How Katie Krispin Avoids the $15M Tax Trap Most Owners Miss

Katie actually, the most basic estate plan would be your financial power of attorney, health care, power of attorney and living will and testament. And then you kind of build off of that with a trust, and then it can get very specialized depending on your situation. Hector Hello and welcome to another episode of the How to Scale a Business podcast. My name is Hector Santisteban and I am your host for today. Our special guest is Miss Katie Crispin. She is the founder of Katie Crispin Law and she helps with trusts, estate and probate planning. And we're going to talk about really the long term planning, for business owners and how they can start even thinking ahead of not even the next few years, but the next few decades. So, Katie, thanks for hanging out with us today. Katie Yeah. Thank you so much for having me. I'm excited to be here. Of course. Hector one of the big things that we sort of, you know, I think there's even a thing in iOS or in like this sort of development coding world that's starting to, develop here is like where people look at their life and sprints, right? Two week sprints or five week sprints or, you know, might you might even have a ninety day sprint, which is sort of a long term thinking these days because things are changing so quickly. I'm curious for you how you look at sort of long term planning and then your perspective as a business owner yourself and, and how other business owners might be thinking about this sort of general field or general idea, which they may not be giving much time to these days. Katie Sure. Yeah. I mean, kind of what you alluded to. We live in a very busy world, right? So, it's difficult sometimes, at least for speaking from my own experience as a business owner. It's difficult to know where I'm going to be. You know, one of the hardest questions asked, or at least it was one of my most feared questions, is like, where do you want to be in five years? And I think a better question is, where do I want to be in a year? And the better question to that is, you know, it's these smaller increments, like you said, often ninety days is is much more digestible for me personally. So all that to say, it's difficult when you are in these sprints, as you say, and you're wearing so many hats and trying to, um, manage all of these pieces of your business, it can be really difficult to look so long term at what is estate planning. Right. Um, and even the concept of estate planning it means something different for everyone in terms of how they look at it. do they perceive it as negative? And I'm going to die someday. So I need to plan for that. Do I want to just completely avoid that conversation? especially for my younger clients. I think that's it's obviously people are not thinking about death as if they were reaching the age of retirement, those kinds of things. So, it can be difficult to keep top of mind, but something that I like to approach my clients with. Just just the idea that, listen, this is an ongoing process as you build your wealth. And so the earlier you can start, the better off you're going to be. and the easier it's going to be. So that I mean, the idea is that you create these estate plans and you just keep adding to the pot. It's not we don't need to recreate, over and over again. And so that's something that I don't know, that estate planning is necessarily thought of as like an ongoing process, but it very much is and I think especially for business owners who are I mean, they're unique, right? Like sometimes I would say often businesses are their biggest asset. It's also their biggest liability. So we want to make sure that for estate planning when you die. you've got that control, you've got that continuity and you've got that protection. and it just it can be very difficult to keep those big concepts and a big concept like estate planning, um, in the forefront of your mind. But I think it's something that everybody certainly understands that they need. It's just a matter of getting around to doing it kind of thing. And, that's something I've liked to focus on with my practice is make it as approachable as possible so that we, slowly but surely get it done. Right. So we're not waiting until we're at the end of life to do so. Hector Well, I think even before approachable, a lot of business owners need to make it relevant. And one of my favorite stories is, um, when I was reading the biography of Sam Walton, they talk about how he structured his estate, you know, led to billions and billions and maybe over time, trillions in savings because he he was smart about what he was doing while he was doing it. And to your point, it wasn't something that he looked up and did when he was on his, you know, sort of his deathbed, but it was something that he was actively creating as he was building his business. and it ended up, you know, resulting in his family continuing to be, you know, some of the richest people in the world. Katie Sure. Yeah. just the amount of cases that I. So I do the estate planning, but I also, as you mentioned, do um, sort of the probate administration, um, as well as trust administration. But what that basically means that we're probate. it's sort of an umbrella term for whatever you own personally at the time of your death that does not otherwise have a beneficiary designation, it's going to go through the probate court process, like in terms of your assets are basically going to be overseen by a court, by a judge. and it can be, you know, depending on the estate, anywhere from a year to, I would say, like the most typical in, in what I'm dealing with is like twelve to eighteen months. But I also have an estate that's been open for six years. So, any asset that you don't like keep tabs on and gets, maybe if you created a trust, gets left out of the trust, it's going to go through this probate process. And, um, I see that so often with people they don't look at it as ongoing. And so they'll create an estate plan and they're doing their due diligence. They're doing well, but they then acquire property thereafter. and don't properly account for that, and so that it can be subject to these issues of probate court. you know, the legal fees, the court costs, the actual time that's involved with that stress as well. you kind of hinted on family and what that matters for the people coming behind you. it absolutely matters what you're doing now and how that's going to affect things after the fact. I've got a case that just resonates with me deeply. It's going on right now, but three young children who lost their mom and, their mom did not have an estate plan. In fact, she called me a week before her death. We were going to set up, um, her plan actually executed the documents, had a had a date on the calendar to go to the hospital and and have them execute it. And then she passed away. And so now her three children, barely adults, are having to go through this probate court process that I just mentioned. And it's I mean, it's interfering with their grieving process. It's, causing them to have to grow up in many different ways. I mean, they're paying legal fees, court costs. It's just it's really I think so many of us, and especially business owners, we want to leave our footprint on the world. Um, and hopefully you want to leave a positive footprint on the world. And so one way to do that is to create your estate plan and keep tabs on it, and make sure that everything's being accounted for throughout your lifetime so that, um, if something were to happen to you and I'm talking about both incapacity and death, right. Um, that those people behind you are going to be able to handle that as seamlessly as possible. And frankly, remember you for all of the good things. And I've seen a lot of estates that end up in this, stressful, um, state. And it it definitely makes you think about that person in a different way. it's about protecting your assets. Sure. Um, but a big piece of it is making sure that you're paying attention to those people that are going to have to deal with it in the end. Hector Yeah. Is there any, like, misconceptions or blind spots other than, abdication or really just ignorance or, uh, and meaning they're ignoring it, right? Or they're avoiding it. Is there any other sort of common mistakes or common pitfalls that you see business owners either making or not making when it comes to doing this. Katie I think there's just like misinformation out there. I think that there's a lot of questions. Um, probably the most common question I get is what's the difference between a trust and a will? and I think a lot of people think that it's an either or situation. And ultimately those documents are meant to work in tandem with one another. Um, so is there a. Hector Easy distinction between those two? Katie the biggest distinction, the two functions similarly, which is probably why they get confused. But the biggest distinction is, that when you have a will at the time of your death, that will still needs to go through the probate process. When you have a trust, you can bypass that probate process. So both of those documents, like at their core, are meant to say, okay, where is my stuff? Who's in charge of my stuff at the time of my death? And who's my stuff going to? Right. and the difference is, do you want to be subject or do you want your heirs to have to deal with that court process or not? Um, and so I think like another kind of misconception related to that is that trusts are only for the rich people. we think of so commonly trust fund babies, but ultimately it's not about the, amount of your wealth. It's about the purpose that it serves. And it is that that bypass of that process, um, which ultimately is easier. It makes your assets more accessible, your business more accessible, more easily accessible after your death and avoids delays, stress, all those things costs. Hector Is the field different now because of whether it's technology or legislation? You know, I know this has been something that you've been pursuing for years, but you mentioned these misconceptions about, what it is. Are there things that have changed, or things that, matter more now because of the way things have evolved over the last several years? Katie I would say that people are in terms of like the laws changing and things like that. There are technicalities with like tax laws being changing kind of how distributions can be made and the timing of those distributions, um, there are certainly laws that are impacting, the federal estate tax. for example, there's a federal estate tax, which means that if you die at the time that you die, if you hold this amount of assets, anything beyond that can be taxed. Now, at this point in time, there was a law passed back in, in twenty eighteen that, basically changed the federal tax exemption to, um, a larger amount, which means you could acquire more wealth at the time of your death, and you would not be taxed. We are now at the point where we're above we're like at fifteen million. and so you can die with fifteen million dollars not taxed by the federal government. Anything above that you will be the law that was passed in twenty eighteen was actually set to sunset at the end of this year. So December thirty first, twenty twenty five, it was going to revert back to what the pre twenty eighteen um, amount was, which at that time was about five to six million. Now with inflation it would have gone to in today's world it would go back to about six to seven million. Right. Um, but with the way the government is now, and who's in charge of the government, that law is almost certainly not going to sunset. They're going to continue it so that the federal federal tax exemption stays high. So yes, there are constantly and, you know, that means that fewer people are going to be taxed by the federal government upon their death. I mean, fifteen million dollars at the time that you die. That's a lot of money. So there's certainly laws that are impacting, estate planning on a day to day basis and all these, these different parts that overlap with estate planning, right. Like taxes. just like the whole wealth picture that is involved with estate planning. Um, but I just think that with those misconceptions out there and, and just kind of like the old thoughts of, well, trusts are only for the rich. And that's the most basic example, people are starting to understand more. And I hope estate planners are doing a better job of explaining better what is actually the purpose of all these documents and why they matter for you instead of just these, you know, insurmountable pieces of paper that you're just like, oh my goodness. But, hopefully that information is becoming more available through like social media and things like that. So. Sure. The game's changing. I mean, there's laws being passed for virtual signing of estate planning. So, it's just keeping an eye on all of that and how it's kind of changing with our world. And it's always subject to change, like anything else. Hector Yeah. When we get back from break, I'm curious, I think that this is so not in a most business owner's wheelhouse. That it probably seems like common knowledge for you is sort of, I don't know if breathtaking is the right word, but I think small hinges can move some big doors for people. So we're going to get into that right after this quick break. Hey, on today's episode is brought to you by Amplify Media, and we are a podcast and content production company. Well, we actually like to think of ourselves as like the fractional media arm of your company, because chances are, if you're listening to this, you probably have a product, a passion, a mission, a message, some sort of service that you're trying to get out to the world, but you might not have the time, the team or the tech skills to be able to do it. Well, that's the case. We can help. Go to amplify Media.com. That's AMP Media.com. You can also also throw the link in the show notes for you. And with that let's get back to Katie. So Katie, I'm curious for you as a business owner yourself, what sort of things are you doing? to sort of take your own medicine, if you will, or are there sort of easy steps or a foundation that people can sort of, maybe get started with? Katie Sure. I mean, it sounds so simplistic, but just start the conversation. You know, I think it can be an just an unapproachable topic for people, as I've kind of been mentioning. And, one thing that I've tried to do with my business in particular is get where people are at, right? Get on social media. It's it's the way that our world is now. So just kind of educating starting with that education piece. So as a business owner, I mean we work so hard for I, I guess what I'm trying to say is we teach ourselves things. Right. We have to go the extra mile to learn things. Um, and I would say that estate planning is one of those topics that you just, you dive into, or you find someone, even better, find someone who knows about the topic and just listen to them. Just start with it. and then once you have that conversation, I think it just becomes more, you understand, more like the purpose of it and why you're doing it. And, and the people that you're protecting. And we work as I mentioned, we work so hard. So why would we not want to make sure that that there's a plan in place so that if something were to ever happen to us, there's no guarantees in this life, right? and estate planning is thought most commonly about death. But we have to think about incapacity, too. Um, there's I don't know what the latest statistics are, but I read some time ago that two thirds of people become incapacitated at the time or before they pass away. That's a lot. Um, and so we just don't know. We don't know what's coming down the pipe. And estate planning is meant to, protect that part, too. So if you have a business and you don't have anything in place, like a financial power of attorney, for example, that would allow someone to manage your business if you were to become incapacitated and you couldn't manage your everyday affairs. I mean, what happens to your business? What happens to this baby or mule or whatever you refer to your business as? it's just kind of stuck, right? Like, and with my experience with banks or financial institutions, they want that piece of paper authorizing someone to handle that bank account or handle that piece of real estate. So it's so important that we consider all of the things about estate planning, which is we're not just talking about death, we're talking about incapacity to and making sure that we have decision makers that clearly authorize people to act when needed. and that that integration with your personal plan as well. It's all encompassing. start educating yourself or investing in education, which you can find anywhere on the internet these days. And I think just the maybe you understand the importance right away, maybe not. But the more that it gets in front of you, the more that you'll realize, oh, I got to do something here. Hector What are the core components of an estate plan? Or what are sort of the pieces that, you know, even if they're going to go talk to somebody, that they should make sure that these things are being included or addressed. Katie I like to refer to them as the four core. And that's usually your financial power of attorney, your health care power of attorney, your last will and testament and your revocable living trust. Now that's the most basic estate plan. Um, actually, the most basic estate plan would be your financial power of attorney, health care, power of attorney and living will and testament. And then you kind of build off of that with a trust, and then it can get very specialized depending on your situation. to some extent, like there's a lot of commonalities with people, but it's so particular to people's assets. I mean, down to do you have an LLC or do you have a PC? You know, like it matters, and how your estate plan is structured is going to matter even how your company is formed. So all that to be said, those four core documents, um, your financial power of attorney, it's going to say if in the event I become incapacitated and I cannot manage my financial affairs, I'm going to designate this person, this person and this person, usually in succession of one another, to take over. Okay, so take over my bank accounts. If I have real estate to be able to, rent or sell or buy those kinds of things. and then at the time of your death, that financial power of attorney essentially ceases to exist. And then your last will and testament is going to pick up, and that's going to say, okay, I died with these assets in my name, and I want this person in charge, and I want these people to benefit. And then you take it through that court process. The health care power of attorney is similar to financial power of attorney, in that, you know who's making my medical decisions if I'm unable to. Okay. So, um, that means placement. That means which doctor? you're going to see. That means anatomical gifts. Um, you know, organ donation, transplantation, those kinds of things. That means, disposition of remains. Do I want to be cremated or buried? Those things. It's just the the healthcare version of your financial power of attorney. Right. And then that last document that I mentioned is that trust. And I kind of already explained, um, how that differs from a will, but the the idea being that you create this trust, it becomes effective upon its creation, and then you funnel assets into the trust so that everything owned by the trust is governed by the trust. and in the event you become incapacitated, it's still governed by the trust. And in the event that you pass away, it's still governed by the trust, and there's no interference whatsoever. Um, now, when you have a trust, you still need a will, and the reason you would still have a will is because if you were to, as I kind of mentioned before, acquire something later that you forget to then fund into your trust. Um, or you forgot that something even existed and it's in your name at the time of your death. That Will is going to pick it up. And this is how the will works in tandem with the trust. it's usually referred to as a specific type of will a pour over will. That asset will be picked up by your will and poured over to the trust. So it makes it more seamless in that way. And it's it's a catch all. it's a cushion in case you don't put everything in your trust. Um, so all of these documents serve different purposes. for example, guardianship. So who's taking care of your children. That's specific to a will. So that's another reason. Even if you have a trust, you would still need a will because If you have young children and you pass away, um, and your children are under the age of majority in whichever state you live in, Missouri, it's eighteen. then that Will's going to say, okay, I want I want this person to take over. Um, so they all serve very, different but important roles. And it's all meant to be this comprehensive plan that touches all these different pieces of your life. Hector Yeah. really comprehensive. And I think why so many more people should be relistening to this conversation. Uh, Katie, this has been, deeply insightful. If people want to go deeper into your world, get more connected with you. where's the best place for people to go? Katie I have my website. Katie Crispin Law.com. as I mentioned, I am on social media. My Instagram handle is Katie Finney crispy? Um, and I'm also on Facebook. So Katie Finnegan Crispin. And that's where, you know, I'm just putting out some content just simply to educate people and So I just want to serve as a resource. I mean, that's where I get my passion with this particular topic is just it's something that's often overlooked and it can get missed and it can have huge implications. And so for me, my service is just educating and, making a, as I sort of been the theme, an unapproachable topic, approachable. Hector And the last question I ask all of our guests is, in your opinion, Katie, what is the secret to scaling a business? Katie Well, right now maybe this answer would change, but right now, I think it's, um, paying attention to the financials is something that I'm learning. Um, and kind of things that, I would say overall it's a mindset, right? Like, I, I don't particularly enjoy looking at my financials, but my mindset, I have to overcome that, blockage in my mindset in order to dive into that. And then once I see my financials, I can see where I'm going. Right? So that's something that again, I think the answer would probably change. But I think looking at that and improving your mindset and trying to get over these obstacles that I often find in my own life and business.