410: 7 Principles of Estate Planning and Building a Legacy That Lasts with David York

Casey Weade: Welcome to the Retire with Purpose podcast. My name is Casey Weade, where it is my mission to deliver clarity and purpose and elevate meaning in your life. Now, we do that in a couple of different ways here on the Retire with Purpose podcast. If you’re new to the show, you will see that we do it a little differently. We’re not just here to talk about financial topics. We want to talk about some of those more meaningful topics, the softer side of retirement as well.

And we do that by doing long-form interviews with you, like we’re going to be doing here today, long-form interviews with world-class guests that we bring to you every other Monday. And then every Friday, we’re going to be discussing a trending topic in short form with you. And I hope that you’re a Weekend Reading subscriber. If you’re a Weekend Reading subscriber, you are being asked to submit questions to us prior to these interviews, and we’re going to bring those questions here into the interview. You’re there to co-architect this interview there with me.

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With that, I’d love to introduce your guest today. Our guest is David York. He is an attorney. He is a CPA. He is a managing partner with the Salt Lake City law firm, York, Howell & Guymon. And he practices law in the areas of estate planning, tax, business, and nonprofit entities. I’m really excited to have someone like Dave here on the podcast because we often think of this estate planning process as simply drafting wills, drafting power of attorneys, drafting trust documents. And it’s so much more than that. And I love that David thinks much deeper about these types of conversations and really spends time with his clients to do as we do, not just build a financial plan or build an estate plan, but make sure it’s truly purpose driven.

He’s the co-creator of the Entrusted Planning process, which provides individuals, couples, and families with the clarity needed to put words to their why and to align their individual purpose with their personal estate and financial plan. He’s a coauthor of two books Entrusted: Building a Legacy That Lasts, which will be our focus for the conversation today as we cover the seven principles of Entrusted Planning. What’s it mean to have an entrusted estate plan to begin with? He is also the author of Riveted: 44 Values that Change the World.

And we’re going to be giving away his book, Entrusted: Building a Legacy That Lasts. If you’d like to get a free copy, partnered up with Dave to give away copies of that book for free, all you have to do is write an honest rating and review of the podcast over on iTunes. And as you do that, shoot us a text, shoot us a text with a keyword “Book,” B-O-O-K, at 866-482-9559. We’ll send you a link so that you can give us your iTunes username. We can verify your review and send you the book for free. It’s really that easy. With that, I want to go ahead and get started with Dave.

[INTERVIEW]

Casey Weade: David, welcome to the podcast.

David York: Oh, thanks so much, Casey. I’ve been looking forward to this and looking forward to our conversation.

Casey Weade: We have so much to cover. And we had so many great questions that came in. These are questions that I get asked all the time when it comes to estate planning. I think it can be a somewhat confusing and overwhelming area. And the work that you’re doing is so impactful, I think, because it’s driven by purpose, and that’s illustrated on your website. So, I want to kick us off with a statement from your website, a little quote that you have that says, “You are owned by nothing when you only own your purpose.” I want to know, what does that quote mean to you? How do you define purpose? What does this quote really mean?

David York: Yeah, well, first of all, it’s so interesting. I’ve had been fortunate over 26 years of doing estate planning. I’ve worked with over 5,000 clients, all different asset levels from just young parents trying to deal with guardians for their kids all the way up to eight, nine, and ten-figure estates. And one of the things that I’ve learned over time is that often, if we’re not careful, all those things that we think we own end up owning us. And I saw so many people who became slaves to their businesses, slaves to their assets. What we thought were blessings became burdens.

In fact, one of the things I talk with, especially among my high-net-worth clients, is I tell them, “You were lied to. You were told if you go out and accumulate large amounts of wealth and large amounts of resources, that you won’t have a care and worry in the world.” And it’s just not true. The reality is, so many of them feel the burden and responsibility that comes with those assets because with assets comes impact. And the reality is impact is not optional. We can’t choose whether or not to make an impact. And a lot of clients get worried about the potential negative effects of the wealth that they have and the transfer of that wealth.

I had one client once who said, “Man, this is just too much. This is so overwhelming. Maybe I’ll just give all my assets away to charity as opposed to leaving it to the kids and potentially destroying them.” And I told him, I said, “You know what? That’s an impact. That’s an impact to the charity you give to, the family that you don’t.” So, I’ve seen that. On the other side, though I’ve seen people who are driven by purpose, they have a clarity of their why and that why makes the how so much simpler.

And so, when you really are only owned by your purpose, we go from being possessed to having possessions and using those in furtherance of that. So, I think sometimes, it’s really twofold. One, it’s to recognize the fact that if we’re not careful, everything we own owns us, and the way to do that is really to push into purpose more than it is to try to just push away from what you have.

Casey Weade: Yeah, that weight can be overwhelming. I’ve seen it in so many lives of those I’ve worked with and myself, I feel it. There’s a major concern, and I think there should be to talk about how important this is today. I think it’s more important today than it has been in the past. And I think you agree with me on that. When I think about what’s going to happen over the coming 10, 20, 30 years to this next generation, it’s a completely different experience than our founding fathers had. This was a country that was founded by people that really had nothing. What made this country great were people that really didn’t have anything. They had to strive to build something and create something.

Now, we have the largest wealth transfers going on in history, and we have the silent generation passing on about $12 trillion. Baby boomers are supposed to pass on over $40 trillion, the largest wealth transfer in history. How do you view this? How do you view the impact of this wealth transfer on this next generation? Because I got to say it, I don’t think I’m the only one that’s really concerned not just about the future of our country as a whole, but the future of the country as a result of the wealth that’s going to be inherited.

David York: Yeah, I think it’s monumental. And you’re absolutely right on those stats. But one other thing you have to realize is that on average, baby boomers had about half the number of children is that greatest silent generation. So, you have literally four times as much wealth going to half as many people. And so, it’s the largest wealth transfer in the history of the world that we’re at the beginning stages of. And by and large, and this is my anecdotal experience, but this is also what the statistics show that, by and large, that money is undirected and unintentioned and it’s being transferred to kids who are uninformed and unprepared.

And I have a lot of clients who actually want to talk to their kids about wealth, about wealth transfer, about purpose and meaning, but they don’t know how to because they were raised by that greatest generation. But as you referred to them, they’re also known as the silent generation. And part of it is they didn’t talk. They didn’t talk about money, they didn’t talk about inheritance, they didn’t talk about the things. They were very, very private in their stories and in their planning.

And so, even if you want to have more meaningful conversations with the next generation, for a lot of people, they just don’t have a framework to do that in. And what it unfortunately leads to is a lot of silence and ambiguity or even a level of being disingenuous. I have clients who are like, “I don’t know what to say to my kids.” So, like this when I had a client once and he said, “My dad told me that he didn’t have any assets and he wasn’t going to leave us anything, that I needed to go out and make it in the world,” because that’s what I did. And I went out and worked and built a business. And he goes, “So, that’s what I’m telling my kids. We don’t have anything. We’re not going to leave you anything, and you got to go make it in life.” And I said, “That’s great, but you live in a $5 million house. The kids aren’t buying that.”

And yeah, I talked to a client literally just the other day and he’s facing this quandary and he grew up where his parents had no resources. He had to put himself through college, started a business. He makes roughly $4 to $5 million a year now and has no idea how to talk to his kids about it. And he’s had his friends say, “Just lie to him. Just lie to him, say that you aren’t making that much money.” And the problem is when you’re being inauthentic, when you’re living this duplicity, it creates ambiguity, it creates uncertainty. And kids are going to fill in the blanks themselves and oftentimes with the wrong message or the wrong reality.

Casey Weade: Yeah. Well, and I think I see this kind of tongue in cheek. We’re talking about estate planning, but I don’t know that estate planning is the solution to this. But we could say, “Hey, is estate planning the solution to this?” And I think I know what your answer is going to be. That’s really not the solution. But I think we need to kind of rewind here a little bit even further than that, as we need to define what estate planning actually is in order to know if it is actually the answer to so many of these things. I think there’s a lot of confusion around what estate planning is. I saw it in a lot of the questions that came in from our Weekend Reading subscribers. So, please, define for us what an estate planning is. And is that the answer?

David York: Yeah. So good question. So, inartfully, really what estate planning is, is death planning. It’s when I die, what do I do with the assets that I have? And who do I put in charge? It probably doesn’t market as well as to say the estate planning, it’s like life insurance. What is life insurance? Well, that’s what you get to receive when you die. But death insurance doesn’t sound as good. So, to a certain extent, yes, I tell people I went into the two certainties of life, death and taxes, and they affect a lot of people. And so, you certainly need to have that plan.

But honestly, the ideal for me for clients is to actually come up more with a life plan than simply a death plan. Yes, that proverbial bus might get you tomorrow, and so, we’ve got to have a plan. We shouldn’t be naive. We shouldn’t try to avoid the situation. I’ve had some clients reluctant to do estate planning because they said, “Look, we’ve heard that everybody who’s ever signed a will has either died or will die.” And I say, “Well, that’s true, but it’s also true if you’ve eaten a carrot.” So, life is a terminal condition. And so, I do think estate planning is an important part.

But the reality is so often, we create this disconnect between purpose and planning. I have clients who say, by and large, all my clients want the same thing. They want to raise children who are so self-reliant, self-sufficient, productive, and mature that they don’t actually need any of the assets you have. And yet, they’re so intention directed in purpose. You’d be comfortable even in everything, right? You get to that point, you’re free. And so, you have this high purpose for your wealth.

And then what does your estate plan say? Says if I die, here’s a bunch of unearned, undirected, unintentioned wealth. Go do anything you want with it. And there’s a huge disconnect. So, while I think it’s important in our estate planning to align purpose with planning, I think it really is but a step more than that, which is, okay, let’s come up with a life plan because in all likelihood, if you’re in your 30, 40, 50s, even 60s, you’re going to probably live for the next 20, 30, 40 years. So, maybe instead of just creating an irrelevant binder that sits in the back of your office collecting dust, maybe we come up with a vision and plan for your wealth that you incorporate now, and then the estate planning simply becomes an extension of that.

Casey Weade: Is that how you would delineate between legacy planning and estate planning? Is there a delineation between those two? And how would you define legacy?

David York: Yeah, it’s interesting. I love the word legacy, but it’s a loaded word. I’ve had some clients say this is the defining word for the next 20 to 30 years of my life. I’ve had other clients tell me that it’s forbidden. I can’t even use the word because it comes with baggage or heaviness or whatnot. But it’s interesting, if you go look up the definition of legacy, there’s two definitions in the dictionary. One is property left to someone in a will, a legacy. But it’s the second definition that I love. And it’s this, it’s a thing handed down by a predecessor.

And so, I think there’s a couple of things we need to recognize with legacy. As I mentioned earlier, one, it’s not optional. Legacies are not optional. We can’t choose whether or not to leave a legacy. The second is that legacies aren’t neutral. Legacies can be good. Legacies can be bad. I mean, the reality is we’re in 2023. We’re living the legacies in some very negative respects of how this country has been run. There’s so many great things, so many great legacies that we have looking in the past.

But there’s also issues as well, right? And so, legacies aren’t neutral and they’re not optional. So, what I tell clients is, “Well, if you can’t choose whether or not to leave a legacy, let’s at least be intentional about the legacy that we leave.” And so, to me, the difference between legacy planning and estate planning is legacy incorporates far more than just the transfer of financial assets at death. It involves the transfer of our human capital or intellectual capital. It has to do with our social capital, even our spiritual capital. So, I see legacy as far more impactful. We probably all have these stories. I was not a good student growing up and I struggled. I had an eighth-grade teacher. Her nickname is Sarge.

Casey Weade: Hard to believe from someone that’s an attorney and a CPA.

David York: I was a late bloomer. I was a late bloomer. But anyway, I had an eighth-grade teacher. Her nickname, I don’t think we ever told her this directly, was Sarge. I mean, she was tough. But she instilled in me, one, a belief in me, and two, an expectation of excellence. And she has a legacy on my life, an impact 40 years later, she never gave me a penny. And so, I think it’s really important to recognize the broader impact of the term legacy beyond just estate planning.

And I’ll be honest, I tell clients it’s giving away your money at death, leaving your assets at death, it’s easy. Leaving it well is not. It takes work and it takes effort. But why would we be so intentional in life, so intentional in parenting, and then so haphazard in how we use and leave our assets? And so, that’s why I think legacy, ultimately, is something that we all need to understand and embrace and recognize the lasting impact we have on things far more than just wealth.

Casey Weade: I think both of these words, I get the sense that many are feeling that, well, it’s just financial. Legacy seems financial estate. Well, they go, “I don’t have an estate. Why would I put together an estate plan? I’m not a multimillionaire.” And I think that leads us to a really great question from one of our Weekend Reading subscribers, Tracy. Tracy asking, “When does an estate plan make sense?” And this is what she goes on to say. She says, “I have heard different answers from planners. The most common one I get is at around $6 million in assets.”

David York: Yeah, unfortunately, I think estate planning has actually just turned into tax planning and mitigating tax. And again, I’m a CPA, I’m attorney, I love to try to save taxes. But we’ve turned what is really just an issue into a destination. And taxes are simply an issue to deal with. And we’ve turned it into the metric for a successful or unsuccessful estate plan. And I’ve seen wealth transfers that have avoided any estate tax at all and have destroyed successive generations. Is that success? Is that how we measure success? And so, I think that $6 million figure is a reference to the estate tax limits. Right now, the per person that you can transfer without estate tax is $13 million that’s scheduled to be cut in half in 2026.

So, unfortunately, I think the answer to that, and that’s scheduled to be cut in half in 2026, to be on that $6 million figure. So, I think, what she’s hearing is really tax planning. And I just think that’s such a myopic perspective. Again, it doesn’t take into account, unless you’re family, you have minor children that need to be provided for. Who’s going to be the guardian for them? How do you want to use and deploy the wealth that you have? Do you have kids with special needs? Do you have special circumstances? Do you have a family-owned business? So, yeah, unfortunately, while I understand the answer to that question, I think that’s just emblematic of the problem of this myopic perspective on wealth and wealth transfer.

Casey Weade: Yeah, I think there’s estate planning and then there’s estate tax planning, and we can delineate these two different things. I for one, before I had anything, when I was 22, 23 years old, and estate plan, it was pretty basic, it was pretty simple. It’s pretty inexpensive to get accomplished. But I didn’t need the extensive estate tax planning at that point. But I think, no matter how much you have or where you’re at in life, everyone needs an estate plan.

David York: Yeah, absolutely. And the reality is an estate plan is how you care for and provide for your family after death. And so, again, while I think we shouldn’t just simply stop there and have an estate plan and then be completely unintentional during life, you need to have an estate plan just like you need to have life insurance and you need to be thoughtful about retirement. These are all means to an end.

Casey Weade: And you talk about the standard model for estate planning and kind of things that are really wrong, some of the biggest pitfalls and problems with estate planning, like they show up in your four Ds. These four Ds being dumping the assets to the next generation, dividing them among children, deferring taxes, dissipating those assets within one or two generations. Can you just talk a little bit about that standard model and some of the big issues there?

David York: Yeah. And I think one of the bugaboos I have about estate planning is that we take a one size fits all approach to wealth transfer. I’ve seen estate plans for people worth $1 million and $100 million, and they’re designed the exact same way. They simply dump the assets to the next generation, divide them up, defer any tax, and dissipate that wealth. It’s a shotgun approach to wealth transfer.

And to me, how you draft and structure a $100 million estate should look fundamentally different than a $1 million estate because wealth transfer doesn’t scale. I love what Warren Buffett said. He said, “Inheritance should be left in a way that children can do anything, not left in a way that they can do nothing.” He was actually drawing on wisdom even farther back. You go back 3,000 years. Solomon said, “Give me neither riches nor poverty, but only my daily bread.” He saw problems with having too much as being just as bad as not having enough. And I think we all inherently recognize that.

When you have no resources and access to resources, it is hard to get into the game of life. When you have too many resources, you don’t even need to play. And so, I think for a lot of my clients, especially as you mentioned earlier, we have accumulated more wealth than prior generations could even hope to imagine. And that wealth is more diffused generally. And so, clients are faced with this issue of just because transferring some wealth is good doesn’t necessarily mean more is better. And what makes sense for X amount that allows a child to do anything, a 2x or 4x or 8x allows them to do nothing. And there’s a destructive element to inherited wealth.

Casey Weade: You’re hitting on each one, saying, the first one dumping the assets to the next generation. That’s the big one. And that’s pretty easy to understand that dividing them among children. Okay, well, what do I always hear? Almost always. There’s some families say, “Well, they need to get this and they need to get this due to how much they contributed to this or how successful they are.” But most often, I feel it is, I just want to make sure it’s fair. I don’t want any fighting after I’m gone, just divide it equally among the children. What’s wrong with that mentality?

David York: Well, I think it’s a noble notion. But a couple of things, one, the terms fair and equal, when I started practicing law 26 years ago, I thought those were objective terms. I’ve come to find that they’re very subjective. And what you think is fair or equal may not. I’ll give you an example. I had a client who had two children and four grandchildren, and one child had one kid and one child had three kids. And they said, “Okay, we want to be fair and equal, so we’re going to set up a college fund with $30,000. We’re going to put it in each grandchild’s account.” Well, that sounds fair, right?

Well, the child with one child said, “Wait a second, my family only got $30,000. That family got $90,000. That family got $90,000, that’s not fair. They got three fourths of the wealth.” So, they said, “Oh, yeah, that doesn’t sound fair.” So, what we’ll do is we’ll put $45,000 in the account of the one grandchild and we’ll divide 45,000 between the accounts of the three grandchildren. So, now, it’s fair. Both sides of the family got 45. And then the grandchildren raised their hand and said, “Wait a second, that’s not fair. Why did that grandchild get $45,000 and I only got $15,000? They got three times as much, but we’re all grandchildren.” So, even though we think we’re being fair and equal, oftentimes it’s a subjective perspective. But for a lot of times, what I…

Casey Weade: So much more complex. I mean, when you say something like that, I go, well, how do we ever make everybody happy? And that seems like what we’re trying to accomplish is just making everybody happy. But maybe the key to this is not worrying about making everybody happy.

David York: Oh, yeah, I had one client literally, for Christmas, she does Christmas gifts and then she creates a spreadsheet to calculate how much she paid for each person’s gift. So, they may have each gotten three gifts, but then she creates how much it is and then she writes checks equaling the difference between the highest of the three gifts and the lowest. So, you get your three gifts plus $84.96 to make sure it’s exactly equal.

But one of the things I talk about clients is there’s equal division, but there’s also equal opportunity. And a lot of our clients, especially as they have along that wealth continuum, they focus more on opportunity transfer. So, instead of transferring wealth in a consumptive model, and here’s the reality, the average American inheritance in the United States is consumed in 18 months. So, what people accumulate over the course of their life is on average, consumed within 18 months. And you say, “Okay, well, that’s the average American. That’s not true of high net worth or ultra-high net worth. They have financial advisors like Casey and experts and all around the nation, and the wealthy get wealthier.”

The studies show that the average half-life of inherited wealth, even among the wealthiest Americans, is eight years. So, take what even the wealthiest Americans inherit and cut it in half every eight years. That means in one generation, 24 years, the average ultra-high-net-worth inheritor has about 12% left. That’s the average. And again, it’s because it’s a consumption-based model. I’m going to give you something that has no cost, there’s no meaning or purpose behind it. And then I’m shocked when you consume it.

So, what a lot of our clients do is we actually focus more on opportunity-based transfer, providing funds for things like education, homeownership, entrepreneurship, charitable service, even just annual family reunions for the families to get together. By doing that, one child may go get a doctorate and may start a business and may buy a house. Another kid wants to be a park ranger and living a double wide in the beauty of a national park and they’re content and happy. They each had equal opportunities, but those opportunities come with costs. The cost is what brings value. And then the next generation has those opportunities to create their own wealth because the reality is this, in 26 years of doing estate planning, the one thing I’ve learned is that we value things based on what they cost us. And when something doesn’t cost us anything, we simply can’t value it, like something that comes with cost. And inheritance is, by and large, a costless asset.

And so, you see it’s the same with lottery winners. What happens to lottery winners is very similar to what happens to inherited wealth. And one of the hard parts that my clients have to recognize is, by and large, they acquire their wealth through hard work, risk, stress, sleepless nights, or it’s probably your story. As a result, they highly value what they’ve accumulated. The problem is I can’t transfer the cost. I can only transfer the financial resources in estate planning. And when I undercut the cost, I undercut the value that’s received. And so, I think when we talk about wanting to be fair and equal, I think we need to decide, is that equal outcome or is that equal opportunity? Because those are two very different things.

Casey Weade: How do you create a cost to an inheritance, then? Is that even possible?

David York: Yeah, I think there is. And cost comes from the three kids, right? Time, talent, and treasure. It comes from the time that you spend on something. You may provide funds for education or for a portion of education. The child, the grandchild, the great grandchild still has to come with the costs and work and effort. I have some clients who will only cover a portion of the cost of education because they want it to have cost. Housing, I know here, I think it is, most places, a huge issue for people. But if you help with a down payment assistance maybe, you’re not buying a house for someone, but you’re creating an opportunity to leverage their own work and effort. And even if something involves fairly modest costs, it increases value.

There is a great study they did. I think it was at the University of Chicago where they took students and they had these coffee mugs and they sold the kids coffee mugs. They were worth $7 and they sold it to them for $2. Half the kids, they had them pay with a credit card. The other half, they had to pay the $2 with cash. Now, studies have shown that when you pay with cash, you probably know this, that actually, pain receptors go off in your brain. You feel a sense of loss when you pay with cash that you don’t feel with credit card. I think a lot of people try to have people go to credit cards so they don’t actually feel that pain.

But that wasn’t the experiment. They then went back to the kids and they said, “Guys, we screwed up. We sold too many mugs. We got to buy them back from you. But you bought them for $2, they were $7. You can sell them back to us for whatever you think is fair.” The half that bought with the credit card and didn’t feel the pain, on average, were much more willing to sell the coffee mugs back and on average, asked for $3.70. The half that paid with cash, same $2, but they felt that that tiny little prick of pain that came from parting with the $2 were much less willing to resell the mugs and, on average, demanded $6.71. The value of the mug, which was $7 purchased for $2, was valued nearly twice as much by those who felt even at small amount of pain or effort associated with the acquisition. And so, it does not have to be full pain, but everything that we do that’s opportunity based, it requires an investment on the part of that next generation so that they can bring their own value proposition.

Casey Weade: Those are lot of different ways to create that cost. An element of our estate plan is essentially matching income. You are an X, you get Y. And so, they have to earn it, right? There’s others that might build in, while in order to get this, you have to graduate a four-year degree or be employed or whatever it might is. But actually, you have them work for it in some way, shape, or form.

Now, this is an interesting question that you pose, and maybe there’s some crossover here. I just really wanted to hear you dive a little bit deeper and extrapolate on this question, saying why should you ultimately deploy your assets at death in a way that you never would have while you were alive? Oh, that’s a tough question. That’s a question that makes you think.

David York: Yeah. And honestly, I think that’s why so many clients, it seems hard, it seems difficult, and why they opt out of and take this path of simplicity in the estate planning. But you know what I tell clients is, you would never just give undirected, unintentioned wealth to your kids during life to just go out and consume. Why would you do it at death? I went to a tax conference once and they were talking about bringing boredom estate tax planning.

So, if you think you’re going to die or you’re about to die, what are some strategies that you could employ to try to reduce estate tax? My favorite one was they said, “You know what you should do is go out and buy the Ferrari now because when you die, your kids are going to take the money and they’re going to go buy the Ferrari. So, if you go and pay $200,000 for a Ferrari and drive it off the lot, it’s instantly going to depreciate $60,000. So, now, your estate will only be taxed on 140 as opposed to 200. And that’s what the kids are going to go do with it anyway.” I thought that is the stupidest thing I’ve ever heard in my life.

But again, it’s based on this concept, one of, oh, that was great. We saved $80,000 in tax on the Ferrari, but it already is within that consumption-based model. But you would never do that during life. Why in the world would you structure to do that at death?

Casey Weade: I think if nobody gets anything out of this conversation but that one thing, I think that’s just a massive takeaway. As we get into Entrusted Planning, I want to leave this up to you. I really do want to walk through the seven principles of Entrusted Planning. You also have initially the four steps of Entrusted Planning. Where would you like to go next? Four steps or the seven principles?

David York: Well, let’s go through the seven principles. And just 30 seconds on the genesis of it, when I started doing estate planning, I saw so much failed wealth transfer. I saw heirs stripped of purpose. I saw addictions fed. I saw families fighting. And I saw so many bad elements. But there were people that they were the exception, that there was just tremendous impact on the wealth. So, kind of a positive psychology mentality, instead of studying dysfunction and disorder, what are the habits of those people that truly transfer wealth in a positive, impactful way? And so, we started to look at those families, and we really identified seven disciplines because I think they’re disciplines that these families exuded. And so, that’s what the book is, is our summation of those seven ways in which successful wealth transfer occurs, the habits of those who do that.

Casey Weade: And that first principle is that entrusted families know who they are and what they believe. And I think, it’s easy to say that. Yeah, hey, just need to know who you are and what– yeah, I know that and then discuss, well, what’s the step-by-step process to that, that is identifying your guiding principles, your core values, your life lessons, and your personal preferences. Again, I think many of us kind of know that. But how do you work with those that might say, “I know that, I know I need guiding principles and core values, life lessons, vision and mission”? But how do we identify those things? How do you help people really identify what each one of those things are? Or how should they be going about it?

David York: Yeah. So, it’s great. It’s interesting so many of us who work in a business, a successful business. If I were to ask you, Casey, for the elevator speech of the why of your business and how you do it, you could articulate that to me in 30 to 60 seconds. You have such clarity on that. And you’ve created a successful business and a successful podcast because of that.

But if I were to say, give me the elevator speech for your family and for the meaning and purpose of your wealth, I have a lot of clients are like, “Ah,” they can’t articulate it. But those families that do, they have such a sense of clarity and purpose. And actually, I find 90% of new wisdom is just old wisdom we’ve forgotten. How many times have we seen those coats of arms from the past of families who have two or three or four words that they want to be known for it? And then they use that in the guiding principles of how they implement.

I worked with the family office once and we went through a process of helping to identify their core values that they wanted to be known for, and they wanted to be known for three things. They wanted to be known for loyalty with themselves, with each other, and with others that they dealt with. They wanted to be known for integrity in everything they did, and then they wanted everything that they touched to be marked by excellence. So, loyalty, integrity, excellence. Now, unfortunately, the acronym was LIE, but set that aside for a second.

So, that afternoon, they were looking at an investment to make and it had a really positive pro forma, look like it was going to cash flow really well. But it was kind of geographically remote. It was going to take a lot of work and effort on their part. And so, they had gone back and forth for months on this decision. And so, I asked them, I said, “Let me ask you this, can you do this with excellence?” And they said, “Done. We’re not doing the deal.” They said, “We could make money on it, but ultimately, we can’t give it the time and effort that we want to be known for and we want to be known for excellence.”

So, what was a three-month decision-making process for them as a family became a 10-second decision. Once they had clarity on their why, it drove everything else. And so, understanding the why of your wealth for your own personal assets is every bit as important as the business. And one of the ways I ask clients, as I say this, “If your wealth transfer strategy were a business, would you invest in it?” And they realized, like, “No, I would not invest in this. It’s a 40-page trust sitting on a binder. It’s generic. It’s like every other– no, I would not invest in this.” And then I have to break it to them. You’re currently 100% invested in your wealth transfer strategy.

But I think, especially for my entrepreneurial clients, that can oftentimes be a light bulb that goes off when they realize where is the business plan? What is the why? What is the elevator speech for our family and for our wealth? We have five core values as a family and we purposely choose, how do we invest our time, our talent, our resources into those? And so, it’s not only directional, but it also helps us filter because we can always do more than we probably should. So, just like you wouldn’t probably start a med spa at your business or anything else. You know what you’re good at, you know what you’re focused on, and that helps you make decisions. And I think the same should be true with families.

Casey Weade: Yeah. Well, what I hear you saying, if I were to distill that down is, whether you own a business or not, you’re an entrepreneur and you have to think like an entrepreneur. You have to run your family like a business. And I’ve seen the most successful family men are those that run their business at home just like a business. They have their board of directors, they have their regular meetings, they have their mission, they have their vision, they have their values. And I think that’s just an incredibly valuable principle for us to all pay very close attention to, especially if we have a family. And that’s, who’s listening, large individuals that are thinking about family.

Now, we get to number two here, and that is entrusted families prepare the family for the wealth, not the wealth for the family. My question there is, and I think it’s a question so many have, how far in advance we get the beneficiaries involved? You talked about somebody else in. Just lie to your kids. Don’t tell them how much money you’re making. So, when do we actually cannot let them into that fold? How do we know that it’s time for them to know what the plan is and what they’re looking forward to at some point in life? And how do we involve them in that decision-making process?

David York: Yeah. Unfortunately, so many people, their estate planning, their wealth transfer planning, it’s like building an airplane for the next generation. Now, it might be a Cessna, it might be a 747 or something in between, but it’s like building an airplane and not teaching your kids how to be pilots. It’s not going to take off. It’s not going to do anything.

And what I think clients need to recognize is it’s more important to prepare kids for wealth than simply just preparing wealth for kids. And I think you should do both. But I think it should be done early on, I think by the time they’re teenagers and beyond. And what I tell clients is every child from teenage up, so you could start this any time, but every child and I especially think it’s true in higher-net-worth families, they need to know the answers to three questions. Question number one is what can I expect because I’m part of this family? Question number two is what should I not expect simply because I’m part of this family? And question number three is what is expected of me?

Now, those sound like pretty simple foundational questions. I will tell you this. In a vast majority of families, kids don’t know the answers to those three questions and they don’t know the answers to those three questions because the parents haven’t come up with the answers to those three questions. So, I think if you do nothing else but help answer those three questions for yourself, yourself and your spouse, and pass those on, you do more for kids. And what I love about those questions is its balance of both rights and responsibilities.

We talk so much in estate planning about entitlement. We throw out this word entitlement. Entitlement is the presence of rights in the absence of responsibilities. And I think, unfortunately, one of the problems with estate planning is that it’s all about rights. What are you entitled to? There’s no corresponding responsibilities. Now, I think there’s problems when you have responsibilities in the absence of rights, but you need to know that.

And again, going back to the business model, that’s a base expectation for every one of your employees, right? What can I expect here? What should I not expect? What’s expected of me? And yet, we don’t answer that in our families. So same thing. And so, obviously, that’s about education. But preparing kids for wealth, the next generation is more than that. It’s about life experiences. It’s about informal education. It’s about understanding finances, understanding investing, business. It’s about understanding who they are because they’re unique individuals. So, it’s a lot beyond just simply getting a college degree and you’re prepared for wealth. We all know that’s not true.

Casey Weade: Yeah, getting them involved, I mean, what I hear you saying is making sure we’re checking some of these boxes and having these conversations. Do you have the guiding principles, the values, the life lessons, personal preferences, the vision, the mission? Identifying all of those things and answering these three questions you laid out, what can I expect? What should I expect? What’s expected of me? Now, we’re able to start involving them in that conversation.

I think of it much like the business. If I would involve my team members in, actually, opening up the P&L five, ten years ago, probably wouldn’t have been ready for that. Now, they’re aware of that profit and loss statement and now they’re prepared for that. They have responsibilities. There’s ownership, there’s KPIs, right? And it all became out of having that really clearly defined before you bring them into that conversation, I think that’s the key, which is number three, families maximize the positive benefits of the wealth and minimizing the negative effects. This is how we avoid it, not turning into financial dynamite that we’re leaving behind for the next generation.

David York: Yeah, exactly. And I think, I would say the vast majority of the clients I work with are the wealth creators. I do work with a number of clients that are second, third, fourth, fifth generation. One of the reasons is because I work with a lot of entrepreneurs and live out west. You don’t have a lot of the old money maybe that you have on the East Coast, but part of it is wealth does not typically transfer to multiple generations. There is that old proverb of shirt sleeves to shirt sleeves in three generations, right? The first generation earns it, the second maintains it, the third consumes it.

But the reality is that, again, wealth is not the impact that money makes is not neutral. It’s a moral. I like what Dave Ramsey talks about money is like a brick. You can use it to build an orphanage. You can throw it through a window. It’s a moral. It’s just a brick. But the effect is not. And so, what we have to realize is that wealth of any amount is impactful. And the more wealth we have, the more impact it makes. So, let’s really think through how do we maximize the positive benefits of that and how do we minimize the negative effects. Let’s be intentional about that, recognizing it’s not a neutral thing.

Casey Weade: Well, one way that you encourage us to do that is having families focus on flint and kindling, not the fire. That’s principle number four. Let’s talk a little bit about flint and kindling. I have some questions.

David York: Yeah. So, the notion there is, again, take the analogy of having built a fire, a roaring fire to keep your family warm, to provide light and resource and warmth. And now, it comes a time that your kids are grown and gone or ready to deploy and go on their journey. You would not hand them a burning log down the path, right? Because that would end up just burning them and it would burn the forest on the way down. What you would do is teach him how to replicate the fire that you created, right? You would provide flint and you’d provide kindling. If anybody watched a survivor out there, fire is life, right? They don’t give people fire. They give people the tools to make fire.

And that’s why I love focusing on more opportunity-based planning because, again, by creating the opportunities to create wealth, you infuse that cost element, you create that replication, and you create a multiplicative effect. It’s interesting, I mentioned earlier, traditional wealth transfer over 25 years, you take your wealth and divide it by eight. Statistically, that’s what happens with inherited wealth.

On the other hand, if you look at the increase in lifetime earning potential for education, you look at the ROI on the average closely held business, you look at the impact of a down payment on the growth of assets over time over a 24-year period of time, you average that out, it’s about an 8x return on money. So, now, you’re talking about dividing assets by eight or timesing them by eight. And that’s really what we’re talking about is you really not only create that value proposition, but you get a multiplicative return on your investment when you focus on the tools to create wealth as opposed to just the transfer of wealth itself.

Casey Weade: When I think about this, it makes me think about an experience that I’ve had multiple times but not that long ago. I was at a friend’s house and he was trying to make a fire. And I was just mind blown that he had no idea how to make a fire. Nobody ever actually taught him how to make a fire. He’s taking these big logs and trying to light them on fire, and then he’s trying to use fuel, accelerate and accelerate. What is going on here? My dad was a survival instructor, and so, it was just natural, I mean, he just taught me how to make a fire, and that was a regular part of my youth. He was always educating me on surviving in the wild, starting fires, building lean tubes and all this.

But that’s what you’re really talking about, being the survival instructor for the next generation, teaching them how to build the fire. Don’t just leave them the kindling because they may not know what to do with the kindling. Don’t just leave them the flint. They don’t know how to use the flint. You teach them how to use these things. You are their survival instructor. And I just love that analogy.

Number five here on your list of principles is entrusted families are generous. Now, what hits me here is I don’t see everybody being generous. I feel like the bulk of individuals I meet with, they’re not that charitably inclined or they don’t really have any goals or any wishes to leave anything to charity at some point in the future. And maybe that’s not what you mean, but do you feel that there always has to be a charitable element to a successful estate plan?

David York: I really do for a couple of reasons. One is, honestly, the value that we see, the old adage, it’s better to give than receive, it’s true. Studies show that people who are generous have much lower rates of depression, other mental issues, even physical issues. People who are generous have longer life expectancies. They tend to have more relationships. If you could take the benefits of generosity and sell it in a pill for the same price the generosity costs you, people would buy it. I mean, it’s just study after study has shown that.

And what we find is families that are generous and act in generous ways is actually a tool for bonding. That other centeredness actually creates, paradoxically, higher levels of engagement within those families. You get those endorphin rushes and you go, again, from a consumption model to an impact model. And so, I’m a huge fan now. That said, I do think you have to be careful with forced generosity. I’ve had some families who say, “Well, instead of leaving a bunch of money to the kids, we’re going to leave it to a foundation and we’re going to have all the kids sit around each year and give money away to these prescribed charities.” And I tell them, “Look, forcing your kids each year to give away money that you did entrust them with, the organizations that they don’t engage in, is that actually going to build family harmony? It’s going to do the exact opposite.”

So, I think, generosity is such a critical tool for building strong families. But I do think you have to be careful with it, and it needs to be something that’s engaging that next generation. And you need to give in ways that they want to give, as opposed to just prescribing forced generosity in the framework that the parents want.

Casey Weade: It seems to me the answer to that, if we want to leave funds to a foundation and we want the kids to be on that board of the foundation, we set up the foundation prior to us passing away and we involve them in that decision making of what the foundation’s going to do earlier on.

David York: Absolutely. I couldn’t agree more. I think, again, the best estate plan is one that the kids say Jesus is exactly how we did it during life. There’s no difference. There’s no change. I’ve had some clients who, again, enable, entitle their kids, bail them out of every circumstance or situation, and then the estate plan, they want to parent in a way that they aren’t parenting now. And so, I totally agree. Plus, it gives you an idea of understanding if it works or not. When you take your estate planning principles and apply them during life, it’s like training wheels. It lets you learn what works and what doesn’t work and lets you adapt and change as opposed to just in case of death, break glass, pull this thing out, and think it’s going to work.

Casey Weade: Number six is entrusted families preserve and protect wealth. As people think about that, they’re probably thinking about trust structures and things like that. I don’t know if that’s entirely your intent. I don’t believe that’s really your intent with that principle entirely. But a lot of that does come down to structuring trusts. I just wanted to pose this question, as I’ve heard this quoted in the past. If you have trust, you don’t need a trust. If you don’t have trust, then you need a trust.

David York: Yeah. It’s interesting because trusts, initially, I mean, you go back a thousand years, they were about who before they were about what. So, to a certain extent, I kind of agree with that. It actually was born out of the Crusades. People would leave, and so, they would have to transfer title of their properties to someone else who had total ownership. And then when you got back, you would hope that they would give it back to you. If that was the case, it’d probably be a pretty small list of people that you’d actually trust. So, I understand that.

But at the same time, I think, it’s purpose and planning. Purpose is the heart and soul of your family, but planning is the skeletal structure that holds it together. So, if I were to say, what does the body need more? Do you need heart and lungs and organs? Or do you need a skeletal system? I don’t know how you can argue that you need one to the exclusion of the other, right? You need them both. And so, I am a huge believer in planning, but it should be driven by purpose. The heart and soul of your family is the why and it’s the who. But that doesn’t mean you don’t have to deal with the what and the how.

And so, planning is where I have frustrations is when we focus on the planning to the exclusion of purpose. To me, purpose to drive planning, but planning needs to support purpose. And I can say, “Oh, I have the greatest trust in the world and people.” If I have no structure behind that, I think you’re going to run into just as much failure as if you have great structure and no purpose.

Casey Weade: Yeah, that’s well said. Let’s bring the seven principles to a close here with the seventh one, interested families design and implement dynamic governance. What is dynamic governance, and maybe involve the family exchange zone in there, if you would?

David York: Yeah. So, the concept here is, especially if we want to make a lasting impact and, again, some of that has to do with scale. But I would say this, even if you had a modest amount of resources, I have a lot of clients who say, “Look, I want to provide multi-generational opportunities for education.” If you can get education, you can do anything. So, instead of just leaving a bunch of assets to the next generation that will likely get consumed, I just want to focus on education or homeownership or whatever it is.

But if you’re looking at making a lasting impact, you’ve got to think through, okay, what is governance look like? And I am a fan of what I call dynamic governance. And you look back to the US Constitution, they went from a monarchy where the king made the rules to a group of the people, by the people, for the people, right? And so, that’s why you have to develop a structure for long-term family governance and that’s why I love what you referred to, the exchange zone.

If you’ve ever watched a relay race, obviously, there’s spots where the runners are running on their own as fast as they can. But then there’s a place where the first runner is still running, the second runner starts to go. They actually run together for a period of time. Then you have a passing of the baton. The two still run for a period of time together before that second runner heads off to continue the relay. That area is called the exchange zone. And I think it’s a really, really important period of time where one generation collaborates with the next generation. Unfortunately, we’ve lost the notion of mentorship or an apprenticeship that used to be so much more common.

And unfortunately, we outsource so much of the education of the next generation to third parties. But I think there’s such valuable wisdom that can be transferred from one generation to another and an opportunity to really bless and then power that next generation by working together. So, I’m a huge fan of that exchange zone concept where you actually work together generationally as you work to transfer wealth.

Casey Weade: That’s great. I know we’re at the bottom of the hour here. Let’s just be bringing things to a close. But do we have time for some tactical questions and some questions from our subscribers?

David York: Absolutely. This is your chance to ask a lawyer a question and not getting a bill for the answers, so take advantage.

Casey Weade: Well, before we even get into their questions, I just have this one that we have, this is diversity in different estate planning attorneys to go to. There are all these different attorneys to choose from. And then we have ChatGPT, we have AI coming online, and we’re able to go to these resources and say, “Hey, these are my wishes. Structure this document for me.” And then we can take that to an attorney, get it signed off on. And then, of course, we have LegalZoom and other tools like that. Where should we be going for estate planning?

I feel that there are some that maybe can accomplish everything they need at a low cost, going to a LegalZoom, doing it online, something along those lines. And then there’s those that have deeper needs. They have to find a specialist. What are your thoughts on AI, LegalZoom, and other tools like that online and then working with a variety of different estate planning attorneys we have?

David York: Yeah. Honestly, I would say it’s a lot like investment on the investment side. There are so many tools and resources for investing. To the extent that you want to educate yourself and understand the options and understand and do that work on your own, I think there’s resources and opportunities for that. Some people, though, like to hire a professional investment advisor because they want to be able to talk to a person, have a specialized plan, and know that there’s someone who’s looking at it.

And I think the same is true, I mean, I look far more at the human element for the need to do estate planning. Again, back to the original question, if I’m worth $6 million, I need to do estate planning or not. That’s not my first question. My first question is, do you have a spouse? Do you have minor children? Do you have a disabled child? If something happened to you, who do you want making medical decisions for you? Who do you want making financial decisions? Those are all questions that are very important that are agnostic to the amount of your wealth. It doesn’t matter whether you’re worth $10 or $10 million. You need to address those.

Now, that said, most states have great statutory forms for medical and financial powers of attorney. A simple will that names guardians for minor children and list assets to spouses are actually fairly easy to do and to generate. So, honestly, I think for a lot of clients, a lot of people, they can actually accomplish their estate planning through those by spending a little time and effort to educate yourself and then implementing those.

But for more unique situations or for people who simply just want to pay for the advice and know that they’re getting something done, that’s really more my delineation on that. But I do think there’s great resources out there today. I use ChatGPT for stuff too. So, there’s great resources out there.

Casey Weade: Yeah, I agree with all of that. I know for myself, there was a progression. When I didn’t have anything, it was LegalZoom. And then, as thing’s progressing, well, you’ve got multiple business entities, you have more complex estate, and then had to go from one attorney to the next attorney and just continue to go to different resources as complexity evolved.

We have three questions that I want to go through. We might even be able to group all of these three into one because all three questions we have here have to do with trusts. And so, we have living trusts, revocable living trusts. We have irrevocable trusts. Let’s kick it off with Michael, I think. So, Michael says, “I have an existing living trust and was wondering which assets should be placed in the trusts versus which assets should be kept out of the trusts? For the assets not included in the trust, is it advisable to simply designate a primary and secondary beneficiary for these assets?”

David York: Yeah. So, if you spend any time with an estate planner, you’ll know the only thing we like more than a trust is two trusts, that the answer to every one life’s problems is a trust. But really, trusts do a couple of things. One, and I think Michael’s referencing this here, trusts are unique legal structure and they don’t require any formal filing. They’re not like an LLC or a corporation where you have to set them up with the state. They’re private documents. But they allow you to establish trustees to manage assets, beneficiaries to get the benefit, and then terms and conditions for how those reviews. One of the big benefits of trusts is the ability to avoid probate. So, if I have a home or I have a bank account, life insurance policy, I can name the trust as the owner of those. And then I can build in mechanisms for who the trustee is to manage those and how the beneficiaries receive benefit.

Now, that said, let’s say you have a surviving spouse or you have adult children, you’re comfortable with them receiving assets and let’s say you have a retirement plan at work, you can also use beneficiary designations to have those assets go directly. So, sometimes we’ll just use beneficiary designations because we’re comfortable with those assets transferee not subject to the terms of a trust. But if you have minor children, under most state laws, that would go into a conservatorship and then outright to a child at 18 or 21. A lot of clients want help for their kids to an older age.

So, it kind of depends on your circumstance. Both of those, whether it’s a trust or beneficiary, avoid probate. It just depends on, are there other issues other than simply avoiding probate that you’re trying to accomplish? And if so, the trust is probably the better beneficiary.

Casey Weade: Well, I think speaking to other issues is the next question for Mark. Mark asking, “Is revocable living trust enough to avoid any chance of a legal challenge for heirs?”

David York: Well, the reality is, you know what do they say, where there’s a will, there’s a contest. Any time…

Casey Weade: That’s a new one for me.

David York: Yeah. Any time you have any kind of legal process, anyone could challenge things. I have a client who said, “Well, if someone’s sued for this or that, anyone can sue for any reason.” Doesn’t mean they’ll prevail. That said, often most wills and most trusts have what are called no-contest provisions. So, they put in, I call it the you get what you get and you don’t throw a fit cause. They’re designed to say, if you challenge the terms of this, you receive nothing.

Now, there’s limitations on that if you have a good faith challenge or there’s some extenuating circumstances. But oftentimes, wills and trusts will have provisions called no-contest clauses or in terrorem clauses. They’re designed to try to prevent people from coming in and arguing over the transfer. So, that can go a long way towards preventing conflict. So, it’s not the trust, per se, it’s the terms of the trust that deal with those circumstances.

Casey Weade: Our next question, I’d love to answer this, so I’m going to let you answer this question. You’re the expert here. So, we have Carolyn that says, “What’s the typical age for establishing an irrevocable trust?”

David York: Yeah. So, good question. Irrevocable trusts are not really driven by age. They’re really driven, we use them for two situations. One is for asset protection. Irrevocable trusts can be used to protect assets for future creditor events. The other is for tax planning, typically estate tax planning, sometimes income tax planning. So, it’s really driven more by the type of assets, the type of risks, and the level of assets that you have. So, I have clients in their 20s and 30s who have irrevocable trusts. I have clients in their 60s and 70s who have no need for them. So, it’s really driven more by a strategic need around asset protection or estate tax planning than it is a certain age.

Casey Weade: Yeah, I think what it really takes there is really clear, is that all these things you’ve been talking about this whole time, just really clear, a lot of clarity around your purpose, your meaning, what you want out of the dollars. Once you have that clarity, then you can decide, “Hey, now, I need to put together a financial plan. And now I know I don’t need X, Y, and Z assets. Now, we can set those things aside.” Those are just such difficult things, I think, for so many to accomplish during their lifetime because there are, a lot of times, things they’ve never thought about before or they just need some coaching through the process.

And quite often, the first part of that is just picking up and listening to a podcast like this or reading a book. And so, we partnered up to give away your book. I want to give away your book to as many people as possible because, I mean, we’re going to be giving this away to a lot of our clients for sure. This is going to be extremely valuable for us as financial planners as well as the people that we work with. So, if you want to get a copy of Entrusted: Building a Legacy That Lasts, you want to dive deeper into these principles and get that legacy that does last, simply write an honest rating and review over on iTunes for the podcast. Shoot us a text with the keyword “Book” at 866-482-9559. We’ll send you a link to verify your iTunes username and send you out that book for free.

David, I could continue this conversation. We’re going to wrap it up here today. And hopefully, we get to have another one in the not-too-distant future. Thanks, Dave.

David York: Anytime. Anytime. Thank you, Casey.