Safeguarding Generational Real Estate Wealth With Megan L. Whipp, Real Finds Podcast #17 Transcript
Gordon Lamphere: Hi, I’m Gordon Lamphere with the Real Finds Podcast, the podcast series where we interview key entrepreneurs, scientists, and activists shaping the real estate industry and, as a result, our world. On today’s podcast, we’ll be interviewing Megan Whipp. Megan is the founder of the Law Offices of Megan L. Whipp, which specializes in family law and estate planning, and she’s also an avid real estate investor. On the podcast, we discuss the importance of estate planning, the advantages of trusts, efficient tax planning, and how changing demographics and an existential crisis are reshaping the future of the real estate industry. It’s well worth a listen. Megan, thank you so much for hopping on the podcast today.
Megan Whipp: Thank you so much for having me. I’m excited to be here.
Gordon Lamphere: For our audience, could you tell us a little bit about yourself?
Megan Whipp: Absolutely. I’m an estate planning lawyer in Los Angeles. I graduated law school in 2017 and was working in Big Law doing complex litigation, and I knew pretty early on I wanted out.
Gordon Lamphere: That’s not atypical.
Megan Whipp: I’m not alone in that. Getting out had been the plan for a long time. I got interested in real estate in 2019, started purchasing when COVID happened in 2020, and got addicted to it, as a lot of people do. Then I finally had the nerve to leave Big Law at the beginning of last year and started my own law firm doing estate planning.
Why Estate Planning Matters
Gordon Lamphere: Estate planning is very different from Big Law, and it’s probably one of the least prominently positioned areas of law for how important it is societally. Can you tell us why estate planning really matters? For the average person, it’s a will or maybe a trust, but I don’t think they understand how essential it is to planning for the future.
Megan Whipp: Absolutely. When I say estate planning, people’s eyes glaze over, because we usually put it in the conversation of death, and a lot of people don’t want to talk about that, understandably. I try to position estate planning in a financial planning context. When you shift your perspective that way, you’re setting yourself up for the future. It’s a fundamental cornerstone of any functioning financial plan. Having a financial plan without an estate plan to protect those assets is a little like buying property without homeowner’s insurance. There’s a risk, and it’s not worth taking. You don’t think something will happen, but we all know it can. Ensuring you have a plan so your assets are protected if you become incapacitated, whether for a short period or at the end of life, and that those assets pass securely to the right people without court intervention, is a complete game changer when you’re talking about growing generational wealth. For entrepreneurs and real estate investors, this is an essential element of whatever your ten-year plan is. It has to be a piece of it, or you have a lot of exposure.
What Probate Actually Looks Like
Gordon Lamphere: I always joke that I’m a reformed lawyer, as a J.D. who never really pursued law. You touched on how the courts operate in the absence of a will or trust, and I think that’s something people who haven’t taken wills, trusts, and estates or gone through the process don’t understand. Could you tell us more?
Megan Whipp: I did take wills, trusts, and estates, and it was on the bar when I took it, and I still had no idea. Clueless. But ask anyone who’s had a personal experience with the probate court system in California, and they’ll tell you horror stories that rival anything I could tell you. My experience is that it’s a long, protracted, public, expensive process, and those are the three things people are trying to avoid. Probate is the court proceeding that adjudicates all of your assets, determines how they’re distributed, who’s responsible for distributing them, and the timeframe. The time: it takes a year to many, many more years. The cost: there are mandatory statutory fees. One thing I always point out to real estate investors is that your estate’s probate fees are based on the fair market value of your assets.
Gordon Lamphere: Which is so difficult to find.
Megan Whipp: And it’s high. It’s not based on your equity. If you had a million-dollar asset with an $800,000 loan, you only have $200,000 in equity, but probate fees are calculated on the million. Anybody who owns real estate is looking at hefty fees.
Gordon Lamphere: So how do we avoid probate and all those costly fees? What are a couple of key considerations any real estate investor should plan for?
Megan Whipp: One thing a lot of people don’t know is that a will does not keep you out of probate court. A lot of people think, I have a will, I’m good. There are two problems with a will. First, it has no legal effect whatsoever until you’re deceased. You could be incapacitated for years, and a will won’t do anything for your family. It has no power until you’re legally dead. Second, what a will essentially does is tell the court, this is what I want to happen, this is who I want to represent me, this is what I want done with my assets. You still have to get the court order. The court still has to sign off and say this personal representative is authorized to make these distributions. So anyone with assets over about $180,000 in value, and anyone who owns any real estate, is subject to probate with or without a will. The key to staying out of probate is holding title to those assets in a revocable living trust.
What a Revocable Living Trust Is
Gordon Lamphere: Can you talk about what a revocable living trust is? Anyone with some economic knowledge has heard the term trust, and they have this idea of trust fund kids. What is a trust, what is a living trust, and how does it operate?
Megan Whipp: It’s funny, because a lot of people hear trust and think trust fund babies, it’s for really, really rich people. It’s not. I had the same misconception. But the uber wealthy got uber wealthy by holding their assets in trusts and building generational wealth. That’s how they got there. A trust is a really unique legal animal, because it’s not an entity. It’s not an LLC or a corporation. It’s a little more like a contract, but it has its own set of rules. Contract law doesn’t apply; trust law does. And it can hold title, which a contract could never do. You literally take title to a property as the trustee of the trust. When property is held in the trust, the trust determines what happens to it, and all of that property passes outside of probate, automatically, by operation of law. Similarly, bank accounts and any titleable asset can be held in the trust. I think of a trust as a bucket holding all your assets that comes with a manual of what you want to happen. Anything that can be put in that bucket can pass outside of probate.
Gordon Lamphere: You mentioned a couple of different types of trusts. How do you go about choosing one?
Megan Whipp: We start by looking at your assets and determining whether you have federal tax exposure.
Gordon Lamphere: Sometimes it could be a problem, right?
Megan Whipp: Most people think of it as a problem. If you have tax exposure, there are different things you may want to do. So we start with your assets, then separately look at your goals: what are you trying to achieve? For most folks whose assets are under $12 million, which is the federal estate tax exemption per person, a revocable living trust is sufficient and will keep you out of probate. And I want to be clear, because these terms get confused: revocable trust, revocable living trust, living trust, it’s all the same thing. Inside that trust, there are a lot of different terms depending on whether you’re married, whether you have children, and how you choose to pass your assets. The other kinds of trusts are much more advanced. Those address a tax exposure issue, and when you get into that world, you’re in advanced estate planning, essentially pulling assets out of your estate to lower that dollar amount.
Trustees and How to Choose One
Gordon Lamphere: Another word people use is trustee. What is a trustee? I’m familiar, but some in our audience might not fully understand the concept.
Megan Whipp: A trustee, big picture, is a fiduciary: someone with duties, responsibilities, and ethical obligations to take care of your assets. In an estate plan, when you set up your trust, you wear three hats. You’re the grantor, the person who created and funded the trust. You’re the beneficiary, the person who benefits from it. And you’re the trustee, the person responsible for managing the assets. The trust includes a provision for a successor trustee, which is probably more what people think of. They don’t think of themselves as trustee, but they are. If you become incapacitated, or when you die, the successor trustee steps into that role. There are professional trustees who can be appointed, and folks with really large estates may consider a professional like a CPA or attorney. For most people, it’s a person they trust, who they believe will execute their wishes as intended. For a lot of folks, that’s a spouse, a sibling, or a close friend. That’s the person who steps in after you die and says, okay, this is what you wanted. I’ll get your taxes filed, marshal the assets, and distribute them as you requested.
Gordon Lamphere: The big question that comes up in our business, because we work with a lot of folks with family wealth and family assets, is who do you choose as a trustee? Do you have advice on selecting one?
Megan Whipp: The advice I give clients is to make the decision based on immediate circumstances. A lot of clients say, I want this person, but will they be the right person in ten years? Let’s get to ten years. Today, we pick who it would be if, God forbid, you needed this tomorrow. The cool thing about a revocable trust is that you can change it, and you should. Most of my clients are in their thirties and forties, younger people acquiring and building wealth, and they most likely won’t need this trust for decades. The trust isn’t designed to be made today and then be the document that applies when you’re ninety. You’ll make changes throughout your lifetime. So I tell clients, pick someone you’d feel comfortable with today, and we’ll change it later if we need to. The other thing I point out, especially for people with children, is that it’s an option, and can be advisable, to pick a person to manage the money side who is not the same person who has physical guardianship of the kids. Being aware of each person’s role helps people sort through family and friends and decide who fits what. And finally, having a conversation with the person you think might be the trustee is a good starting point. How do they feel about it? Are they willing? Their response may change the client’s ultimate decision.
Gordon Lamphere: That’s a phenomenal point. My wife and I are in the process of establishing a revocable trust for our children right now, and there’s a big difference between who you want raising your kids and who you want managing their financial assets. We’ve seen that play out in real estate as well. There are people you want raising your kids and people you want managing your real estate, and they’re often very different people. My wife is and will be a much better parent than I’ll be, but I wouldn’t want her managing our children’s real estate assets. So let’s move this into the real estate world. We’ve dealt with trusts and trustees. How does this apply to real estate?
Succession Planning for Real Estate
Megan Whipp: The first main point of estate planning is keeping you out of probate, and on the other side, ensuring you have documents in place so someone can step in if you become incapacitated. When we’re talking about real estate, the better way to put it is succession planning. Any time you’re building a business, and real estate is a business, whether you’re a passive investor or not, you’re still building something. Anyone putting in that kind of sacrifice, building with that much intentionality, needs a succession plan as part of it. To your point about your wife not being the right person to manage real estate, a lot of parents want to pass to their adult children, and those adult children may not be the right people to manage it. They could benefit as beneficiaries, but you see it happen frequently: a business is handed down and it blows up, because the kids didn’t want it, didn’t have the skill or knowledge, or weren’t interested. So ensuring that what you’re building today serves its generational purpose is a key element: identifying who will manage it, who will benefit, and how to structure it so nothing falls through the cracks and it doesn’t get squandered, lost, or go to the wrong people.
Gordon Lamphere: That’s a phenomenal point, and I’ll tag onto it. We’ve managed a lot of assets over the years for folks who are incredibly competent business people but don’t have a real estate background, or they’re out of state. They’re in New York City and their real estate is in Chicago, and they don’t drive by the buildings day to day. They could have gone to Harvard Business School or Wharton, but they won’t have the day-to-day real estate knowledge. That’s often where you see fire sales, because people either don’t have the capability or the willingness, and you’ve lost generations of tax advantage and gains. Your kids can be the most competent kids in the world, but unless they want to be invested in that asset and spend time on it, maybe a trust is the right move. Continuing on that, how can owners ensure their plan is tax efficient? Tax is sometimes seen as a dirty word, but in real estate it’s one of the most important words out there.
Tax-Efficient Planning
Megan Whipp: Absolutely. Everyone is focused on taxes, and anyone who owns a business knows you want to know what’s going on with your taxes in December, not April. You don’t want to be in April saying, oops, I should have done this differently last year. Same concept with an estate plan: plan ahead, look far down the road, and ask what tax bill is coming so you can prepare today.
One thing to note is that a revocable trust uses your Social Security number. It doesn’t have its own EIN, and it doesn’t alter your taxes or how you’re taxed. What a lot of my clients do is own property in an LLC for tax reasons, which is a good strategy, and then the ownership of the LLC is held in the name of the trust. That keeps you out of probate, the LLC creates limited liability, and it doesn’t alter your tax situation as an individual. So that level of estate planning doesn’t change taxes. Taxes become relevant when we’re talking about the federal estate tax. And this is California; there are states with inheritance tax, so if you’re in a different state, find out what yours is. Amazingly, California doesn’t tax inheritance, so you’re only looking at federal tax. If you’re coming up on that $12 million, especially if you’re younger and investing in real estate, you’re going to hit that amount. It’s not that hard. It sounds hard to a lot of folks, and I’d love to have that problem, but because your estate is based on fair market value, if you’ve been in the game a while and doing larger deals, you’re looking at that tax bill, and it’s forty percent. The government gets its share, and then some.
The federal tax is a bit of a political number, always subject to change. The percentage can change and the exemption can change. Historically, the exemption has increased dramatically in the last twenty years, but nothing says it can’t go down with a different administration or new tax laws. I always tell people, I don’t know what your assets will be, I don’t know what the federal tax will be, and I don’t know when you’re going to pass. With that in mind, if you have a potential federal tax issue, you want to start planning early to move assets out of the estate. A lot of people set up a trust for their children and take advantage of the $17,000 annual gift limit. Each parent can gift that amount to each child per year, and you start pulling assets out of the estate. Or if you have more significant assets, you start moving them out of your control before you pass. Advanced estate planning is largely about the distinction between benefiting from something and controlling it. That’s where the trust fund babies come from. They don’t control the trust fund; they benefit from it. So you move assets into irrevocable trusts, give up control, and once you have no control, it’s no longer your asset, which lowers your estate and can reduce or avoid estate tax. It gets more complicated, and that’s when you bring on a team: your financial advisor, your tax person, your estate planner. It’s a team effort. But for real estate folks, it’s something to start thinking about even when younger, because you’re likely going to have that problem.
Planning for an Aging Country
Gordon Lamphere: The best advice I’ve been given on estate planning with multigenerational real estate wealth is to plan for the best case for your wealth and the worst case for the tax regime, because administrations change. Whether it’s team red or team blue in Congress, or social norms change, you want to be ready, because the worst case is doing your planning in old age, at the end of your life, in an absolute panic. On planning for old age, we have an aging demographic across the country. We’ve had folks on the podcast talking about the silver tsunami. Whatever term you use, we’re getting older as a country. How can we, as estate planners, understand and maximize in an aging world?
Megan Whipp: The primary focus needs to be ensuring people have an estate plan. A lot of people think of estate planning as something for older people, but younger people die as well, sadly. It’s not an older generation thing. It’s not “I do this after I’m fifty or sixty.” And yet, even though estate planning for older people is more societally accepted, there are a lot of older folks who have no plan in place, or an insufficient one. As we watch this large increase and baby boomers begin to pass away, you’re going to see probate problems and jams in the probate courts, because if people don’t have plans, that’s where they’re all going. So it’s a conversation people need to have with their parents and the older people in their lives, to make sure they have a plan and not just assume they do. Ultimately, when someone passes, the people impacted are the ones left behind. Talk to your parents and grandparents and have that open dialogue about what their plans are, because we’re going to see this large transfer of wealth, and there’s no reason for it to have to go through the probate courts. There’s an option to avoid it. If you’re the one left, you’ll really prefer that you had that conversation and gave them the information they needed to avoid that outcome.
Gordon Lamphere: A lot of folks have a deep religious, philosophical, and psychological hang-up about their own existence. There are so many families and generational real estate holdings we’ve dealt with where an individual had hang-ups about their own death, and it created so much trauma at the end of their lives. I can’t say enough about what an absolute blessing it is for folks who don’t have that last-minute push to wrap everything into a trust or will, and then the big issue becomes whether it even holds up, because they drafted it on their deathbed pumped full of morphine. It’s not the situation you want to be in. That’s one of the biggest reasons we had you on. It’s a critical conversation we should all be having, particularly those of us who work with high-net-worth individuals and portfolios.
The Final Four
Gordon Lamphere: We’re getting to the end, but it’s not over. We have the Final Four, one of my favorite parts of the podcast. First: where do you see trusts, estates, and planning going in the real estate world?
Megan Whipp: I don’t know where I see it going, other than that with the silver tsunami, there’s going to be a large transfer of wealth, and if people aren’t educated and having these conversations, we’ll see an increase in probate sales of real estate and a cluster in the courts. But can I say where I’d like to see it going instead? I’d like us to shift the conversation away from death planning, because there are so many hang-ups, and because it isn’t accurate to say estate planning is death planning. There is such a thing as death planning. A trust is not that. Make it about succession planning, multigenerational wealth building, and general financial responsibility, a piece of the financial literacy conversation, and encourage people to get into these plans much younger, so they’re not scrambling to do deathbed estate planning.
Gordon Lamphere: A hundred percent. We should get away from the existential crisis talk and move toward generational planning. Where do you see that going? Can we get people starting earlier, or is it still going to be a long challenge?
Megan Whipp: I’m an eternal optimist, and I think we can. There was a time when no one wore seatbelts, and now I won’t drive around the corner to the gas station without one. It feels wrong. We changed how risk was perceived over a couple of generations. So I think it’s completely possible to change the conversation and an entire generation’s perspective. The need is there. It’s about presenting the solution and normalizing it.
Gordon Lamphere: One last follow-up. Are you starting to see that change? I live in a weird bubble where most of my family are lawyers, insurers, real estate people, or economists, some of the most boring people in the world who see things in a very matter-of-fact way, and I’m saying this as two of them. Are you seeing it in your practice, or are we still fighting the good fight?
Megan Whipp: I am seeing it. A lot of my clients are younger, many in their thirties, and I think it’s in large part due to access to information on the internet and social media. I don’t know if it’s a trend, but there’s a great deal of interest in financial literacy and making wise financial decisions. If we can add this to that conversation, it fits hand in glove. There’s a lot of interest in the younger generations in being financially responsible and planning for the future. The seeds have been planted. People are interested. It’s just adding this piece to a conversation that’s already going on.
Gordon Lamphere: To keep the conversation going: if we could go back in time to young Megan and give her one tidbit of advice, what would it be?
Megan Whipp: Start sooner and dream a lot bigger. I played it really small for a long time, and I was shocked at every little achievement. At every stage of my very slow career development, I thought, this seems impossible. If I could go back, I’d tell myself to plan ahead, plan a lot bigger, and start taking action today with that endpoint in mind. I don’t know if younger Megan would have taken that advice, but that’s what I’d give her.
Gordon Lamphere: One of the best ways to get advice is reading books. Is there a book that’s influenced your career? It could be business, real estate, or life.
Megan Whipp: My go-to is Grant Cardone’s Be Obsessed or Be Average. I listened to it on audio in 2019, and it was a big mental shift. It’s what started me down the real estate investing path. It’s a great listen and a great read, and I go back to it all the time.
Gordon Lamphere: Wonderful read, but there’s something even more important: meeting new people and understanding the real estate world through their eyes. The whole reason we started this podcast is to find people who are influential in real estate and spread their message to a broader audience. So, the most important question in the whole podcast: who’s the next person we should bring on?
Megan Whipp: There are so many awesome women investors in real estate I’ve enjoyed following. One who always comes to mind is Heather Blankenship. She does RV and mobile home park investing, and she has great advice on how she got into that business and on how she manages and motivates employees. You have to learn how to scale and how to be a leader, or you’re stuck really small. That aspect of her guidance has always been really helpful, and I think she’s awesome.
Gordon Lamphere: We have to have her on. I’ve casually reached out a couple of times, and we have to make it happen. The last question, probably the second most important: how does someone reach out and find you? You’ve got a lot of great real estate, legal, and estate planning advice, and so many people in our audience have developed tremendous portfolios but haven’t planned for the future.
Megan Whipp: They can go to my website at whipplaw.com. That’s W-H-I-P-P, two Ps, law dot com. All my contact information is there. You can schedule a fifteen-minute consultation or call my office.
Gordon Lamphere: Megan, thank you so much for hopping on the podcast today, and we’ll have to have you on in the future.
Megan Whipp: Thank you so much for having me.
Gordon Lamphere: Thanks again to Megan. We appreciate her insights. If you enjoyed the podcast, please give us a like, a five-star rating, or a review. Your comments, interactions, and subscriptions truly matter and help us continue to provide quality guests. You can follow us on YouTube, Spotify, or wherever you get your podcasts. I’m Gordon Lamphere with the Real Finds Podcast. Thank you for listening.
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