IamA lawyer who creates trust funds for millionaires.

I'll be the one to ask. How much money do you make in a year?

[deleted]

One of the many careers my guidance counselor never told me about.

My guidance counselor suggested I apply to community college and discouraged me from applying to prestigious private schools because it would be "a waste of money for the application fee."

Moral of the story: Don't listen to guidance counselors. You're likely smarter than they are.

Most interesting thing about your job? Also, most interesting story in dealing with rich people.

Most interesting part about my job is seeing the absolutely crazy things completely anonymous people can make millions of dollars doing. You don't need to be famous or be a CEO of a Fortune 500 company to be filthy rich. For example, you know those "door handles" that you commonly see in elementary schools...the ones that are long metal bars that run across the middle of the door that you push in? Yeah, they're called "crash bars." I did an estate plan for a guy last week who owns the patent on one of the designs of that product. Worth millions upon millions.

Just remember, every time you open those little plastic packages that contain a fork, spoon, knife, and napkin...some dude owns the company that makes those...and he's a multi-millionaire.

Also interesting is seeing how screwed up the kids of the ultra-wealthy become.

Also interesting is seeing how screwed up the kids of the ultra-wealthy become.

Can you see that coming? I know a guy who grew up as the son of an ultra-wealthy real estate developer (he inherited north of 100 million) and he's got a healthy relationship with his money and is passing that knowledge onto his kids.

His brother? Train wreck. Spoiled rotten kids. All in one family.

Funny you say that. Your anecdote seems to be 100% on point.

I've found that there is no "middle ground." Children of the ultra wealthy are either (i) absolute leech screw ups or (ii) incredibly hard-working, humble, and shrewd professionals. There doesn't seem to be any middle ground, as odd as that may seem.

Are you still friends with any of the millionaires you worked with?

I am. The proper term for my practice area is "trusts and estates." I am an estate planning attorney apt to handle particularly complex estates (ie. those of extremely wealthy people). As an estate planning attorney, you must understand all aspects of an entire family, inside and out, and all of their assets and business holdings. That inevitably leads to an extremely personal and trust-filled attorney-client relationship, often lasting decades.

Do you ever underestimate a client's net worth, but then are complete blown away once you find out how much money they have?

As in, you meet them for the first time, and judge them based on their looks, clothes, car or some other thing that is associated with wealth, and think to yourself, "this is going to be a waste of time".

Never, the reason being that before I even meet them they are required by the Firm to complete a Questionnaire disclosing their net worth. The only way a proper plan can be prepared for the client is if we know everything in advance, as the plan has to be custom tailored. That said, the reverse of you question has happened. I have walked into the conference room knowing someone is disgustingly rich and they are missing six teeth...

From your unique perspective, does it seem like money buys happiness for these people? Or is it more like mo money, mo problems?

It completely depends upon the person, and I don't think having money is the "cause" of any problems. I'm a very big proponent of nurture over nature to begin with, so, like I said, it depends upon the individual. I don't mean to say I discredit valid physical disabilities with my previous comment, but, if you were raised by scumbags, you're going to be a scumbag. If your parents were cutthroat scumbags and you come into money one day, you're going to act like a cutthroat scumbag yourself. If, however, I came into millions of dollars (my parents were kind, awesome people!) I would be super humble, and I meet people on a daily basis who are just that way.

Overall, the humble outnumber the scumbags 100 to 1. Even in the millionaires realm.

I've been thinking about getting into law after school, and with first round Uni-placements just a couple of moths away, I must commend you on your excellent timing. When you first thought about getting into law, was this line of work exactly what you had in mind? I.e, A lot of people are going to get into undergrad law with the vague idea that they may become a Human Rights, Criminal Law Barrister like some bastard Geoffrey Robertson/Atticus Finch hybrid, only to realize what a limited aperture on their prospective career that is. Was this the case for you?

Also, who are your lawyering Heros?

First, I realize from the terminology and syntax you used in your question that you are from the UK. Let me preface by saying that I am not from the UK (I am American), and I cannot attest to the legal education process / career prospects for a UK licensed attorney.

That said, I had no idea that I would end up doing what I do. In fact, it was not until my second year of law school (three years post-graduate in America) that I fell in love with the tax laws, primarily because they are so complex, and I viewed them as an unconquerable puzzle.

I went to law school because every successful person I met my entire life was a lawyer, although none of them practiced law. I met countless people when I was young (family friends, friends' parents) who all owned their own businesses (none of them involving the practice of law), but they all held J.D.s (American law degrees). I realized from a young age that there was something very different about those people, and it wasn't until recently (with the benefit of hindsight) that I realized what made them different and gave them the ability to succeed.

Law school trains you to think in a way nobody but another lawyer can relate to. Just as a musician may view the world-at-large in terms of rhythm and measures, or just as a mathematician may recognize patterns and formulas in society that are unrecognizable to the layperson, lawyers are trained to view the world with cold, refined logic. Although, at first glance, that may sound unappealing, the practical effect is that we are trained to look at a mountain of information, immediately slice through and filter out everything that is bullshit, and analyze the relevant facts in order to determine what the most logical, efficient, and best course of action to pursue is in any given situation. We are trained at all times to look at a situation and think "what is the best and most-likely-to-work course of action to pursue." That is why, in my opinion, a legal education is invaluable, and that is why a legal education allows you to out-think the next guy without a law degree, even if you are not practicing law.

Seems very similar to the outlook of engineers, mathematicians and physicists (my degree) develop over the course of their academic life with regards to logic and cutting through mountains of data. Would you say that the logic that very analytic sciences provide are one of the reasons why those individuals score so highly on the LSAT?

Also a question for myself as a current student. What do you think the prospects are of a scientist (specifically physicist) who is very interested in law becoming a lawyer or attending a highly regarded law school. Are most law schools heavily biased when it comes to their applicants' academic backgrounds?

If you have any type of hard science / mathematics background, you will have a MAJOR advantage in getting into law school, and a MAJOR advantage in terms of job prospects upon job graduation. The scientists / engineer lawyers are always the first ones employed.

Anyone we might know?

Likely not considering more people than you can possibly imagine have millions of dollars. Some clients own things you certainly know of, however, such as large ownership interests in Major League Baseball teams or American corporations.

How did you get into the industry?

I went to a prestigious undergraduate institution, I attended a well-ranked law school, and after law school I pursued an LL.M. (Masters of Law (master's degree for lawyers)) in tax law from a top 5 program.

I received almost no scholarship along the way, paid for the entire thing in loans, worked my tits off (I'm a guy) finished close to the top of my class, and landed my dream job doing exactly what I desired to do.

I have approximately $150,000 in student debt.

The American Dream is very much still alive if you ask me.

Were you a guy before you worked your tits off?

Clever!

I guess student loans are worth it if you're confident they can be paid back, while still profiting for yourself.

Good luck in your future career!

Thank you very much. I genuinely appreciate your kind words. However (I should've said stated this before) (i) the cost of education in this country is absolutely out of control and (ii) I got extremely lucky. Even with good degrees, great grades, and a voracious work ethic, I was lucky to have landed a job doing what I actually studied in school to be able to do. I know more than a handful of spectacularly intelligent law graduates who found nothing for themselves after school, which is why every day I remind myself of how lucky I am.

did you always have a strong work ethic?

No. I'm actually quite a lazy person, lol. I trained myself to work.

Holy shit, I had no idea that there was a law degree other than a JD. Holy shit. I need to go reevaluate my life plans.

Lol. Well, maybe I didn't express myself clearly, but an LL.M. is a "graduate" law degree in America. In Europe, if I'm correct, one may practice law after obtaining an LL.M. only. In the United States, in order to practice law, one must first obtain a J.D. degree. After obtaining a J.D. , the next highest law degree is an LL.M. The LL.M. is typically only pursued by American lawyers if they desire to practice in a specialized or complex area of the law, like tax. After the LL.M. there comes the S.JD., which is the highest law degree, is equivalent to a PhD in law, and is typically only pursued by career academics.

I'm curious, what did you study for your undergraduate degree before pursuing your LL.M.?

I studied business and finance.

150k seems like a low number for the quality of education you received.

I may not have been clear, but I had partial undergraduate scholarship. My debt is almost all from law school.

He has likely already back a portion

I have paid back a nice chunk.

I'm heading in the direction of law school, but am unsure of exactly what to do/where to go with it. How did you determine this specialization was for you? And how competitive is that relative section of law?

I first determined that I wanted to pursue an LL.M. in taxation. Only after completing my LL.M. in taxation was I even able to consider a trusts & estates position as almost all opening for this area of the law require a tax LL.M. That said, it is still a very niche area of the law in which to practice. I went to quite a large law school (approximately 300 students in my J.D. class) and I'm the only one in a true "boutique" trusts and estates practice from my class. A few others are in small firms that do estate planning, but none that are capable of planning at the level my firm does.

Would you take on Walter White as a client?

I'm such a scumbag, and I hate admitting this, but I have never watched Breaking Bad. The only reason I know who Walter White is is because, believe it or not, I'm actually a living / breathing human on planet Earth in the year 2013.

That said, probably. I don't need to know how / where you got your monies! Lol.

I don't blame you after seeing your hours. Jeez man, hopefully you'll have some time to relax soon.

Thank you for your kind concern. Luckily, however, I very much enjoy what I do!

How do I get rich?

Trade stocks. That's how it always seems to happen. Some of these 25-35 year stock-trader kids I see are millionaires!

What would you say the biggest mistake a wealthy person makes other than not planning in terms of estate planning.

For a person who would be worth (1 -2 mil) upon their retirement what would you plan in terms of trust funds, non-revocable trusts, jt tenants, etc. I know you don't always like to talk about legal questions but you brought it up :-)

Without going into too much detail, an estate of $1-2 million USD would not require creating irrevocable trusts during your lifetime. Gifting would not be required as that is typically a strategy used to reduce death taxes, and you need a lot of money for that.

If everything was titled jointly with, say, a spouse, probate could be avoided. However, there are other reasons for leaving assets in trust to a surviving spouse or to children.

The Big Three are 1) Creditors; 2) Predators; and 3) Taxes.

First, taxes. The estate tax exemption has been in a constant state of flux over the past decade. Anything left in a properly-drafted trust to a beneficiary is outside of such beneficiary's "taxable estate," meaning that when that beneficiary eventually dies, the trust of which they were the beneficiary (the trust that you, as the Grantor, left them) is not included in their taxable estate for purposes of the death tax.

Predators refers to a second marriage / divorce situation. Although as a matter of "family (divorce) law" inheritance is separate property and should not be subject to an "equitable division" upon divorce, the situation becomes hairy when assets left by a parent to a child or a first spouse to die to the surviving spouse start to be "commingled" with other assets. If you leave assets outright to a child, if such child gets divorced, his or her divorcing spouse can potentially reach the assets you left to him or her. The same applies to a surviving spouse. If you leave assets to your surviving spouse outright, there is no guarantee she will pass them at her death to the children of your marriage. She is free to blow them on her new husband, and her new husband is free to attack those assets in a divorce proceeding. In both situations, assets left in trust for the benefit or a surviving spouse or children are protected from such "predators," and you can control, even years after your death, how the assets are to be distributed when your children or surviving spouse dies years down the road.

Third is "creditors." Grossly oversimplified, anything you own outright is subject to your creditors. Anything someone else leaves to you in a trust of which you are the beneficiary is not subject to the claims of your creditors.

As you can see, there are MANY non-tax reasons to leave assets in trust to your beneficiaries. In fact, most clients do not have "taxable estates" (ie. net worth the multiple-millions), and employ estate planning for the reasons discussed above.

One of the most interesting AMA's I have read in a while. Thanks!

You're welcome!

In one of your responses, you indicate that you are a first year attorney and only 26 years old.

Have you encountered any issues with current or potential high net worth clients (such as those above estate tax exemption levels thus requiring more advanced planning) who have reservations about having such a new attorney handle their estate?

Absolutely not. Primarily because, if I am attending a meeting with a client with a taxable estate, my boss is sitting beside me. I will not venture into one of those situations alone. However, after the initial client meeting, the client will often communicate with me directly.

All in all, they come to us because our reputation precedes us. They know how capable we before they walk in the door.

Thanks for the quality responses in this AMA. Fellow attorney, roughly same age but I'm in a slightly different firm environment and only a portion of my practice is dedicated to T&E.

Apologies for tacking on another question here, but thoughts on getting the Tax LLM? It seems to be a hot topic for debate - in your estimation, has it been worth the investment of time/money for you?

This is a tough topic for me to give advice on. I had a very unique situation. I was already in a J.D. program that had a top LL.M. program at the school. I completed my J.D. and LL.M. in three years (plus some summer courses) as a dual degree student in a seven-semester program. That saved me a boatload of time and money.

As far as tax LL.M.s go, an LL.M. from NYU, Georgetown, or University of Florida (top 3) are almost always worth it. But, in reality, it's NYU and "all the rest" in the tax LL.M. realm. But NYU is always a go.

Has anyone ever offered to pay your student debt? If not, would you accept if someone offered?

Nobody has offered to pay my student debt. Although I (technically) could accept such an offer, personal dealing between an attorney and his or her client quickly becomes a very "hairy" subject under the "rules of professional responsibility" governing lawyers. Instead of having a loyal client leave me something under his or her will and having to deal with his or her children contesting the bequest down the road (because, honestly, what type of person leaves their lawyer money in their will without the lawyer coercing them or being un-ethical in some way), it's better to just stay away from those types of situations altogether.

Can you give an opinion on Bitcoin?

Unfortunately I cannot. I have not used it nor do I know much about it. However, it appears to be a fiat currency without any underlying institution to legitimize or rationalize the faith-in-buying-power expressed by those who demand it. That, in my opinion, makes Bitcoin completely unique.

Bitcoin is not a fiat currency. Fiat is a declaration by a government or issuer - not individual people "who say it's money" - otherwise you might as well call gold fiat. Using the term this way makes it useless.

I was under the impression that a fiat currency is any currency the value of which is not derived from anything tangible (ie. gold) but instead from any other non-tangible, often institutional (government) organization which is the true "trustee" of the investors' faith. If my analysis is true, the "people at large" substitute as the institutional underpinning of Bitcoin's value. Also, with any form of valueless paper issued by a government, isn't it always the people "who say it's money?" We decide when it has worth based on our faith in the stability of the issuer...

If you google the definition of fiat, you get ...

fi·at ˈfēət,ˈfēˌät/ noun noun: fiat; plural noun: fiats

1.
a formal authorization or proposition; a decree.

Also, with any form of valueless paper issued by a government, isn't it always the people "who say it's money?" We decide when it has worth based on our faith in the stability of the issuer...

No, governments say its the currency you pay your taxes in, so the people have no choice - especially after the government and central banks begin to debase it.

Another interesting comparison... Fiats are debt based currency - they are (should be) IOUs for precious metals on reserve. You deposit a unit of gold/silver, you get an easy to carry around, divisible reserve note (IOU), that can be used to redeem that precious metal at any time. Problems begin when the banks start issuing more notes than they have PMs on hand.

This introduces counter-party risk and your holdings in IOUs can be debased without your knowledge or recourse.

Gold/Silver/Bitcoin cannot be trivially created and people can trust the math and physics behind this phenomenon. (This makes them non-debt based assets). It is trivial to test the validity/authenticity of Gold/Silver/Bitcoin so there is no counter-party trust - you're simply basing your faith in the strength of physics/math.

How did this conversation even begin?

Something I've been curious of, how are the rates your firm charges created and whom(in title) is responsible for the rates?

Partner sets the rates. Among the "high-end", complex "boutique" tax and estate planning firms, we are among the cheapest. Partner is $400 / hr, associates $295, support staff $120. That said, you can get a very high quality estate plan for a husband and wife, with powers of attorney, for approximately $3,500. For less complex estates, there are firms that will do it cheaper (around $2,000), but I would have serious reservations about the quality of their documents.

What kind of reservations do you have about possibly lesser quality firms? To add to that, would you say price is a good measure of quality?

Trusts and estates may appear simple at first glance, but it is anything but a simple practice area. There are certain things you entrust to an expert, and estate planning is one of them. There are lots of firms around that throw up a smorgasbord of services they claim to offer, estate planning being one of them. I can tell you, however, from a multitude of experience (even though I'm young) I call straight up bullshit. Unless, as an attorney, you "grew up" inside a true trusts and estates practice group or boutique, there's no way you can properly understand the trust laws, tax laws, and drafting techniques required to draft a proper estate plan. Maybe I'm biased, but I think you'd want to trust the person who is hand-crafting your testamentary plan and creating the documents that will dispose of all your life's spoils.

That said, price is not necessarily an indicator of quality. Any Joe Shmoe Lawyer can quote you $10,000 for an estate plan, and that doesn't mean it's a quality plan. It should be easy, however, to seek out a trusts and estates boutique firm like mine. If you can't, and you choose a firm that practices many types of law (except for the huge multinational firms, which are always a safe bet but expensive and often times provide poor customer service) make sure at least one of the partners has extensive trusts and estates experience.

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Humans are pretty cool. The vast majority of them are awesome people.

Thanks for doing this. Interested in how your day-to-day work looks like. How many hours do you spend every day in the office? How many of those hours are with clients? How many hours do you spend drafting or reading legal documents?

I will answer your questions in the reverse order from which you asked them because I think that is the most logical way to answer.

Estate planning is a "civilized" practice in terms of practicing law. By that, I mean the hours are less than, say, a litigator (someone who goes to court and sues people) and the practice is, for the most part, non-contentions (because, well, I'm not suing people!). That said, I spend upwards of 11 hours a day at the office; no less than 10, no more than 12, and 80% of that time (8-10 hours daily) is spent reading or drafting legal documents.

As I am the youngest associate, I spend less time with clients than the partners, but, since I work in a small firm, I have a healthy amount of client contact most attorneys my age would not otherwise have. I meet with clients approximately 1 hour a day. A partner would be meeting with clients / speaking with clients on the phone upwards of 5 hours per day.

I handle the Firm's entire practice. Whether or not I meet face-to-face with a new client, I am tasked, largely unsupervised, with choosing how to craft his or her estate plan. I draft all of the trusts, powers of attorney, special provisions for managing business interests after his or her death, ect. I also spend a large portion of my day handling complex "death tax" issues for very wealthy clients who are subject to the Death Tax (net worth of more than $10,500,000 for a husband and wife). Also, a large portion of the service I provide is "estate administration." After someone dies, all the testamentary provisions of their documents must be implemented. When someone during their lifetime directs that, upon their death, trust funds are to be created and funded for his or her children, I implement that plan after the client's death.

Thanks for the detailed answer! 11 hours a day is hard work. I hope you're enjoying it.

What do you mean by "I handle the Firm's entire practice. "? You are the primary person responsible for drafting all of your clients' work? How big is your firm? And how many clients do you guys have?

Our Firm is, in the legal world, what is called a true "boutique." We are a group of four attorneys (one Principal and three associates) and we service a core group of approximately 250 families. However, "boutique", in the legal world, does not simply mean "small firm." Boutique means a specialized law firm that holds itself out as being an absolute expert in only one area of the law.

When I say I handle the Firm's entire practice, I mean that I handle all aspects of it :) One of the more senior associates will always review my work, and our Firm's sole Partner will always put his final touch on my documents before they are presented to the client, but, often times, I am the first attorney to craft a client's estate plan, and, in doing so, I am given free reign to draft the documents in any way I believe is best for the client and most efficiently effectuates his or her intentions.

I'm a 3L planning on getting into estate planning. I'm also planning on taking the CPA exam after I graduate (I've completed all the requirements). Which do you think is more beneficial, CPA or Tax LLM? Do you think there would be much of a marginal benefit of pursuing a Tax LLM in addition to the CPA?

This is an interesting question that I too have pondered from time to time since I also meet the CPA requirements. However, I think the answer should be to go with the LL.M.

First, J.D., LL.M, CPAs are individuals who usually practice in very, very narrow and specialized areas of the tax laws like tax-exempt entities only or working in-house for something like a REIT (a "Real Estate Investment Trust"). If you want to be a lawyer, and you are interested in tax and estate planning, you absolutely do not need to be a CPA and it will not help you in any way. In fact, I have never seen an estate planning associate job seeking a candidate with a CPA; it's always LL.M. only. However, if you want to practice something such as corporate M&A tax or some forms of international tax, a CPA would be valuable.

In addition, from a business standpoint, being a CPA estate planner may hurt you in the sense that you "don't bite the hand that feeds you." Estate planning attorneys' core referral base is from CPAs and financial advisors, and we don't step on the CPAs toes cause its bad for business.

Finally, I'll leave you with an anecdote. It's a little different from the situation at hand, but I think it applies here. When I was a 2L, I was deciding whether to do the JD/MBA or JD/LLM program. I was leaning towards the MBA. My dad set me straight. He said, "don't be an idiot. Anybody can get an MBA. Only a lawyer can get an LL.M." The same applies to your situation.

If you want to practice law, an LL.M. is much more valuable, but it must be from the "right" program. A bottom-tier LL.M. will get you nowhere.

ALSO, I forgot to mention that most states' CPA licensing boards have a 1-3 year apprenticeship requirement,. Even if you pass all four parts of the CPA exam, you will not be able to hold yourself out as a licensed CPA unless you practice under another CPA for the requisite number of years. As an attorney, that is very hard to do (unless there is a JD/CPA in your firm who, if there was, obviously wouldn't be allowed to practice accounting but could sign off on your apprenticeship forms). I knew I'd never meet that requirement.

I have a question for you, and it may be outside your range of knowledge considering its dealing with property in another country. My great uncle owns my families island in Canada, he is dual citizenship with both Canada and America. His place of residence and work are both in America. He had a tumor in his head and was expected to die at one point. We were told if he died, in order to keep the island we would have to pay two million in taxes. I assume this is the" Death tax" My question in regards to that situation is, is there a way around that or is my family screwed upon his death.

Estate tax in America is determined not only upon citizenship but also upon "domicile." Domicile means "residing somewhere with no present intention of departing." Therefore, if your uncle was a Canadian citizen but was domiciled in America, he would be subject to the death tax in America.

A U.S. citizen (this includes a dual citizen) or a non-U.S. citizen who is "domiciled" in the United States at the time of his or her death is subject to the U.S. estate tax (ie. the "death tax") on the value of his or her worldwide assets at the time of his or her death. A non-citizen / non-domiciliary is subject to the death tax at his or her death only on the value of his or her assets located in the United States.

Because your uncle holds U.S. citizenship, he is, as a U.S. citizen, subject to the U.S. estate tax on the value of his worldwide assets, wherever located. However, as a U.S. citizen, he has a lifetime exemption of $5,250,000. This means that only his assets in excess of $5,250,000 in value will be subject to the estate tax. The estate tax exemption has risen drastically in recent years (it used to be as low as $675,000 per person!!!), so the $2,000,000 number you mention may have actually been the case a number of years ago.

Also, because your uncle is a dual U.S.-Canadian citizen, the provisions of the United States - Canadian Estate Tax Treaty apply. This is a treaty between the United States and Canada intended to eliminate double taxation of dual citizens.

The scope of your question is beyond what I can advise here, and, because I am not your attorney, you should seek the guidance of an estate planning attorney apt to deal with cross-border U.S. / Canadian estate tax issues.

I hope, however, that my brief explanation helped to clear up some of your questions.

The estate tax exemption has risen drastically in recent years (it used to be as low as $675,000 per person!!!), so the $2,000,000 number you mention may have actually been the case a number of years ago.

With all the hoopla over "death taxes" in the last couple of years, do you get a lot of people looking for assistance that don't even come close to exceeding the exemptions? In such cases do you still advise trusts and what not?

Sorry for not answering this question sooner. I mentioned earlier that the vast majority of clients do not have "taxable estates," and there are a multitude of non-tax reasons to plan using trusts. I read a statistic recently that said only 0.2% of all Americans dying each year will be subject to the estate tax. However, because the exemption amount has been in a constant state of flux, a standard revocable trust will contain "marital provisions" that are essentially formula provisions that will minimize, to the extent possible, death taxes upon the Grantor's death regardless of what the estate tax exemption is at that time. If the Grantor is not subject to estate taxes at his or her death, the formula provisions just sidestep funding a "marital trust" that would have been created to minimize, to the extent possible, estate taxes.

Also important to mention is that many states have their own estate taxes with exemptions much lower than the federal $5,250,000. New Jersey, for example, is in the high $600s.

At what point is a trust fund necessary/ a good idea ? I'm meeting a tax guy on friday. I just finished fellowship a bit ago and all of a sudden i'm making what would have seemed like an obscene amount of money.

not close to a millionaire yet, but apparently not far away as long as i don't dick it up.

when do i need to start talking to wealth management people? trust fund and financial advisers?

so far i've done it all myself, but i can see this quickly being a bad idea.

Wealth management is a separate area of expertise, and you should certainly meet with a financial advisor who you trust so that you can begin making your money productive.

See my comment (somewhere in here) regarding the non-tax reasons for having a proper estate plan. Having millions is far from the only reason to create a revocable trust and ensure that assets are left in trust to your beneficiaries at your death.

saw it, thanks chief

If you have any follow up questions, please do not hesitate to ask.

i don't think i know enough to think of anything appropriate. but, here's a scenario that has been running through my mind. (with a little background)

me and my 2 bothers now all make good money, if we wanted to build up a kind of familial wealth fund, who would we talk to?

is there such a thing? could we aggregate out incomes/savings /investments into a kind of super-estate so that everyone and everyones kids have something for a generation or two ?

or is each branch of the family basically on it's own after we all die?

It is certainly possible for you to aggregate your wealth after your respective deaths for the benefit of, say, all of your descendants and your descendants spouses.

First, you would want to speak to an estate planning attorney. A likely course of action would be to create a stand-alone irrevocable trust (think of it as an empty box) to receive all three of your respective assets upon your eventual deaths. You would each then create your own revocable trusts (the equivalent of a will) which would direct that, upon each of your deaths, your assets will simply "pour" into the stand alone "pot trust" the three of you created together during your joint lifetimes.

The "pot trust" you create could have all of your descendants, spouses, and the spouses of your descendants as the beneficiaries, and distributions could be purely discretionary. This means that the Trustee (whomever you choose to name, and it can be, say, the two surviving brothers during their lifetimes after the first brother dies, and then successors of your joint choosing after all of you die) can choose who to distribute income and principal to for each beneficiaries' "best interests." This is actually quite efficient from an income tax standpoint, as the Trustee has discretion to "spray" the trust's income to the beneficiaries in a lower individual income tax bracket before then making distributions to beneficiaries in a higher bracket.

Ultimately, the "pot trust" you would all create would contain all of the governing provisions regarding how the assets are to be managed after each of your deaths, how distributions should be made, and how assets should be distributed among the last of your deaths.

I should say, however, that, depending upon each of your net worths, this may not be the optimal plan to employ depending upon whether any of you may be subject to death taxes. I just reference the above example to show you that trust agreements are EXTREMELY flexible, and, if you so desire, you can easily implement the plan I described. However, you should consult a qualified estate planning attorney and discuss your wishes and desires with him or her.

thanks for the reply man.

Any time!

I've heard that people set up Trust funds because they DON'T trust the people they are leaving money to.

Do you see any grains of truth in that?

For the VAST majority of clients, there is no truth to that statement. Often times, you may name the child who is the beneficiary of the trust as a trustee of the trust created for his or her benefit. As weird as that sounds, it happens. The trust is much more often created for the non-tax reasons I discussed earlier in this AMA (protection from creditors and predators). However, a small minority of clients (maybe 10% or so) leave funds in trust because they don't trust the individuals to manage their inheritance in a capable manner. For example, if one who has a child who is a drug addict, or has a gambling addiction, those are sure-fire reasons to leave assets in trust. However, if anyone was ever going to leave me money, I would certainly want the assets left to me in trust - especially if it was a substantial sum of money - for the creditor, estate tax, and predator protection it provides. The administrative burden or keeping a trust in good standing is basically Trustee's fees (if a corporate fiduciary like a bank is named, but usually they aren't and Trustee's fees are not therefore incurred) and a separate annual income tax return for the trust.

Have you ever run into any civil law? If so what is your opinion on civil law from a comparative point of view

I have not encountered any civil law whatsoever. Sorry.

No worries. I'm in a comparative law class at the moment (i'm from a civil law country) and common law seems so much more efficient than civil law in many aspects. I guess the grass is always greener on the opposit side.

Sorry I don't know more. I would've loved to help you shine in class!

How difficult would it be to leave someone 9,720,000 dollars of drug money in the form of an irrevocable trust?

Very difficult. First, upon funding the trust, you would be required to file IRS Form 709, which is a United States Gift and Generation-Skipping Transfer Tax return (feel to ask about those taxes at any point, anyone!) The return would require you provide the IRS with your SSN, which would immediately notify them that you have that much money and that you likely never paid income tax on it. If you did report all of the money when you earned it, however, on your Form 1040, then things should match up.

The second problem would be, upon funding, there would be a massive gift tax. Each individual only has a lifetime gift tax exclusion amount of $5,250,000, so the approximately $4.5 million you would transfer in excess of the exclusion amount would be taxed at roughly 45%, resulting in almost $2,000,000 in transfer tax.

Assuming you found an attorney to draft the trust, you transferred title to, say, a checking account holding the money discreetly into the trust and reported none of it, the second the trust makes distributions the IRS will once again be put on notice because the trust becomes it's own "taxpaying entity" that has its own reporting obligations.

Next, a trust must have a valid "trust purpose" which means it cannot be used for any illegal purpose. This is a maxim of most states' trust codes.

The bottom line is I could go on and on, but its probably impossible to do :)

Excellent answer. I kind of made that comment with tongue-in-cheek, but you actually broke that down quite well. Thanks!

No problem!

3 questions:

1. I don't know if you have specified this but do you do any overseas/offshore trusts for your clients? Dealing with that much money, I'm sure some of them have pushed for you to take it out the country to save them some tax.

2. Also, what are the biggest and smallest amount of money have you dealt with?

3. Any interesting client background/stories? I.e. lottery winners, silicon valley entrepreneur with an exit, etc.

Thanks in advance for doing the AMA.

1. I am knowledgable in international tax and trust planning. I do not use those skills on a daily basis because it is not something my Firm does often, but I studied planning using offshore trusts extensively in my LL.M. program. If you are looking for an attorney specializing in that area, I suggest seeking out firms in South Florida, as there are entire firms down there that do nothing but that.

2. Smallest amount is $100,000. Largest amount is around $500,000,000.

3. I mentioned this briefly before, but some clients own large interests in major league sports teams and others hold patents to products. Also, a lot of people with significant amounts of wealth got in on the ground floor of chemical and manufacturing companies decades ago. Personally, I find most fascinating this "emerging" group of 26-32 year olds who are stock traders and simply trade for themselves. I did a plan last week for a 30 year old kid, still in school (Ivy League MBA) who has accumulated $4.5 million trading on his own.

Wow, $500million is a lot of money.

Funny you mentioned the chemical thingy because one of my relatives got rich off that too. Specifically industrial grade detergent and he sells it to factories, medical centres, etc and the company he started only manufactures/sells that one and only thing. He recently just sold off the company so he can spend more time with the family. Funny how people don't realise or give a thought about how much opportunities these unorthodox industries have.

Oh, and I'm on the other side of the world so I already have an awesome attorney that does my stuff. As a client of someone whom has similar expertise like you, we probably give you way more shit than you deserve but don't thank you guys enough.

Thanks for your reply!

Thank you for your kind words.

Guessing you don't have a lot of time for TV, but I'll ask anyway: ever watch Suits?

Never have, but I heard its a good show. And I have plenty of time to watch TV if I want to :) I just don't find it very enjoyable for some reason...

what do you do for fun, do you procrastinate?

I play a lot of guitar. And yes, I'm a huge procrastinator. It takes a lot of work, but you can train yourself out of procrastinating.

Have you ever suspected someone of possible money laundering?

I have not, but creating inter-vivos (lifetime) irrevocable trusts is certainly not a viable way to launder funds.

I know the AMA is over, but maybe you'll catch this and answer.

There are many stories of people coming into wealth (through a big Lotto jackpot or something like it) and completely fucking it up. What are the right steps to take when you come into lots of money to make sure you hold on to it and to minimize the tax bill?

The AMA is not over by any means. I am happy to continue answering questions.

There is no real way to minimize tax when you receive a "windfall" such as a lottery score. In fact, if I'm correct, I think there is an an additional windfall tax imposed upon lottery winnings on top of the standard 39.6% top-rate income tax due on the entire lump sum.

While I have never personally represented a lottery winner, I can envision a scenario where a trust or other entity could be deemed to be the lottery winner (thus avoiding a transfer tax upon putting the money in a trust, ie. a "gift tax"), but I doubt that would fly. So, I would imagine that after all of the income taxes are paid, most of the subsequent planning would be for asset protection / wealth management. You can't own that much money outright because it would be subject to your creditors. Wrapping it up in an entity (LLC / S-Corp) will resolve that issue, but trust planning is yet another layer of insulation (but one that, as far as I can imagine, would impose a transfer tax).

The benefit of an irrevocable trust, however, is that all the assets are out of your taxable estate at your death. This also means that any further appreciation in those assets has been removed from your taxable estate. For example, if I gift 100 dollars today to a trust, assuming I have used my entire $5,250,000 lifetime exclusion amount, that $100 gift is fully subject to gift tax at a rate of 40%, so the trust has $60 left over after tax. Since that $60 is now in a trust that I have no control over and cannot revoke, when I die, I don't "own" the assets in that trust for estate tax purposes, so the $60 can appreciate to $600,000,000 and none of it will be taxable at my death. The alternative would be to simply hold on to the $100, but, because I mentioned my lifetime exclusion is already gone in this scenario, the $100 is subject to a 40% estate tax at my death, but, assuming I die years down the road, that $100 will have appreciated to, say, 200, so the estate tax due will be 40% of $200, which is $80. So, as you can see, if you have no exclusion amount left, it is often better to pay gift tax now in order to remove an asset's further appreciation from your "gross estate" at your death. It results in a lower overall tax burden (assuming your assets in the trust actually appreciate instead of depreciate, in which case it would have been more tax efficient to own then outright and have them subject to the estate tax at your death).

The gift limit is for a lifetime for an individual, correct? So, if a wealthy uncle decided to give me money and he was under his limit, it would incur no transfer tax?

Correct. But, remember, there are two separate taxes with a "unified credit": the gift and estate taxes. Each individual currently has a $5,250,000 lifetime "applicable exclusion amount" which is unified between the gift and estate taxes. So, you can use the credit during your lifetime to make gifts or at your death to shelter estate taxes. Therefore, if your uncle gave you $5,250,000 in gifts during his lifetime, there would be no tax upon the initial transfer, but, at his death, if he had even $1.00 it would be fully subject to the estate tax at 40% cause he used his entire lifetime credit to make gifts. Along the same note, if he gives you $3,000,000 in gifts, he only has $2,250,000 in remaining estate tax exemption at his death, meaning that anything he dies owning in excess of that value is taxed at 40%.

Wow. I'm a finance guy, and tax law makes my brain hurt. A much more general question - with everything you know about taxation, what should our (USA) tax code look like in your opinion?

You ask a complicated question. In order to answer it, you must define what you mean by "looks" like.

It should look exactly the way it does in terms of syntax. The Internal Revenue Code is unique in that it attempts to codify a finite result for every conceivable economic transaction in which two individuals, entities, or trusts can engage. It must be written with extreme detail and precision, which it (for the most part) currently is. If fewer words were used, or if words with less precise definitions were used in the Code, it would inevitably end right back up in the form it is now after the litigation between the IRS and taxpayers settles over the meaning of the terminology.

If by "look" you mean the substantive results it achieves (such as allowing certain deductions, credits, tax-free exchanges), that's a policy question too complicated for a simple discussion! But, I think a thing or two could be changed :)

How many of your clients are active users of reddit?

I have absolutely no idea, but there are enough estate planning attorneys out there that they'd never be able to tell it was me.

Is it true that the key to being a successful estate attorney is to a) have wealthy clients and b) outlive them?

Also, I've noticed that you consistently refer to the estate tax as the "death tax". Why is that? It's not the dead person who is being taxed.

Kind of and yes. Estate plans are usually a flat fee, so you need somewhat wealthy clients who are willing to pay an upfront fee for an estate plan. However, the big money is made when the billable hours come into play, and that is when you administer a decedent's estate. So, yes, outliving your clients and administering estates is key.

I refer to the estate tax as the death tax because more people have heard the term death tax. And, technically, it is the decedent's estate that is being taxed, as it bears the primarily responsibility for the tax due (as opposed to an inheritance tax regime where the recipients of an estate themselves bear the actual tax burden).

How can an undergraduate prepare for law school and your line of work?

Don't treat school like school but instead accept it as your career (and, notice I said "career" not JOB). Cultivate your intelligence, do not cram things into your brain. Always remember that, even for me as a lawyer, it often takes me hours upon hours to understand things and do them correctly. And, last but not least, cultivate (notice my use of that word again) your ability to be detail oriented - be an absolute perfectionist in everything you do. If something is not absolutely perfect, it has not been done correctly (and you damn well better remember that someone else who you're competing against, whether or not you realize it, has in fact gotten it perfect).

Discipling yourself to do all of the above takes time; the discipline must be cultivated, and nothing can substitute for the hard work and thousands of hours that cultivation entails.

I hope to one day be a lawyer so I have a couple questions for you. 1. What law school did you go to? 2. How many years did you attend? 3. How expensive was it? 4. How hard is the BAR exam? 5. How much studying and hard work does it take to become a lawyer?

While I will not disclose what law school I went (Reddit is supposed to be anonymous, right?!), I'm happy to answer your other questions.

I attended law school for three years but completed four years of coursework in the time because I also earned an LL.M. degree;

It cost approximately $120,000 for tuition plus living expenses (I went to a private law school, which is why it was so expensive);

The bar exam is extremely difficult, but its nothing you can't conquer after three years of learning to become a lawyer; and

Law school (and, specifically, earning an LL.M. in taxation) was the most difficult and intense undertaking I have ever conquered in my lifetime. But, then again, it is just school, so you get out of it what you put in. You can treat it like college, float through, and not get a job afterwards but probably pass the bar and be a jobless lawyer. Or, you can choose incredibly complex coursework, engage with brilliant professors, often put in 12-hour days, and have great prospects for success. Going to law school will not get you a job. "Doing it right" and working your balls off will.

HI! I am thinking about pursuing a job in the legal field as a lawyer, and I am curious, on average, how many hours would you say that you have to work in a given week?

I have a very lax job for a lawyer and I work approximately 55 hours a week. However, I have friends who work 70+ hours per week.

Thanks a lot! I also have one more question, would you say that you and your friends can have a a social life outside of your work?

Absolutely.

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You can never objectively determine for certain if someone is a "good lawyer." What constitutes a "good lawyer" is highly subjective and, furthermore, since lawyers are simply human beings, even the most experienced attorney can be a prick.

That said, you can make a "best educated guess" when choosing a lawyer, and that will likely lead you in the right direction...especially in the estate planning realm. Remember that most estate planning attorneys WILL meet with you for an initial consultation, so you can shop around. For estate planning, you want to find someone who is knowledgeable, kind, and compassionate.

As far as knowledge goes, it's obviously once again subjective, but you can make a good educated guess by looking at the attorney's past experience. Lawyers are not allowed to lie about their credentials, so look for someone who has spent their entire career, or a substantial part of their career, in "estate planning, " trusts and estates" or "wealth preservation and planning." Stay away from the guys who push "asset protection" as their skill. A good lawyer should have asset protection planning skills, but it shouldn't be a selling point. That's just shady.

So, once you find a lawyer who looks ok from the yellow pages, look him up online. Today, every reputable lawyer will have a website, and that website should clearly outline the lawyer's experience. From there, like I said, shop around. I can assure you that there are hundreds of excellent estate planning attorneys who meet the criteria I described above.

So, to recap, look for extreme depth of expertise and someone who is kind, compassionate, and smart. You should be good from there. The kindness and compassion is a must in estate planning because of the extremely personal, sensitive, and often-times emotional nature of the practice.

Hey, thanks for the AMA - I can appreciate the area of your expertise. To make things easier for you, I am familiar with trusts in Australia (and the United Kingdom) but not in the USA. Do you know if they are essentially the same?

My question: hypothetically speaking (but it may be a reality), if I were to move to the United States from Australia with a portfolio of assets here, what would be the best method to receive that income? By moving them in to a newly established US trust? Or would I be better off keeping my existing discretionary trust and distribute the income in Australia for taxation purposes (and receive it as foreign income, although I presume this would mean I get taxed twice..?)? The assets are significant enough to ignore establishment costs etc.

I will be seeking professional advice on this at a latter date if things materialise but I am just curious as to your opinion, that is if you know about international assets.

Thanks again.

Unfortunately you need to resort to a specialist. I mentioned before, but there are a number of firms in South Florida that exclusively handle these types of matters. PM me if you would like a recommendation of a firm.

When you were looking at law schools, did you you try your hardest to get into a great law school and take out the loans or did you look at what the best local options were?

And thank you for doing this AMA, this has been really interesting!

You're welcome!

Indeed, thank you. I am a new lawyer (graduated/passed the bar last summer) who just struck out on his own after resigning from a nightmare small firm. I was the fourth associate to leave in three years, and I believe the two partners only ever had one associate at a time. It was that type of place. Anyways, it's been tough for me to get excited about the work after that experience. Reading your well crafted answers, however, has helped me remember how much I truly love the profession. Now, I'm off to find some clients!

If you remain passionate, you will succeed.

I blindly followed the rankings (US News and World Report) and went to the best ranked law school I got into. In retrospect, I may not have fallen into the tax LL.M. had I attended a different school without a good tax program, but I'd be in a lot less debt if I went to a strong regional state school. Some state schools have poor rankings but a very strong alumni base that hires from that school.

I live in Ohio and Ohio State University ranks really well for the area. but, if I got accepted into the University of Indiana which ranks much higher than OSU, would the extra debt be worth it?

Its a tough call. How much better ranked is Indiana and how much more would it cost?

OSU is 36th and about 25K a year. Indiana is 25th and about 52K a year. Are the extra loans worth it?

In my opinion, absolutely not. A top 40 school for half the price of a top 25 is a no-brainer.

Thank you very much for in the input and again for doing this AMA! Best of luck on your career.

Thank you very much!

to be a tax attorney, do you need a degree in finance?

Absolutely not. One thing I must always explain to people is, although there are inevitably numbers involved in tax law, I am not an accountant, and numbers are not a large part of what I or any other tax lawyer does. We are lawyers, and, therefore, we interpret and apply laws. It is my job to determine what the tax laws are and advise clients accordingly. It is a the job of an accountant to crunch numbers and advise the client what amount of tax, if any, is actually due. All that said, finance has almost nothing to do with tax law.

That makes sense, drafting the documents sound a lot more interesting than crunching the numbers. Did you know what you wanted to practice before you were accepted, or did you find what you really wanted to do after a year or two in law school?

After two years of law school when I chose to pursue a tax LL.M.

Hey, weird question, how hard would it be for someone starting at a junior college to make it to a firm of your prestige? I was left alone in paying for college so I figured 2 years at a junior college and a transfer out would be the best financial option for me. Would a firm of your prestige have any second thoughts or apprehensions about hiring someone like me?

All that matters in law school is your grades and the prestige of the school. Essentially, its very "crapshooty," but job prospects after law school are based solely upon law school performance and from what law school you graduate. The caliber of your undergraduate institution is largely irrelevant in terms of finding a law job, but it is an important factor in getting into a well-ranked law school.

Thanks! Wonderful AmA!

You're welcome! I am happy you are enjoying it.

Have you ever been surprised by how much money one of your clients had? Like, "WOW! This is a shitload of money!"

All the time. LOL.

Could you give us a number? I will understand if you can't.

Lots of different things. For example, reviewing life insurance trust documents of a trust that owns a $17,000,000 life insurance policy for someone's life, seeing a real estate appraisal saying a property is worth $42,000,000, seeing an appraisal for a fractional ownership in a MLB team worth $100,000,000.

Do you deal primarily with family members or with family offices? What big differences do you see with dealing with these?

I deal exclusive with individuals - husbands and wives. A "family office" which is an entity would have no need to visit an estate planning attorney because "entities" are not subject to taxes at their "deaths" (if there is such a thing as the death of an entity). I do, however, help the husbands and wives who own family businesses create plans regarding how the business interests will pass at their deaths and how the business will be managed.

Whats the most off the wall asset you been asked to hold for a beneficiary?

Asked to hold or asked to created a trust upon death for? I am never asked to hold anything for a decedent (I am never the Trustee), but, sometimes we will create and fund "pet trusts" for the care of an animal after death.

One of my best friends is in the same line of work and has maybe 4 lottery winners under his belt, do you have any lottery winner clients?

I do not.

Just want to say thanks for doing this AMA! I read most of your answers and I'm incredibly impressed, thanks for taking the time!

No problem! I greatly appreciate your reading it.

What is a good resource for learning more about Trusts? My parents have put what assets they have in a Trust, and I don't really understand how that works except a vague concept of it being a legal entity that has ownership of the property, which is watched over by them and eventually me.

Your parents, unless they are multi-millionaires, have created Revocable Trusts. I suggest Googling "Revocable Trusts" or something along the lines of "reasons for using revocable trusts."

trusts was my fave subject at law school, im still working hard to become qualified in my country. do you really need an llm to work in this field? or is it a matter of finding a firm to hire you? do you work in tax law as well?

It depends what country you're in, how complex the tax laws are, whether there are wealth transfer taxes, and at how "high" of a level you want to practice. In the United States, tax and trusts go hand in hand.

Can you set me up a trust fund?

Sure! What are your goals?

Could we see some proof? I am interested.

I am in the process of sending proof to mods ASAP.