If you are a fan of the PBS show, Downton Abbey, of course you recognize that iconic music. That is the beginning of the series, season one episode one, in which Lord Grantham, the owner having inherited Downton Abbey from his father, the owner of the estate. He's about to learn that the only qualified male heirs to the estate, no kidding. Drowned.
When the Titanic sank, this of course creates an estate planning problem of epic proportions for Lord Grantham and his family and also creates great content for today's episode. When we talk about the way british common law treated the conveyance of estates. What we have inherited from them and what we do much better, but the concepts and the terminology that we are stuck with, we will learn from history.
We will learn from the laws of money so that we can leverage it to our advantage. Let's get started.
Welcome. BoomXers. Let's throw out the old playbook. It's time to tear down the traditional way of looking at your life and money and leverage the laws of money to our advantage. That's right. There are laws of money and those who learn and leverage the laws of money win, and sometimes win big. Stay tuned as asset protection attorney, Darol Tuttle, educator, and leader of the Boom X Nation shows us how.
Beginners, investors, entrepreneurs, fellow attorneys, are you ready? Are you ready? Let's arm this bomb.
Now, here's the Boom X Show, The Laws of Money.
Welcome back to the Boom X Show. I have just uploaded to the companion course, a short video that defines the word estate as it appears in the code. And trust me estate, that term estate planning is not what you think it is. In that video, I also let me just walk around with my iPhone at a spot on the Caribbean that's not very far from the studio here.
We'll talk a bit about the history of this area, which actually I'm focused on back on the theme of pirates that operated in this area. I talk a little bit in that video about that, but remember it all comes down to like the influence of great Britain in common law, but even great Britain in the United States.
We've inherited the legal system from great Britain and United Kingdom really. And lawyers just referred to it as common law or British Common Law. The first trust, if you take the nest egg course as a family member of the Boom X Academy, you'll learn the history of trust law that dates back to the black, it's just fascinating to me because we're experiencing a pandemic now.
And so ironic that people are in some cases, making mistakes that is leading to their wealth being eroded and the single best way to protect it is an irrevocable trust. It's really not that different than the trust that was created during the black plague, which I explained in the companion course, I misspoke in the nest egg course which is available.
You'll be automatically enrolled if you join as a family leader. If you want to test drive the concept, boomxacademy.com is the URL for you to go to the website and you can join as a free member. And the companion course there's additional content. And then I can see there's some tangents that I go on, but that's my product.
And that first video, I'm talking about the idea, not the idea of an estate as it's used in nomenclature today, but the actual legal definition of the word estate. It only appears the word estate three times in the law. And it's very important for a person who wants to distinguish between asset protection and basic run of the mill retirement planning which I believe is the difference between success and failure. If you really want to begin with the foundation, it's understanding what estate, that term means. It happens to come from archaic French brought over to great Britain during the invasion of Normandy, 1066 that's its origins as is probate.
Probate's origin is from William, the conqueror in 1066. And we still have the archaic word escheatment came from archaic French in Normandy when William the conqueror came across and invaded and conquered England. That word escheatment refers to the practice of, in the event that there is not a qualified mail heir back in those days.
Then the estate, which the crown had distributed to the Lord. If there is no qualified male there, it will escheat back to the crown. It will revert back to the crown. The crown has a remainder interest. It's a conveyance of the estate to the Lord that had shown fealty to William the conqueror, King William, but it was contingent.
There were strings attached. If there was no qualified male heir to run the estate, to raise taxes, to raise an army, to serve the crown, then it would revert back to the crown. For its own use to be distributed again. And that's how the Lord's one of the ways that the Lord's lost their estate.
Downton Abbey, the show, fast forward in 1066. Downton Abbey is set in when the Titanic sank in what? Early 19 hundreds. So even though centuries had passed. Downton Abbey is in the estate that had been with that family for centuries. Maybe it had been distributed by William or redistributed. And his problem is if he does not have a qualified male heir, it will escheat back to the crown and the family will lose the estate.
If you think that this is all hypothetical in my state, your state too, there is not a state in all 50 states in which there is not a concept of a escheatment. If there is no heir, the state's department of unclaimed property will take possession of the asset my friends. And that statute in my state is no kidding called a escheatment, quote, unquote.
That's what the statute called. And it is verbatim from a concept of a low GL title. Originating before, but inculcated into British common law and therefore American it's actually astounding. Talk about holding onto a really bad idea. That's what the law does, it we look back into time for a legal principle so that we can have consistency.
And so the terminology and the history and the construct of British common law is still with us today and it is still relevant. Now, of course, we don't have time to go into all the terminology. But if you enroll in the companion course, that's the first step. As a member of family leaders of course, then you have if you take the asset protection roadmap, of course, then you get a glossary of the 50 most common estate planning terms and much more.
So that's a great way to learn let's on that note let's just take a moment and really focus on the benefits of the academy.
If you are in or near retirement, you may have concerns that one of the many threats to wealth in America today, in particular high unreimbursed medical costs, unnecessary taxation, or even family mismanagement could threaten your retirement nest egg. The good news is that the law does have solutions, federal law and centuries old trust law offers many safe harbors and when implemented correctly, can protect your savings against Medicaid liens, state, and federal tax agencies and even private credit.
But why do so many retires then suffer asset erosion or even complete depletion having failed to meet the laws requirements? The simple but sad truth is that most are unaware of these asset protection laws, or believe that only the super wealthy can pay less in taxes or think that they must hire an expensive attorney.
Some who charge tens of thousands of dollars to put it all together. Unfortunately, we live in a world now where middle class Americans simply do not have enough wealth to lose any of it. It's more important than ever for most to have an asset protection trust and plan, even if they are not super wealthy.
Now for the first time families have help. Families can protect their assets if they learn a few basic concepts, have the correct legal documents and implement these asset protection plans correctly. To do this begin by enrolling in the Boom X Academy. The Boom X Academy is that you guessed it, boomxacademy.com. That's a boomxacademy.com.
Boom X Academy offers free and tuition-based courses on topics related to retirement estate and asset protection planning sign up today for the family leaders membership level. And you will also join an online community of other learners. You may attend weekly live office hours with me, Darol Tuttle, host of the Boom X Show and in, in the trenches asset protection attorney. Best of all, you'll have access to the boom ex drafting app so that you can easily draft all of the legal documents you need without hiring an expensive lawyer. To repeat, you will walk away with a full set of properly drafted legal documents that you understand.
You can join today as a free member and you will be enrolled in the Boom X Show companion course automatically. You can also test drive the $40 per month. The family leaders level at the astounding rate of just $1 for the first 30 days. During this first month, you will be able to draft a limited power of attorney to preserve their right, to transfer your nest egg, to an irrevocable trust.
A proven strategy. I've helped clients implement countless times. This is also an $1,800 value. You will be enrolled at no further costs into the nest egg course, which will introduce you to the concepts of asset protection and how to implement this legal document and begin your asset protection plan. To learn more, go to boomxacademy.com. That's boomxacademy.com.
In last week's episode, Susan who attended office hours at the Boom X Academy indicated she had a family, four daughters. And she was in the process of using the drafting app and the application to create a asset protection plan in which she was preserving the right to transfer that a nest egg into an irrevocable trust, which I characterize like the mind map should be, or the theater of the mind rather it should be like a family bank.
Now not a bank like bank of America uses the term. Bank of America just hold your money, charges you fees. And there is a, and we'll throw you under the bus under certain conditions without thinking twice about it. For example, think about privacy. Privacy is under assault in America today.
It's primarily under assault, not by the government rather, but by private companies. And if you've ever really looked at terms and agreement, services agreements. When you sign up for a social media account, of course, what happens is to use the social media platform. Facebook is a great example you are essentially waiving all right, to indicate a privacy that you would normally expect and financial institutions have the same sort of morals.
And everybody pays lip service to privacy, but the truth is in the event that you have a family bank account and you can go to bank of America setup. Susan, in this example, Susan is trying to set up a pot of money, like a responsible family financial plan to build family wealth that's her goal.
That should be everybody's. And she could, she can not go to bank of America and set up an account with her husband and her four daughters as joint tenants with rights of survivorship and expect any kind of asset protection.
For example, if the internal revenue service decided to audit the family, Susan just by this is a hypothetical, this is not going on with Susan at all, but it if the internal revenue service issued a subpoena for the bank records. Bank of America would spit those up in a heartbeat. And so while, a bank customer expects privacy, it's limited, extremely limited in my view limited. Now, if on the other hand let me use a slightly different examples to illustrate the point, which I think will make more sense.
If you buy a car and register the car in your name and you are later driving it home from the car lot, you run through a red light and in the red light intersection has a traffic camera. They will issue an infraction. Now it is not required. Infractions can be issued, not crimes, but infraction, traffic tickets, which are civil penalties can be issued by a government authority without a police officer present under some city statutes and in other words, the camera.
And the problem is identifying the driver. You cannot issue a citation against a car, an automobile. It has to be against a human being. So the statutes work this way. If the ticket goes to the registered driver owner and driver of the registered owner, rather of the car, and it's up to the driver to rebut the presumption when they receive the ticket in the mail that the the driver was the registered owner.
That's fine, except that we could create a limited liability company that purchases the automobile. And in that case, so ABC privacy is important, comma, LLC. That's the name of the company and it purchases the vehicle and driver of the company runs through a red light. There's not going to be an ability to enforce a traffic ticket because the privacy of the driver has been protected by owning the vehicle rather than the driver.
Now, remember business entities are for business assets and trusts are for personal assets. A Trust could even own a vehicle. And so you can't send a traffic infraction to a family trust. It's an unenforceable because you protected the privacy of the driver. Now I am not suggesting that you can use a trust and then go violate run through red lights.
Of course not, but it does illustrate the point that the government's job is to in some cases, enforce spurious type, running a red light to me you like, would you run a red light at two o'clock in the morning if there was absolutely nobody present? Some people would say yes, some people would say, no, that's not the point.
The point is privacy. Is it, is I, my view important. Now, back to the example though, of an account, if we made a complete transfer of assets and tax year one and establish a non-grantor trust. The taxpayer no longer owns those assets. Rather the trust owns the assets and the trust actually is considered obtains, a taxpayer ID number, registered with the internal revenue service and files, a 1041 to report any kind of a gain or loss inside of the trust.
And the owner, the prior owner of the assets has essentially been divested from ownership. Although there could be some benefit to the trust or more importantly, the trust are his family. Now in the event and tax year two or tax year three, absent a claim of fraudulent transfer.
If the taxpayer was audited by the internal revenue service then a subpoena against the trust would be improper. And that's not to say that the internal revenue service wouldn't try, but a motion in court should be able to compel, restrain the bank from issuing the bank records because it's a different entity. Now that is not the case if they can prove fraud, but we're not talking about fraud here. Like none of the work I do involves any kind of tax evasion at, at all. In fact we are transparent. As the law describes.
Now, so what Susan's trying to do is not set up a family bank account, a Bank of America, which really has no asset protection value whatsoever, but to create a true asset protection trust that not only preserves the privacy of the family, but also creates a pot of money that the family can draw upon for whatever purpose that they want.
And that also gets to privacy. So in the event, You, essentially if your family's values are like, we're all in this together. And if mom becomes ill and frail late in her life, we're gonna, we're gonna, we're not going to just let her die pennyless on what's on the streets. We're going to take care of her.
We're going to take care of our mom. That's our family values. Now, if the family has been provided a pot of money ahead of time, for whatever, like all bent fountain family members benefit from this. Then that is a private transaction and those funds are available to co-pay with Medicare, to co-pay with Medicaid.
And it also reduces the estate tax liability. If there is one, because you have lowered the taxable estate, it makes perfect sense. That's what Susan's goal is. Now in, in the last episode of the boom, extra laws of money podcast, she had asked in office hours, I'm confused about professional trustees versus using my daughter.
Cause I had strongly advocated do not. Think everybody's instinct is well, I'll just let my daughter be the trustee. That creates a lot of problems. She's an interested party. She's also a lifetime beneficiary. And the question that Susan had asked when setting up this family bank is bullet-proof asset protection, family bank and irrevocable non-grantor trusts was I'm confused about the terminology.
So the trustee is the person that manages it. The lifetime beneficiary is the person that's entitled to distributions of income or principal, depending on how it's set up during the lifetime of the trust maker. And then when the trust maker dies or whatever termination event you choose could be a termination of event, 150 years out for all I care, but there is a termination event all trust have to be able to terminate at some point, or it's not a valid trust and so whatever that termination event is, then the remainder beneficiaries are those who are entitled to distributions out of the trust.
So in this case, the four daughters equally, now that does not mean that you cannot create a separate trust for each kid. If the, you want this trust to, the idea of asset protection to protect not only your, that first-generation, but the grandkids generation as well, then, you create a cascading or dynasty trust. And so when Sharon or Susan rather is setting this all up, she in office hours, we were able, I was able to explain to her what the different parties were.
Now, what's what I think is cool is we started this out with Downtown Abbey. My job is a little boring, like it's talking about trust law can be a little bit dry. And so here we are, we have a PBS show that's basically on that point, historically Lord Grantham wakes up on the morning that the Titanic sinks and his two two heirs to the estate had perished.
So he's wow. My plan is falling apart here because I am tied to the entail. Let me explain that. If you go back to 1066, William the conqueror prevailed to the battle of Hastings against his Harold Edward, the confessor, anyway, 1066 won the battle of Hastings. He brought with him very strange from the English perspective ideas about property.
And essentially William was able to conquer all of England and then parceled out the prior estates like he's conquered England. And so he's taken the land. And then he creates, he actually created the first parcel system and then parceled out estates to all his buddies that helped him win the Lord.
So that became the nobility, the new nobility of England and it's really, I bet you, if he really realized what he was doing, he might've done it differently, but he didn't give complete title to the Lords. He could have, that's the system that they had used, like here, this is your land you can do with, as you please.
But he did not do that. He said, this is my land and I have a divine right to it. And my title is ultimate. And so now. What he gave to each Lord was not all of all complete title forever. It was contingent. There were strings attached, and that sprung into existence. This idea of property interests.
Now in America, we read, talk about interest. I have an interest in that. I like we're used to the idea of interests, but back then they were not. And in here, you think it's. What William said was if you die, Lord, here's your estate. You're good to go. The only thing I expect is you need to pay me taxes and you need to be able to provide troops in the event that I need to call upon them to defend your estate in order to defend my crown.
So that right there, there's a string attached. Isn't there, it's not an estate outright. It's an estate. If you do these two things, the third string attached was when you pass away, it's okay if you keep it in your family provided you have a family. And I define family as a qualified male heir, not a female here, a male heir.
If you do not have a qualified male heir then it's going to escheat back to the crown. I get it back. Now, think about that that, so that is a con it's not a future. It's called a future interest. And law school, the first year of law school, property professors across the nation torture young law students with this, the difference between a present interest and a future interest is may or may not vest on a contingent event in the future.
And if, for example, the crown has a future interest. If Lord Buckingham is granted in a state, the crown, the future interest that the crown has retained is the right of reversion. In other words, if there's no qualified heir, the estate reverts back to the crown, but if there is a qualified heir, the Crown's interests, the future interest does not vest.
Rather it vast in the next heir and that repeats itself over and over again right. Now, that difference between present and future interests became a source of contention with the Lords. If you think about a Magna Carta, it's all about what are our interests, what are our property interests? What rights do we have?
Because we are on clear and what developed was complicated systems. The very first trust developed because of this problem, but then these things called a fee simple and can back then the land was conveyed by written instrument. According to strict rules, a conveyance, and they had future interests that had to be described in the conveyance.
And there, there were entails that's what they called them that were complicated. And the problem that Lord grant them in Downtown Abbey has is that his father had hired a lawyer and wanted to make sure that the estate that he hadn't inherited from his father and so far was wrapped up and protected so that it would stay in the family and go down this medieval line of inheritance to male heirs.
Now, the problem that Lord Grantham had was in the early 19 hundreds, the estates where the middle ages are over, right? So it's not like Laura, Grantham's riding around in a suit of armor and protecting the surfs from marauders those days are over. And as the economy of the world changes, Lord Grantham's in trouble.
So he ended up marrying the storyline in Downtown Abbey. He marries a rich American woman who comes over and she just infuses the estate with a lot of money, which is like her dowry, but it becomes part of the estate. And she's actually divested of control over that money. Lord Grantham now has the money and he's able to run the estate with it.
So marriage with the American woman saved the estate. Now, if you think that's horrible, they're a close couple, actually. You know what I mean? They're husband and wife, they love each other and they have a close family. Now, the second thing that went wrong with, Lord Grantham poor guy is he had only daughters, no sons.
So already we have a problem because his, the entail that provided and required the estate to pass to a qualified male heir did not work because we only had daughters. And in a sense had the oldest daughter or any of the kids been a male then the future interests would have vested. Wouldn't it?
Because I have a son. And if inheritance passes down to my descendants, contingent upon a male heir. That didn't happen. And so when Susan's asking this question about how do my four daughters fit in, of course we're not talking about their gender anymore, those days are over, but we are talking about what are their interest in the future.
One daughter might be entitled to lifetime distributions the other three might be excluded. And then when the trust terminates, the future interest is distribution to all of them equally. Now in Lord Grantham's case he thought he had it set because he strangely enough, the aristocracy back in those days, they did all kinds of weird things.
But they that apparently hooked for lack of a better word, hooked, marry up his daughter with his brother's son, which would be Mary's cousin. So she's engaged to her cousin. For an obvious reason in that obvious reason is at the end of Lord Grantham's life, the cousin will inherit title to the estate, but at least his daughter is married and then they can continue owning the estate down the family line. So Lord grant them has met his goal, which is his descendants inherit rather than another family or having it revert back to the crown, which it would have done had they had no heirs.
When the Titanic sinks, of course, they're out of luck because now Mary is not engaged anymore. And, his brother's son, his brother and his son die in the Titanic and he doesn't even know who the new heir is. So they had to do some research and figure out, okay. It has to be a male heir from the family. And so now we're going over to the Lord Grantham's fathers' uncles or whatever. And they find the next in line, who is a man named Matthew?
It's so funny because Matthew is in Manchester. They're out, I don't know where they are, but Manchester that's like Tacoma, Washington. Tacoma, Washington is like grit city compared to Seattle. There's this snobbish attitude towards, and there's always it, no matter where you are in America.
You probably, there's probably a city that has a reputation that's not quite as good as, the fancy city in your state. Just imagine, and then on top of it, they're trying to figure out who this guy is. That's going to be the new Earl of Grantham. And it turns out he's a lawyer, a barrister, a counselor, and they actually say something well, at least he's not a physician.
Apparently doctors had a bad reputation back then. But so now Lord Grantham because of this very complicated conveyance, that dates back to 1066 and that whole weird future interest is stuck with this barrister that comes in. And it's hysterical because Matthew, the barrister for mantra, he doesn't want to be inherit the estate either.
He's not happy about the situation because he wants to practice law. And it's a really great show. You got to watch Downton Abbey, not only because of, how many shows are there about estate planning really none, trust me. But that aside, of course, there's. It's just historically accurate.
They spend a lot of time on the details and there's all this intrigue between the servants who are constantly on the first level of the home. And then the family that's on the top level and everything. You really need to see it, but they spend the next two seasons trying to figure out how they're going to get around this entail.
And they're trying and early in the show, they hire a fancy lawyer to try to smash the entail to get around it. And the advocate and the number one advocate for smashing the entail is the countless dowager who is the widow of Lord Grantham's father. Who's the one that created it and it's hysterical back and forth.
And she counter dowager, countess, dowagers constantly got to smash it. And she's scheming and Laura grandson's mom, this is what dads set up. You can't just change the rules because you don't like the result. And of course she's won't take no for an answer she's played by Maggie Smith, who is, who she is.
She played professor McGonagall and the Harry Potter series. And she's a wonderful actress, but that problem has now been solved with trust. If you think about I don't know why property professors even include requiring law students to learn future interest in entails that existed as late as maybe the 19 hundreds.
And I suppose in England, maybe they still use them, but I've never seen one in 26 years of practice because even though estates can be quite large, we use trusts. And trusts have so much more flexibility than a entails. So rather than the conveyance that really encumbers the property, so it cannot be transferred under certain conditions rather transfer the property into a trust and the trust now owns it and the trust can transfer it out under certain conditions and even a court approval, if it gets to that point. However at least it can be transferred inside of the trust it's up to you to create the rules.
And so you can say, look, if I was counsel for Lord Grantham's father and had the tool of a trust, I would never use an entail. I understand what the goal was, but you could say something like the objective of the tri-state is to ensure that the descendants, my descendants always on this property, it's the exclusion of the rest of the world.
And so therefore, now in the event that there is no male sense. And I'm going to take a a page from the playbook of Queen Elizabeth. It's not like the British family, it didn't. Queen Elizabeth I reign for how long? Queen Victoria was the queen right before the Monarch, right before the Titanic sank.
It was now Edward, but the guy's name. And so it's not like you couldn't have laid out in more detail with more flexibility, what your goal was and building contingencies. He could have done that. So I don't know why the British were so into the entail which ended up encumbering and locking up property and it just didn't work.
However, we have to borrow from that terminology later in office hours, Susan asked and I'm on, she goes, I'm unclear about remain there. So I see remainder beneficiaries and residuary beneficiaries. And I spent a lot of time explaining to her. I think about it. It's a trust now, the modern term for a beneficiary.
So there's beneficiaries that are entitled to distribution from the family bank during lifetime while the trust is in existence. When the trust terminates, then whatever's leftover, that's called a residue distributes out to the remainder beneficiaries. That idea of remainder comes from remainder men and remainder men is directly linked to William the conqueror's idea of future interest.
And it's a few it's exactly that a future interest when the entail contingent event occurred. Or terminates the remainder men cause remember it was always just males. That's the term remainder men, a van title vest in the remainder men who are last in the chain of contingent events basically.
We don't really use remainder men anymore. We could say remainder beneficiaries or the modern term is residuary like whatever's left over in this pot of money goes to these designated people, it's much more flexible. And if you think about it lifetime, and then residuary or remainder, whatever's leftover, they get the leftovers.
And then the other term is remote contingent beneficiaries. And as I indicated, that's those folks who are next in the intestate succession, if all the designated beneficiaries die. So we can say to my son, in Susan's case, it's a, she has four daughters. I can't remember all of their names. But Amy, so Amy per stirpes meaning if she passes away then to her descendants if are no descendants then it goes to one of the other one of Susan's other children equally.
So building that all in just takes, you can say in one term, a lot per stirpes has a very specific meaning in two words would describe the remote contingent beneficiaries if the named kid has pre-deceased. You can also not even use per stirpes and say in the event that Amy dies, I want her share to go to charity.
See, now it's fun, but you can tell that the history and the terminology dates back to the origins of British common law, which is the origins of American jurisprudence which is exciting. I get to wrap up, use both my interest in history and law, all in one fell swoop.
Thanks for listening to another episode of the Boom X Show, Laws of Money podcast, where asset protection attorney Darol Tuttle breaks down the complicated rules of estate, retirement and even long-term care planning.
You can listen to past episodes of the Boom X show by going to boomxshow.com or subscribing right from your smart phones podcast player.
To take a deeper dive, join as a free member in the Boom X Academy, and you'll be automatically enrolled in the show's companion courses where you can find enhanced content and many of the shows important to episodes. Enroll now by visiting boomxacademy.com. That's boomxacademy.com.
