If you couldn't make your own decisions tomorrow, would your family know what to do?
Many adults are caring for aging parents while raising kids, and their own estate plan keeps getting pushed aside.
Stephanie Rapp, a trusts and estates partner at Day Pitney, joins the show today to explain the estate planning documents that matter most.
Listen in as she covers how a power of attorney, healthcare surrogate, and living will work while you're alive, and how a revocable trust passes your assets after you die.
You’ll learn how to start your estate plan with confidence to protect the people you love.
What You’ll Learn:
The 3 documents that protect you if you can't make decisions for yourself.
What to know before signing a power of attorney in Florida.
How a revocable trust works during your lifetime and after death.
The common mistake that leaves many trusts empty.
How one simple account form can override your will or trust.
What probate does well that most people don't realize.
What the boomerang effect is and how it can backfire with your kids.
Ideas Worth Sharing:
"If that revocable trust isn't funded, then it's really not effective until after probate on your death. It's not going to help you during life, and it's not going to help you during your incapacity." - Stephanie Rapp
"At the end of the day, you are the one that knows your family the best and that dynamic the best. And so you have to deal with that, and you have to address it." - Stephanie Rapp
"Don't be scared. It doesn't have to be scary. We can simplify it for you. And it's an important thing to get done for you and your family." - Stephanie Rapp
Resources:
Stephanie Rapp: Website | LinkedIn | srapp@daypitney.com | 561-803-3523
About Our Guest:
Stephanie Rapp is a partner at Day Pitney in West Palm Beach and a Florida Bar Board Certified Wills, Trusts and Estates Lawyer. She works with high net worth individuals and families on customized, tax-efficient estate plans shaped around their family dynamics and long-term goals. Much of her practice involves clients moving their domicile to Florida, including homestead issues and federal estate and gift tax planning, along with estate and trust administration in and out of court. Stephanie earned her J.D., cum laude, from Southern Methodist University School of Law and her B.S., cum laude, from the University of Florida, and was named to Palm Beach Illustrated's Top Lawyers list for Trusts & Estates in 2023 and 2024.
Connect with Us:
If you're ready to stop avoiding your finances and start building the future you deserve, schedule a free call with me at pelicanfinancialplanning.com and let’s create your personalized financial plan together.
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Read the Transcript:
Stephanie Rapp: It's a little bit different and I think, and I find it to be the hardest. I think that's the hardest relationship is dealing with your aging parents or an aging relative that you've been deemed to be the one that takes care of them is you have to accept in that instance that, at the end of the day, you don't have control because they're adults.
Welcome to The Wealth Development Studio. I'm your host, Genevieve George, Senior Financial Advisor and Founder of Pelican Financial Planning & Wealth. Our goal for this episode is to provide clarity about today's financial topic, inspire you to be brave with your questions, and gain confidence in your financial future. So take a deep breath, grab your favorite cup of coffee, and step into the studio. Your dose of financial empowerment begins now.
Genevieve George: Right now, a lot of us are holding down two jobs outside of our actual paying jobs. We're helping our aging parents navigate their own health and finances while raising kids who need us just as much. It's a lot to carry, and it's easy to feel like you're falling behind on your own plans while you're busy holding everyone else's together. The good news is there's a way to get real clarity on this for your parents, for yourself, and eventually for your own kids while not turning it into an overwhelming task on your ever-growing to-do list.
Today, we're breaking down what a complete estate plan actually looks like at each stage of life and the documents that matter the most, and how to avoid what our guest calls the boomerang effect, where good intentions around money and control end up backfiring. Joining me today is Stephanie Rapp, a trusts and estates partner at Day Pitney in West Palm Beach.
Stephanie spends her days helping families build estate plans that actually reflect what they care about, not just generic boilerplate. I first heard her break this topic down for a women's group, the Women's Wealth Collaborative, that we are both involved in, and I loved how she made everything sound just easy to understand rather than, sometimes, things in the legal space can be very dense and not understandable.
So thank you so much for bringing that clarity to us today. So Stephanie, thanks for being here.
Stephanie Rapp: Oh, thanks, Gen, so much for having me.
Genevieve George: Yeah. I'm excited to break this down, and I really think it's so important in that we use this term a lot on the show, clarity. And what does that really mean when we're talking about estate planning in your clients?
Stephanie Rapp: Sure. Well, when I meet with my clients, I divide up the planning a lot into their lifetime planning and then their after-death planning. And by that I mean, it's very important to plan for a lifetime, so for incapacity, when you're not able to make decisions for yourself, but you have your intentions now that you would like to be carried out.
And then for after-death planning, which is ensuring that your hard-earned wealth and the wealth that you have passes according to your wishes after you die. So I like to divide it up that way.
Genevieve George: Yeah. So let's pick on the while we're living component of that. So if I understand you correctly, what we're trying to address is how do we manage if I'm still living but I've become incapacitated, I'm not making financial decisions for myself, what does it really take to address that?
Stephanie Rapp: Sure. So for financial decisions, it's really important that you have a durable power of attorney in place. That's a document where you can nominate a trusted agent. It could be a family member, it could be a friend, it could be a professional that would be able to make either legal decisions for you or manage your finances during a time when you're unable to do so yourself.
But it is also important to remember in Florida particular document, according to our statute that's in effect now, is effective immediately. So you really have to trust the person that you're naming as your agent to carry out your financial affairs, because there is potential that it could be used even while you are competent.
Genevieve George: So that's a big thing that I think a lot of people don't understand is that when we sit down to do our documents, it's important to have this power of attorney so this person or a group of people can come in and help make those decisions if I'm not to. But you say on the day that I sign it, technically that person carries that power.
Stephanie Rapp: 100%. And so I have to often have to review that with clients because that wasn't always the law. It used to be that you could have a spring durable power of attorney that would only be effective upon your incapacity, and I know in other jurisdictions that's still the case, where the power of attorney is effective upon a determination of your inability to manage your financial affairs.
But here in Florida, the statute says that it is now effective immediately. So if you execute a durable power of attorney now, it's going to be effective today.
Genevieve George: But it's still recommended that we go ahead and have that in place or execute that just because something might happen not planned?
Stephanie Rapp: Yes, absolutely. You never know. I mean, you could go out today and get in a terrible car accident and need that to have been in place. So it's absolutely a critical document. I use that and emphasize the fact that it's effective immediately, just to make sure that the clients understand that the fiduciary that they nominate, the person they nominate as their agent, needs to be someone that they trust.
I think that is really important. And do you recommend when you're sitting down with a client, in my own family, that would be my spouse, but is it recommended that there's different layers, that there's maybe a second person or some other professional involved as well if it, if your spouse is maybe not available?
If they can, if the client is able to identify a successor or an alternate, it's best that they do so, right? Because perhaps the spouse at the time that the principal, is what you call the person who's signing the document, is unable to manage their, his or her affairs. Maybe the spouse isn't either, or maybe the spouse is overwhelmed and doesn't want to; then it's good to have a backup.
Genevieve George: Okay. And then so durable power of attorney, is that something that you put in place for every estate package that you're working through for their time while they're living?
Stephanie Rapp: Yes, absolutely. The durable power of attorney, and that covers, like I said, the finances and perhaps some legal affairs. The other one that's sort of akin to the durable power of attorney on the medical side will be the designation of healthcare surrogate. And I tell people that this document controls when there is a possibility that you're going to recover.
So you're not in a terminal state necessarily, but you're in a condition and in a state where at that moment you're unable to manage or communicate your medical wishes. And so similar to the durable power of attorney, under the designation of healthcare surrogate, the principal designates a healthcare surrogate or an agent, a trusted person, to make those medical decisions for him or her when he or she is unable to do so.
And that document actually can choose that it's effective immediately, or it can be effective when two doctors determine that you are no longer able to make medical decisions for yourself. So that's a decision you have to think about because sometimes you don't want there to be a delay.
If the paramedics are there and you're unconscious, you might just want your surrogate to be able to say, "Yes, take them to the hospital, do the surgery, intervene however you need to." But it's a personal decision, and there is an ability to delay the effectiveness of that document.
Genevieve George: Okay. Yeah, that'd be a personal decision based on how the individual feels who they're assigning, if it's immediate or if there's a delay there.
Now you stressed that that is for temporary medical conditions that delay me from being able to make those decisions for myself. But what if there is more of a terminal situation? Is that a different document?
Stephanie Rapp: Absolutely. So the more terminal situation is the living will, and that the legal standard there in Florida is that there's no reasonable medical probability of your recovery. In this document, one way to think of it is that it relieves your healthcare surrogate of the burden of making those decisions when you are in a terminal or vegetative state.
And so that document lists some medical procedures, and you can indicate that you would not like those interventions to be pursued if you are indeed in the medical state where you're terminal, and there's no reasonable medical probability of your recovery. And there's two physicians would need to make that determination.
It's your attending and then another consulting physician that would make that decision.
Genevieve George: And I would think common that you see, you're meeting with somebody for the first time, are they already aware that those are two different documents? Or is that new information to most of the people that are going through this?
Stephanie Rapp: It depends. I think people are nervous about their living wills because you feel like you're signing your life away. They're much, more comfortable with the healthcare surrogate. But when it comes to the living will, there's often a pause, and we sit and review, and I emphasize the legal standard so everybody understands that really it's a world where you're not getting better.
That's when this document comes into play. And sometimes if I also am able to explain that, when you do designate that you don't want certain medical procedures pursued, that as to those procedures, you're alleviating the burden off of your family and off of your designated healthcare surrogate, because it's very clear it was your intent that you didn't want them pursued. And so that comforts a lot of people.
Genevieve George: I've talked about that a lot as well, is like, a lot of what we're doing... Well, I say we, as a collective we, but really I'm not the attorney; it's you doing this. But a lot of what we're doing in the collective we is providing clarity, and providing clarity for that person who is serving as the healthcare surrogate or the person, that being able to have that documented, like if I have a living will and I say, "These are the things that I really don't want to happen," it's already documented, and that person isn't in a position where they have to decide that.
Stephanie Rapp: Exactly. So it's clarity in that instance, as you're describing, it's clarity not only for the person signing the document and who may be in a critical medical condition and a terminal medical condition, but there's also clarity for the family. And so that provides a lot of comfort as well.
Genevieve George: Right. And some peace of mind because in that moment, obviously that person may not be able to communicate their wishes, but they've communicated it in writing at some point in time, so there's at least some sort of guidance for the family going through that.
Stephanie Rapp: Exactly. Exactly.
Genevieve George: Just really powerful. I know one of the other areas, like in your lifetime planning is the pre-need guardian. Explain to me what that is.
Stephanie Rapp: Yes, there is the pre-need guardian. So the pre-need guardian is a document that designates who you would want to be the guardian of your person and your property in the event one were needed. And what that does is it creates a rebuttable presumption in court that that indeed was your intent.
And I'm gonna stop there because the whole point of the durable power of attorney and the designation of healthcare surrogate, and we'll talk about irrevocable trust as well, is to avoid guardianship. So a court will not impose a guardianship or nominate a guardian for somebody unless it's deemed to be the least restrictive alternative.
And these documents, if they're valid, the designation of healthcare surrogate, yes, a living will, but also we're really talking about an agent. So the designation of healthcare surrogate, the durable power of attorney, and irrevocable trust, those are deemed to be lesser restrictive alternatives to a guardianship.
But because you never know, they could be abused down the road by a fiduciary if they were deemed to be ineffective, maybe because of they were... it was deemed that they were the subject of undue influence or duress or mistake or something, then the backstop document would be a pre-need guardian.
And again, that is just another way to tell the court while you were well and competent, that this is who you trusted and this is who you wanted to be your guardian if you were in this situation. So it's used for that purpose.
Genevieve George: And so in cases where you have a revocable trust, is that needed as well? Or is it sort of one or the other?
Stephanie Rapp: It's very helpful, especially depending on the net worth of the individual. But if you have a revocable trust that's funded, meaning that you have assets that are titled in the name of the revocable trust during your life, then it's the trustee that is in control of the disposition of those assets during your life for you, and then after your death, which is not what we're talking about right now, to your beneficiaries.
But during your life, if there's a successor trustee named in your revocable trust, which there needs to be, that individual can manage your finances as to the assets that are in and titled in your revocable trust. So a funded revocable trust provides seamless continuity during incapacity over the management of those assets that are in it.
The durable power of attorney would kick in, frankly, for assets that are not in the revocable trust. They're not titled in the name…
Genevieve George: Outside of the trust. So if I'm hearing you correctly, if a revocable trust is recommended and drafted by your attorney, it is in your best interest to go ahead and title things in the revocable trust.
Stephanie Rapp: It's absolutely critical. It's completely critical to talk about the titling of your assets when you're doing your estate planning, right? If that revocable trust isn't funded, then it's really not effective until after probate on your death.
It's not gonna help you during life, and it's not gonna help you during your incapacity.
Genevieve George: And that's something that I think is that is often missed too. Where I'll sit down with somebody for the first time and I'm saying, "Okay, do you have estate documents?" And they'll say, “Yes, I did that a couple years ago. I think I set up a trust."
And I'm like, "Okay, well, nothing is actually titled in the trust as far as I can tell we need to circle back." Then that activity was actually like just like a, we just set money on fire over there.
Stephanie Rapp: And they've spent money and time and effort trying to come up with the terms of that revocable trust and, gosh, nominating their trustee and trying to figure out who they want it to be in charge of their assets after themselves. And then it's not gonna work because it's empty. So yeah, it's absolutely critical that the funding piece is not overlooked.
And that is, gosh, I think there's a lot of collaboration with the advisors from the get-go, and it's best to have the collaboration from the beginning. But goodness gracious, you have to be in collaboration with them when it comes time for funding, right? And for re-titling assets.
Genevieve George: Because even what we're talking about now, we're talking about trying to get our ducks in a row while we're living and well, and we can handle all of these things on our own. But if we wait until we're not, then that even… I mean, it's a difficult conversation to have. It's a difficult exercise that I've been through it myself.
You do it with families all day long, right? To have to think about, what if I'm incapacitated? what happens when I die? All of these difficult decisions have to be made. But then if you don't actually execute the documents and retitle the assets appropriately and make sure all the ducks are in a row with the other members of your team outside of your attorney, right?
Then it was all for naught, and it's not a fun… I think working with you is very pleasant, but it's not a exciting exercise to have to go through on the personal side to have to think about all of those things.
Stephanie Rapp: No. Gosh. Yes, people don't like to think about it because they're thinking about their mortality, and it's hard to make these decisions about who you're going to trust. It's a very, very difficult process, but it's an important one in that people have a huge sense of relief and gratitude and satisfaction after the documents are signed.
And then, gosh, the sense of relief and satisfaction after they have confirmation that everything is going to pass according to their plan because their assets have been titled in accordance with the plan, is tremendous. And so it's definitely worth it. Another thing that can happen if you forget to retitle your assets is that there might be a greater chance of guardianship coming into play, and that guardianship will involve the court. There are periodic reports that have to be filed with the court. All of the disbursements from a guardianship have to be court-approved. It's expensive. It's an expensive and cumbersome process for the appointed guardian so it's in everyone's best interest to try and avoid that if at all possible.
Genevieve George: Well, and it adds to the stress of the situation too, right? Because if you're in a position where you're going through and you're having to have this guardian appointed and going through the court system, it's because something else very difficult is happening in your life, right? And so it's just like one extra administrative thing that we can avoid by doing this in the right order.
Stephanie Rapp: I think that's exactly right, and that's how it impacts the family. That's how it feels, and it's something they're not used to. It's foreign, and so it makes it that much more stressful.
Genevieve George: And so we've covered a lot of the things that we wanna put in place for while we're still, living. But in the course of going through that planning, we're also making plans for what happens when we die, right? And so how are those documents different and/or combined?
Stephanie Rapp: So it's important to know that the durable power of attorney, the designation of healthcare surrogate, and the living will are gonna be completely ineffective after you die. So those are pure lifetime planning tools, okay? They're absolutely critical, but they're lifetime tools. The revocable trust and a will, the will is only a death planning tool.
The revocable trust is both, okay? It crosses over. So we talked about how the revocable trust is important to provide continuity in the event of your incapacity, but it's also important because it can be used and it is used as a will substitute and as a way to dictate the passing of your assets in a more detailed way that also can involve some tax planning, if needed, after you're done.
So what do I mean, by that? Well, if we're talking to somebody whose wealth exceeds the current very, very, very, very high federal state tax exemption of $15 million, then you're really gonna wanna be talking about a revocable trust for tax strategies. But even if we're not, even if we're talking about the vast majority of us that fall under that $15 million net worth threshold, the revocable trust is important for probate avoidance, okay?
So we talked about how important it is to title assets in your revocable trust during your life. One other great thing about that is that as to any assets that are titled, already titled in the name of your revocable trust on your date of death, they are not subject to probate, so you can greatly minimize and streamline the administration after your death and reduce what may need to go through probate by titling assets in your revocable trust.
It also allows for flexibility with planning, for example, for minors. Nowadays, and we might talk about this a little bit more later, young people are very educated and very bright, but they don't necessarily have the same life skills at as young of an age as maybe prior generations did.
And so more and more frequently, people are desiring to keep their wealth in trust for the children until, for example, age 25, age 30, age 35. And doing that via a revocable trust is a very simple process.
Genevieve George: Well, and it's my understanding, I mean, I think that's a huge, a really powerful tool. And like we did that for ourselves as well because the kids were minors, right?
When we were doing our documents. But it gives you flexibility to plan for your specific family, right? Because if you have a child that is super responsible and can handle that, and you don't have as many concerns, you can set it up one way.
But if you have other children where you think, if they got this money, and it's hard to think about this, right? But if they get this money at 22, what will they do?
And so you can put some sort of guardrails to just help them protect themselves in that they can't just go out and buy a Ferrari like at 22.
Stephanie Rapp: Oh, I think that's exactly right. And people are really able to customize. That was a really good point. I mean, I have a client, they want one side, one child can get it outright and the other one needs it in trust forever, right? And that's very common actually, the more you speak with people, because everybody's different.
So it really allows for customized guardrails and for flexibility in that way.
Genevieve George: And I think it’s… I had a conversation with somebody on a different podcast episode actually, like where they went through this whole project and they were really thinking about, "Okay, we need to do this." There was a liquidation of an a business, so it made them say, "Okay, we need to look at this. We need to put these, different documents in place and get our ducks in a row." And they were still thinking long-term planning.
Well, in that situation, the husband actually passed away significantly earlier than they expected, and the plans that they put in place ended up coming to fruition obviously sooner than they expected.
So they had younger children actually become beneficiaries at ages that they had not considered, right? And so it's a part of the exercise of talking through, we really have to think through this is great, we're taking this and we're having this long-term plan, and we're hoping that we all live to our full, whatever age that we wanna live to.
But in some cases, that's not always what the reality of what happens, and so we have to really talk through, and that's where the trust really helps put those parameters in place too, 'cause you can say, if I pass away and they're 20, this is what I want to happen."
Stephanie Rapp: Absolutely, and there's so many things you can do with it. I was just thinking about that. The fiduciary selection is so important, and by that I mean the trustee. A fiduciary is someone who has a heightened duty of care, right? And so the trustee has this heightened duty of care to oversee the management of assets for the benefit of the beneficiaries.
But we're talking about, let's say, someone wants to keep the assets in trust for their child until they reach 25. What if they want to say, "Well, at age 25, my child can be co-trustee with an independent person," whether that's a professional person, a corporation, or just a friend, a neutral person, a trusted friend.
So that gives the child some say in the distribution of assets that the child would receive, right, in certain situations. but still there's a safeguard there because the child doesn't have sole control over when the child would receive the money. But maybe at age 30 they're, at that point, they're ready to be sole trustee or they're ready for an outright distribution.
So those are additional considerations and things to think about with your planning, with your revocable trust, it's a lot easier to flesh that out in a revocable trust.
Genevieve George: And just for our listeners that might not know, right? a revocable trust that you put in place during your lifetime and you title your assets inside this trust. Assuming you're not incapacitated, it really operates the same as how you had your regular checking, savings, investment accounts operating.
And I think that's important for people to know because you hear the word trust and people sort of, that aren't in our space, right, they sort of lock up like you're gonna put it away forever. I can't access it. But a revocable trust while you're living really operates the same. Is that accurate?
Stephanie Rapp: I tell people it's as if you're owning it outright. I mean, it feels like that during your life. The other thing that comforts people is it can be changed at any time, can be revoked. There's no special modification. There's no going to court. It's not an irrevocable trust, it's a revocable trust.
So just like a will, you can amend it, you can revoke it, you can restate it at any time while you have capacity, right? And so that gives people some comfort too, because the circumstances with the kids change. Their family dynamics change. They might get divorced. Life happens. And it's not set in stone. As long as you have capacity, it can be changed.
Genevieve George: And then what happens when I do pass?
Stephanie Rapp: Sure. So when you do pass, that revocable trust by operation of law becomes irrevocable. So now it can no longer be changed because you, the settlor who had the power to revoke, are no longer living. And then it's pretty cool, automatically all of the after-death provisions that were in that revocable trust are “activated.”
And so now it's time for the person that you named to be trustee, presumably after you yourself, because most of the time you're your own trustee of your revocable trust during your life. That person succeeds and accepts the trusteeship and distributes the assets and manages the assets according to the document, according to the terms of the trust, and passes them to the beneficiaries as you've laid out during your life.
Okay? It really provides the same benefit of planning as a will, but with extra safeguards, and it's a bit more streamlined, because it also gives you that incapacity benefit during your life.
Genevieve George: Okay. So knowing that, right? We put the trust in place, and it's revocable, so it can be changed any time while we are living, and then upon my passing, it becomes irrevocable. But we've put all these parameters, like we had time to sort of customize it with the attorney to say, "This is what I want to happen. Now I'm dead, and all of those things are actually executing in the way that we planned for." I think that's a really powerful clarity tool as well.
Like we talked about the living will side, in that you can... you've essentially put your wishes for how you want everything to flow after you've passed. Is that fair to say?
Stephanie Rapp: Very fair. And I think the extra benefit there is that even if you had, if you have what's called, and most people do when you have a revocable trust, you have what's called a pour-over will. So what that means is that any assets in your individual name, which would be governed by a will they are, gosh, poured into or pushed through the residue clause of the will into your revocable trust.
So even those assets, after probate now, even those assets in your individual name, they get to pass pursuant to the terms of your revocable trust. After your death, it's not only the assets that are titled in the name of your revocable trust that are passing according to your wishes as written in the trust, but it's also the assets in your individual name to the extent that they pass to the residue clause of the will.
So it really is good.
Genevieve George: So I think what's important with what you said, right, we stressed title the things that you can title in your trust, right?
And then they're already addressed. But if there are things that you couldn't re-title or have not re-titled, you'll be subject to probate, but you have a will that says those assets flow into the trust.
But we still have to go through the probate process to have them flow. Is that correct?
Stephanie Rapp: We do. We do. And I like to tell people, complete probate avoidance, especially if you're married and we're talking about the second of you to pass, is really difficult and unusual. And there are benefits to probate. There's something called creditor protection that comes into place.
The creditors period runs. For creditors that you know about, and you serve them with- them within thirty days, you can cut them off. For others that might be out there in the community, they're notified in the newspaper, and after ninety days, they're cut off. And that is helpful to a lot of people to cut that creditor period down because if you don't have probate, then creditors have two full years after your date of death to come after the assets.
Genevieve George: Okay. so probates maybe not as bad as it sounds.
Stephanie Rapp: It may not be as bad as it sounds. I think it's very helpful to minimize the assets that are subject to probate, but sometimes you can't avoid it. You might get an income tax refund that comes to someone's individual name, and that needs to be probated. If you're a membership in our community, there's a...
Gosh, we have so many golf clubs and things like that. So if that membership refund comes back to an individual name of the decedent, that's gonna be a probate asset. So we like to minimize it and retitle as much as we can in the name of the revocable trust, but it's probably not realistic to say that everyone should be able to completely avoid it in Florida.
That’s not realistic and not necessarily the most beneficial thing either because of the creditors period benefit to probate.
Genevieve George: Right. Okay. All right. So I feel like that's important information to know too, because I think that we walk around, we’re like, "Okay we need to do this so that we can completely avoid that." But it's not completely avoidable, but we're essentially trying to avoid it as much as possible so that the process is minimal, maybe.
Stephanie Rapp: Yes. Yeah.
Genevieve George: That’s a good word for it. The transactions that… you use as an example, like a tax refund or golf membership dues coming back or whatever the case may be, those are not massive transactions in most cases. And that process wouldn't maybe be too cumbersome…
Stephanie Rapp: That's right. That's right.
Genevieve George: …for the administrator, I guess, is what... essentially we're trying to reduce the work on the family that's now grieving their loved one to not have to do as much administrative work.
Stephanie Rapp: Absolutely.
Genevieve George: But you're right, there's always something that comes in the name of that person that you're like, "Now what do I do with this check?"
Stephanie Rapp: And just, it's fine. We'll get through it. It's not a big deal. But I don't like to put out there that in every case we can absolutely plan that there will be absolutely no probate. I mean, that's the ultimate goal, but there are benefits to probate as well.
There's often small, amounts that still need to pass through.
Genevieve George: Sure. And so what else should people be considering as they're going through this process, for planning for after the death?
Stephanie Rapp: Sure. the main thing would be the will and the trust. In corollary to that, so you wanna be thinking about who do you want to receive your assets? Who do you want your beneficiaries to be? Everybody thinks about that, right? And that's important. What everybody doesn't spend a lot of time thinking until they come to the lawyer about is who do you wanna be your fiduciaries.
So the personal representative is the fiduciary with the authority to oversee the administration of your probate estate, so assets titled in your individual name. And then the trustee oversees the administration of your trust estate, which is the outside-of-probate piece. Fun fact, in Florida, a personal representative has to be a Florida resident or a very close relative.
So that affects a lot of our clients that are moving down here from up north because—
Genevieve George: All of their family members don't live here?
Stephanie Rapp: Correct. So if it's a close family member, that person could still be personal representative. But if it’s a trusted friend from up north, they're not gonna qualify unless they're a Florida resident at the time, the client passes.
So there's a little something to consider there. No similar restrictions on the trust side. There's no residency restrictions on the trustee side for revocable trust.
Genevieve George: I think you hit on something that I stress a lot to my clients in particularly where we live, right? A lot of people move here in retirement, and one of my first questions is: Do you already have an estate package? Was it written in Florida?
Stephanie Rapp: Yes.
Genevieve George: Because they might have done it in Michigan or New York or wherever, and now they're here and they don't know that, what you just said that that personal representative for your Florida estate has to be a Florida resident or a close relative, right? and so I stress to them that they need to at least talk to an attorney and make sure their documents are in order. But generally I see that the attorneys have to do some sort of amendment for the state of Florida. Is that fairly accurate?
Stephanie Rapp: Yes. Yes and that's often a trigger. The biggest trigger is often homestead. So Florida has a lot of requirements on how… there's the tax benefits to homes or the property tax benefits, but there are descent and devise restrictions on how homestead is allowed to pass after you die.
And often we have to deal with that in the updated estate planning documents for Florida.
Genevieve George: Okay. Okay. All right, so circle back. You were talking about the importance of understanding who your representatives can be and your trustees should be. We'll circle back to that.
Stephanie Rapp: No, for sure. Yeah. So yes, so understanding who your beneficiaries are, understanding who your fiduciaries are, so the people that are gonna be in charge, right, of your assets after you pass away, that's a critical piece. and then I would say in this space, maybe we're not necessarily talking about tax planning, I think we're gonna look again, circle back a little bit to titling of assets because there are also beneficiary-designated assets that we haven't talked about, or joint property that we haven't talked about.
So I've said it about a thousand times, but will covers assets titled in your individual name, okay? Trust covers assets titled in your revocable trust or the assets that the will is saying are gonna be pushed through to your revocable trust. Those two documents control those two things, and that's why asset titling is important.
But let's say you have a joint account with right of survivorship with your spouse or with your child or with your friends, but it has this right of survivorship component to it. That account will pass to the survivor by operation of law no matter what your will or trust says, okay? That's gonna pass outside of those two documents.
Same thing if you have a checking account and you went online and you saw a form that said, "Hey, pick a beneficiary for the checking account," and you typed in your three children's names. Guess what? That checking account that you thought was gonna pass how your will said, which might have been push it over to my rev trust, and then it's going into continuing trusts for these people, is now gonna pass outright to those three children regardless of what your estate plan says.
So in examining who your beneficiaries are under your will and your trust and who your fiduciaries are, we also have to be keeping an eye on asset titling and joint accounts and beneficiary-designated accounts, and how that can defeat your estate plan after you die. Or just understanding that's how the assets will pass.
Because for some people that's what they want, and that's okay. We just need to understand that.
Genevieve George: And that's where, for me, I'm communicating with my clients, "Okay, here are the accounts that are titled in trust, and then these accounts here are really beneficiary designated. Has your attorney provided any wording that they would like used, or do you want these to pass outright?"
Because I think it's important, I mean, and particularly even, on the IRA rules, right? If we're talking about a non-spouse beneficiary of the IRA, they're gonna be subject to the 10-year withdrawal and all these things, so there needs to be, like, discussion around that.
But a lot of attorneys' estate package sort of comes with a letter that says, “Here's how things should be titled. Here's how things should be beneficiary designated."
And making sure that all the parties are on the same page I think is super important.
Stephanie Rapp: Yes, definitely for life insurance and for the retirement accounts especially because like you said, there's the Secure Act rules and all of that, it's important that you review that with your lawyer. Because sometimes you want it to go into trust, and sometimes you want it outright depending on who the beneficiary is and your situation, and that's a discussion to have.
Genevieve George: And I imagine is the process for you is that you're essentially receiving a net worth statement to know what all of their assets are to help them plan for how the titling and the beneficiaries of these assets.
Stephanie Rapp: Yeah, the net worth statement is critical because we can see what you have, how it's titled now, how it should go, whether you need sophisticated tax planning or not. and so it is the initial piece to understanding how the assets are going to flow after you die.
Genevieve George: Now, in the beginning we talked about something that you called the boomerang effect. So talk to me about what that means and is it bad or good, and how do we avoid it if it's bad?
Stephanie Rapp: Sure. So switching gears a little bit, Boomerang Effect, I talk a lot about when we're discussing sort of our lives and how to prepare our children for life and wealth management. In the context of let's just take you and I, right? We're in our early 40s, we have children entering their teenage years and their pre-teens, right?
So how do we set them up? How do we start to set them up for success and autonomy in life skills and managing money? And I think the boomerang effect addresses sort of the fine line between wanting to shield them from failure and wanting to protect them and dictate their every move because we've been through it, and we've been hurt, and we've suffered the consequences, and we don't wanna have to see them go through that, and their reaction is when we try to exert too much control over their decision-making.
So for example, people talk about, I think it's a good idea to have... And I haven't implemented it, so I'm guilty as anyone. If they have some sort of an allowance or if they've been given money for a birthday or they've been given money for an accomplishment, you can have three envelopes: spend, save, and donate to a charity.
And it can help them delineate and think ahead of just dividing up their little wealth. Because if they take money out of that spending envelope and they spend it, then it's gone, and in my case, my 10-year-old is out of money to buy more squishies. She can't do it anymore. And so she's- she'd either have to dip into that save bucket, or she wouldn't be able to donate and help a friend or a charity or something that she cares about until she earns more money somehow to fill up the spend envelope again.
And I think where the boomerang effect is most applicable is what do you do when they've run out of the spend? Do you just automatically fill it up? Do they have to earn it? Do you let them sit with the fact that they overspent? Probably. I think that's the most important thing. Let them sit with that, and don't immediately go out and fill that up again or buy them the new squishy or the new outfit or whatever it is, so that they can learn that everything has a consequence.
Genevieve George: And we're using it, we're using it as an example for our children. But what you probably see something similar with the adults that you work with, right? The aging adults that have adult children, same thing. Where they're getting more and more help, right? The same thing is happening, right?
And then they're trying to build good structure for their inevitable passing and this, these dollars coming into play for these adult children. Is that…
Stephanie Rapp: I do. I see that a lot and people vary with do they want their adult children to even know the extent of their wealth, right? Because a lot of times we have notice provisions in these trusts, but sometimes you can designate someone else to receive the notices, and so the children don't even have a full understanding of what the wealth of their parents is.
That's when we can create also irrevocable trusts, right? So they get that money later and they don't know about it. but yeah, absolutely, it happens that way. so I think it's just with the next generation it's navigating their ability to process consequences and to deal with rejection, failure, and mistakes…
Genevieve George: It builds some good habits and resilience so that they're more capable of managing their finances when they're independent, right?
Stephanie Rapp: Exactly. and the older generation, they struggle sometimes, we talked about this before, with there’s an adult child with addiction. How do I take care of that person in a way that is fair to everybody? And so you have to just counsel them and come up with different options.
But I find the boomerang effect is more with our kids, and hoping that they build that resilience that they need before they get out there.
Genevieve George: Yeah. Yeah. And how do we help guide them in for that, right? Without just keep continuing to fill the spend bucket on their behalf.
Stephanie Rapp: Exactly. Exactly.
Genevieve George: Which is sometimes the easy way out.
Stephanie Rapp: Yeah.
Genevieve George: I don't wanna battle about this. Let's just move on.
Stephanie Rapp: I know. And then on the aging parent side, which is also something we talked about before, it's a little bit different and I think, and I find it to be the hardest. I think that's the hardest relationship is dealing with your aging parents or an aging relative that you've been deemed to be the one that takes care of them, is, you have to accept in that instance that, at the end of the day, you don't have control because they're adults. Especially if you're not their guardian or you're not, they're not fully incapacitated, they're just…
Genevieve George: They’re not incapacitated, they're just…
Stephanie Rapp: …struggling. They don't remember things as well, and they, everything's harder and more frustrating, but they still have capacity, right? That's where it's really, really hard.
And you have to accept it, and you have to sort of release some control over the outcome there in a way that you can retain that string of control with your kids, because at the end of the day, you are in charge legally.
Genevieve George: Yeah.
Stephanie Rapp: So that, I think that’s…
Genevieve George: That's what perfectly puts us in this sandwich generation for trying to manage both of those things, and we have to retain control on our kids and give up control on our parents.
Stephanie Rapp: Exactly. Exactly.
Genevieve George: And on the aging parent side, I've seen families sort of handle it in different ways, and then I'm sure you have as well, where some families are very closed off.
They don't really wanna share their personal information with the kids. Their thoughts are they'll just, they'll find out later, whatever the case may be. And then other families that are more, sort of wide open about it, where they're saying, "Okay, here's what we've set up, and here's why, and here's how we want it to flow."
And do you see a balance between those two or where it goes smoothly and where it hit roadblocks?
Stephanie Rapp: I'm convinced at this point that every single family is different and every single person is different.
Genevieve George: It keeps our jobs exciting every day.
Stephanie Rapp: It keeps our jobs exciting, and I think there's no labeling, right? Because everyone's relationship with their parent is different, and every parent has different issues, and every person has different issues.
No, I don't see... No. I think it's, I think you have to just lean into what you can do, your capacity as the caregiver. What's your capacity with your deck of cards, your kids, your job, your responsibilities what they are, what's your capacity, and then what are the specific needs of your parent or your relative that you're taking care of?
And you just do the best you can to accept what you can't change and to give options and give strategies and give advice and offer help to the extent that you can within your boundaries and within your limitations, and that's all you can do. I mean, people, there's mental health problems that people have that cause issues that are sometimes unresolvable, right?
And there's I mean, think about dementia and the layer of difficulty that causes. And there's physical. People have physical issues, right, that are limiting. But the way that parent perceives them and the way that family dynamic operates within them is gonna be different from one family to the next.
Genevieve George: It truly is too. I think I mean, I say that, genuinely as that's part of what I love about what I do and probably you as well, right? Two people can walk in with the exact same amount of money.
Their plans, their intentions are completely different. And to your point I love that.
I mean, you're essentially saying you have to just do what's right for your family. And as the caregiver, as the parent, all of it, you have to just sort of feel out what is best for your family and get your ducks in a row from a legal standpoint. But there's such an emotional side to this particularly as the caregiver for an aging parent on sort of trying to meet them where they're at, make sure they have everything that they need, but that we're not pushing them.
Stephanie Rapp: Yeah, I agree. I think it's important, at the end of the day, the caregiver's gonna have to put his or her head on the pillow and live with whatever decisions and choices and actions that they took and didn't take, right? And so I think it's important to not be in a box and to lean into your support system and get advice.
But at the end of the day, you are the one that knows your family the best and that dynamic the best, and so you have to deal with that, and you have to address it. So that's my take.
Genevieve George: And we're sort of talking about it here, but I know when you presented to our women's wealth group you really talked about the team effort that this really… the approach that, you're the legal team. You're helping this family develop "Okay, what do you want to happen?"
And we're putting it in writing the appropriately, appropriate way. But who else is on that team in an ideal world?
Stephanie Rapp: For sure. I'm just one piece of the puzzle, right? I can make it legally effective or not, but we have the financial advisors like yourself, who I find have day-to-day communication with the clients, and might know things that the client takes a little bit longer into the relationship with us to address, assuming that the client started with a financial advisor.
That's often a model that is typical. And so it's important that everyone's talking together, excuse me, so that the plan that's implemented reflects the complete picture of the client's goals and desires, right? There's also the CPA and the accountants, and they have often income tax expertise, and they're important and need to be involved from the get-go as well.
And more in line with what we were talking about more recently with the kids and the aging parents, you have caregivers and maybe assisted living facilities and coaches that come into play. And I think it's becoming more and more common, even in the ultra-high net worth family office space, to have therapist-type folks involved with the family when their estate plan is being developed.
So on the smaller scale and the more simple scale, I think where it is directly relevant is, again, where are mom and dad gonna live? Who's gonna come and take care of mom and dad? What is the plan for their long-term care? I think it's important to have those individuals and companies involved, and just to have options for people you can contact when that happens.
Genevieve George: And for me personally, like in my family, that's a much easier communication because I'm an only child. But then I can only imagine that the dynamics of that get more and more complex the more family members that you have involved. If there's siblings, like having that discussion. if you have a sibling and we're talking about what needs to happen for mom and dad, getting on the same page can be challenging too.
So having sort of those third-party assistance, if that's a therapist or a coach or whatever, might be very beneficial to have in that discussion so that it's not like one pitted against the other.
Stephanie Rapp: Absolutely. I mean, I'm an only child as well, so my, for better or for worse, the buck stops with me and will. But I've seen even on the legal side when there have been siblings involved, they look to me to say, "Well, what is the answer?" Because they've heard something about whether the house should be in a trust from somebody, and the other one heard it from somebody else, so they look to me, "Well, what are the options?"
And then again, a trusted third-party advisor eases that issue. So that's on the legal side. Same thing happens with where mom and dad are gonna live. Where's mom gonna live? Who's gonna take care of her? If the family hasn't decided that there's one particular sibling that's gonna handle that role, then having a third party come in and speak with everybody is really critical.
And even if they have, then that poor person that gets stuck with it needs someone to talk to help him or her.
Genevieve George: Yeah.
Stephanie Rapp: Make those informed.
Genevieve George: I figure you and I are gonna be talking to each other as only children.
Stephanie Rapp: Apparently. Yes. Yes.
Genevieve George: I think you've done a phenomenal job of breaking this down to not sound so scary, right? Here are the things that you should have, and this is when they're effective, and this is what's effective before you die and what's effective after you die. But I still think people, there's a mental block to wanting to sit down and do their estate package.
So can you maybe talk to sort of like the process that you go through with your clients? How do they sit down with you? Like what do they need to have prepared before they come versus like what's just conversational?
Stephanie Rapp: Sure. Well, there's sort of two camps. So if you have an existing estate plan, then definitely look through what you have and that's something I'm gonna need to have eventually. So we can either… I can get it at the initial meeting, or we can talk about it over the phone in the beginning, but that's a critical piece.
The other critical piece that we just mentioned, Gen, was the net worth statement, so some list of your assets and your liabilities and how they're titled and the amounts.
Genevieve George: And if you have an advisor, the advisor can help pull it out together.
Stephanie Rapp: Yeah, that's the best, easiest way to handle it.
If you don't have an existing estate plan, then just think about generally your accounts, your assets when you're looking through your list, and, in general, who you want to benefit. A lot of times it's the spouse that gets the primary benefit after the first spouse dies, the surviving spouse, and then to the kids.
But what if you have a second marriage, and you have kids from different marriages, right? You need to think about how you want to benefit them. Do you want to give outright amounts to some and then the remainder of your assets after your surviving spouse passes to other children? Those are all things that you need to think about.
And then your fiduciaries, who's going to be in charge of those assets? And if you have that, an idea of those things, then we can talk about the more specifics of the structure of the trust, any tax planning that needs to be done, and things like that. But I would say find out what your assets and your liabilities are, identify the people you want to be in charge of them, and have an idea of where you want those assets to go, and then we can talk about restrictions and options and things like that.
Genevieve George: Yeah. So that initial meeting you shouldn't be too terrified to go into that. It's really more of a discussion. Here's what we have. Here's how I sort of want it to flow, and then you sort of get into more of the details of if there are guardrails that we wanna put up for any kind of reason or other customizations I should call them, not guardrails, but customizations specific to your family, and that's when you're digging a little deeper into what's going on there.
Stephanie Rapp: Absolutely. And the initial meeting, do you trust me, right? That's the big part of it, the conversation. How do you feel about the relationship? So before we dive into nitty, nitty-gritty, you need to see is this someone I wanna be working with? Is this someone I wanna trust with all of this, right?
And that's 100% valid and should be part of the initial conversation.
Genevieve George: I love that. And so let's say somebody's listening to this and they already feel like they trust you, Stephanie, how do they find you and how do they, how can they work with you?
Stephanie Rapp: Sure. So I'm a partner at Day Pitney in West Palm Beach. You can go on our website and find my bio, right? So the website is www.daypitney, D-A-Y-P-I-T-N-E-Y .com. and just send me an email. My email is srapp, S-R-A-P-P @daypitney.com, or you can call me, and my direct line is 561-803-3523.
And we can just get to know each other a little bit and see, if we'd like to work together to effectuate your plan.
Genevieve George: I love that. I love that. And those initial calls, you're taking those initial calls. Is there a cost that people should be aware of to having an initial meeting or
Stephanie Rapp: I typically have an introductory, a short introductory meeting without charge. I mean, if we're getting into details of legal advice, that's different, but…
Genevieve George: But just getting to know each other, make sure that you're a good fit. That's gonna be just an initial meeting. All right. I love that. Anything else that you want to share that we didn't touch on that you feel like would be important to know?
Stephanie Rapp: No, I don't think so. I don't think so. I think people shouldn't be scared to do this. It's important to get it done. I think it's good to think about the peace of mind that you'll have when it's over, and if you work with someone that you trust, hopefully the process is a collaborative, wholesome, happy one, right?
And that you can walk away feeling a sense of relief and put it behind you for a while. So don't be scared. It doesn't have to be scary. We can simplify it for you. And it's an important thing to get done for you and your family.
Genevieve George: Yeah. Yeah. And truly because both of us have seen estates where it wasn't done, right? So there are, it's an exercise that can be done smoothly, and if not done, it could be kind of disastrous for your family.
Stephanie Rapp: Absolutely.
Genevieve George: It's a good exercise to go through and honestly, everybody should go through it at some degree or level to make sure that their information is documented the way they want it to be.
Stephanie Rapp: Agreed. 100% agreed.
That's it for today's episode of The Wealth Development Studio. Remember, financial clarity is powerful. Do you need help with your financial plan? Go to pelicanfinancialplanning.com to schedule a call with me. Until next time.
