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00:00:04
Welcome to another episode of the Widest Net podcast. I’m your host Pamela Slim, and I’m joined today by my guest, Carmen Rosas. Hoop wearing, award winning, and stereotype defying attorney. Carmen is on a mission to help women chase and secure the bag. Drawing on more than ten years experience in estate planning, she equips women to protect themselves and their families by protecting their assets.
00:00:30
And she’s doing it all in style. A proud mix of Mexican, French, and Italian, Carmen grew up in the Bay Area, as did I, fascinated by her grandmother’s stories of living in Mexico, arriving in America, and settling in California, her curiosity about other cultures and the development of languages and communal systems led her to study anthropology at Santa Clara University. During her sophomore year, she even interned at the Public Defender’s Office Juvenile Division in Washington, D. C. Today, she’s the founder and lead counsel of Carmen Rosas Law, where she empowers women to take back control of their money, desires, and life.
00:01:11
Her unique approach to estate planning blends personalized, intuitive coaching with trusted legal and financial advice to finally give women, especially women of color, the chance to be seen and heard by an attorney who looks like them and understands what it means to be a first generation wealth builder. She has been featured in The Huffington Post, Forbes, Create and Cultivate, Bilatina, the Super Mamas Podcast, and More, where she shares her guidance and legal advice with women across the country. When she’s not plotting a new way to help women win, she’s spending time with her family, either hiking, gardening, traveling, shopping in a local farmer’s market, or experiencing new cultures. Welcome to the podcast.
00:01:57
Hi, Pam. Thank you so much for having me. And so glad to have you here. And this all came about. I actually was working with a client that had a number of questions around planning for estate and business entities and personal entities, and I love it where I was like, wait a minute. I’ve been friends with Carmen for a really long time.
00:02:17
We bumped into each other at Jen Kem’s event in person, and all of a sudden, I made this connection of, oh, my gosh, she is the perfect person who understands it all. And I actually find, unscientifically, but just amongst clients, that in general, entrepreneurs tend to have a much less structured, solid approach to business, financial, legal planning than maybe they did in being in a corporate environment. What do you find in your work with clients? Yeah, absolutely. Well, when you’re in a corporate culture, HR has these employee benefits, right?
00:02:56
They have all of these things that they offer, and they’re like, hey, make sure you do your 401K. Make sure you do X, Y and Z. And when you’re an entrepreneur, you just want to do what you love and grow and scale your business. Where the legal and financial part you’re like, I’ll get there. I’ll get to it.
00:03:09
And the reality is that sometimes we don’t ever get to it, right? And we don’t have the opportunity to. But we’re working so hard to build that. Sometimes protecting it or thinking that we might not be here to actually run our own business is not even a thought that crosses our minds.
00:03:29
For some reason, it can feel like maybe a scary thing to think about a subject that people want to avoid. Why do we need to be thinking about it beyond just the obvious if anything happens? But what have you found gets people a little bit out of that stupor of just thinking about the short term, of how can I bring in clients and money to the business that I think could be a very dangerous kind of trap that just often extends over many years? Yeah. And I think that’s a great question.
00:04:00
I’m sure you kind of see it with the clients that you work with. But if we just kind of throw out the net, right, and really think about what do we want long term, right, where we can get out of…And it’s this really funny place where we’re like, we need to be in the present. Let’s focus on the present, let’s be present. And also we need to plan for the future because as we grow our businesses, right, we want to make sure that that money that we’re putting our blood, sweat and tears into it, right?
00:04:30
I remember that I had my business before I had my daughter, and so I joked that my business was my first baby and so navigating some of those things, but I love and protect it as much as I would my daughter. And so as entrepreneurs, we need to love and protect our business as we would our children or just making sure that it then flows to the next generation. But what really helps is if we just kind of sit back and say, okay, in a year, where do we see ourselves? In three years, where do we see ourselves? And really just focusing on the vision and having that plan in place.
00:05:02
So essentially a business plan, but also a vision board for our business and where we see that going. And then we do have to pause and ask, okay, if I wasn’t running my business, or sometimes when we’re scaling right, it’s getting the right team in place. It’s getting people who will be our right hand person that’s going to just manage it all for us. Well, if something happens to us and that person is absolutely left in charge, how can they continue running your business? How can they make sure that funds and assets are going to your kids or to your significant other to make sure that they’re still being properly cared for?
00:05:36
And I don’t know about you, but a lot of my clients tend to be the breadwinners when women step into entrepreneurship. They end up being the breadwinners and want to or are taking care of their families. And so almost in this reverse way that we’ve been taught for years is if you lost your income, whether it’s because you get sick, it’s because you pass away or even, if you know slow business is slow, what are the next steps? What’s your emergency plan? And so, just like we would have an emergency plan in case of disaster or earthquakes right here in California, what is your emergency plan for your business and for your family?
00:06:17
Yeah, it’s so helpful to think of it that way. I admit it still scares me when I just think about it. But one of the things that got me finally after I actually been in business quite a few years to get life insurance is when a former very frightening person threatened my husband’s life in a business context. And it was one of those things our kids were a lot smaller in those days. But it was the thing for me that just instantaneously made me shift.
00:06:47
And we can think about that often in things around protection that in some ways it can be that is response to something that’s kind of a negative thing happening. It was very scary and I really like it in that way, as you said, where it is more taking the breath, looking at the long term, thinking through all of the different options, which tends, working backwards to create much more structured like organized, thoughtful planning. And the piece of it that I notice a lot as a business coach is it’s taking into consideration and we’ll get into specifics, maybe not necessarily huge extra amounts of how people need to think about their business. But I find that people that are self employed tend to not even put into budgets or into their income targets things.. life, like life insurance or putting away money for retirement and so forth. So maybe in that context, can you help us understand when you talk about building a legacy and a plan, what are the pieces that are involved?
00:07:54
Because it sounds like some of them can go on the personal side and then some of them can go on the business side. So how should we think about that foundation and what it costs? I love that it’s one of those things where as an estate planning attorney, it’s funny, right? Because I do do coaching in part of my estate planning, because we look at it as a more holistic approach to estate planning versus you just go into an attorney, you create the documents and that’s it. I like to go a little bit deeper because for me, being a first generation, my dad was born in Mexico, my mom was born here, but we grew up with my dad’s side of the family.
00:08:32
My grandma doesn’t speak English and my dad didn’t teach us Spanish growing up because he was made fun of when he was younger. And so, so much of it is even deeper than that, where I look at, okay, what are my roots and my traditions? And what do I want to pass on to my children? So some of it is personal. It’s those cultural traditions and little things that are just personal to us that we want to make sure get passed on.
00:08:55
And then the other part of it is the financial and using legal to get that in place. And so from the financial part of it, life insurance is huge. I’m a huge advocate of life insurance. I just kind of off topic, but when I was pregnant with my daughter back in 2014 ish right. I had her in 2015, early 2015.
00:09:16
My dad had just happened to have life insurance from when I was 19. He was like, you’re going to get a life insurance? Like dad, I’m 19. I don’t need this. But I just went along with it.
00:09:25
But fast forward to 31. When I had my daughter and I was self-employed, I did not plan on having her. So she was definitely, like a surprise. Didn’t have paid parental leave because, again, I was self employed, didn’t sign up for any of that. But I was able to tap into my life insurance to support myself for the first month and a half without having to really work super hard and be able to spend time with my daughter.
00:09:50
And at that time, I did become a single mom. And so it was like I was the only income earner. And so life insurance really helped me in that way, starting at young. And so I’m always like, get the life insurance. You don’t know when you’ll need it, make sure you’re paying your premiums.
00:10:05
And when I do my budgeting right, I make sure that my life insurance is the first thing that’s on there. My daughter got a life insurance right, when she was born because I was like, well, you’re going to invest in it. And if at 18, and if I’m not here, yes, you’ll have my life insurance, but also, you’ll also have your insurance to tap into based on what I’ve invested for you. And you can take out some of that money and use it for what you need or a down payment on the house or when you get married. And so setting her up for financial success and educating her about finances that I wasn’t educated about from a young age.
00:10:40
Can I ask you a super quick question about that? Because I think a lot of people think about life insurance as only having utility when somebody dies and passes on. But the way that you described it, how can people use it in terms of pulling out money? Like, from the policy? How does that work?
00:10:56
So there’s different types of life insurance, right? Some people are like, oh, just get a term. It’s just that for a set amount of time, maybe ten years. And a lot of times people will do that when their kids are really young, if they’re the only income earner, and that’s fine. But it’s like renting space, kind of.
00:11:12
You rent the policy for a little bit and if you don’t pass within that window, it goes away. You can convert it. Obviously disclaimer I don’t sell life insurance, but I’m so obsessed with it, maybe I should get into it. I really love it. And so the way that I use it, there’s a universal whole life where it lasts your entire life.
00:11:31
As long as you’re funding it, you’re investing in it. And the really cool thing about that is you end up being like your own bank, right, is how I see it is where you’re able to you’re investing this money and you can take a loan against yourself or you can give it as a gift to yourself. And so the money that you’re investing builds and develops more. And that’s what they call the cash value. So when you pass, you potentially have a cash value and the death value, which means that it may actually end up being more than your, say, 500,000 or 250,000 is very common to cover expenses and things like that.
00:12:01
So then you have that additional money that you’ve already invested. Granted, it’s like any other bank and financial institution. They’re using your money to invest and build up the banks and the insurance company’s bank account. But there’s so many different terms and so basically you end up being your own bank where you can borrow money from your life insurance. Again, you can borrow and you pay it back.
00:12:25
So you’re loaning yourself money and you pay it back or you just gift it to yourself. Or you can just do a withdrawal and not ever pay it back. So it really just depends. But that’s kind of how that works. And again, there’s different types of life insurance policies that’s super helpful.
00:12:39
So that’s one piece of it that is getting all of your legacy planning in order. What are some of the other pieces? Yeah, so I like to look at I’m doing a webinar actually coming up at the end of August, like five tips on how to build generational wealth. One is getting clarity around who you are and what you want, right? Because I think so many times we think we want to have this American dream, right?
00:13:04
And I do air quotes, right? But this quote unquote American dream. Buy a house, climb the corporate ladder, have 2.5 kids, et cetera, et cetera, right? But the reality is that’s just not real life. That is not how people live.
00:13:16
There’s different circumstances. So one is get really clear on what you want, right? What are your goals, what are your visions? And so that’s one part. The second part is knowing where your money is going, right?
00:13:25
So making sure that the budget is set up properly, you know exactly where your money goes so more money can flow to you. Because money love is neutral. However, it really loves direction, right? Kind of like kids where you’re like, oh, I don’t want to be too strict. But they really love discipline, right, and structure, and they want to have that organization.
00:13:44
And so whether it’s in business or in personal finances, having an idea and knowing where that money is going. And then, of course, allocating it for legal and financial investments because we want our money to grow. So number three is investing, making sure we’re investing in ourselves and in our business and in financial things, whatever. That maybe that’s another business. Maybe you want to be an angel investor of sorts, but just making a way to figure out how your money can grow for you.
00:14:15
The other part is, which, of course, all of your clients are probably doing, is they have multiple streams of income. So they have their business, they have maybe different offers, their main offers, but it’s making sure that there’s just not one thing. And then the multiple streams of income can be life insurance, right, which also connects to the investing because your money is making money for you. And so it’s just really kind of fine tuning that. And then the fifth one, of course, is estate planning.
00:14:43
And so making sure those legal documents are in place. Because what happens is if you don’t have a power of attorney or the right operating agreement so it’s really legal documents. Not even just estate planning, but it’s business succession planning. Having those right legal documents in place so your assets and your business that you’re building don’t end up in court. Your family members, partners don’t end up in court.
00:15:07
And everything is already spelled out once you have that clarity and really the capacity, because as we get older, we can get into it. Well, one is you can end up with dementia, Alzheimer’s, things like that. We can get really sick or even I can walk out of here today and be hit by a car and we don’t know. And so a lot of it and I joke with my clients, I was like, I live in a world of hypothetical where it’s like, well, if this happens, then what would you want? Right?
00:15:36
But that’s really where a lot more of the coaching comes in with my clients, because it’s not just, okay, when you die, what do you want to happen? It’s like, no, there’s other ways that this can play out. What if your entire family and this is so morbid, right? And I joke and I laugh about it, but I just do it daily. But it’s like, well, if your entire family was on a cruise ship to Mexico and you all passed away at, you know, a Titanic situation happened, what would happen to your family?
00:16:03
People go, that’s not going to happen. And I’m like, I understand that we don’t think it will ever happen to us, but it does. Those are the five. I know it was just kind of jumbled up together, but lots that’s really helpful. And I will make sure we’re published hopefully in line with when before your webinar comes out.
00:16:22
So that way people could take advantage of that as well as they hear it because it’s really helpful. And what’s interesting on a couple of levels, one is recognizing just what we need to be thinking about and having in place. The other is more an approach to how it is that you can have these open and frank conversations. And I’m imagining in some of the coaching that you do, everybody can be socialized differently around it. One thing I’ve appreciated is my dad passed away and my mom and my bonus mom are still alive.
00:16:55
But my mom’s dad, my grandpa, he was actually the treasurer for the Western Conference of the Methodist Church. So he worked right next to Glide Memorial in San Francisco for many years. And so he always had an approach that was very pragmatic and he was very clear and just talked about it clearly and openly about a plan. So in his case, my grandma, his wife died earlier when she was about 70. He lived another 20 something years.
00:17:26
He got remarried. But I remember seeing modeled in that particular family system that he openly would talk about things like what would happen when I die. He had things really organized for my mom and for my uncle in order for it to happen. And then I’ve noticed with my mom and my bonus mom as we’ve had these conversations, it’s like you’re saying we sort of will sit around chuckling. It’s a little bit weird, but I appreciate the fact that it’s so normative where they’re having very open conversations with us.
00:17:57
Everything from like, hey, don’t expect to get a lot of money because I’m going to use it all to have a good quality of life, which we all love and appreciate, as well as being very clear to talk through scenarios. So I happen to have that has very openly talked about in my family. Do you see other scenarios? I imagine in your conversations with people what comes up and how do you help people navigate through the conversations? Yeah, so I get clients a couple of ways.
00:18:31
One is they’re like, oh, well, my mom or my dad had a trust and it was super helpful. And so now I figure I should set it up for my kids. And so those are super easy. We don’t have to do much coaching around that. They already understand it.
00:18:44
The other ones that we get are and a lot of this is with my Spanish speakers, right? I have lots of Spanish speakers because I do speak Spanish, although my dad didn’t teach me. I learned it from my grandmother and in school and watching like Spanish novellas with her. But I do speak Spanish. I’m one of very few estate planning attorneys who also speak Spanish.
00:19:05
So I’m glad that I’m able to tap into that community. Is that the superstition around talking about death? Or if we’re signing documents that are related to death, then that means we’re calling death upon us. And so that one is a little bit interesting when I try to navigate. And so obviously I meet clients where they are and so some of them will.
00:19:27
And it’s very interesting because I find it’s the men that have a little bit more pushback than the women because also men don’t want to feel like they’ll never be in control of their lives. And so some of it is cultural, some of it is, I guess, societal. And so we just kind of walk through some of that where it’s like we’re actually doing this and positioning it in a way that it’s not about them, right? It’s actually about the people that they’re leaving behind and the potential for conflict. I have one client, well actually, I’m actually personally going through my family is going through a conflict right now, where my grandmother, as I mentioned, came from Mexico.
00:20:07
She has eight children. My grandfather passed away in 2011. No, 2018. My other grandmother passed away in 2011, but my grandfather passed away. So my grandmother’s single, eight children.
00:20:18
And right now we are in a court battle. I’m not involved in any of it, but I know about this stuff and I understand it. And all eight of my aunts and uncles, including my dad, they’re just in court and at each other’s necks. Family literally is being torn apart. Everyone is choosing sides and nobody talks to anyone.
00:20:39
And so unfortunately, I’m experiencing but also I’m able to explain to my clients not just like, this is what could happen, but I’m actually living it and it’s not fun even for grandchildren. And so when clients come in, they’re like, oh, they’ll figure it out. They know what they’re supposed to do. The courts don’t care, the state doesn’t care. That if your kids know, right, they need to have a legal document that explains.
00:21:03
And so tapping into some of that has been interesting. I mean, I’ve been doing this eleven years now, and so it’s become easier. And it’s very similar objections, right? They’re worried that they’re going to die or they don’t want to think about their mortality. And just what I find is really helpful is repositioning it and giving them the perspective of it’s not about us, it’s about who we leave behind.
00:21:28
Also explaining to them that they can use their money. Even if you create an estate plan, you create this plan, you’re like, oh, I’m going to give it away. One question that does come up is, well, will I still have control over it? Will they be able to kick me out of my house if I get old. And if you get a revocable living trust, which is really common for my clients.
00:21:46
Right. Because they’ll still maintain control. They can buy, they can sell, basically do whatever they want. And your family members don’t actually get access to it until either you’re incapacitated and the trustee is managing it or you’ve passed away and then the distributions happen. So they can’t kick you out of your house unless the trustee decides, which is a whole other conversation, but you still get to maintain control.
00:22:09
And so you’re positioning it so that your family doesn’t get torn apart. Because the truth is, I think about my kids. I have a stepson and my daughter is they’re on their best behavior when I’m around or dad is around. And the moment we’re gone, it’s like they’re at each other’s necks or I’m not touching you. It’s just one of those things where they’re nitpicking.
00:22:29
Well, as adults, those feelings are still there. And once mom and dad have passed, they just come out and there’s no one there to stop them or to break up the fighting so unless they go to court. And so in order to help minimize that, having a plan where you have the clarity and capacity to put that plan in place is always better to do it sooner rather than later. Think about Aretha Franklin and just all the conversation around that where I think the latest, most recent version was a piece of paper that was stuck inside a couch that they’re using as the most recent. Right.
00:23:06
It’s so painful to see it. And yes, you do realize that it is the kind of thing that really can and I’m so sorry it’s happening in your family because it really is painful. Where things are not clarified, as you say, we can understand for different reasons why people might be reticent to talk about it. In Navajo culture, my husband’s culture, there can be similar things around both birth and death about what is appropriate to talk about, when that can make conversations sometimes a little bit more challenging in American legal system ways. And I love, as you’re describing it, really thinking about it from the perspective of what really will create ease, even just in the way that somebody can look at their situation, begin to put plans in place.
00:23:56
I think that can create just ease in the now the more aware you are of it. And then you can be very deliberate about what you create for your family. Yeah. Can you explain the difference between a will and trust in the components of legal documents that one should have? And knowing I think most of my audience are entrepreneurs, just this difference between do you have a will for yourself?
00:24:23
Does that include your business assets? Is it separate? How does that work? Yeah, that’s a great question. And so I used to see that there were four essential documents that you needed a will, a trust, healthcare directive, and power of attorney.
00:24:38
But for entrepreneurs, there’s a fifth one, right? And that’s a business succession plan. And so the difference between a will and a trust I’ll tackle those first is in California specifically, and in most states, you have three options when you’re creating an estate plan or creating when you want to transfer assets. The first one is you do nothing and you end up in probate court. If you’re in a state where probate court is not so bad, it may not be horrible, but you’re paying a good chunk of money and spending a lot of time.
00:25:07
If you’re in California, you’re looking at a year plus closer to like, 18 months to get through the probate process. Assets are frozen for at least the first 60 days. It’s public, so creditors can submit claims. Everybody knows everything about you based on your assets that you own, right? So it’s all public.
00:25:26
So option one would be do nothing and you end up in probate court. Option two is you create a will. So, for example, Aretha Franklin, if all she had was a will, she would still end up in probate court. A will, however, says, I want all of my stuff to go to X, Y, and Z. So I’ll use myself as an example.
00:25:45
I have a daughter and a stepson. I’m not married, so I have my partner. And if I passed all of my assets through probate without doing anything, my daughter would get everything. She’s my next of kin, my blood relative. She gets everything.
00:25:59
Option two with the will is instructions to the judge. Hey, Judge, I want my daughter to get 50%, I want my partner to get 25% and my stepson to get 25%. These are my instructions. So it doesn’t follow the intestate default next of kin, but it still goes through the probate court. So you’re presenting the will to the judge.
00:26:19
Same probate process, maybe a little bit simpler, but it’s still that same process. Court proceedings, you have to get approval from the judge, assets are frozen for the first 60 days, et cetera, et cetera. Option three, which I’m a huge advocate for, and people are always asking, do we need a trust? Not always. And so a trust is this other vehicle that we use where I like to look at it as a treasure box, where everything we own goes into the trust.
00:26:46
And the trust document essentially is that key. And it says who gets to have the key next, and you never have to go to court. So it basically is all protected. You keep everything out of court. It’s private, immediate access to the next trustee in line, and you can get super specific within a trust.
00:27:07
And that will say, my daughter’s eight, right? We can put in provisions where my daughter is going to get 50%. For example, 25% to my partner. 25% to my stepson. My daughter’s 50% will stay in trust.
00:27:21
And you can do structure trust within the trust right. Where it can get more complex and very specific. Right. So she doesn’t get any of her inheritance until she graduates from college. Or I can say she has to have a job and actually be kind of contributing to her own finances before she’ll even get any money.
00:27:41
Or no substance abuse, no gambling addiction. Right. Or it can be very specific. And so you can put conditions in. There are some limitations.
00:27:51
Like, you can’t say they can’t get married or they have to get married, but you can. That’s only the trashy romance novels. Right. That’s the main plotline of like, 50% that I read over the summertime. Exactly.
00:28:02
What you can say that in order for her to receive an inheritance, I want her to get a prenup. So she needs a prenuptial agreement in order to continue to receive her inheritance. One, because if there’s ever a divorce, I want to make sure that it’s not subject to divorce proceedings because this is money that I’ve worked hard for. And I’m just giving an example. I do have a client who is very specific, and if she didn’t get a five year or a prenup or a postnup within five years, she would lose her inheritance and would go to other family members.
00:28:33
So you can get super specific, and you can get very just like just distribute it outright. I just want to avoid court. We don’t want to deal with probate, because probate in California is about 5% average and does take about a year and a half if you get an easy probate, and none of them are easy or simple. Everyone thinks they always are, but that’s not the case. That’s really helpful.
00:28:57
Yeah. So that’s the trust and the will. The other documents I mentioned were the healthcare directive, which is if you’re incapacitated, for example, and I always use this example because I think dementia is so far away for so many of my clients or their parents are going through it. But if you’re in a car accident, maybe you’re out on a date night, girls night, there’s a car accident, you end up in a coma, you need a surgery, who’s going to make those decisions for you? A lot of times people say, oh, it’ll just be my significant other.
00:29:28
But there was a case, and I think it was in Florida and it was years ago, the Terry Shivo case. I’m not sure if you’re familiar with it. Yes, and Terry Shivo was I think she was in a coma. I can’t remember it now, but her husband and her parents were fighting over whether or not she would stay on life support. And they ended up in this long, drawn out custody battle or not custody battle, but I mean, it felt like a custody battle, but this long drawn out court battle to decide who would get the final decision.
00:29:54
So if you have an advanced health care directive that already dictates who gets to make that decision. For example, I did not name my parents on my health care directive because I thought they would be too emotional. They’d want to keep me on life support or do whatever is possible to keep me alive. But if I’m just not going to have the quality of life so I picked my brother and I’m like my brother will be more than happy to pull the plug if needed. I feel like patch himself emotionally enough to say just yank it out.
00:30:21
And then the fourth one is a power of attorney. Power of attorney is who manages your finances that are held in your name alone. So for example, brokerage accounts, right? They’re in your name, but you have a beneficiary named and so your trust would be the named beneficiary. So when you die, it actually goes to the trust.
00:30:39
However, if you’re still alive and incapacitated again, let’s go back to this car accident. Now I’m awake, right? Or you’re awake, but your brain activities, your brain just doesn’t function the same or you have some disability now and someone needs to manage your finances because you’re just not capable of it. And so the individual named on your power of attorney will then be the person in charge of managing your finances while you’re alive and making those decisions. So if we need to sell a piece of property, we can in order to pay for medical bills, right?
00:31:10
And so again, avoiding any conflicts saying, oh, I’m going to be in charge of her money, et cetera, et cetera. And then with that, including who can manage your business. So that coupled with your business succession plan and the business succession plan, which is the fifth one, can be very complex or can be super simple, say if you’re a sole proprietor, it varies. Now, if you’re a sole proprietor, if you’re an LLC, or if you’re incorporated LLCs, your trust can be the member of the LLC, which means that when you pass away, your trustee is the owner of your LLC and can continue managing it assuming that your operating agreement still matches. Same with corporations, assuming your bylaws and your trust match up.
00:31:57
So making sure that you work with someone who does both business and estate planning, especially for entrepreneurs, to make sure that your business and personal are lined up and it’s in one cohesive package that is the same. Because then when you start having a different language or different people in charge, then it becomes a mess. It’s like, well, who’s actually in charge? Well, let’s petition the court and have a judge tell us what his interpretation of it is, right, based on just reading the documents. And so if you’re there to be very clear and spell it all out so people know, then it makes it a lot easier no one has to end up in court to get that interpreted by someone who doesn’t know you or what you would have wanted.
00:32:38
That’s really helpful. Really. And you just see very directly through that explanation of why you do want to have everything aligned. And it’s just so handy to have one person, aka you in your firm that can manage both sides of that. Because that’s what my client was saying is like often talking to people who just do the personal side or the business side where you need to have both aligned.
00:33:01
And then you said the succession plan could be also yeah, the succession plan. Basically spells out who would be in charge, how it would be distributed, again, matching your trust. So in your trust, you would be so I’m going to use an LLC because that’s just an easier example. So I own an LLC. I have a trust.
00:33:20
My trust is the sole member of the LLC. I’d be happy to talk to people to answer questions regarding multi-member, et cetera. But we’re going to do a very simple single member LLC. I’m the owner of my LLC. I transfer my rights to my trust, me as trustee of my trust.
00:33:38
So now my trust owns my LLC. Within my trust, I can gift the property or the LLC to say Pam, right? Say, I want Pam to manage it. Either you can manage it, dissolve it, but you’re going to be responsible. And so within my trust, it says, or I just give you my LLC and I say, hey, you can do whatever you want.
00:33:57
Other things are just instructions. I give Pam authorization to dissolve my LLC and then use that money to create a foundation or to just give it to my daughter whatever is left from the sale. But making sure that you’re nominating someone who’s going to have authority to manage your business and the business finances with the Secretary of State, with your tax person, with the banks. Because if it’s an LLC and most of you, if you’ve started a business account, you know that they ask for either your operating agreement, your statement of information, legal documents to show that you’re authorized to open this bank account. And so if you pass or you become incapacitated, there needs to be documents set up to then transfer it so that the next person in line can continue managing.
00:34:47
Maybe it’s paying out dividends or royalties, depending on how big your company is, et cetera. So if you’re a sole proprietor, makes it a little bit easier, but you still want a plan that says, this is what I want to happen, this is who will be in charge, and then making sure your trust also distributes it that way. LLC and corporations definitely require more documentation, just like the banks would. That’s really helpful. So two more questions.
00:35:19
One of them is a common challenge for entrepreneurs, is not always having really consistent cash flow depending upon their business model and how work comes in. And so how do you advise besides obvious things like creating maybe some more stable types of revenue sources for the business, how do you advise that they deal with, for example, if you’re saying it’s important to fund life insurance or to have retirement or to pay for an attorney, do you like the Profit First model? Do people save up to do it? Is there a priority? How do you advise people to manage it?
00:36:01
Yeah. And I have not come across many people who are kind of in that situation. But I think that’s a very valid question and probably something that people just don’t ask me about. They’ll ask if there’s payment plans, which we do offer payment plans, but I think one of the bare bones basic right, is I don’t like to say, okay, we’ll just wait and save up. Right.
00:36:21
But if that’s what makes you feel comfortable, I use profit first. So that’s kind of how we set things up. But budgeting is huge, right? Just knowing where your money is going, having these sinking saving funds where we have different bank accounts, I have probably ten or eleven saving accounts for different purposes, right. It’s like a kids summer camp, it’s vacation for next year.
00:36:47
It’s life insurance that’s going to come out every month. And life insurance is actually a lot cheaper than a lot of people think, especially if you’re a healthy adult. It can be a lot cheaper than people think. Right. And premiums are paid.
00:37:01
It’s like, oh, your premium is say we’ll say $1,000, but it’s paid over twelve months, right. So when you actually break it down, you have to have the $1,000 or it’s not $1,000 a month. So talking with a life insurance, right? And I think one of the big steps now as I’m speaking is to talk to an expert, ask the questions. A lot of times people are more than happy.
00:37:21
I love educating people around estate planning and what it can be and how you can position your finances. But sinking funds, going back to your question, are really big. And sinking funds are just basically having specific savings funds where you put a little bit away each month, even if it’s $5, right. Even with investing, when we’re looking at investing our money, $50 a month. And so I understand because I’m an entrepreneur too, right, is that our cash flow can fluctuate.
00:37:49
Right. And so one thing that’s really big is looking at your money story. I know that’s more of like a coaching part, but it is for a long time. If I had excess money in my bank account, I would be like, oh, I can go and spend it. Right. Because I didn’t have a plan and I didn’t have organization or know where I wanted to invest my money next.
00:38:12
But as I matured as a business owner, I realized, okay, just because I have extra money, it doesn’t mean I just go out and spend it. And that’s when Profit first came in, it was really helpful so I could set it up in a way where it was very intentional. So now when I spend my money, I’m very intentional. I’m like, okay, what do I want to use this money for? Right?
00:38:32
Looking at instant gratification versus like a long term investment and things like that. When it comes to this, it’s create a plan, obviously a budget. And I don’t even like to call it a budget. I call it a money tracker just so that we have that loving relationship with our money to know where it’s going and then allocating even if five or $10 a week a month into that and it doesn’t feel like a lot, but it ends up being that snowball effect where it slowly will start picking up. And if you’re saving in a high yield savings account, you get a higher interest rate.
00:39:09
I think it’s 4% right now. Like for Ally Amex, I have no affiliation with any of them, so there’s no disclaimer necessary. But looking into a high yield savings account so it’s immediately accessible when you’re ready, but it’s gaining more than the 0.1% that you would in a standard savings account. Yeah, that’s really helpful and I think it is interesting. I do see a lot behind the scenes and listeners probably get tired.
00:39:38
Every time I have a financial professional, I always get on my soapbox of how financial legal professionals need to understand how shame comes up. It’s things that I know your work is steeped in as you’re looking at the big picture for people, I find it’s not even necessarily correlated to how much money somebody is making or if they can afford it. There’s one part of just which I’m also a fan of profit first. I’m going to have Mike on the podcast coming up soon in the fall. But looking at that as an example of you getting an accurate piece of what actually your run rate is, so sometimes we actually activate our plans if you just think, oh, I just need to pay this much for my mortgage and this for my car, food, et cetera.
00:40:22
And you’re not creating in your plan an accommodation for some of these monthly investments to fund more your legacy and protection, then you’re just going to be underfunding your business. So you might not want to have a huge scaled business, but you won’t have accurate numbers to base it on. So I think from one side there’s that and then there’s the other side. And this is certainly inviting any listeners to think about is what my dear friend Kyle Durand, who’s also a lawyer, know, says in any kind of situation that has come up in the many decades we’ve known each other is just whatever has happened in the past, has happened in the past. And we cannot change that.
00:41:04
And all that matters is what it is that you do from today forward. It doesn’t need to be a shame or some people think they need to be in a very specific situation like cleaning your house before you invite somebody to clean for you, whereas I don’t know what is your perspective? What do you say to clients that might come with a shame story that might apologize all over themselves for what they haven’t done? Yeah, especially when it comes I know that I’m very focused on the finances, but a lot of people will not create because one of the misconceptions about estate planning is you have to have a lot and the reality is you just have to protect what you have, no matter how little or how big it is, right? And so I have a lot.
00:41:48
For a long time, even I was like, well, I don’t make that much money or I don’t have my finances under control. So I’m not going to talk to a financial advisor because they’re going to be like, you’re a lawyer. All of these things that I think that the stereotypes that I think they’re going to have or assumptions about me really is just my story and where I feel like I’m lacking because I don’t have hundreds of thousands of million in the bank and so I haven’t set it up. But as I kind of coach myself and just go through and learn more and more about the finances over the last few years, I’m like, oh, it’s not really that big of a deal. Are there financial advisors that have minimums for investment?
00:42:27
Absolutely, but there are also financial advisors who have no minimum and they’d be more than happy to help you invest your $5,000 to make it 1020 30 and have that grow over the next 20 to 30 years. And so the misconception is you have to have a lot. So I think three of them is that you have to be really old, you have to have a lot of money, and then the other one, what is the third one? I can’t remember, but those are the two big ones are really old and really rich to have your documents in place. But the truth is, death, like taxes, does not care how old you are or it’s coming for you and could come at any time.
00:43:06
And I think the shame around not having enough. But I like to switch that perspective a little bit. And I like to say, okay, when you create a trust and you create this business plan of where you want to grow and scale. You’re giving your business direction, you’re giving your money direction because as you grow, you have a safe place for it to land, right? There’s this safe trust that it can go into.
00:43:27
And as you build and grow, obviously we’ll make Tweaks down the line, but like a kid, right we buy new clothes, we buy new shoes. And I keep saying kids, because back to school is starting. And I’m like, Your clothes don’t fit you. Your shoes don’t fit you. We just bought these.
00:43:41
But if you have the direction and you’re encouraging it to grow, and it’s not being focused so much on this little tiny like, this is where we are right now, and you’re casting the widest net, and it’s like, what else is possible? And you’re allowing your money and everything to kind of go out there and grow and have a safe place to land. And so I like to think of your trust is great at any age, whether you have minors or not or you’re building your wealth. There’s no rule that you have to have a million dollars in order to create a trust. And in fact, if you have over 100,000 or 165,000 in California, you want to have a trust.
00:44:19
Otherwise you end up in probate. So the threshold is not very high. And so, as you know, your wealth is going to build and accumulate. Why not do it now? That’s so helpful.
00:44:32
Well, and I love the idea of having good places for your money to go. As somebody’s bringing their son to college this week, I encourage people to put money in your 529 accounts. That’s an example of a specific for US. Listeners, an account you can start to fund with really small amounts of money that really do add up if your kids choose to go to college on. The college drop off.
00:44:56
Now, is your son 18? Yeah. Okay, so anyone over the age of 18. So now, Mama, now that he’s 18, you won’t have immediate access to his financial records or his medical records. So a power of attorney or healthcare directive for anyone over the 18 starting college.
00:45:14
Make sure that your kiddo signs something so you can have access to that information while they’re away or in school. It’s so helpful. It’s so funny. I learned that on TikTok. And I sent that TikTok to Josh.
00:45:28
As I say, TikTok is my medical advisor, my legal advisor. So call it questionable, but that’s such a useful Tidbit. It is a big difference that I never anticipated. Colleges don’t communicate directly with you, so it’s really solid advice. Well, I could talk to you all day, but I know we can’t.
00:45:48
So what is the best way for people to connect with you and learn more about your work? Yeah. So I’m on Instagram and I am on TikTok. I’m not as on TikTok as I could potentially be, but I’m still navigating it. I’m turning 40 this year, and it’s one of those things where I feel like my mom and trying to navigate, how do we post and create these reels?
00:46:08
But I am on TikTok, Instagram, and Facebook handle is I am Carmen Rosas. And then Your Legacy Protection Firm is our website, so you can check us out there, schedule an appointment with one of my client success coordinators or send me a DM and I can get some of your questions answered. That’s so helpful. Well, thanks so much, Carmen, for spending time with us and sharing so much useful information. I really appreciate it.
00:46:34
Thank you, Pam. For those of you listening, make sure to check out the show notes with all the links that we described at podcast. And I want to thank my 31 Marketplace production team, La’Vista Jones, Tanika Lothery, Jose Arboleda and our award winning narrator, for our intro and outro, Andia Winslow. Until next time, be sure to subscribe and rate the show and enjoy building partnerships, organizations and communities that grow our ecosystem.
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