#51 | Essential Estate Planning: Navigating Trusts, Taxes, and Digital Assets with Jon Linford – Part 1

Guest Profile

Jon Linford was raised in Arizona as the oldest of seven children. At age 19, Jon served a two-year mission for his church on the islands of Tahiti. After returning to Arizona, he attended Brigham Young University in Utah, where he obtained a Bachelor’s degree in Political Science. Jon attended law school at the University of Arizona. During law school, he was a teaching assistant to the Dean for the Legal Writing Department and received recognition for excellence in legal writing.

Jon was the team leader of the Ninth Circuit Pro Bono Appellate Program, and during his first summer of law school, he clerked for the Governor’s office of General Counsel. After law school, Jon and his growing family moved to Northern Arizona where he practiced in many different legal areas. Of those different areas of law, Jon discovered that he especially enjoyed working with families to protect and distribute their hard-earned assets according to their wishes.

Jon was pleased to join the experienced attorneys of Morris Hall and has focused his practice on estate planning, business planning, estate administration and probate.  Jon and his wife, Maurine, currently reside in Clarkdale, Arizona with their four children. Jon enjoys spending much of his time outdoors, including hiking and mountain biking. Jon looks forward to helping others protect their loved ones and their assets through quality estate planning with Morris Hall, PLLC.

Contact info for Jon Linford and Morris Trust: https://morristrust.com/
Phoenix: 602-249-1328
Northern Arizona: 928-774-0333

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Transcript

Speakers: Jon Gay, Bruce Hosler, & Jon Linford

Jon Gay (00:05):

Welcome back to Protecting and Preserving Wealth. I’m Jon Gay, I’m joined by Bruce Hosler of Hosler Wealth Management. Bruce’s got a special guest today in part one of our two-part series.

Bruce Hosler (00:13):

Yes, I want to welcome Jon Linford. He is a fantastic attorney that we work with. We love working with Jon. I want to invite Jon just to give a little bit of his background and experience, and tell the folks about his firm.

Jon Linford (00:28):

Thank you, Bruce. I’m happy to be here. As far as my background, I’ve been practicing law since 2011, graduated during the recession. I started practicing in litigation for about four and a half to five years, a lot of civil litigation, and during that time, I was doing some estate planning and I realized that that’s really what I like to do instead of always looking to fight.

I like setting things up to protect assets and protect estates to avoid the fighting if possible. So, I switched over to estate planning. I’ve been doing that for about seven years. I’m with the law firm Morris Hall. We’re one of the biggest estate planning law firms in Arizona. We have offices throughout all of Arizona, and I cover Northern Arizona, but also, I’m in the valley as well.

Bruce Hosler (01:15):

When you say the valley, you mean the Phoenix metro area, right, Jon?

Jon Linford (01:19):

Yeah, Phoenix metro area. We have Scottsdale, West Valley, Carefree, Phoenix, Chandler, Mesa, all over the valley. We also have two offices in Tucson, and then Flagstaff, Prescott, and Sedona.

Bruce Hosler (01:32):

Fantastic. Folks, I love to work with Jon because again, his firm just specializes in estate planning. That’s really all they do. That’s their niche, and so they’re specialists in it. They work on a flat fee basis. I have worked with other attorneys that work on an hourly basis and I’ve seen what would be a non-ideal result come out of that as far as what it costs to get their estate planning work done for other clients.

So, Jon works on a flat fee basis. The other thing is as you know, I’m an Ed Slott Master Lead IRA advisor. And in my experience, not all the estate planning attorneys understand all the nuances of how to do and work with IRAs, retirement plans, charitable gifting from those, and structuring that properly with their trusts.

Jon, I have properly trained (actually, I didn’t have to do much training), but he has been very good to work with on these subjects. And so, I like to work with Jon and he’s one of our go-to attorneys.

So, Jon, last week, I was in a meeting with some other advisors. One of the other advisors kind of had the comment that he didn’t think that everybody needs a living trust. Now, I don’t think that everybody needs a living trust, but what are some of the factors that people should be considering to determine if they need a living trust or not?

Jon Linford (02:57):

Yeah, it’s a really good question, and I also agree that not every single person needs a living trust, but there are several factors to think about when determining whether you would need a living trust or not. And honestly, in Arizona, if you were to go look at the county recorders website and see how houses are owned in Arizona, you’re going to see a lot of them are owned by a living trust, and there’s good reasons for that.

One of them is to avoid probate. It’s a way to avoid probate court, and we’ve all heard the word “probate.” Probate is something that’s time-consuming, it’s expensive, and it’s a public proceeding. And we want to avoid that. There are ways to avoid that without a trust, but a trust will avoid probate because the assets in the trust can transfer to your beneficiaries, to a successor trustee to manage that, without going through probate court.

Bruce Hosler (03:49):

The other way that you can do that is Arizona has what’s called an Arizona beneficiary deed.

Jon Linford (03:54):

Correct.

Bruce Hosler (03:55):

And that’s all fine and good if you have just one child, but if you have multiple children and you’re leaving your house to multiple children, the whole sale process of the house becomes a convoluted mess of offers and counter offers and getting every child to sign off on that. I mean, what a mess. As opposed to if we just had a trust, one person can take care of settling the estate and it doesn’t become a mess.

So, I’m not saying that an Arizona beneficiary deed in some cases may not be the perfect vehicle, but in many cases, it’s problematic as well. So, for that reason, we want to make sure our listeners know that a trust is many times the preferred vehicle.

Let’s go on a little bit more about that. If people own a house, would you say most of the time that a trust is probably indicated as a beneficial way to go?

Jon Linford (04:52):

Yeah, real estate, and that’s what I was saying before. When you’re looking with the county, most houses are going to be owned by a living trust, a good majority of them. And because of what you just said, if it’s not owned by a trust and you have a beneficiary deed that does avoid probate — the problem with that beneficiary deed is the beneficiaries listed on that deed immediately become owners the day that you pass away. And so, they are all then co-owners of the house.

Now, like you said, if you have one child, that may not be a huge deal, but if you have multiple children, and especially like a blended family and they all have to get along in order to sell that house or do something with that house, make decisions, hire the real estate agent — I mean, you can just imagine the problems that could come with that.

Also, if one of those beneficiaries happen to have creditors coming after them at the time that you pass, those creditors are going to try to come after the entire house. And so, that can be an issue.

Bruce Hosler (05:50):

Well, Jon, that is a great insight. Now, the other thing that I run into all the time as financial and a wealth manager is clients have money that is invested in taxable asset accounts. I can’t tell you the number of times I will have clients, they have a living trust, and they come to us and their brokers have left their taxable money invested in a joint account.

Now, as a tax accountant in Arizona, we have all the benefits of the community property laws, which is when the first spouse dies, the other spouse can get a full step up in basis on both halves of their shares of that account and pay zero capital gains tax to sell any appreciated stocks, bonds, mutual funds, ETFs in that trust account.

But if it’s just a joint account, now they lose out on half of that step up because they didn’t have it titled properly in a trust. So, if folks have investible money that’s taxable money, not IRA money, are you normally recommending that they use a living trust for that? I would assume that you are.

Jon Linford (07:02):

Yeah, if they have that taxable money, IRAs cannot go into a living trust, but the taxable account should go into living trust for two big reasons. One is what you just expressed, which is the taxes. I mean, all those capital gains in a community property state like Arizona get reset (if it’s community property) as of the date of death.

And that’s a huge benefit from a capital gains tax standpoint. And by having it in the trust as community property, it just helps confirm that if there’s any issues with the IRS that you’re going to have that benefit from the capital gains tax standpoint.

The other issue is we think a lot about death. But we’re living longer these days and incapacity is becoming a bigger issue. And if you become incapacitated, the person who’s going to be taking care of you, it’s easier for them to work as a trustee of a trust to get access to your accounts and to manage your accounts than it is to work as a power of attorney.

And so, for that reason, I really like to put as many of the accounts in the trust as we can to give your power of attorney the ability to manage that if you became incapacitated.

Bruce Hosler (08:11):

I want to talk about that for a second because that is one of the main benefits that I see to having a trust is because that’s a high probability that as a married couple, one of us is going to be become incapacitated at some time.

And I have actually seen where banks will not honor a power of attorney and not give the power access to the bank account because they consider the power of attorney to be stale. And that frequently is if it’s over 24-months-old, well, that means people are having to update their powers of attorney every 24 months.

Not that they shouldn’t be updating them every three to five years, but my understanding and my experience is if they come into the bank, your child comes in, you’re incapacitated, and they are the successor trustee, they have legal rights to the access inside of that account, and the bank cannot deny them access to those funds to provide for your needs.

Is that your understanding as well? Because that’s been my experience.

Jon Linford (09:13):

Right. Now, banks, they kind of consider themselves sovereign nations a little bit. Sometimes it depends on who you’re interacting with. But by having a trust, it’ll make it so much easier to access for your agent, the person who you’ve put in charge to manage your affairs.

Just a quick experience, I had a client whose daughter had power of attorney over an account, and the daughter kind of went bad. She started not managing money very well and not making good decisions. And so, the mom changed the power of attorney to another child.

However, the first daughter still had a copy of the original power of attorney and used that. Even though there was a subsequent one that was supposed to replace the first one, the daughter used that to go access money and spend it.

Bruce Hosler (10:02):

Oh, dear.

Jon Linford (10:03):

Yes. Well, the mom found out and got mad, and of course, the money’s gone. And so, the mom’s coming after the bank saying, “Why did you do that?” And the bank said, “Well, she presented this power of attorney.” Well, it was an old one.

So, banks get nervous. They don’t like working with powers of attorney. They don’t like working with, if it gets too old … they just don’t like it. So, sometimes they’ll just say, “You know what, we’re not going to accept it.” They don’t want that liability that comes with that.

But with a trust, they have to accept because they have to follow what the trustee says. Well, if the successor trustee is coming in because you’re incapacitated, the bank needs to follow that without going to court.

Bruce Hosler (10:39):

They have to honor that. That’s been my experience and that’s very powerful. So, we want to give our clients the power to be able to do what they will.

So, Jon, one of the most important estate planning issues that we’re seeing that affects clients in the healthcare area is the healthcare power of attorney, a durable healthcare power of attorney. What insights do you see about that for our listeners? Do you have some comments about that?

Jon Linford (11:05):

Yeah, I mean there’s a lot there to talk about, but just some salient things to talk about, I think with the healthcare documents. So, in Arizona, really, you should have a healthcare power of attorney, which is you appoint your agent, and you give them the authority to manage your healthcare.

Now, if you don’t have this, then if someone needs to come in and make healthcare decisions for you because you’re incapacitated, they have to get what’s called a guardianship or a conservatorship, but a guardianship for the healthcare decisions. And a guardianship requires two attorneys, a private investigator, a doctor, multiple hearings with the judge and supervision, ongoing supervision by a judge.

Bruce Hosler (11:44):

Jon, how much does all that cost?

Jon Linford (11:45):

It’s a lot.

Bruce Hosler (11:46):

What are we talking there?

Jon Linford (11:47):

Thousands of dollars.

Bruce Hosler (11:48):

Maybe tens of thousands, maybe-

Jon Linford (11:50):

Could be tens of thousands of dollars. Yeah, it could be. And then it’s time-consuming and it’s public. So, all of your issues of incapacity and mental incapacity, that’s now public. We can avoid all of that if we do the healthcare power of attorney properly in Arizona and we appoint the agent ahead of time. It’s not a judge choosing who’s going to be your agent. It’s you choosing ahead of time on the power of attorney.

Now, Arizona also has what’s called a mental healthcare power of attorney that a lot of other states don’t have. And let me tell you, I have someone come into my office and he was trying to get his mom into a memory care unit because she had dementia really bad, and he was trying to check her in, and they said, “Well, she can’t sign herself into that memory care unit, obviously, because she couldn’t understand what was going on.”

Bruce Hosler (12:37):

Yeah, she’s incapacitated.

Jon Linford (12:40):

So, he was trying to sign her in and get her admitted, and they would not let him do it. And he said, “Well, I have this power of attorney, but it was from Maryland.” They had moved from Maryland to Arizona. They said, “We will not accept this power of attorney because it has to be an Arizona mental healthcare power of attorney.”

So, they told him, now you have to go get the guardianship for her to even get her into this facility. And so, he came to me and said, “Well, what’s involved with getting the guardianship?” And I said, “Well, it’s the two attorneys. We got to get a private investigator, we got to get a doctor, and then we have to go in front of a judge and do these hearings.”

And so, it was just frustrating because if he had just had the updated document in Arizona with a mental healthcare power of attorney, we could have avoided all that. So, very important.

And now, the mental healthcare power of attorneys only been around for a little over a decade in Arizona. And so, if you haven’t had your documents updated … even if you’ve lived in Arizona, you need to have those updated. If you’re moved in from out of state, you definitely need them updated to avoid all of these problems that could come up.

Bruce Hosler (13:41):

I see that all the time, Jon. I see people, in Arizona we’re kind of being invaded by California a little bit. They’re kind of escaping jail over there.

Jon Linford (13:50):

Some refugees, right?

Bruce Hosler (13:51):

Yeah, they’re refugees from California, but they come over and here we got these trusts and it has all this specific language to California statutes inside of these trusts. And so, we try and get the clients in to get that updated.

Now, on the healthcare powers of attorney, one of the things that I want to have a conversation with so people can understand, because I get clients in and they’re like, “Well, I have four children, what can I do?” And we can set up the healthcare power of attorney and put the children in order that maybe someone lives close, so they’re the first one in order and then the subsequent and the third and the fourth.

So, all the kids can be on the power of attorney, is that right?

Jon Linford (14:31):

Yes.

Bruce Hosler (14:32):

And how do you do that and how is that effective in the hospital situation? What has been your experience?

Jon Linford (14:38):

So, usually, more often than not, it is the children that are on the power of attorney, as long as they can make some good decisions and they’re of age. And so, we can list all the children, and we can list them in order of preference of, a lot of times it is proximity to Arizona just because it’s easier for them to come to the hospital or take care of that.

But all of them could be listed and they’re all going to work together. But the doctor needs someone that has the authority to say, “Do this.” And so, the doctor’s going to go down that list of whoever’s available and make that decision, but not have to go to court and deal with all that.

Bruce Hosler (15:12):

And if any one of them is available, they’ll say the other kids are traveling or gone. Any one of them is there and there’s a crucial decision, they can speak up for mom or dad and advocate for them, right? Very important.

Jon Linford (15:25):

Yeah. Now, some of my clients, they only want one or two of their kids to be making decisions. There are some kids they don’t want making the decisions.

Bruce Hosler (15:32):

Well, then don’t put them on the healthcare power of attorney.

Jon Linford (15:34):

They may pull the plug too fast or not fast enough. But we do a separate, what’s called a HIPAA release. And we all know about the federal law, HIPPA, that doesn’t allow doctors to disclose any private health information. It’s very strict.

Well, a lot of times, we’ll put all of the children on that document so that they all can talk to the doctors, and they can get information about the client, but only certain children will be making decisions.

Bruce Hosler (16:00):

That’s brilliant. So, if we’re taking turns doing a hospital stay with mom and dad, we can all learn what’s going on, but we may not be the person that has the authority to make a healthcare decision.

Now, I’ve run into a couple other things I want to discuss. When you prepare a trust and healthcare powers of attorney, you frequently will provide that to the client in a digital form. Is that right? Do you put it on a jump drive? Do you send it to them electronically? What do you do?

Jon Linford (16:27):

Yeah, so we put it on a USB drive for the client. They get the originals, and they put the originals in a safe place in their house where the trustee can find it. But then we also give them a USB drive so they can have that electronically. They can print, they can email if they want, and usually, they’ll put that in a safe place or lock it in a safe.

And then we keep copies too for our clients.

Bruce Hosler (16:47):

That’s perfect.

Jon Linford (16:48):

So, if something happens to all of that, we have copies. And then Bruce, I know you keep copies too.

Bruce Hosler (16:54):

I do too. And I’ve got the call and gone down to the hospital and printed out the power of attorney at nine o’clock at night. So, I know how important that is.

I want to leave some special information with our listeners on this. The problem now is that hospitals do not trust a USB jump drive for fear that it will have malware on it. So, you cannot take that into a hospital and expect them to print out those powers of attorneys.

So, I’m advising all of our listeners, you should be taking multiple copies of your powers of attorney, both financial and healthcare. Put a copy of that in your glove box so you have it. So, if you drive to the hospital with your spouse and you’re there, you have the powers of attorney with you wherever you go, make sure you have them in every vehicle that you have, not the jump drive.

And then the other thing is if you’re of age that you go to the hospital or go to a doctor every once in a while, take your healthcare powers of attorney. Once they scan it in the system, for example, it could be HonorHealth, or we have Dignity up here in Prescott.

Once it’s in the system, then everybody has it. And the other document that we want to include there is our living will. Right, Jon?

Jon Linford (18:07):

Yeah, of course. The living will is the end-of-life decisions. People hear the terms “do not resuscitate, pull the plug.” If you’re at end of life, we want to make sure that the right decisions are being made for life sustaining treatment: the feeding tube, the breathing tube, CPR, all of that.

There’s a certain point where we don’t want to be on the machines forever, and so the living will outlines that. We also have another option, Bruce. We have a portal that has a card you can carry in your wallet where the healthcare providers could find that card and they can actually go onto a portal and download the documents there.

Bruce Hosler (18:42):

There you go, Jon. So, all your clients have access to that portal and you guys can provide them with a card to do that, right?

Jon Linford (18:49):

Yeah, it’s an option for clients. They can use that option if they like. So, we give that option to the clients.

Bruce Hosler (18:56):

Well, on this same topic, so more and more, we’re seeing in the world that our lives are dependent upon digital and online access, usernames, passwords, all of that. Please talk to my listeners about what they need to do to protect access and transfer access should they become incapacitated or die to their family at that important moment of truth.

When you have all the access to the passwords and everything like that, how do your legal documents address all the digital ownership that clients have?

Jon Linford (19:35):

Very good question, because we’re getting more into the digital age, even with cryptocurrency and with everything’s online now. Our photos are online, everything’s saved there. Email, our banking, our financial institutions — we do almost everything online now.

Bruce Hosler (19:52):

All of it, including your Apple music.

Jon Linford (19:54):

Music, everything. And so, for your family to be able to access that and take over, there’s kind of two different ways to look at it. One is legally, they need to be able to access it. And if they don’t have the passwords available to get into these accounts or whatever, we have specific language in both the will and the trust because you have both of those documents in an estate plan that will allow access to the digital assets.

So, if they need to use the will or the trust to show one of these companies that they have the right to access the account, they can do that with the language that we have in these documents. Now, sometimes, that is burdensome for them to have to actually go to the company and prove that they’re the one that should have access to it, have the authority. That can be a lot of work, and depending on who you’re working with at the company.

But a lot of times, by leaving passwords for your successor trustee, for your beneficiaries, it’s easier if they have your passwords already or if they have access to your passwords for them to get access to that. Nowadays, you have to change your password, it seems like, every month on a lot of these accounts, on a lot of these things.

So, there’s programs that you can use to hand over to your successor trustee where they can have access to your passwords. We have a spot in the actual physical portfolio, the estate planning portfolio, we have a spot where you can actually write out your usernames and passwords on all these things so that your successor trustee or your agent, your personal representative, whoever’s in charge, can have access to this.

It’ just so much easier that way than for them having to go prove that they should be the one with the authority to access it.

Bruce Hosler (21:34):

Well, certainly, my conversation with you is to make sure that the clients know that they have that legally taken care of, but if they’re using a password manager like LastPass or 1Pass, one of those, that is a good way logistically to take care of it. But we want to take care of it legally, and I’m glad that you discussed that with your trust and with the will as well.

Jon Linford (21:55):

And the other interesting thing is cryptocurrency, right? I mean, that’s becoming a big thing.

Bruce Hosler (22:00):

Oh, big thing.

Jon Linford (22:01):

People own crypto in different ways; they’ll possess it in different ways. They’ll have a wallet, or they’ll have it through Coinbase, or they’ll have it through-

Bruce Hosler (22:10):

A brokerage account, Coinbase or Kraken.

Jon Linford (22:12):

Now they have ETFs. So, it’s interesting how people are handling that. Now, if it’s in a wallet, if it’s the code or the key, the successor trustee is going to need to have access to that somewhere. If they can’t find that, then it’s like as if it just disappears and it’s gone. You need to be careful with that too.

Bruce Hosler (22:33):

You have to have those passwords. And if it’s in a brokerage account, one of those crypto brokerage accounts like Coinbase or Kraken, they’re going to have two-factor authentication. So, they’re probably going to have to have access to a digital phone, smartphone to be able to two-factor authenticate. So, that’s important as well.

Jon Linford (22:52):

And some of these don’t allow the account to be titled in the trust yet or even list a beneficiary yet, but I think they’re heading that direction. I think some of these, like Coinbase, I think we’ll see that they’ll at some point, allow the trust to be involved.

Bruce Hosler (23:07):

I think that point is not too far in the future, Jon, I think it’s coming soon.

Jon Gay (23:11):

Jon, this information, everything we’ve covered so far today is just so crucial in 2024 as the world is changing in so many ways. That’s going to wrap up part one of our series. Part two is going to come up next.

We’re going to talk about some other things that are coming down the pike, such as the conclusion of the Tax Cuts and Jobs Act and some other really important financial issues that Jon and Bruce are going to cover.

So, with that, before we wrap for this episode, Jon, if our listeners want to come talk to you about estate planning or anything else related to what it is you do, how do they best find you?

Jon Linford (23:41):

Yeah, so they can always find out anything on our website morristrust.com. We also have phone number for the Phoenix area: 602-249-1328 for Northern Arizona: 928-774-0333.

Jon Gay (24:03):

And Bruce, our listeners as always, if they want to contact you and your team at Hosler Wealth Management, how do they best find you?

Bruce Hosler (24:08):

They can schedule an appointment on the website at https://hoslerwm.com or call one of the offices, Prescott: 928-778-7666 or in Scottsdale, 480-994-7342.

Jon Gay (24:23):

Great. Jon, can we have you back for part two coming up?

Jon Linford (24:25):

Of course.

Jon Gay:  Securities and advisory services offered through Commonwealth Financial Network, member of FINRA/SIPC, a registered investment advisor.

Forward-looking commentary should not be misconstrued as investment or financial advice. The advisor associated with this podcast is not monitored for comments and any comments should be given directly to the office at the contact information specified.

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