Jason and Richard talk about Federal, State and estate taxes.

Richard C. Tizzano is a principal at Sherrard McGonagle Tizzano, P.S. He has 20 years of legal experience in Washington and California and in the United States District Court for the Western District of Washington. Richard’s expertise is in the areas of estate planning and estate settlement, elder law, and adoptions.
Richard is a graduate of Vanguard University of Southern California and Seattle University School of Law. Prior to law school, Richard served as an ordained Minister with the Assemblies of God Church, and has extensive experience in both the financial and commercial real estate markets. This unique background enables him to provide a compassionate, comprehensive approach to the practice of law and estate planning.
Sherrard McGonagle Tizzano is a full service law firm, established in 1954 located in Kitsap County with offices in Poulsbo and Bainbridge Island.


Below is the full transcript:


Announcer: Welcome back America to Sound Retirement Radio, where we bring you concepts, ideas, and strategies designed to help you achieve clarity, confidence, and freedom as you prepare for and transition through retirement.

Now, here is your host, Jason Parker.

Jason: Alrighty folks. Welcome back to another round of Sound Retirement Radio. My name is Jason Parker and I’m so glad to have you back on the program with us this morning. We have a very special guest in the studio with me this morning. It’s Richard Tizzano. I’ll do a proper introduction here.

We’re going to be talking about estate planning and asset protection. This is an area of expertise for Richard. I’m looking forward to getting in to that. Before we do, I’d like to start the morning right by renewing our mind. I think one of the best ways we can do that is with some scripture with a verse.

I was out to coffee with a friend of mine the other morning and I asked him how he came to know the Lord. There was one specific verse that stood out to him. I wanted to share that with our listeners this morning, because you never know which one of these is going to be the one that captures someone’s heart.

This is the verse that he shared. This is Luke 15 verse 3, “Then Jesus told them this parable, “Supposed one of you has 100 sheep and loses one of them, doesn’t he leave the 99 in the open country and go after the lost sheep until he finds it? When he finds it, he joyfully puts it on his shoulders and goes home. Then he calls his friends and neighbors together and says, “Rejoice with me. I have found my lost sheep.” I tell you that in the same way, there will be more rejoicing in heaven over one sinner who repents than over 99 righteous persons who do not need to repent.” That’s pretty awesome.

Of course, we want to have just a quick joke to put a smile on everybody’s face. Maybe you’re going to visit the grandkids this morning. Here’s one for you. Actually, let me bring Richard on to the program so that he can participate in this joke. I’ll share with you his bio and then we’ll do a joke.

Richard Tizzano is a principal at Sherrard McGonagle Tiziano. He has over 20 years of legal experience in Washington and California in the United States District Court for the Western District of Washington. Richard’s expertise is in the areas of estate planning and estate settlement, elder law, and adoptions. Richard is a graduate of Vanguard University of Southern California and Seattle University School of Law.

Prior to law school, Richard served as an ordained minister with the Assemblies of God Church and has extensive experience in both the financial and commercial real estate markets. This unique background enables him to provide compassionate, comprehensive approach to the practice of law and estate planning.

Sherrard McGonagle Tizzano is a full service law firm established in 1954, located in Kitsap County with offices in Poulsbo and Bainbridge Island.

Richard Tizzano, welcome back to another round of Sound Retirement Radio.

Richard: Thank you for including me. Now, I feel free to laugh at your joke. I’m looking forward to it.

Jason: I know. I had to have some audience participation here. Richard, why did the crab cross the road?

Richard: To be dinner. To get to the other side. I give up.

Jason: To get to the other tide.

Richard: Oh! I was so close.

Jason: One of friends, her son, that was printed on his t-shirt. It was silly. Anyhow Richard, thank you. Thank you for being a guest. Coming back on to the Sound Retirement Radio. We’ve had you on over the years. It’s been a while since we’ve had you on the program.

Richard: Right. I enjoyed being your straight man. Anytime.

Jason: This morning, I wanted to start out with … We always want to bring new and relevant information to people’s lives. In our professions, our lives are constantly being touched by people’s stories. We are learning from real life as it’s happening. You’ve had a couple of things that have been brought to your attention, and I was hoping maybe we could start out with maybe just sharing some of the things that you’ve been working on, or some of the things that have impacted you recently that you think people should know about.

Richard: I was sharing before we started this personal story. I help a lot of people all the time with the areas of elder law and they’re having to deal with issues of long term care and paying for things like that and how the whole system works.

I had a very close friend of mine who I’ve known for a lot of years, a little bit older than myself. He had a sudden stroke, and it was a pretty severe stroke. As you know the story, that sets into motion all bunch of things. He was at the hospital, went for the hospital to the rehab center, which is a nursing home. He wasn’t able to take in enough calories to sustain himself. There was a decision made to give the feeding tube, where they put it through your nose. After about a week or so of that, then he came back a bit and was stronger. They removed the tube and then he was off again to see how he was going to rehab and if he was going to be able to come back.

At some point, I could just sense that he’d had enough and he wasn’t going to do the work that it was probably necessary to do to sustain his life. I have an interesting perspective in that because I know when I was growing up my mom had a stroke when I was very young, about 12 years old. When she came home from the hospital, she fought as much as she could to get back as much the use of her arms and leg as much as she could, but she was in a wheelchair the rest of her life.

Even though she wasn’t real satisfied with the life she had because it was so different than the life she had enjoyed before, she did what was necessary to keep going and to get through life.

Anyway, I had this emotional, spiritual meditation about the quality of life versus the sanctity of life. I see everyday how people, when I talk about their medical directive and what things they might want, if they were dying, whether they want the feeding tube or whether they want the pain medication, whether they want to be on a respirator, those kinds of things. We have those discussions a lot in my office.

People flippantly say, “Well, I wouldn’t want this if it came to that point in my life if I didn’t have quality of life.” However they may define that. I saw it real up close and personal. It really made me think about those kinds of things and I reflected on some other events that I’ll share as we go along today that have to do with that directive to physicians and having a medial power of attorney.

Jason: It’s probably a good starting point actually talking about some of the legal documents that people want to make sure they have in place so that when those types of decisions have to be made, it’s very clear to the people that love them what they want to have happened.

Will you maybe just touch on that a little bit here and specifically what they should be thinking, about what they should be planning for?

Richard: Right. Documents you need for life are a power of attorney. Power of attorney is a document that authorizes someone to step in and assist you in certain areas. A general power of attorney addresses just about everything in your life, from financial to medical. These days, with the HIPAA laws and all, there’s a whole lot of issues that should be covered in those kinds of documents. In my office, we typically divide them into a power of attorney for financial matters, and then a power of attorney for healthcare issues.

The person or persons you name on your power of attorney have the authority to step in and assist you. Traditionally, powers of attorney sprung into effect when you were unable to act on your own behalf. If I was getting on my horse and going to ride down to Olympia, I fell off my horse and hit my head. The person I had named in my power of attorney would then be authorized to step in and assist me. That carried forward, and we have called it a durable power of attorney where it’s effective when I’m incompetent. It traditionally didn’t spring into effect until I became incompetent.

In the area I practice with elder law, what that does, if you have a power of attorney like that, it imposes on the principal person whose power of attorney it is to have to go to the doctor to have this determination made of your incapacity.

I strongly encourage people when we’re talking about a power of attorney to consider having the power of attorney effective when they sign it so that the person they’ve named could assist them immediately at any time if they want, even if they’re feeling bad or having a bad day or just they’re out of town and they need something taken care off financially.

Medically, you get a diagnosis and your loved or your person on your power of attorney says, “We should have a second opinion. Let me get those records sent over there for you, or arrange for the appointment.” They can do those kind of medical arrangements for you and talk to your doctor if the power of attorney for healthcare is effective immediately.

That power of attorney for healthcare appoints someone who can act with you or for you medically. It also authorizes that person if you’re unable to communicate your wishes to assert your directive to physicians on your behalf at the appropriate time. In many states, they call it a living will. In Washington, we call it a directive to physicians. It has those questions on there whether or not you would want a feeding tube under those circumstances, or hydration by intravenous.

Many people flippantly, or maybe after some serious thoughts say, “Oh, no. I wouldn’t. In those kind of circumstance, I would not want that.”

I had two situations where I knew people very well and they were faced with a disease that … ALS. That it’s eventually fatal. They got to the place in their lives when they could not intake enough calories to maintain life. Both of them had on their directives checked that they did not want a feeding tube.

Both of those people who I know were deep men of faith, and in my mind would … I would think looking ahead, they would welcome to opportunity to go into heaven. One in his mid-60s and the other one is mid-80s, both said, “Oh, no. I want a feeding tube under those circumstances.” Another thing got me thinking about the quality of life versus the sanctity of life.

Jason: You know you and I have both experienced this first hand. I experienced having to make some of these decisions. I was the power of attorney, and you help us drop those documents for my in-laws. My father-in-law was in a nursing home, and I was acting as power of attorney on his behalf. I was very grateful that we had those documents and that we had the ability to have me in that position.

One of the things I found, there were several times, Richard, when people actually wanted to have a copy of the power of attorney. We had stored that electronically in the cloud. Every time I needed, I could just quickly pull up my phone and print off a copy and I had it. I just remind our listeners out there, that’s one of the things not only do you want to have it drawn up, but you want to have access to it.

I have to tell you, it’s a lot different talking about it from a distance making those types of decisions about feeding tubes and what medications you want administered to keep people comfortable at the end. Until you’re actually in the position where you have to make those decisions, you don’t realize how difficult all those decisions are, and they are very, very emotionally challenging.

I think it’s one thing to have boxes checked on a form, but to make sure you have a conversation … The good news for me was, with my father-in-law, we actually had the opportunity to sit down. I recorded the conversation. I could actually go back and I could listen to our conversation of him telling me exactly what he wanted to have happened. I didn’t have to feel like I was taking all of the responsibility for making these decisions. I was just helping to make sure that it was being carried out what he wanted to have happened.

Really important that directive to physicians or living will, powers of attorney, so that people can act on their behalf financially and get things done and moving and make some decisions, tough decisions that are going to have to be made.

Richard: You’re so electronically savvy. Those are too cool ideas, saving it in the cloud. That’s a lot better than tattooing it on your chest exactly …

Jason: Yeah, that’s the old school approach I guess.

Richard: Especially with the POLST note. In Washington, we have this what’s called a POLST form. Physician’s Order for Life Sustaining Treatment. That one-ups the directive to physicians, because that talks about … It’s something, a discussion you have with your doctor. Your doctor signs the form. That’s the form that if the EMT showed up, you would want to waive the … Or someone you love would waive the lime green form and say, “They did not want any resuscitation.”

I tell people, “You want to staple that on your chest so when they rip your shirt open they give you the paddles to start your heart, they can see that you checked the box, “Don’t do that.”

Jason: The POLST form trumps the directive to physicians then.

Richard: It does, and hopefully they say the same thing. The POLST form is something … Because it’s signed by your doctor that the EMT would honor if they showed up and you had one of those lime green forms.

Jason: Is that state specific, or does that go across the country?

Richard: No. That’s state specific.

Jason: State specific. Is that something that we could add a link to the show notes where people can download that form? Is it something that they need to get from their doctor, from an attorney? How do we get them?

Richard: They could download and look at it, but it’s something they fill out with their attorney. My perspective on the directive to physicians is you don’t really want or need a directive to physicians unless you have some horrible diagnosis and your prayer when you go to bed at night is, “Lord, help me find some way to escape having to face this.” Whatever that disease maybe. If God is gracious enough to give you heart attack, you don’t want somebody to show up and revive you or save you only so you can face this fatal illness. That’s where it plugs in.

I had a women come into my office and we’re talking about the directive to physicians. She says, “I already have a POLST form.” I said, “Why do you have a POLST form?” She said, “The doctor said I have one.” I said, “Why is that?” “I’m 86 years old.” I said, “What is that have to do anything?” I shared my opinion with her. I said, “If you’re dying, then a POLST form …” Because the POLST form allows people to make decisions on the spot. Whereas the directive to physician forces the physician and the family to get together to have the discussion before the decision is made. That’s the difference with the forms.

Jason: Okay. All right. Let’s transition into trusts, Richard, because that an area that we get a lot of questions about as a financial adviser. People say, “Do I need to have a trust?” Can you help our listeners understand the advantages of a trust and maybe disadvantages of going that route?

Richard: Sure. A living trust is a document that allows you to avoid probate, because in a sense, you’re doing the probate in advance. You’re re-titling assets and your name as trustee of the trust. Which enables, when you die, the successor trustee to step into your shoes and administer those assets as directed in the trust without having to be appointed by the court through their probate process.

The questions I ask folks if they’re considering doing a trust in Washington is, “Do you have a taxable state?” Washington has a state tax on assets in excess of $2 million. If you’re a single person doing a trust has no effect on your state taxes. If you’re a couple, each of you has a $2 million exemption. Together, you have a $4 million exemption.

If you have the traditional old fashion, “I leave everything to you because I love you dear.” When the first spouse dies, everything goes to the surviving spouse who then is worth the whole amount. Whereas in a living trust, you can divide the assets between the spouses.

You have language that says, “When I die, the half of the assets that I control, my half of the community property, goes into a trust for the benefit of my spouse. It doesn’t go under my spouse’s social security number. It’s held in a different pot, so to speak, under a new tax ID number. My spouse gets the income, gets access to the principal, but we still retain each of our $2 million exemptions.” Which means you have a $4 million exemption from state taxes in Washington State. The federal exemption is $5 million per person.

Jason: Per person. Yeah. On those trusts, I know that sometimes people will draft those where the trusts are not created until after death. What do they call them? Testamentary?

Richard: Yes.

Jason: Yeah. Do you have any thoughts on whether that’s … Which way is better to have the trust established beforehand, versus having the testamentary trust established at the time of death?

Richard: Sure. If you’re a couple and you’re doing that, then each of you has those provisions in your will that says, “When I die, all the assets I control are going to be entrust for my spouse.” To effectuate that trust, to create it, you have to do a probate.

You’re in a position where both spouses end up doing a probate. You have two probates in your future if that’s how the trusts are going to be created. Whereas in a living trust, you avoid probate in either case, the death of either spouse.

The other thing a trust would do is if you own real property in other than Washington State. You’re going to avoid having to do a probate in each of those states where you own real properties.

Jason: Yeah. That’s really interesting. We talk about a trust being an advantage and avoiding probate. Is that really that big of a deal though in Washington State? Is probate an issue that people should be concerned with?

Richard: That’s a good question. I’m licensed in California and Washington. In California, there is a real urgency for people to do a living trust because the cost of probate is so much. It’s a percentage of the gross value of your state. It’s fixed by statute.

For instance, a million dollar probate, or a probate of an estate worth a million dollars. In California, it would cost about $23,000 in attorney fees, and the same amount for the executor feed. Whereas in Washington, we don’t have any such statute that imposes a cost of probate. It’s whatever the attorney and the family may negotiate or as an hourly fee. Something that’s agreed upon in advance.

I would say, typically, in our office, on a probate of a million dollars state which we do often, it’s not a taxable state. It’s going to cost somewhere between maybe $1,500 or $2,500 just to give you a ballpark. Which is a tenth of the cost of probate in California.

There’s an urgency to do trusts down there for financial reasons. We don’t have that urgency in Washington. One of the reasons it’s not so expensive here is because it’s not as involved with the court. The Court authorizes the executor in a probate to do just about everything that needs to be done without having to go back to the court. That reduces the cost dramatically.

It is a process with the court nonetheless, and it’s something that can totally be avoided if you do it as a living trust. In the long run, I think it’s a little bit less expensive probably to do it as a trust. It’s certainly much more convenient I think.

Jason: I’ve also heard arguments about the amount of time that probate takes. Also, from a privacy standpoint, because probate is a public process, that it may help just keep people’s information maybe a little bit more private. Is that a fair understanding?

Richard: Yeah, it is. There’s a creditor’s claim period that needs to be observed in a probate. That’s a four month creditor’s claim period. Assets typically shouldn’t be transferred during that period, four month creditor’s claim period.

Wills, by statute, should be filed with the court whether or not there’s a probate. There’s a statute that says if somebody dies and they have a will, it should be filed with the court within 30 days. That makes it a public document. Anybody can go look at see who you wrote at your will or who you loved or didn’t put.

Jason: We talked about higher net worth folks going through a probate process, especially when there’s just trust created to help protect assets from estate taxes, Washington State estate taxes. For lower net worth folks, is it necessary to go through probate when one spouse passes away? Do you still need to have a probate process for a married couple? Can we just assume in a community property state, everything goes to the surviving spouse?

Richard: You can’t really assume that, but you can do a community property agreement which allows all the assets to pass to the surviving spouse immediately upon presenting the agreement. It doesn’t require a probate. That’s a way around having to do a probate when the first spouse dies.

Jason: Especially for lower people that aren’t over that $2 million threshold, because we’re not worried about the creation of a trust.

Richard: Exactly. If all the asset is passed to the surviving spouse and it’s under the taxable amount, then it’s just the convenient way to do it.

Jason: Folks, if you’re just tuning in, you’re driving down the road this morning here in the Seattle area, I want to remind you, you’re listening to Sound Retirement Radio. You can find us online at soundretirementplanning.com. Not only do we archive all of these programs for you, you can listen online via iTunes.

We also transcribe everything. If you want to go back and read through the show notes, we do that. I’ll also be sure to put a link on there to Richard’s office right here in Poulsbo, Bainbridge Island. If you’re looking for some help on elder law, or estate planning, we’ll have that resource.

Richard, though, for people that, maybe, they’re driving down the road and they want to look you up, how do they … What’s the best way to get a hold of you?

Richard: On my website, it’s legalpeaceofmind.com. Just go online there and you can get my other contact information. The offices in Poulsbo is the office I’m at. We also, as you said, have an office on Bainbridge.

Jason: I want to remind our listeners too, in my book, Sound Retirement Planning, one of the chapters is on getting your legal house in order. Richard was kind enough to allow me to interview him for that chapter. We’ve got a lot of information in there for people.

I just basically tried to him a lot of the questions that people ask us as they’re preparing for retirement and they’re trying to put these documents all together.

Richard, we only have about 30 seconds left. In 30 seconds, what are your thoughts about people just getting forms from the local office store to do their state documents?

Richard: I tell folks that what they’re paying for is the peace of mind that I provide when they come to me. I realize that they can get those forms if they need them, and they can be very helpful. There’s certainly a place for those kids of estate plans.

The people that come to me, they want that extra confidence that comes with dealing with someone who knows what they’re doing. You wouldn’t do brain surgery on yourself. Not necessarily that what I do is equal to brain surgery.

Jason: Richard Tizzano, thank you for being a guest this morning.

Richard: Okay. Thank you.

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Investing involves risk. Jason Parker is the president of Parker Financial, an independent fee-based wealth management firm located at 9057 Washington Avenue Northwest, Silverdale, Washington.

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