Building an Estate Plan That Lasts Across Generations with Chad Halbur (Ep. 9)

Building wealth is one challenge. Helping it benefit future generations is another.

Why does so much family wealth fail to make it beyond the second or third generation? And how can better communication, thoughtful planning, and family values help families create a legacy that lasts longer than the assets themselves?

In this episode, Jon Meyer sits down with Chad Halbur, CFA®, CTFA™, President and Shareholder of Cornerstone Private Asset Trust Company, to discuss the estate planning decisions that often create unintended family conflict. They explore why trusts are about much more than legal documents, how family conversations can shape better outcomes, why choosing the right trustee matters, and how today’s families are rethinking gifting, trust structures, and legacy planning so future generations are prepared instead of simply receiving an inheritance.

Key takeaways:

• Why communication between generations often shapes estate planning outcomes more than legal documents alone
• How selecting the wrong trustee can unintentionally create conflict between siblings
• Why family values should influence trust design instead of relying only on standard legal language
• How lifetime trusts and early gifting can help families teach financial responsibility over time
• Why reviewing estate plans regularly helps families adapt as goals, relationships, and priorities evolve
• And more!

 

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Watch us on YouTube at https://youtu.be/ZHR73q8DR0M.

 

Connect with Jon Meyer:

• BGM
• LinkedIn: Jon Meyer
• Email: jmeyer@BGM360.com
• Schedule a Call

Connect with Chad Halbur:

• LinkedIn: Chad Halbur
• Website: Cornerstone Private Asset Trust Company
• CHalbur@CornerstoneTrust.net

About Our Guest:

Chad M. Halbur is President and a shareholder of Cornerstone Private Asset Trust Company, LLC. He is responsible for establishing procedures and the development of day-to-day operations. Chad is our Senior Investment Manager and oversees all accounts and works with clients on strategies to help meet their financial goals and is involved in the implementation and daily management of those strategies.

He is a CFA® charterholder and Certified Trust and Financial Advisor. He is also a member of the Twin Cities Society of Security Analysts, Minnesota Financial Planning Association and is a member of the firm’s Investment Committee.

He was born and raised in the Twin Cities and completed his undergraduate work at St. Cloud State University. After obtaining a B.S. in finance and a minor in economics, he worked for a large insurance company for several years before joining Boeckermann, Grafstrom & Mayer Wealth Management, LLC in 1999. As Assistant Investment Advisor, Chad handled investment research, due diligence, portfolio design, and implementation of all investment strategies.

Chad is married with two children. Chad enjoys hunting, fishing, and vacationing at his family’s cabin.

 

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Transcript

Chad Halbur: Working with a client, and the client really wanted to have his kids be the trustee, and he was strongly encouraging we use a corporate trustee, which is what Cornerstone is. And the way he said it, he said, “I have never seen a sibling relationship improve when one of the siblings is a trustee over the other sibling’s money.”

Jon Meyer: Kids need money from age 25 to 40, ’cause that’s when real life happens, with kids and houses and job changes and whatever else. And so waiting to give people money in their 60s and 70s doesn’t add a lot of value.

Welcome to Mastering the 360 Mindset with John Meyer from BGM. Join us as we explore ways to make the most out of your wealth, health, and time, unlocking opportunities for balance and lasting success.

With insights from John’s years of experience and guest experts, you’ll gain the tools to design a life that works on your terms. Now on to the show

Jon Meyer: Good day, everyone, and welcome to another podcast from BGM. And today we are circling the wagons on our 360 mindset by in- talking to Chad Halbur, who is the president of one of our sister companies, Cornerstone Private Asset Trust Company.

Jon Meyer: And with that, we are going to dig into some of the real fun things that people sometimes do but oftentimes make a mistake at when they do their estate planning. So Chad, I’d like to welcome you to the podcast.

Chad Halbur: Thanks, John. Look forward to it.

Jon Meyer: Yeah. Let’s start out with, just tell me two, two seconds of, you know, who you are, what your role is at a trust company, and how trust companies fit into, you know, generally into the estate plan.

Chad Halbur: Perfect. My name is Chad Halbur. I’m president of Cornerstone. You know, state trust companies tend to be a great partner for families in helping them provide oversight and direction in advance of setting up trusts and estate planning, and then at the time of administration of estate planning. So there’s some real value that we can bring to the table when it comes to helping families understand what the moving pieces are in advance, and then also at estate settlement time, and then also to be able to honor your intent and wishes as the person who passes this money or resources on to family or charities.

Jon Meyer: That’s great. And one thing I want to point out Is you guys are located out of South Dakota, which is a state level issue. Why don’t you, again, give me a, you know, a few minutes on why South Dakota over other states in the union? That’d be great.

Chad Halbur: Perfect. Yeah, South Dakota, they’re– South Dakota has a lot of favorable trust laws that can provide some meaningful impact and benefit for our families as they look through estate planning and transfer strategies.

Chad Halbur: One of the benefits is South Dakota does not have a state income tax, so there’s the ability to not have the trust pay a state income tax if certain circumstances and assets are aligned. South Dakota has some of the best trust decanting language in– of all the 50 states, so there’s some real benefit in being able to have a certain amount of flexibility in being able to modify trust and adjust trust after they’ve been set up.

Chad Halbur: Asset protection, I think South Dakota ranks number one or number two in asset protection when it comes to making sure that our beneficiaries have these assets protected, and there’s no surprises that they get encroached upon by creditors or other, other scenarios. So those are really the primary things.

Chad Halbur: The last one, I guess, really being dynasty trust provisions. When South Dakota was one of the first states to put in dynasty trust provisions, meaning trust assets could go on in perpetuity. So if we wanted to look at something like a Rockefeller trust or a dynasty trust where someone can have meaningful benefit and legacy for their family for two, three, four, five multiple generations, South Dakota can definitely accomplish that for our families.

Jon Meyer: Good to know. Well, one of the reasons I wanted to have you on, and you know this, is that you and I sit around and chat about All the mistakes people make in estate planning, and particularly because everyone seems to think that this is all about, well, the lawyer will write an estate plan. But you and I get to see what happens with the second generation, the third generation, which is kind of where the money dissipates.

Jon Meyer: I don’t know the exact stat, but it’s something like half the money’s gone by generation two and all the money’s gone by generation three. Is that about accurate?

Chad Halbur: Yeah. There’s this whole adage of shirt sleeves to shirt sleeves in three generations, meaning, you know, the first generation doesn’t have a lot of money, and they accumulate money in that first generation.

Chad Halbur: The second generation has seen some struggle, but mostly privilege, and so their expectations of money have changed a little bit from the first generation. And then the third generation, in many scenarios, again, this is stereotyping, but in many scenarios they haven’t seen much struggle. They’ve only seen opportunity and abundance.

Chad Halbur: And if they don’t continue to reinvent their family lines, the businesses, the assets, and the growth, money eventually runs out. And the adage of shirt sleeves to shirt sleeves in three generations is where this comes from. By the third generation, if you think about it, assets have been divided in multiple ways.

Chad Halbur: If you’ve got a husband and wife that divide it and they have three kids, then that’s divided by three. And then that next generation three, they have three children in that, we now have assets really being divided in a lot of ways. So what was a lot of money for generation one has really been distributed out and has been spread out significantly.

Chad Halbur: So if each generation isn’t continuing to build on that wealth and grow the assets, you know, it doesn’t last forever. So we want to really be intentional in how we look at estate planning and succession planning and making sure our clients understand good strategies that can help them accomplish their goals.

Jon Meyer: So you bring up something I want to dig into a little bit, which is maybe I can– I’ll position this question two different ways. You pick the one you like. What are parents doing wrong as they put together their estate plan? Or said another way, treating children fair and equal is very different. Fair is very different than equal, and maybe that’s where parents go wrong.

Jon Meyer: But talk to me a little bit about where parents go wrong as they start to go down this path of creating an estate plan for their kids.

Chad Halbur: There’s so many things to unpack there. Let me just start with the first thing I can think of is fair and equal are really two different things. If we look at different scenarios, we have family members who need more help than others in a lot of cases, and that doesn’t mean that you don’t love them as much if you give less to one and more to another.

Chad Halbur: It really means you’re looking at this from a standpoint of need versus equality, and that’s okay. The other part that I think is important, and I say this to a lot of my clients, inheritance is not an outright expectation. Inheritance is a gift. So the fact that generation two thinks generation one should do it exactly the way they would do it, I disagree with completely.

Chad Halbur: Generation one grew the money. Generation one had accumulated the money. If they want to spend it all during their lifetime, then do it. If they want to share it with charity, then do it. If they want to give it to family, then do it. I’m a big advocate of trust and estate planning should be a function of goals and objectives, and we really try to build in family values and, you know, what is important to these people when we build trust and create structures to allow these assets to go on for more than one generation past their lifetime.

Chad Halbur: Building off of what do they do wrong I think there’s a couple different approaches, and we can get into family dynamics, and I know you probably have this teed up for later. So, family dynamics are a big piece. I’m gonna pause on most of that discussion. But what I see is some families are more open about conversation about money and resources and how money can be a tool, and others are very private about it.

Chad Halbur: There isn’t a right or wrong answer. But what I’ve found is those families that communicate more openly about money and how money is a tool, and not just to be accumulated only, but also how it can be used for good and how it can be used to better their family members, tend to build better plans. And when they build better plans, it comes in the form of a variety of ways.

Chad Halbur: One, first of all, you gotta start somewhere. So the first and most important thing is get a plan done. Ninety-nine percent of the plans that you’re gonna build are not irrevocable. They have the ability to be changed. They have the ability to be modified. So get a plan in place, understand how that plan works, identify what you like and don’t like about that plan, and this goes back to revisiting the plan every three to five years or five to eight years.

Chad Halbur: Identify what you wanna see changed. So as we look at these plans, families that really do this well are incredibly intentional and have spent multiple iterations of their estate plan, whether it’s they’ve literally changed the plan two or three times, or whether they’ve just chicken scratched it on paper how they wanna see the change, you know, five or six or seven or eight times.

Chad Halbur: Being intentional about it really has a meaningful impact in what the outcome is. And then the second piece is by having these conversations and reviewing it with some regularity, it’s really important because you grow in your knowledge. As you grow in your knowledge of what it can look like, you’re able to look at being more sophisticated and more intentional with how the plan lays out.

Chad Halbur: And I have always found that when you do that, you can get a better result for your family because it becomes what you want, not what the lawyer drafted as standard legal documents

Jon Meyer: I think one thing that you and I would agree on when you do family meetings is communication’s the key, because more often than not, parents are not getting their kids in the room in advance of doing estate planning.

Jon Meyer: They just assume they know what the kids want, and half the time the kids don’t want something. Like, perfect example, kids don’t always want the family cabin, and the parents anguish over who gets the family cabin. I don’t know if you agree with that, but-

Chad Halbur: I do agree with that, and I think just having conversations about, having conversations about some of the unique assets, as you said, having conversations about what the money can do and how they can use it, I think is really important.

Chad Halbur: What we see oftentimes is children– Well, let me say this. I think family meetings are really important, and I strongly encourage it for all of our clients for a couple of reasons. One, I think it allows you to align with the family, generation one, generation two. Most generation one parents are willing to be flexible in the outcome if they really understand what generation two wants and how they would use it.

Chad Halbur: Now, there are some that wouldn’t use it the way they would want to. Yep. And we have to be strong in that position and make sure that we’re getting what generation one or the grantors want to see happen. So I think that’s important. The second thing is, and I f- I found this really interesting, generation two, especially as generation two gets into their 50s and 60s, they’re starting to think about this for themselves.

Chad Halbur: They’re starting to see their 60, 70, and 80-year-old parents’ health decline. They’re starting to see their abilities day-to-day decline, and they’re worried about their parents. They don’t necessarily want to pry and know all the details or know the numbers or know, you know, all the specifics per se, but what they do want is they want to know their parents have a plan.

Chad Halbur: They want to know their parents have a plan that is intentional for them, that is well thought out, and can be executed without a lot of problems. Because what happens is, in a lot of cases, generation two is gonna have to come in and help clean up some of this, or help organize some of this, or help clear out the house or some of the family possessions and, you know, a lot of times they’re busy with their own lives.

Chad Halbur: So it’s something where I think that communication is really important.

Jon Meyer: So you touch on something that I wanted to touch on, which is quite honestly picking the wrong trustee. Oftentimes, I think families name I, one of the children is trustee, and the reality is that child might be smart, they might be a doctor, but how many doctors have time in their day to stop and deal with settling an estate?

Jon Meyer: So just talk a little bit about how– what picking the wrong trustee looks like, and what are some of the options out there that people could do to kind of alleviate that problem?

Chad Halbur: Yeah. I’ve seen some really interesting strategies on how they choose a trustee. One is the oldest child, one is the oldest male, and again, sometimes this is, is a little stereotypical, but that’s what we see.

Chad Halbur: And then we see someone who has a successful profession, like you said, doctor, lawyer, something financial person who they think would understand this best. The two things that definitely come to mind is they tend to be the busiest. They tend to not have the time and ability to do this. And then the second thing I would say is, and I had a, another advisor share this story with me.

Chad Halbur: We were working with a client, and the client really wanted to have his kids be the trustee. And he was strongly encouraging we use a corporate trustee, which is what Cornerstone is. And the way he said it, he said, “I have never seen a sibling relationship improve when one of the siblings is a trustee over the other sibling’s money.”

Chad Halbur: And I think that’s the simplest way to say it. Relationships tend to get damaged when someone’s making financial decisions on your behalf because it’s assumed they’re smarter, they’re the chosen one. Whatever child two feels in his head, you know, there’s so much family dynamics that come into this, you don’t wanna add more.

Chad Halbur: And I’ve heard it said, “He was always the favorite child, that’s why he’s the trustee. He was the one who always got special treatment, that’s why he’s the trustee.” And all of those emotional components absolutely come into play when we work with families and when we try to look at estate planning and being strategic with how we do this.

Chad Halbur: So for a lot of our clients, they really value the idea of an, an independent third party. They value the idea of having someone that can partner with them throughout their lifetime and help them make good decisions so that when it comes time to take over the estate planning, or I’m sorry, the estate settlement and/or the distribution of assets, and if any of those assets stay in trust, the oversight and management and administration of the trust, that there’s a lot of value in having that relationship I always say clients are putting a lot of trust in a trustee that they’ve never met.

Chad Halbur: There are so many clients that will put in a big bank company, trust company into their documents because they bank there. Well, if you look at any of the top three big banks, they do have trust departments, but those trust departments are pr- typically gonna be really good answers for people who have $150, $250 million in assets or not.

Chad Halbur: For someone who’s got five to 10, $30 million, they’re just an account number. There’s no relationship there. And what our clients really value in us is that we’re building a relationship with them over time, and we’re making sure that we’re understanding what their goals and values and intentions are.

Chad Halbur: Because a document is nothing more than a black and white document that the trustee gets to interpret. If we don’t understand what makes that family tick, what makes that family successful, what values they have, it’s really hard to step in the footsteps of a parent and try and Facilitate money and values the way they would.

Chad Halbur: So if I can, I’ll share a story that really impacted my career. Is that okay?

Jon Meyer: Yeah, go for it.

Chad Halbur: So I had a client who set up trusts for his two kids, and both of these parents, generation one, were still alive. So they were doing some estate planning, some advanced estate planning, and they wanted their kids, who were probably 18 years old at that point, to have trusts set up for them.

Chad Halbur: Those trusts were established. Fast-forward five or six years, some of the kids started wanting to use the money. So one of the children came to me and said, “Hey, I would like to… My family’s growing. I’d like to get a new car that’s a little bit bigger for my family.” So I was able to talk to the beneficiary, got some information about what he was looking for.

Chad Halbur: He told me he was looking for a Toyota, kind of an SUV, and that he was going to go shopping. So this trust was big enough that, you know, the car purchase wasn’t going to be outside of the scope of reasonable. So a few days later, he calls me from the dealership and he says, “Hey, I found the car. What’s the next steps?

Chad Halbur: What do we do?” And I said, “Perfect. Why don’t you let me talk to the salesperson? How much is it, and what type of car is it?” Well, he bought some kind of Toyota, but it was the top-line SUV, and it was a $98,000 car, and this was 10 years ago. So, you know, I have this m- little mini heart attack thinking, “Oh, man, most of my clients are not going to value their 23, 24-year-old kid spending $100,000 on a car.

Chad Halbur: You know, how do I get out of this? How do I work my way through this?” So I played it cool, and fortunately, the grantor was still alive because he had set these up during life. So I call client and I say, “Hey, client, just talked to your son. He’s looking at getting a new car.” He says, “Yeah, I know. His family’s growing.

Chad Halbur: We talked about it, and I support the idea of getting him a new car.” So I respond, “That’s great. Did you know that it’s a $98,000 car?” And he said, without skipping a beat, “Let him have it.” And I said, “Excuse me?” And he said, “We’re a car family, Chad. He drives my Ferrari, he drives my GTR, he drives my Corvette.

Chad Halbur: That’s just who we are. It’s the kind of things that we, we find important in our family and things that we spend money on.” From that day going forward, I knew that every family has something. It’s horses, it’s art, it’s cabins, it’s travel, it’s cars, it’s something. So our job is how do we get to the heart of what’s important to every family and be able to say yes to the things that most other trust companies will say no to, so that we can continue to support the family values as they sit with that individual family.

Chad Halbur: So understanding who our clients are, what they value, is a big part of making us different and being able to say yes to the right things and no to the other things that we should be saying no to.

Jon Meyer: So to that point, you brought this up earlier in your comment, you want to be around forever to support the next generation and maybe a third generation.

Jon Meyer: One of the things that’s really changed in life is that more and more we’re seeing that when money’s put into a trust for the next generation, it never comes back out. Part of that’s done to protect it from lawsuits and divorces and things like that. But what are things like that? What are trends that you’re seeing that have shifted over the last 10 years of your career even, 20 years of your career, where it’s like it’s different now than it used to be, and where are things, you know, headed in that light?

Chad Halbur: So a couple things come to mind. One is I think people Are starting to be more flexible with their trust language. Trusts have changed quite a bit in the last ten years, and here’s how I would explain it. In the past, the trusts that I used to see would say outright distributions at age thirty, age forty, and age fifty.

Chad Halbur: And the idea being that their children would be mature enough and old enough to be able to make good decisions. And by putting s- a sprinkling system in place, meaning they get some of it at thirty, some of it at forty, some of it at fifty, they’ll learn how to use this money effectively. Now, what we’ve seen is that if someone doesn’t have a good financial pattern, getting more money and playing with it doesn’t necessarily solve it.

Chad Halbur: So they don’t necessarily get better when they get more money. The issues tend to become bigger issues. So I have seen that the idea of those outright distributions at specific ages probably aren’t the right answer for most families. The second piece is, and I’ve had clients say this, there isn’t a spouse that doesn’t understand when the outright distribution’s gonna happen.

Chad Halbur: So if we’re trying to protect these from creditors, the biggest creditors we see, unfortunately, are divorce. And I don’t mean it in anything negative, but the truth of the matter is, where we see assets distributed and broken up tends to be first and foremost in divorce. And a lot of our families really wanna see these assets stay within the family.

Chad Halbur: So when you do an outright distribution at age thirty or forty or fifty, what spouse isn’t gonna stick around for another year or so, assuming, you know, es- assuming health and healthy relationship or whatever, to get that distribution? So what we’re seeing i- is really that lifetime trusts are becoming more and more popular.

Chad Halbur: What a lifetime trust is, it’s a trust that stays– the assets stay in trust for the entire life of the beneficiary. That doesn’t mean it can’t be distributed out. That doesn’t mean it can’t be fully used up. But it’s over– It is kind of part of the trust assets for the life of the individual. That has been a big trend.

Chad Halbur: And if you have a friendly trustee, meaning a trustee who’s not looking to hold the assets for the benefit of the trust company, but looking to do what’s right for the beneficiaries, lifetime trusts are a really smart answer The second thing, and I’m working on this with another advisor right now, building multi-generational trusts.

Chad Halbur: So giving trust to generation two, and then setting up trusts for generation three, and then when generation two passes, all of those assets roll into generation three. So we’re replenishing the pot at each generation if those assets continue to not be spent down. It creates a lot of opportunities for individual families to make good estate planning decisions on their family line.

Chad Halbur: Meaning, if they’ve got a taxable estate already, why would they spend those assets? Why wouldn’t they continue to keep them in trust, allow it to pass on to their kids when the time comes, and be able to keep that outside of their taxable estate and from paying estate tax on them? So there’s some really interesting ideas right now that they’re not new.

Chad Halbur: I’m just seeing them become more popular, more common in, in planning practices.

Jon Meyer: So let’s pretend you go the other direction towards Mom and Dad have passed away, next generation’s taking over. What are the surprises that these families have about trust administration, what Mom and Dad with the– did with the estate plan?

Jon Meyer: What surprises families, positive or negative, quite honestly?

Chad Halbur: So the first thing that comes to mind is how long an estate plan– an estate settlement takes. You know, we’ve had clients that say, “Hey, you know, my parents passed away. You guys are listed as executor of the estate.” They give us information, and then two weeks later, they say, you know, “Why haven’t I gotten my distribution yet?”

Chad Halbur: So not understanding all of the moving parts is something that we try to educate them on. On the front end, to file an estate tax return, you have nine months, and then in addition to that, you can get a six-month extension. And then on top of that, no one’s gonna sh- distribute 100% of the assets until you get the IRS letter saying that they’ve accepted the return.

Chad Halbur: So most estates take eighteen to thirty-six months to be fully distributed, and a lot of people don’t understand that, and people get frustrated. But the truth of the matter is, we have to make sure we settle all the obligations of all creditors, including the IRS being one of the biggest ones, and they’re the least forgiving of all of them.

Chad Halbur: So, you know, that takes time. The second piece is sometimes people are overwhelmed ’cause they didn’t know that these assets were coming their way, and they are ill-prepared for the amount and responsibility that comes with it. So when there’s outright distributions, we see that happen, and they are terrified in some cases because they’ve never had…

Chad Halbur: You know, maybe they made fifty or a hundred thousand dollars a year, and they’re getting five million dollars. They don’t know what to do with it. They have a huge sense of responsibility to do the right things with it. They don’t feel equipped with the knowledge on how to do it the way their parents did or the right way to do it to preserve and protect the assets.

Chad Halbur: And instead of it being a blessing, it becomes an obligation and a curse So being able to have these assets in trust for the benefit of their kids with a support team like a trustee and/or a really strong investment advisor has a ton of emotional support and financial support for that next generation.

Jon Meyer: Yeah. It’s interesting. I have had this conversation recently where mom and dad feel so good about the ability to pass on a lot of money, and yet they don’t recognize the responsibility and sometimes negativity that comes with that once someone gets it. So I f- I do think that happens more often than people want to admit.

Jon Meyer: One other thing I want to bring up with that, though, that if you could expand on too is sometimes we run into scenarios where after mom and dad die, we find out that the estate plan was never funded correctly, things– beneficiaries weren’t done correctly. Talk about that part of it because that’s the part that lawyers don’t talk about enough.

Jon Meyer: They draft the documents, but they don’t always do the follow-up needed.

Chad Halbur: Yeah, I think you said this early on. I think both your business as an investment advisor and financial planner as well as our business as trustees, we see a lot of what happens after the fact, and we see some of the messes that have to be cleaned up.

Chad Halbur: So one thing I think is the worst, the one thing that really frustrates people the most is when a beneficiary doesn’t get changed on an IRA, right? So you have a trust document, but the IRA falls outside of the trust document. So, you know, we have seen this in a couple cases where husband and wife get divorced.

Chad Halbur: The individual that we work with never changes the beneficiary and still has the divorced spouse on as beneficiary of a million-dollar IRA, and nobody’s really happy about that.

Jon Meyer: No.

Chad Halbur: Kids are super frustrated. Surviving spouse, the second spouse is really frustrated. A lot of disappointment there. The other thing is just in general.

Chad Halbur: If you’re not– You know, when you set up a revocable trust, the revocable trust is a tool that allows you to have an orderly distribution of assets at death. That’s really what it’s intended to do, and to avoid probate. So what we see in a lot of cases is trusts are drafted really well. Sometimes real property are put into those trusts, but the brokerage account, the, the cabin or one of the houses don’t make it into the account, and now you have a probate estate.

Chad Halbur: So without proper– a proper will to have a rollover will or a few of those other estate planning tools, you end up having a probate estate anyway, which becomes public record. It costs more money, and it takes a longer amount of time to settle the estate. So there’s just inconveniences as well as some privacy issues that a lot of our clients aren’t thrilled about when assets aren’t properly titled.

Jon Meyer: And now you’re talking about Michael Jackson and Prince and Elvis Presley and everyone that didn’t do it correctly

Chad Halbur: Yep. And I would say, uh, this, it’s a great example. You’ve got some real genius people there, and our clients, in a lot of ways, are incredibly brilliant, genius people in the trade and the skill that they’re in.

Chad Halbur: That’s why they have become so successful. But they really need our support to ensure that the I’s are dotted and T’s are crossed on the areas that they’re not experts in, and they really rely on us and their team of financial advisors to ensure that those pieces are taken care of. And too often, unfortunately, we find that mistakes are made or things are missed, a- and it makes it more complicated than it needs to be.

Jon Meyer: Yep. Let’s pivot a second. In, in my last podcast, I, I actually interviewed Blake about selling a business and stuff. And too o- so often we see business owners, as they’re thinking about selling a business, suddenly say, “Oh, and I don’t have an estate plan.” There are things that business owners could consider doing with an estate plan, whether it be charitable or other issues, prior to selling a business.

Jon Meyer: Could you talk about that for a second? Uh, c- ’cause I view this as, when I say this episode’s a little bit about what can go wrong, I view this as lost opportunity when I don’t see it done right.

Chad Halbur: Yeah, I have a client right now that I’m working with that’s a great example of that. He has a successful business.

Chad Halbur: He’s continuing to see the assets grow and grow, and we’re doing some planning right now with him. He has no intentions of selling the business at this point, but the businesses are growing so fast that he’s creating estate planning and estate tax issues. So we’re doing some proactive things. In this case, we’re looking at gifting some of these assets in kind, so the business asset into trust for his kids.

Chad Halbur: And by doing that, there’s some tax benefits, there’s some strategies that we can talk about. One is, the tax benefit is if you gift shares of a LLC, you can usually get a discount on the value of that asset for minority and lack of control. So if you gift, let’s call it a million dollars in business assets, you know, with the discounts, you may only be using $800,000 of gifting power of your exemption amount to do that The second piece is for a lot of our business owners, the biggest growth asset that they have is their business.

Chad Halbur: So continuing to hold that asset until they pass can sometimes really create difficult estate planning and exemption issues for them. If we get some of that growth out of their estate earlier, it can create a lot more efficient transfer of tax options for them. So if we can get it out at a million dollar value, discount it to eight hundred thousand dollar value versus seeing it grow for another twenty years and now become a mil- a ten million dollar asset, you know, it, it just, it changes the equation on what we’re trying to accomplish.

Chad Halbur: Now, that million dollar asset that was transferred out is a ten million dollar asset, but it’s an asset outside of his taxable estate, and it’s an asset that the kids now have the ability to get benefit from. So there’s a lot of different ways that we can look at that. The other one that comes to mind is just charitable planning, and you talked about that.

Chad Halbur: So there’s ways that prior to the actual, the business being sold that we can look at some charitable donor-advised funds. We can look at setting up charitable remainder trust, charitable annuity trusts, some charitable trusts that can give a tax break that can benefit the business owner. Now, when I talk about charitable trusts, you know, we talk about charitable trusts for clients who are charitably inclined.

Chad Halbur: If our clients aren’t charitably inclined, it’s just not a great answer. So making sure that they understand what it is that makes sense for them and being able to offer those options is important.

Jon Meyer: So let me step back a second. You talk about strategy here. Let’s talk tactics for just a second because what I’ve seen is when someone passes, people just can’t find stuff.

Jon Meyer: Any tips or tricks on your end as to what family should be doing so that at the end of the day, everyone can find the right documents, find the right passwords, all the insurance contracts, deeds, anything they might need?

Chad Halbur: I do. I have a couple of suggestions. One is for the do-it-yourselfers, there are systems out there that you can use.

Chad Halbur: Knockbox is one of them. It’s N-O-X… What is it? How do you spell it? N-O-X-B-O-X. All it is is a filing system. It can either be an electronic filing system or it can be a paper filing system. But it helps you think about what assets you have and organize them in a spot where your executor or your family members can find them efficiently The other thing that we do when we work with our clients, we have clients where we’re listed in a document at a future date.

Chad Halbur: So it’s a revocable trust. They are managing the revocable trust right now. They don’t plan on passing assets until they pass away. At that point, you know, they’re asking a corporate trustee like us to step in, help settle the estate, and then distribute the assets. We do meetings every three to five years with these clients to identify a net worth statement, list where the assets are and estimated value, unique assets that require extra hand-holding or support.

Chad Halbur: Business assets tend to be that way. In those cases, where are they? Who owns them? Do they have a succession plan? I mean, do they have a team that can take over, or is the business one hundred percent dependent upon this business owner, and without this business owner, the value of the business is either materially impacted or worthless?

Chad Halbur: So in cases of business transition, making sure that they have a plan for succession is really important. You can have a great estate plan, but if the majority of the value of the estate assets are the business, and the business has not a lot of value, if the primary, you know, owner isn’t operating or the relationships or the connections or all those things, th- then the value really goes down meaningfully.

Chad Halbur: So there’s a lot of things that we need to think about and look at that. The other part is there are some unique assets that we have to be understanding of. You know, some of our clients may have, call it cryptocurrency, call it gold coins, call it a painting that’s worth $5 million. All of those take special care, and identifying where those are and being able to understand how to access those is really important.

Chad Halbur: We hear stories in our industry when we go to conferences about estates that were settled and in the wall of, you know, the utility room, not in a safe, just behind a wall, a sheetrock wall, you know, there’s 10– you know, $5 million worth of gold coins that nobody knows about, right? And the family thinks they know, and then the family assumes someone stole it, right?

Chad Halbur: So when it comes into family dynamics, all of these things come into play, and the best thing to do is have someone that you can trust that can oversee and manage at a high level the moving parts of your estate and sometimes it’s a family member, sometimes it’s a corporate trustee.

Jon Meyer: I don’t know if this is still true with this next generation coming up, but generations older, let’s say people now maybe 80 and older, when they’ve passed away, I’ve always told the family, “Check their Bible or other books in their library because you’ll probably find some cash.”

Jon Meyer: And I have had people come back and say they have found thousands or tens of thousands of dollars in cash because that generation really believed in making sure there was cash laying around the house in case something dramatic happened, right? So to your point, people keep things hidden for whatever reason, and it’s, h- it’s hard to get people talking about it, but people sh- you know, families need to talk about this stuff earlier, so they uncover it.

Jon Meyer: So let me just round this out a little bit. What am I not asking you that you think is important people should understand about what goes wrong?

Chad Halbur: Well, one of the things that you’d asked are trends, and one thing I’m seeing with a lot of our clients now is they’re continuing to hoard and accumulate assets when they need to start transferring and gifting these sooner during their lifetime.

Chad Halbur: Let me give you a couple of examples. If you look at longevity and how long people are living, you– we have people living to age ninety-five, and then their kids are seventy-five, you know, seventy-five or eighty years old when they inherit a bunch of money. You know, at that point, they’ve already made it.

Chad Halbur: They’ve already kind of had to figure out their financial future. And there isn’t a whole lot of benefit that can be provided to someone who is in that camp. And it can actually create some really difficult estate planning issues and/or elder abuse issues that we’ve seen as well. So what I’m seeing as a trend and what I’m communicating to some of our clients is, if you think your kids can be trusted with money, then let’s start giving some annual exclusion gifting to them and see how they manage it.

Chad Halbur: If you don’t think they can be trusted with money, let’s start funding trusts earlier and have a distribution provision that allows them to have access to get access to this money earlier when they’re struggling with paying college tuition for their kids, when they’re struggling with saving for retirement, helping their kids buy their first home, a handful of things like that.

Chad Halbur: I’m starting to see that become a bigger and bigger trend. And where I’m seeing it, again, is in clients who have discretionary income above and beyond what they need for their own retirement. But I do think that’s a trend I’m seeing, and I do think it’s a positive trend. Helping– I-if the goal is to help your kids, to be able to help your kids and educate them in a way that’s consistent with what your goals and values are, there’s no better time to do it when you’re alive.

Chad Halbur: Where I see the disconnect is parents in generation one give it to their kids, and then it isn’t spent the way they want to, and then they get frustrated, right? Truth is, maybe that’s a good solution for a trust, maybe that’s a solution where you just gotta let go. You know, i- at the end of the day, the, if your plan is to give them the money anyway, you gotta start trusting them at some point.

Chad Halbur: And I think if the plan is to get them the money, I have seen it start to happen sooner so that the generation one can see the benefit. They can see the college tuition paid for their grandkids. They can see, you know, the, the benefits of traveling with their kids and being able to do things that their kids wouldn’t otherwise afford, creating family memories together.

Chad Halbur: And in some cases, they’re just paying for that vacation on behalf of the family. That’s great, too. But spreading that money out a little bit earlier is what I’m starting to see as a trend, and I think it’s a positive trend for families that have wealth above and beyond what they need over their lifetime.

Jon Meyer: Well, and it goes to the book Die With Zero. It’s basically one of the things he writes about is kids need money from age 25 to 40 ’cause that’s when real life happens with kids and houses and job changes and whatever else. And so waiting to give people money in their 60s and 70s doesn’t add a lot of value.

Jon Meyer: And the thing that I always tell f- most of my clients, too, is if you don’t like what your kids are gonna do with the money, then you should spend it more. You should fly first class ’cause your kids will fly first class. So why don’t you enjoy it more? And, and that’s hard on people.

Chad Halbur: Yep.

Jon Meyer: So, well, listen, I want to thank you for coming on today.

Jon Meyer: This has been great talking to you. Probably have you back to talk about some real fun topics here and there, but it’s just fun catching up on what’s going on in, in the world of the trust.

Chad Halbur: I appreciate your time. Glad to help out, and there’s, I think there’s more s- more to come, right? There’s always new stories and new opportunities that come up.

Chad Halbur: We can share how to improve this process for some of our clients and keep them in a good spot.

Jon Meyer: Well, thanks, Chad, for joining us today, and why don’t you tell us where we can reach you if we have further questions?

Chad Halbur: Yeah. You can reach me at my email address, which is my first initial, last name, chalbur@cornerstonetrust.net, or you can find our website on the web at www.cornerstonetrust.net.

Jon Meyer: All right. Thanks, Chad. And for anyone wanting to see more of what’s going on here at BGM or listen to any of my other podcasts, feel free to check us out on bgm360.com. With that, thanks, Chad, for joining us, and everyone have a great day.

Chad Halbur: Thanks, John.

 

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