Kellie Chrisman is a California licensed attorney who has experience in estate planning, trust administration, contested trust matters, conservatorships and business/corporate law throughout California. Following graduation, Kellie found her passion for helping people and clients by making the complexities of the law accessible and approachable during the worst of times, planning for a loss or following the loss of a loved one.
It is with great pleasure that Kellie feels she can take the worries and difficult tasks of legal issues off her client’s minds and allow them to simply be in the moment and focus on what is most important to them. Tune in for today's episode where Kellie shares her insight on what you as a real estate investor need to be aware of to protect your estate and some real-life experiences of some of her own clients.
Episode Link:
https://www.taylorchrismanlaw.com/
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Transcript
Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only and is not intended as investment advice. The views, opinions, and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.
Michael:
Hey, everyone, welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today with me I have Kellie Chrisman who's returning on the podcast with me. Kellie is an attorney extraordinaire, and she's going to be talking to us about all the things we as real estate investors need to be aware of when it comes to protecting our estate. So let's get into it.
Before we get into the episode, I would definitely encourage everyone listening to go check out the Roofstock Academy at roofstockacademy.com. It is a one-stop shop education platform that comes with over 50 hours of on-demand lectures one on one coaching access to private slack forums and our community as well as a bunch of other financial benefits depending on which program you opt to enroll in. Just come check us out at roofstockacademy.com. Looking forward to seeing you in there.
Kellie Chrisman, welcome back to the show. It is always a pleasure to have you on.
Kellie:
Awesome. Thanks for having me.
Michael:
No, it's totally my pleasure. I'm super excited. You are an attorney, an amazing person, a mother a rockstar. For anyone who hasn't heard your prior episodes, give us a quick and dirty who you are and what it is you're doing.
Kellie:
Oh, this morning…My name is Kellie Chrisman. I'm an attorney I practice law in California and kind of I practice California law for other people throughout the United States. I grew up in Chico, which is in Northern California town, Sierra Nevada, beer, Chico State, things like that and then went to college at UCLA law school at Loyola and then my husband, I say we got stuck in LA for about 10 years. But we loved it, we had so much fun and then moved back to the Sacramento area to be close to family and really close to the mountains, we can get to Tahoe in an hour and a half we can get to San Francisco or an hour and a half. It's awesome. So that's where I'm based now and practice state planning, business for setting up business entity that has information and strategy for smaller investors and real estate clients and if I can't help somebody I like to send them where I would trust. So yeah…
Michael:
Love it, I'm so glad you mentioned estate planning since that's the topic that I really want to focus on today. So I think I mean, in full disclosure, you are my attorney, you've helped me so much with estate planning and entity formation and just getting all my ducks in a row. So I want everyone to know how amazing you are and I can personally attest to that.
Kellie:
You can say it I can't, you know I can't.
I really appreciate it…
Michael:
Absolutely. So let's talk about what investors specifically real estate investors need to know when it comes to estate planning. What are some things that people should be aware of? What are some things they should be doing? What are some things that they should be thinking about kind of long term?
Kellie:
Yeah, I think that, for me as an attorney in this area of law, because I do I do before people pass away the planning part and then I do when people don't plan anything. So I've seen both sides, and I've seen the worst of both sides but it's not necessarily just investors, it's anyone over 18 than then then when you add on, if you own property in California at all, we'll get into the dirty details, I'm sure, then you not really needing to trust powers of attorney. If something happens to you while you're alive, who's managing your investments, who's making sure you know, tenants are paying who's making sure you know, you're in the middle of a transaction and that it can close all that type of stuff, is stuff you can accomplish through an estate plan and I think it becomes this big giant thing a lot of people don't know anything about and a lot of attorneys try to make very complicated but it doesn't have to be.
Michael:
Okay. So it sounds like just having a will from Legal Zoom, that maybe isn't going to cut it.
Kellie:
I mean, it'll, it'll get you somewhere.
Michael:
Maybe it’s not where we want to go.
Kellie:
I legally was great and so I think that there's this is one of those areas where I actually had a conversation with a client yesterday where she was very surprised by the cost and I told her, you know, there's always going to be someone cheaper, there's always going to be someone more expensive. You can go to Costco and buy the wills drafting program or go to Legal Zoom and buy a will and it will do some things it'll avoid, you know, maybe getting your property where you don't want it and you can get your property where you want it.
But there's a lot of little nuances in this area where I think if you do it right the first time you, you don't have to pay for it. Again, it's an investment in your future and it's a gift to your family down the road. So it's interesting.
Michael:
Needless to say, so talk to us about like, what a trust is, how does it get set up? Like, what should people be thinking about in terms of cost, or like who even needs one as opposed to just a will?
Kellie:
Yeah, so the difference between a trust and a will and I think the big thing in this area is probate and probate. People get very scared, and it's simply the court monitored administration of an estate. That's all it is. So you can pay, go to Beverly Hills, pay $10,000, for a will, or by your Costco will drafting program and pay $40, for your will, and you're both going to end up in probate. The scary thing about probate it's public. So if you want to know what was in a celebrity's a state that had a will, you can go and look it up, see where it went. They publish about it and it takes about a year. I say a year you say your NADs about a year and a half, with the way that COVID has affected the court system, and it's expensive. So the attorney ends up taking about two to 3% of the estate, the fees are set by law and then the administrator or executor, whoever does it takes two to 3%, then everything is distributed. Versus a trust is when you have enough that you need to trust which is in California $166,000. Whether you have a mortgage or not. A trust avoids the whole process. It says here's who I trust, to administer my estate and here's where I want it to go. The court is not involved. That's the that's the goal and that's the difference between having a trust you've done yourself, or trust that's been done completely, and having it done in tailored to us that the trust has been created correctly, it's funded correctly, and it just functions seamlessly down the road for you.
So the will is great, and it says where your property goes. But it's probated and the trust is the same thing. Avoiding the probate process.
Michael:
Got it, and so why, like, Why does a will exist versus a trust? Like, it seems like a trust is the obvious choice for anyone that has more than 166,000 in asset or value?
Kellie:
I think so many so many levels to that answer. I mean, the will is something that has been adopted from common law, something that's been based on what was done in the UK back in the day, which is where a lot of our laws are from and at a basic level, not everybody needs a trust. So if you don't own over 166,000 and assets, so you don't really in California, I just assume if you own a house, you're over that. In every state's a little bit different. I've noticed in some states, I know not everybody's California, some states that's as low as like 45,000. So it's, it's vary state to state. But it just, it's there because it's easy. and so if you don't have enough assets to maybe make the trouble of a trust worth it, then the will is there and allows you to say where you want your things to go. So it avoids what the basic, okay, the other thing is, uh, wills a lot easier to create.
You can hand write a will, as long as it's signed and dated, which I've told some of my friends, they they're going on vacation, and I'm like at least handwrite it out.
Michael:
If you don't want it on the airplane on the napkin.
Kellie:
You can do it on a napkin. You can do it, people have done it, you know, dying with a crayon on a wall, that's a valid will wow. At that, at that core level, it's just easier. You don't need a notary, you need witnesses. So it allows you to do things, if you have kids, that's where we do guardianship. So wills do all sorts of things and then and then to add a layer of attorney complexity, if you have a trust, you're also going to have a will which actually ends up making sense, but it just doesn't do as much.
Michael:
Okay, okay, got it and so yeah, for all of our listeners that are not California based, is what we're talking about, at a very high level universal in the sense of if I have a will I'm going to probate if I have a trust I'm not is that was that national universal?
Kellie:
Pretty universal and you can pick you don't necessarily have to have a trust from your state. Obviously, an attorney in your state is going to know the ins and outs of the probate law. But if I have a client that I set their trust up and they're in California and they move to Texas or New York, that trust is still valid, and they can continue to use it and that a lot of times I have clients that are not in state and they elect to use a California trust and we work together and I can fund and do everything the same way. So, yeah, this is something that these, these documents that comprise an estate plan are pretty universal.
Michael:
Okay, cool and it's funny, because we so often hear that California law is like the worst for real estate investors or investors. So why would someone elect to use a California trust? I guess, specifically, like, what are the provisions in that that make it attractive as opposed to any other state stressed?
Kellie:
I think that it's not necessarily the law itself in this area is pretty similar. It's not like business law, business is pretty unique. If you're talking about LLC formation, and, you know, Nevada, Delaware versus California. Like all that's a, it's a hot topic. But in this area, it's kind of not the exciting parts of this law, area of law come from other really the family dynamic, but yeah, it's, there's not much different. So a lot of times people will choose California law because they have an attorney that they trust that's in California, or it's simply where they were living or whatever it might be.
Michael:
Okay, cool and so I live in California, now I invest almost exclusively out of state and I think a lot of listeners are in similar situations, should they be using a trust in the state in which they invest or should they be getting a trust in which the state they live or does it not even matter?
Kellie:
Oh, I have to I have to use my typical lawyer phrase, it depends. It doesn't really matter. What matters is that whatever trust you choose, you fund it, that you when you get assets later, you add those assets into your trust, because you can have the best trust in the world and if your assets aren't in it, you're going to probate
Michael:
And so I could have a trust and still go to probate?
Kellie:
You can and that's why I, I say I fix a lot of Legal Zoom trusts, because people create this fabulous trust and they've, you know, they hey, it's super simple. I've got, you know, two kids, it's going to them equally and they don't fund it, or they don't maintain it, or their kids are under age, there's so many different considerations. Their kids are under age, and now they're getting a check it 18. So if you don't fund your trust, you don't add the title of your property. So you deed your property into the name of your trust, you update your bank accounts, an attorney will work with you to say this asset should be in the name of the trust, this one's okay out things like that, then you go to probate and that's where you have what's called a pour over will if you have a trust your will says everything I have that's not in my trust, goes to my trust, it pours over into the trust pot and the trust does the work.
But it's still probate. So Funding Your trust is extremely important and in California, we have a couple of tricks to avoid that process. So you can we avoid probate at all costs. But it still can be avoided just by doing it right the first time.
Michael:
Yeah. Okay and when you say fund the trust, I mean, it just sounds expensive. Let's say the listener has five properties. This is just the first time they're hearing about maybe thinking about, they should have a trust or set up a trust. What is involved with that listener for a couple of properties that they have that are titled maybe in their personal name, or to the name of an LLC?
Kellie:
Yeah, so to fund a trust, there's a couple of I always say there's like good, better and best. Good is that you listed in your schedule of assets. So there should be a page to your trust. Usually, it's the last page and it should list everything you intend to be part of your estate, or your trust and your intent is a lot of the law. It gives me my defense down the road, hey, he intended this to be in his trust, but they took it out to refinance. So therefore give it back to the trust. So you listed on your schedule of assets better is it's titled correctly. So primary residence is titled in the name of the trust. It's in the Kellie Chrisman trustee of the Kellie Chrisman trust. That's what puts it into trust, LLC. If the property is owned by the LLC, we kind of trace up right so we have the property properties owned by the LLC, then we put the LLC into the trust and so then when we trace down, the ownership is still in the trust. So we don't need to change necessarily the details the property. So that's better. So good is scheduled assets better is titled correctly and then best is both if I see both of those things, there's no argument hey, you know, he didn't want that to be part of the trust. It's like, well, he clearly did.
Yeah bank accounts can be the same thing. So you can either make the trust the owner of the account or are the beneficiary. So funding doesn't have to be scary and I think the signs of a good attorney that's going to help you with this is they're going to give you instructions, they're not going to hand you the trust and say, all right, thanks for the money. They're gonna say, here's the next steps. Here's what to do. Here's what to watch out for. Here's the support on the back end, that when you buy a property five years down the line, and you're like, What do I do? I don't remember, you can call their office and they're there to support you.
Michael:
Okay, fantastic and if someone is looking for an attorney, maybe they're just getting started with their real estate investing and haven't had a need for one in the past? What are some questions that they can use as like screening questions, or red flags to look out for as they're trying to reach out to an estate planning attorney, if they're going to use someone other than you? Which I don't know why anyone would do but you know, teach the round?
Kellie:
Yeah. Well, and I like to offer people I mean, when I talk to clients, I see if they're interviewing people, I say, here's what to look for, right? You want somebody that that you trust. You can I think referrals from friends are great. If you're Googling, you know, try and look for Google reviews, or there's a website called Avvo- AVVO, it's like, the Yelp for attorneys. How exciting. But they'll kind of narrow it down in your area, look for great reviews on that.
But things to look out for, what are they including? Are they doing the funding for you? Are they doing more than just, you know, the bare minimum? Are they and then what are they? What are they charging down the road? Right, so I see a lot of attorneys charge a yearly maintenance fee. That's great for the attorney, there is no reason you need to do that and I think if you have an estate plan, you've never had to do anything to it. There's no maintenance, I don't do anything as your lawyer, you know, I have a PDF copy here and, you know, if you need help, I'm here. So watch out for those yearly maintenance fees, you don't need them watch out for what's included. So you want to at least in an estate plan, a typical state plan is a trust, certification of your trust, the funding of your trust, then you want to will powers of attorney for finance and a health care directive. Those are kind of the core documents, we say trust Well, Power of Attorney health care, okay, the core four, make sure those are there.
And then see what amendments cost down the road. That's the other thing, you know, they might be super cheap, but then you want to change something and it's quite expensive. I like to offer my clients, I do amendments for free for a year because I have major buyer's remorse. Like if I make a decision, I'm always like, we have to so and they're pretty simple to change. So that's kind of in you want that support, you want to be able to oh my gosh, I'm closing tomorrow, and they, they need a copy of my certification of trust, I'm on vacation, or I don't know where to find it. My clients will shoot me an email or give me a call and I just, you know, fire it over to title or whatever they might need. So what you're getting for the money, I think is huge.
Michael:
Okay and is there a ballpark like figure that people should have in their mind as they go to an attorney to get this thing because I know you mentioned you know, the Beverly Hills $10,000 will versus the Costco $40. There's a big range there.
Kellie:
Yeah, she'll be in the middle of that. It depends. So generally, and I think that it's going to depend by state right, but what I am seeing is pretty market is about that $3,000 Mark, for a married couple, the what… I guess one of the other key things you're going to look for is most attorneys do this on a flat fee basis. It's not hourly, because they'll make money. It's a standard process and usually if we can estimate how many hours it's going to be in, then we win some and we lose some right like some clients, I end up spending way longer with and make less…Excuse me and some, you know, it's, it's pretty easy and standard, but it's a lot of paperwork and so that flat fee would be a structure I would look for and that I would lean towards if I was paying somebody or telling family. But every stage is different. So will is cheaper. If you're a single person having an estate plan for yourself, should be about 1500-2000 and then I look for you know, if you want to have a trust and your wife wants to have a trust, look for discounts, I mean, an attorney is going to have to do far less work. If they know you and they know your wife then there so there should be some kind of a benefit there as well.
Michael:
That's great to know and then from a like a lending perspective if someone is going to buy a property, they're going to get the loan in their personal name, but they want to take title in the trust. I mean, is that our lenders open to that or do they need to close in their personal name and then quick claim deed it over into the trust? How does that work?
Kellie:
Every, every lender is different. So it's, it's more and more common for trusts to be there and I think that lenders get the benefit, if you're to pass away, it being in your trust is a huge benefit to them, because they're able to follow the trust. So the lender should let you close in the name of the trust, super easy. If they don't, or if it's some huge hassle because sometimes, you know, either lender or title is not familiar or comfortable. It's very easy, we ended up just doing a trust transfer deed after we closed. So a lot of times, our client will say, okay, Kellie, it's closed, and then it's a one page document that you have to assign in front of a notary. Some states have more expensive transfer fees, or transfer tax, that you'll have to pay. So that's a consideration to watch out for and those can be pretty significant, like five or $600. So in those states, it might be more advantageous to close in the name of your trust, but a simple process if, if you forget, or if you're if there's a property.
Michael:
Okay, awesome. What else should people investors need to be aware of when it comes to planning their estate?
Kellie:
I think managing who you trust, you know, who's going to take over who's going to get your property if you're gone. I think that a lot of the law assumes that an adult is 18 and over, so if you have kids, and, and they are under 18, or they're not responsible, and over 18, or the you just don't want them to get a large sum of money and trust should be able to contemplate all sorts of things. I see a lot of clients, you know, hey, I love my kids, but I don't want them to get a lot of money. I want them to, you know, work for it. So everything is held for the kids benefit, you know, education, whatever it might be, but they're not getting money until 25 or 30.
The other thing I often see clients worry about is you know, who's going to be in charge, you know, if I am incapacitated, I get in a car accident, having those people that you trust, and then if that person is not there, then who I always say always tell clients in my intakes, and like, I'm going to come up with the worst scenarios where every person you tell me is unavailable and ask you for someone else. So yeah, watching out for that stuff.
Michael:
Okay, love it. Can you tell us like a gooey horror story of when something went really wrong?
Kellie:
So many, I mean, even like, amongst my, my lawyer, friends, everyone's kind of like, Oh, you do that area of law, like, is it boring? It is fascinating. Um, because families are fascinating.
Michael:
Family dynamics. Yeah, for sure.
Kellie:
So one of the reasons, I guess one of the reasons to have a poor overwhelm, I would say, we had a, there was a situation where somebody won at a casino, very exciting, when a significant amount of money, went out and bought a motorcycle, didn't put the motorcycle in the name of the trust, which is fine. But didn't put the money anywhere. They you know, it's just in a bank account, it was coming their way, crashed their motorcycle and died. Now we have this huge amount of money out there and that's not in the name of the trust. So the goal is to pull it in and probate it. So we go to void and we don't have to probate. So we have stuff like that happen.
I've worked on cases where, you know, the parents have an estate plan that's been in place for 25 years, and then dad has dementia and suddenly has an amendment play a month before he dies, that leaves everything to one kid and that's the kid that took him to you know, the attorney.
Michael:
Oh, my gosh…
Kellie:
There's so many nightmare scenarios. That stuff we can get overturned. But I mean, all of these have solutions, right? If you already have it in place, and then families just fight. I mean, I think especially if you have a family that's going to, you know, your kids don't get along or you know, there's that one person I always tell people, every family has something or someone and if you don't know who that is, or that what that is. It's the right client. Also, you need to look at yourself like what's, what's good because the state plan can take that into consideration. I had a client that had a DeLorean and four boys and she said sell it and I said, okay, you don't want it. We can come up with solutions. You know, do you want to have a to flip a coin, do you want to have draw straws and she said, no, whoever wins, the other three will hate them and I said, okay, so it has to be sold and I, and then I was thinking to myself and like, well, if it was me, I'd have my buddy buy it right, like, and then I get the DeLorean. So it had to be sold, like out of state to a third, like a dealer or somebody like we had, it was so detailed, like pages about this DeLorean. This is one of those situations where I lost on a flat fee, right, because I'm drafting a car. But it was fascinating, because she goes, I know, it's gonna ruin my family and I want it sold. So we could do that.
Michael:
Wow. It's crazy. That's pretty impressive.
Kellie:
Yeah.
Michael:
Okay, cool. Well, Kellie, I want to make sure that we are very respectful of your time. But before we let you out of here, you said something, and I just want to kind of come back and double click on it about in California, if you've own $166,000 and assets, then you're going to probate unless you have this trust and you said that if even if there's a mortgage on the property, so let's say I own a property, it's worth 200k. I've got 100k mortgage on it. My net value are my, my net worth is only 100 grand. So do I fall into that bucket? Where do I land?
Kellie:
Yeah. So there's a there's a, I think, yes, you do. So you start thinking about all these other things. So the way that that probate law works, is they look at the value of the property, not the equity in the property, the value of the property because they see a significant asset that somebody could sell out from under the mortgage company, which is hard to do anymore, but and run away with and so they look at the value of the property itself, and then the equity down the road in the probate in terms of what everybody's paid off, and what is distributed is taken into consideration at that point. So I have clients that will say, well, I don't really want to pay for the trust, I just want to pay for the will and because I'm gonna put beneficiaries on all my accounts and my property, I'm just going to play joint tenancy.
All of that works if everything goes perfectly according to plan, right?
Michael:
So which it always does…
Kellie:
Always goes according to plan. You know, parents always outlive their kids. They live till they're 90, the kids are responsible, never get divorced, you know, they never see anything else happen. The problem is when it doesn't work. The last thing your spouse or your kid is going to want to do when you pass away is to see a lawyer which unfortunately, they usually need to do. But that property then if joint tenancy goes to one person, and now it's just one person that owns it, and it's not a trust, so it's you know, your husband dies now the wife owns it, and the wife isn't going to she's grieving. She's doing all these things and isn't going to think about it and then when the wife dies, it's probated. Same thing with kind of beneficiaries on accounts are you know, if I leave it to my husband, he passes away. Now where does it go, that money can go into probate. So that's where we get IRAs 401 K's things like that can end up in probate so people will list their kids next, I'm avoiding it. I still not over that. 160,000 miles, I have a contingent beneficiary.
My question is then what ages are your kids getting it? What is you know, now we're letting that fidelity or whatever company whatever bank it might be, come up with where it goes, if one of your kids is in the car with you and dies with you and your husband now where's their share going? Is it going to your grandkids is it going to the other kid there's and so by having a trust you lease the trust is that contingent beneficiary it goes into the trust and the trust does all the work so if the worst happens a good lawyer has already contemplated if a kid dies before you what ages all of these things, and you'll avoid the whole mess but yeah, if you want a house in California estate plan if you are trust or if you want significant assets, significant amount of stock, things like that beneficiary accounts yeah, you can technically your pay on death pod. You can avoid it but it scares me. I make a lot of money off of people that do that because they pass away and I would rather probate I make a lot more money probating for clients than I do doing estate plans but that's not the goal. That's not why I do this.
Michael:
Yeah. I love it, I love it. Super, super helpful, Kellie, for people that want to learn more reach out to you for your services, just chat with you because you're a cool, interesting person. What's the best way for them to do so?
Kellie:
So I mean, I'm great with email, and my website is just https://www.taylorchrismanlaw.com/ TAYLOR Chrisman is like a Christian man stuck together, CHRISMAN.com. My email is just Kellie@taylorchrismanlaw.com, AWAL I am on there are my phone number you know, you can always reach out I've got someone that answers the phone all the time. 916-292-8646. But yeah, whatever people have questions on I'm always more than happy to help. I guess you should look for a free consultation because I that's I'm always happy to talk to people and if they're not if I'm not the right fit or you want to find somebody in the you know, in your state or whatever it might be, I like to help connect people where it might be I think if you put that good karma out there, it helps.
Michael:
Amazing, amazing well Kellie, thank you so much. Again, this is super insightful as always, and I'm sure I'll be chatting soon.
Kellie:
Yeah, sounds good. Thanks, guys.
Michael:
Got it, take care.
All right, everyone. That was our episode. A big thank you to Kellie for coming on, as always in sharing some wonderful wisdom and really great insights. As always, if you enjoyed the episode, feel free to leave us a rating or review wherever it is. You get your podcasts and we look forward to seeing the next one. Happy investing…
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