’s up-to-date.

Drew:

Yeah. Yeah. Great advice.

Andrea:

Make sure that the people who need to know know that you have this. It does you no good if nobody knows that they need it or, I’m sorry, knows where it’s at and knows that you have it, right?

Drew:

… and knows what their role is in it, right?

Andrea:

Exactly. Now, you don’t have to tell everybody all the details. Just let them know where to find the binder, “Hey, if something happens to me, you got to go to this place.” When we work with clients, they get all their original documents, but we give them a USB drive, right? “Here, all of your scanned documents, here it is.” You have it in electronic form. It makes it very easy to share with people who need to have those documents. Make sure that they have the tools available that you put in place.

For a business owner, you’ve got to have your emergency plan. Who steps in? Who’s responsible for making sure that payroll happens? Who has access to the business bank accounts to make sure that payroll gets paid, vendors get paid, and so forth? What’s the contingency plan if something was to happen? Okay. Bob does this, Sally does this, Fred does this. Who’s going to do what or what position does what and making sure that the wheels keep on turning. Even if the idea is, “Well, if I’m not here, they have to sell the business,” okay, well, you need to make sure that you-

Drew:

The business is still viable, right?

Andrea:

Exactly. A good friend of mine who happen to be a client, who’s a financial advisor, gosh, he was in his early 50s, him and his wife, high school sweethearts. He was not sick and he wasn’t supposed to die, but I did their plan probably about nine months before his death. Thank you, God, that we got it done because his wife, I mean, obviously distraught. This young 50-year-old healthy man was not supposed to pass, but unfortunately, things occurred. We were able to keep the business going, keep the wheels turning. We needed about six weeks until we were able to not only find a buyer, close the deal, get her paid for all the effort her husband had built, and now the business, the clients are still being serviced, the employees stayed on. I mean, it literally was this is how it’s supposed to work. This is how it’s supposed to go.

Drew:

Six weeks seems fast to me. I thought you were going to say six months. I mean, at least for my listeners and agency, they would never find a buyer in six weeks. I mean, it would be six months or a year before you would find the right buyer, the transaction would be negotiated. So you’ve got to have a plan to keep the machine going. Otherwise, your family’s going to end up holding an empty bag.

Andrea:

Exactly. Exactly because any buyer, they’re going to look at it and be like, “Oh,” I mean, as awful as it sounds, “Oh, the owner just passed away? I’m going to get this for a bargain. It probably was doing really well and now, now it’s not.” No, you’ve got to keep it operating at that high level so it’s very attractive and you can get top dollar. It’s not a fire sale.

Drew:

Right. So if somebody’s done an estate plan or set up a trust in one state or has a will and they’ve moved to another state where the rules are different, what do they need to do?

Andrea:

They should talk to an attorney in their new state. I get transplants all the time coming from other states, and depending on their situation and depending on where they came from and really the quality of the documents, a lot of times they don’t need to make a change. Sometimes, oh, my goodness, they need to make big changes because if you’re coming from a state, there’s community property states and separate property states. In some states, attorneys, they create a trust for husband, a trust for wife. Here in California, we do a joint trust.

So if you’re coming from one type of state and going to another, definitely need to get this looked at because it can have some serious, serious effects, especially on the family home. Is it husband’s trust that owns that or wife’s trust? That’s going to have some serious effects, especially if we don’t have joint children and we have children from other relationships. It gets really messy. So you’ve got to talk to an attorney in your new residence state to make sure you’re still taken care of.

Drew:

So how long does all of this take? If someone’s like, “Okay. I got to get my act together. I haven’t done this,” how much time should someone allot for this? I’m assuming this is not somewhere where you should go to rocket lawyer and fill out some forms and do this. This feels like surgery. I mean, you don’t want to take out your own appendix and you don’t want to do your own will and estate, right?

Andrea:

Right. Exactly. No, no, no, please don’t. This is not the time to save a buck. There is just too much at stake.

Drew:

Especially as business owners.

Andrea:

Yes. Yes. There’s just too much at stake. Rocket lawyer, Legal Zoom or Susie Orman, there’s so many different options. I mean, truly, you can Google living trust and you can get a free one. It’s not necessarily that document, right? That’s not what makes the difference. It’s making sure that it’s custom-tailored to what you need it to do. I’ve seen so many crazy things. I saw one where a three-year-old was going to be in-charge of seriously a national company, several tens of millions of dollars in revenue every year because Legal Zoom let them do it.

Drew:

Right. Well, and I’m sure the person who filled out that, “Oh, well, I’m not going to die until she’s 30.”

Andrea:

Well, didn’t realize that that’s even what she was doing because people don’t understand the different roles nor should they. We go to experts for reason, right? People hire marketing experts because they’re marketing experts. It’s because Google doesn’t do what it needs to do. Sure, you can get some information on the topic, but let’s not confuse a Google search with the expertise of a marketing expert, right? It’s the same thing with legal advice. So no, please don’t do that.

Drew:

Perhaps with much greater consequence. Yeah.

Andrea:

So no, you’ve got to work with an attorney. As far as how long it should take, I would say the process would probably take about two to three months, give or take, depending on how committed you are, and that’s probably all in time as investment, maybe five hours, five to 10 hours-

Drew:

On the person’s part, not on the lawyer’s part.

Andrea:

On the person, yeah, on the person’s part, meeting with the attorney, gathering the documents, making decisions, reviewing it, and executing it. Again, just depends on how committed they are to getting this done in a timely manner, then it’s done. Yes, it’s an investment of time, but it’s not that onerous. It’s not when it’s important. You just get it done like once a year, guess what? We got to do our taxes. It’s not fun. We just do it and then it’s done, and we’re like, “Okay. Great. That’s checked off.”

Drew:

Right. Again, you made the point early on that one of the things that makes you so sought after in this category is because you’re not just an estate planning lawyer, and you’re not just a business attorney, but that for us, for us as business owners, we really do need somebody who understands both business law and estate law because by default, our estate planning is going to be more complicated.

Andrea:

It is. It’s different, and I will say one thing that we haven’t touched on yet, but I just want to mention, this is even more important when we have partners in our business.

Drew:

Oh, gosh. Yeah.

Andrea:

If there’s more than one partner, this gets really messy. What happens? Two guys, I had this situation, it’s sad. Two guys, they were college roommates and they decided to open up a car dealership, and one car dealership turned into five car dealerships and it was very successful over the years. Unfortunately, one of the partners passed away. Well, his wife stepped in to now run half the business. That did not go over well because guess what she was not familiar doing? Running the business. Sure, sure, she talked to her husband when he came home and he’d tell her about what happened at the office, but it became so contested and contentious of figuring out what to do with the dealerships. After the partner died, it just devastated not only the company, but also the relationships.

Drew:

I was just going to say that the undercurrent of that is here are people who have been a part of each other’s life for a long time, and you would assume probably had a very close family-like relationship and now that’s gone. So the losses are multiple.

Andrea:

It is. So having that planning done for partners, especially if there’s two or more people owning a business, you got to have it done and ask the difficult questions, “Okay. If one of us passes, what happens to the business?” A lot of times there’s something called a buy-sell agreement, “I agree to sell you the interest and you agree to buy it. We just agree on a price or a way to determine the price now so we don’t have any issues in the future.”

Drew:

“Then my heirs get the money rather than the interest in the business.”

Andrea:

Exactly. Exactly. That’s really what the heirs want, right? Because they don’t know how to run that company.

Drew:

They probably already have something they’re doing all day. Right?

Andrea:

Exactly, and the business has what it needs, full control and ability to keep on running the business as it needs to.

Drew:

So for partners, do they have to do this together then, at least the business side of it?

Andrea:

That’s the business succession part of it. Yes, they do. That’s the buy-sell agreement. That’s really the bridge, and then they each need their own estate plan, their own trust or whatever. That’s separate because that’s very personal. Basically, the business estate plan is a succession plan. So what happens? What happens if one of them want to retire? What happens if one of them gets sick? What sick? Is it one week, two weeks, a month, two months, six months?

Drew:

Yeah. It feels like you’re putting together a jigsaw puzzle because there’s all these disparate pieces, but they all have to fit together to create the right picture, otherwise, they don’t work together, and in some cases, they might even contradict one another or cause problems with one another.

Andrea:

Yeah, and that’s why working with an experienced attorney matters. That’s exactly the reason why it matters.

Drew:

Yeah. What kind of documentation, because I’m sure part of why people don’t do this is because it sounds owners have to gather all the things, what are the things? Typically, for a business owner, what would they, to start the estate planning process, what would they need to gather?

Andrea:

Bank statements, their corporate record book or LLC, the ownership documents of the business. Those are the two major things. From there, it’s a lot of questions. Yes, names and addresses, names and addresses of whoever’s involved. Are you married? We need to know their name. You got kids? We need to know their name.

Drew:

Yeah, right. Hopefully, you don’t have to gather that up. You probably have that based on memory, right?

Andrea:

Hopefully, you remember that.

Drew:

Right. That’s right.

Andrea:

So I mean, and then it becomes a conversation. Then as you dig deeper, then it’s like, “Oh, wait. Okay. You have this. Let get some more information about that. Oh, wait. This is an issue. Let’s dig into that.”

Drew:

At what age, and maybe it doesn’t matter if you own a business or you’re over 18. I think a lot of people think of this as something they should do when they’re older.

Andrea:

Right. Yup.

Drew:

Probably oftentimes like you’ve described in a couple of your stories, they died unexpectedly and didn’t have their act together and, therefore, again, back to your point, so then the state decides what happens.

Andrea:

Exactly. Somewhat. So here in California, I tell people, “You need a trust,” so that’s one thing in that broad umbrella of an estate plan, “You need a trust whenever you own any real property, any real property at all or your assets are valued over $184,000,” that’s a very specific number because that’s a very specific test in the probate code, “if you have minor children, if you own a business or you’re concerned about incapacity,” and those are all ors. If any of the-

Drew:

Okay. Any of those, right.

Andrea:

Now, I’m helping a lady right now. Unfortunately, her 20-year-old son passed away and he had assets. We have to go through probate court. He wasn’t supposed to get in that motorcycle accident. Yes, he’s 20 years old. He has assets. He had a home and he had a young daughter. Yes, hindsight, he’s 20, but he met two of those criteria, he should have had a trust. Had he had a trust, this would’ve saved a lot of anguish not just for his mom, but now his daughter as well.

Drew:

Right. Yeah. So here are the takeaways. This is more complicated because we own businesses, so we have to choose the right partner who can help us with all aspects of our life. This is not a DIY project or your buddy who’s an attorney, right? You need to find somebody who really knows their stuff.

Number two, for anybody listening, my guess is that you cover one of those five ors and so today is the day you should start looking for that legal partner to do this. Number three, it’s not as onerous as you think to gather the documents and be ready to answer the questions. Number four, the day to do this is today, now. Don’t wait.

Andrea:

Yes. Right. Exactly.

Drew:

Any other parting thoughts for us before … I mean, this has been so good. I have so many more questions, but we’ll have you back on the show and we’ll talk about some more stuff, but this is a good primer I think for everybody to really be thinking about this and starting to put some things in motion, but anything else that you think we need to know before we wrap up?

Andrea:

The only other thing I just want to just touch on is every state is different, but if you have what we call a taxable estate, meaning if you have significant, past a certain threshold of wealth, nationally, it’s $12 million, different states, it’s a million dollars, your estate just by virtue of you passing away, there’s a death tax, an inheritance tax. That can be avoided, but you’ve got to plan for it. So it’s something else to be aware of when you’re looking at it is avoiding that extra cost that just comes because the state’s like, “All right. We have a death tax. Let’s tax you because your estate’s going from you to someone else.” So it’s another thing depending on your state and where your wealth is. You’ve got to be aware of that and plan for that.

Drew:

Awesome. A great note to end on, nobody wants to spend money they don’t have to spend. They could have gone to their family.

Andrea:

Exactly. Well, I pay more to the IRS.

Drew:

That’s right. Absolutely. This has been really great. If folks want to connect with you, learn more about your practice, follow you on social, where can they find you and access your expertise?

Andrea:

Yup. Start at our website, shouplegal.com, S-H-O-U-P-L-E-G-A-L dot com. That has access not just to the firm, but then also our social media as well.

Drew:

Okay. Awesome. This has been great. Thank you so much. I am definitely going to have you back because I have more questions, but this is a good start. So thank you. Thank you for sharing your expertise. I love that you care about your clients the way you do. I think that’s another thing we should be looking for an attorney is somebody who’s not just doing it to do it, but they actually care about the outcome for their people. So thank you.

Andrea:

Absolutely. Well, I appreciate the opportunity to chat with you. This has been fun. Thank you.

Drew:

It has been fun. All right, guys. So as you know, I’m all about actionable podcasts, and I’m not sure I have ever given you a podcast that is more actionable, which is if you think you have it all taken care of, if you have the will, the estate plan, the succession plan, the business documents, all of that, and you haven’t looked at it for a while, at the very least, you need to pull all that stuff out, look at it yourself or sit down with your attorney and walk through it and make sure that it doesn’t need to be updated.

If you have not done any one of those pieces, and we didn’t even get into power of attorney or medical power of attorney, but we all know that we need to take care of those things, too. If you are not prepared, I will tell you from personal experience to put someone in that position, somebody who loves you and is going to be mourning your death, to put someone in the position of having to figure that stuff out is a crappy thing to do to somebody.

So don’t do it to the people that you love. Don’t do it to your employees. Don’t do it to your family. Be responsible. You have built something meaningful and you’ve built something that has value and you want to make sure that if something happens to you, the meaning and the value continue on beyond you, and this is a way for you to do that. Invest the money, don’t cheap out on this, don’t do it yourself, but do it soon. Do not wait.

So Andrea gave you the five reasons why today’s the day, and my guess is for every one of you, if you didn’t check all five boxes, you checked at least three of the box, so this is not something that should be put off. So please, please, please take care of yourself, take care of your team, take care of your family by doing what you need to do to make sure that they’re taken care of.

All right. With that, a quick thank you to our friends at White Label IQ. As you know, they are the presenting sponsors of this podcast. They have some free hours for you on your first project if you go to whitelabeliq.com/ami. They do white label dev design and PPC for lots of AMI agencies. Lots of AMI agencies tell me every day how they are a lifesaver for them, and I can tell you even in my own agency we have done some projects together that I thought were going to be a very onerous, and they made it easy and my clients were delighted. So check them out and reach out and talk to them.

Of course, I want to make sure that you know I’m really grateful that you’re here. I feel like today’s episode is like a gift that I can give you. In gratitude for you listening every week, I try and bring value every single week, but an episode like this that is so impactful to your family and your business, I just feel really good that you heard this today whenever you’re listening to this and that I’m able to bring an expert like Andrea into your world so that you can be prepared. So A, thank you for listening, and I’m super grateful that I was able to give you this gift this week. I’ll be back next week with another guest.

In the meantime, you know how to track me down. It’s just [email protected], but I’ll be back and I hope you will, too. Thanks for listening. All right. See you then.

That’s all for this episode of AMI’s Build A Better Agency podcast. Be sure to visit agencymanagementinstitute.com to learn more about our workshops, online courses, and other ways we serve small to midsize agencies. Don’t forget to subscribe today so you don’t miss an episode.