E07: Why Every Business Owner Needs an Estate Plan
Estate planning might seem like a boring topic, but if you’re a business owner, it could be one of the most important things to think about.
In this episode, we break down the complexities of estate planning, probate, and legal structures, and how these decisions impact your business’s success and your family’s future.
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Kellen Ketchersid
Kellen is a co-founder of Stag Business Coaching, business strategist, and a systems thinker. He leverages his extensive experience in biotech and consulting to empower entrepreneurs to navigate complex challenges with strategic growth solutions.
Albert Gillispie
Albert is a serial entrepreneur, business efficiency expert and co-founder of Stag Business Coaching who has founded several multimillion-dollar companies. With expertise in optimizing operations and innovative systems, he mentors business leaders who want to unlock their business’s full potential.
Austin handles many of Lynch Chappell & Alsup’s estate planning and probate cases, helping individuals prepare to pass their assets on to family, friends, and charitable organizations while planning for specific tax liabilities. Austin is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization and handles a broad spectrum of arrangements within this practice, from large and complex estate planning matters to navigating Texas probate law to ensure that the decedent’s property is distributed according to his or her wishes.
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EPISODE 7 TRANSCRIPTION
Introduction
[00:00:00] Albert Gillispie: Welcome to the business growth masterclass, where business growth is made simple. Listen as we discuss best practices to streamline your operations, increase your profits, and ultimately create healthier and more valuable companies. Today's guest is Austin Ramsey, an estate planning and probate attorney out of Midland, Texas.
[00:00:27] Albert Gillispie: And he's another one of those guys who is just a brilliant business mind who also leads with his faith. And I don't know, it was, it was a fun interview. What was your number one takeaway?
[00:00:41] Kellen Ketchersid: I would have to say legal is something you don't want to mess up. It's worth the investment. And someone like Austin, he just—he knows the questions to ask. He's a true professional. So just hearing, being able to pick his brain today and see how much thought goes into every single client—whether it's helping them with their wills, setting up their entity, or whatever it is—you know, you want to get all those things right, or it'll come back to bite you later. So that's just a great thing for anyone who's in business to know. And just bite the bullet, get a good attorney. And Austin is a great example of it.
[00:01:16] Albert Gillispie: That’s one of those old adages that you hear over and over and over, and you kind of roll your eyes at it. The first two things when you start a business are you need a good accountant and you need a good attorney. And he really drove that point home with more practical nuggets that—you know, you could bore people to tears with the letter of the law—but he really gave some good examples.
[00:01:41] Albert Gillispie: And one of them that hit me the most was how even the language in your company agreement and legal structure can affect how you save on taxes. And just having his expertise looking at that was fascinating and invaluable. And that old adage is true: don’t get off of LegalZoom—go hire a good attorney, spend the money, and do it the right way.
Defining Estate Planning and Probate: What Does an Estate Planning Attorney Do?
[00:02:10] Albert Gillispie: It is worth it. Yeah. It's worth it. All right. We're going to get into the episode. I hope you enjoy it. Welcome to the podcast, Austin Ramsey.
[00:02:26] Austin Ramsey: Thank you. Good to be here.
[00:02:28] Albert Gillispie: Great to have you. I know all the way from Midland, Texas. Always willing to come to Lubbock—any chance to get a little bit, and take a break from Midland is good. Brainbuster to start with: What is an estate planning attorney? What do you do?
[00:02:46] Austin Ramsey: So, essentially what we do is we help people organize their assets in some sense, and then have their documents in place, ready to pass those assets down to their heirs when they pass away—hopefully in the most efficient way possible. Meaning, taking into account probate issues, taxes, estate taxes, capital gains taxes, and things like that. And then we help their heirs. Once they do pass away, we help their heirs with the other side of it, which is probate. You've got estate planning and you've got probate. So, what's probate? Probate is essentially the proving and the implementation of the will.
[00:03:29] Austin Ramsey: So, a lot of times people say, “Okay, well, you know, did they die with a will?” Yes, they had a will. Was the will probated? No. Well, then the will doesn’t do you any good. So probate is a process you go through, through the court system, to have the will essentially put into place, have the executor appointed, and then the court grants someone the power to transfer the assets according to what the will says.
[00:03:54] Austin Ramsey: So, there are two sides of it: You plan the estate, and then you administer the estate. Administration is the probate.
[00:04:00] Kellen Ketchersid: Okay!
The Importance of Wills, Probate, and Planning for Blended Families
[00:04:02] Albert Gillispie: Okay, why, why do people, like, what pain, what problems are you helping people avoid? Like, why, why do I need to run today and make sure that's in order?
[00:04:11] Austin Ramsey: So, okay, great question. If you don't have a will, remember your will is how you say what you want to happen with your property when you die. If you don't say what you want, the Texas legislature is going to decide for you. Does that make sense? A lot of times, what they think—how they think the property should pass—is not necessarily what you would want. So typically, the reason for that is due to issues that arise with blended families, okay?
[00:04:45] Austin Ramsey: Generally, if you're young, if you're married, you have children—sometimes people will still say, "Hey, I don't need a will, I don't own much." Well, you own something—you have stuff. That's what I tell everybody. If you have young children, think about your will not just in terms of where you want your property to go, but also who you want to raise your kids. Those are issues that are addressed in your will, which is why it's important for anybody to have a will in place just to avoid those unintended consequences.
[00:05:03] Austin Ramsey: Another point is that if you don't have a will in place, there's a possibility that the person put in charge of your estate has to do it in a tougher way. For example, if you have a will, you can say that you want your executor to have independent administration or to be an independent executor. That means they go to court one time to get the authority to transfer your assets, sell your assets, do whatever they need to do, and then they're off and running. They don’t have to go back to the judge to ask permission for everything.
[00:05:36] Austin Ramsey: If you don't grant that independent administration, sometimes it’s difficult to get that afterward. And then your administrator has to post a bond, which is expensive and has to get dependent administration, meaning go back to court all the time, meaning they’re paying the lawyer more each time they go back. So it just makes it a lot easier for your family and your heirs if you have a will in place.
[00:06:00] Albert Gillispie: Yeah, Makes sense.
[00:06:08] Kellen Ketchersid: Even for people our age or younger, get that thing done.
[00:06:09] Austin Ramsey: That’s right. I’ll leave my card here.
Austin Ramsey’s Journey
[00:06:13] Albert Gillispie: I mean, did 18-year-old Austin envision being an estate planning attorney? How did you get into this?
[00:06:21] Austin Ramsey: 18-year-old Austin did not envision that. Okay. So, I basically went to school—a few years in at Florida College, which is a small liberal arts school outside of Tampa, Florida.
[00:06:33] Albert Gillispie: You played baseball there, didn't you?
[00:06:34] Austin Ramsey: Played baseball there, yeah. Realized that that was going to be the end of that road—it was time to hang it up. So then from there, I went to Western Kentucky University, majored in ag finance, and thought that I was going to be sort of in the ag lending space but realized that’s not really what I wanted to do.
[00:06:58] Austin Ramsey: And I heard someone randomly, actually at a family function, mention law school. And that's what sort of made me actually think about it. At the time, I was looking around and thought, yeah, that would be something neat to do. So I looked more into it and then decided, a couple of years before I graduated from undergrad, to apply to law school.
[00:07:16] Austin Ramsey: And I realized it was time to get back to Texas, so I looked at Texas schools. Texas Tech had a—I believe it was like an early acceptance program where you could plan out your move quicker. And I thought, well, that'd be great. So I applied, got in, and then we were in Lubbock. Cool. And then, when I was in Lubbock at law school, they have a journal. They have an estate planning journal and I got on that for a couple of different reasons: because I thought it was maybe interesting, but it was also just good credit to get for your hours. And then I realized that I did like it. Okay. And so then I was looking to clerk somewhere at a law firm.
[00:07:52] Austin Ramsey: I had that on my resume, and one of the firms in Midland, Let’s Chapel, also had an opening in their estate planning section. So I sent my resume. All they saw was the estate planning journal. They didn’t see Austin Ramsey; they didn’t see GPA; they didn’t see anything like that. All they saw was the estate planning journal, and that's what sort of clicked and gave me an offer. Clerked down there, got in. That's how it came to be in Midland.
[00:08:15] Kellen Ketchersid: What did you like about estate planning once you learned about it and got into it? What did you like?
[00:08:20] Austin Ramsey: I liked it because there is the tax side of it, and I like the—when it comes to estate tax planning, it's a big problem-solving situation. You've got the looming tax, you've got their assets; how can you arrange it to minimize that tax? It's a problem; it's a task; in some ways, it's a puzzle. Yeah. And I thought that was interesting. Plus, I liked working with individuals. It’s fun to meet people, see what they do, and kind of get to know them, and then help them get their affairs in order. So I liked that part of it, and it just kind of fit for me.
[00:08:54] Albert Gillispie: So, this is a business—you know, our typical listeners are business owners, business leaders—and you've touched on it somewhat with the tax planning and mitigating for taxes and things like that. And, you know, the probate portion with your family. But why does he—as a business owner, why is this important to handle now rather than later?
Key Legal Steps for Business Owners
[00:09:21] Austin Ramsey: So, you've got two sides of it. You've got, for a business owner, specific business issues, and that's what I'm going to kind of categorize as... someone comes to me, and in Midland—and I'm sure in Lubbock too—there's, you know, just a lot of entrepreneurs. We work with a lot of people in the energy industry and help them with starting up whatever type of company you could think of that could be in any way related or involved in the energy industry.
[00:09:48] Austin Ramsey: And typically, if someone comes in, the first thing we're going to talk about is the formation and the type of entity they should use. Generally, that's a conversation between myself and their CPA, because you have the legal side of it—meaning the liability protection that they need if they're going to start a business that has any sort of liability exposure. So, we're going to talk LLCs, we're going to talk limited partnerships, corporations, S Corp versus C Corp, maybe just sole proprietorship, and things like that. We're going to get into the discussion of what type of entity they need for their specific business. The CPA is going to help them out and also give some input on what type of business entity they should use for their income tax purposes. So generally, the CPA and I will come up with—I’ll give my thoughts, they’ll give their thoughts—and we'll decide on the right type of entity for the client. That's step one.
[00:10:35] Austin Ramsey: So now they've got an entity, they're off and running. If they need any sort of intellectual property help, we typically outsource that so they can get any sort of patents or trademarks they need in place for their business. Then, we're going to move on to insurance—getting any sort of liability insurance, umbrella policies, things like that—in place to make sure that they're properly protected. My job is to help them protect themselves, so that's why we get into a lot of those issues.
[00:11:13] Austin Ramsey: Then it's going to be ownership. If it's a sole owner, well, then yeah, that's easier. It’s, let’s get you—most of the time—we're going to start an LLC for them, get their insurance in place, and then they're kind of off and running on the business side. But if it's multiple owners, then we have more discussion. And that's going to be—and it can even be with the sole owner, but especially with partners—it’s going to be succession planning. You know, I typically ask them, "Hey, this is awkward, but what if one of you die?" Yeah, what do we do? And what happens to the business at that point?
[00:11:40] Austin Ramsey: As you can imagine, lots of problems can arise. There's potential for conflict, potential for problems whenever you have partners in a business, one of them dies, and the surviving partner says, "I don't really want to be in business with my deceased partner's spouse or children or cousins or neighbors," do you know what I mean? So typically, we will work through buy-sell agreements with the partners to figure out, "Okay, if and when something happens to one of you, what do you want to happen?" If we want the surviving partner to be able to buy the other partner out—or their family, their estate—that's when we'll pair it up with either life insurance. That's where life insurance comes into play—so upon the first partner's death, there's a liquidity event, which allows the surviving partner to buy out the deceased partner's share. Then, everything goes on: the heirs are happy, the surviving partner is happy. That's good.
[00:12:30] Austin Ramsey: And you typically are going to see issues when people just haven't thought about that. They don't want to talk about that because they're making money, the business is going, they're off and running, everything's great. And unfortunately, in my business, we deal with the issues that arise whenever they haven't really thought about that, haven’t planned for it, and then, you know, something happens to one of them. So those are things we talk through to make sure succession planning is in place.
[00:13:08] Austin Ramsey: And then, once that kind of handles the business side of things, that's when we move into the estate planning side. Hey, we've got this deal worked out with your partner, but whether it's a buyout or whether it's just your shares or your ownership interest in the company that's going to pass to your heirs...
[00:13:27] Austin Ramsey: Who are those heirs? Where do you want those assets to go? Do you want that to be run if it's going to children or minors? What about a trust? Do we need to have one set up with a trustee in place to be able to run the business for them? Things like that. It’s interesting you asked why I like getting into it. I like getting into estate planning for business owners because you do have the business side of things, but then you've got the estate planning side of things, and you’ve got to figure out how to make those two things work together. Again, it’s the puzzle, which is fun.
[00:13:55] Austin Ramsey: So...
[00:13:55] Kellen Ketchersid: Yeah, if I die, I think Albert gets to work with Blake, my 11-year-old. Honestly, it might be an upgrade, I don't know. He's pretty smart. He can play the piano. He's got some talent, I'll say. So, we work with business owners with our business coaching and consulting. And what you were saying kind of resonates because we see a lot of business owners who kind of neglect some of the areas with liability or taxes—or both.
[00:14:19] Kellen Ketchersid: So, would you say it's better to get this started sooner rather than later? Or is it that we often have a mess we have to deal with?
[00:14:28] Austin Ramsey: Yes, absolutely. It's better to get it set up properly from the start so you're not having to fix stuff later on. Yeah. Paying your CPA, paying your lawyer more—get it set up right. It's just a lot easier. And typically, that's going to be a combination. I would say what I really tell clients is—when they're coming in, they say, "Hey, I need an LLC,"—I’ll ask them, "Well, how do you want that LLC to be taxed?" because you have different options within an LLC. You can choose how you want to be taxed: as a corporation, as a partnership, as a disregarded entity—there's several different options, and I don't specifically tell them what they should do. That's really a CPA question, but I make sure to let them know that you need to talk this through with your CPA to make the right choice from the beginning.
[00:15:02] Austin Ramsey: You know, this doesn't apply all across the board, but I'll just give you an example. One of the problems that I've been running into lately is clients that have S Corps with assets inside those S Corps, and then they're wanting to essentially liquidate or distribute all these assets out. There's certain tax consequences that come along with that that maybe they didn't realize when they started it. And if they would have really taken their time to get that good advice early on, it would have saved them money.
[00:15:40] Kellen Ketchersid: So bottom line: pay for it now, or you'll pay for it later.
[00:15:42] Albert Gillispie: Exactly. Yeah, that's right. That, that, that is such an important lesson for business owners and entrepreneurs because they’re, you know, a do-it-themselves, pull-themselves-up-by-their-own-bootstraps type. And that’s something I’ve learned—a lesson I’ve been taught over and over—is whenever you go into business, you need to build a team. And the first, you know, some of the first two members of your team are a good accountant and a good attorney. I would put them in that order (being humble).
Yes, at least you’re honest, at least you’re honest. But, but I mean, so much of what makes a valuable and healthy company is looking at de-risking your company, right? And so, so many of the things you’ve described are setting up the proper entity so that everything else in your life is protected. It’s having proper insurance in place. So when, you know, I think of work trucks driving down the road that people run into, thinking, you know, seeing dollar signs, wanting to just collect a check because some attorney on a billboard is telling them that they can—and they can, and they do.
But having that proper coverage to de-risk your business not only makes your life easier but it makes your company worth more. It makes it stronger. You can sleep better at night.
[00:17:11] Austin Ramsey: Exactly. We work with a lot of independent oil companies down there—energy service companies. And it’s businesses that—these entrepreneurs are really good at what they do. They’re really good at building a business, building a product, building a client base. And the ones that I’ve seen really be successful are the ones who did what you said—they built the team.
They got it created properly from the ground up. I was just working recently with a group who sort of joined up on a side quest, I guess you would say, in the energy industry with some guys who are really good at what they do but haven’t paid much attention to the other things, which is the legal, the accounting, the title side, things like that. And now seeing the group who is really good at it—and they understand that they need to involve this team, these other factors—now showing them how we build this business and saying, for example, "Hey, did you check that you actually own that asset? Do you have a good title? Do you have your insurance in place?" These guys are now learning that. And it’s kind of cool to see them realizing, "We can really—we can do this. We have this product; we can make money doing this. But we can truly grow this business to be marketable by taking these other things into account." So that’s very true.
Common Legal Pitfalls and the Value of Professional Legal Advice
[00:18:37] Albert Gillispie: And those are so—it’s so simple. Well, the attorneys and CPAs have expertise, but rather than an entrepreneur logging onto LegalZoom or whatever to set up their own entity, it’s the best business-generating thing ever because it just messes stuff up. Yeah, no, that’s not always true, but generally, there are things that go into documents that you're going to find on an online website like that that maybe you wouldn’t think about beforehand. And if you know what you’re doing, I’m sure it could work in some way, but a lot of times it doesn’t have the intended results.
[00:19:17] Austin Ramsey: So, quick way to get yourself into trouble. That’s my take on it. Yeah, I think it’s better to have someone that you can really go and talk to and talk through these issues and make sure that the document you’re ending up with is what you need.
[00:19:29] Albert Gillispie: Yeah, but it’s just not worth the risk. You know, it’s not that expensive to hire an attorney to form the right entity, right?
[00:19:39] Albert Gillispie: And it’s not worth it. Yeah, in my opinion, that’s correct. It’s not worth the risk. It’s worth the price of admission with the attorney.
[00:19:45] Austin Ramsey: It’s one of the things I typically tell people. If you try to do it on your own, or you’re trying to do it through an online service or something like that—sure, it might work. But by and large, I think you’re going to get better advice with someone that you can actually bounce those ideas off of and get that legal advice from. Makes sense.
[00:20:03] Albert Gillispie: Tell me some, some good wins, some kind of things that you’ve helped business owners navigate through over the years that’s been invaluable.
[00:20:17] Austin Ramsey: A lot of—when I think about wins, you’ve got—I was trying to think of a win, I was thinking in the business context. Oh, okay. One example—a lot of them are probate wins, which are, in my opinion, really interesting, and then I tell people about it and you just see their eyes sort of glaze over them anyway.
[00:20:36] Austin Ramsey: In a business context, I ran into a situation one time—we talked before about having your documents in place and making sure that things are in order: your operating agreements. If you have partners, remember we talked about how it’s important to have things really, really laid out really organized, really written down so everyone knows what’s happening. We had a situation where that wasn’t really the case. These clients were really good at what they did, and they were good at generating revenue—not so good on the bookkeeping side, not so good on the record-keeping side of who actually owns the company.
[00:21:01] Austin Ramsey: As things started to go really well, one of them said, "Well, I’m the sole owner." And then our client said, "What are you talking about? We’re co-owners, we’re part, we’re 50/50 partners." So as you can imagine, that became a pretty big dispute, and we were able to prove in the end that no, it was 50/50—our client owned half of the company, and we were able to get him his share of the value of the company, which was a big win for him and for us. We liked that. It was an interesting case.
[00:21:44] Austin Ramsey: The other thing is—this maybe is not as interesting of a story—but I’ve had clients who have come in to get their organizational documents going, set up the companies for them, help them get the operating agreements in place. And now they’ve come back to me eight to ten years later, and they’re selling, and you see the amount that they’re selling for, and it’s just mind-blowing. But to know that they did get it set up right, and you had a small little piece in that process and that journey with them—that’s always really cool.
[00:22:20] Kellen Ketchersid: Yeah, excuse the analogy, but I keep thinking about, like, things that you’re willing to spend money on—like a good mattress or something, you know? You spend all your time on it, and you risk your health. I just think it's so easy to think, "I can skimp on legal," or "I can skimp on accounting," or "I’ll try to figure it out on the fly." We’ve just seen it time and time again, what a big mistake it can be. So, yeah.
[00:22:43] Austin Ramsey: And even specifically, the issues that I see with, for example, the online documents. One of the big issues I see with those is not even the content of those documents, but it's the execution of them. So, Texas is really specific about how you sign a will. If it's not signed and witnessed properly, then it's invalid. And so, I’ve seen that. I typically tell people, "If you’re looking at a will and there’s a blank, that blank needs to be filled in, period." And some people don’t always do that. For example, there’s a witness part where there are two witness names. They think, "Well, let's just do one." Well, you just paid for that document online, and now it’s invalid. It doesn’t work. So typically, you’re going to see a lot of issues with the actual execution of them too. That’s a big issue we see. Again, it’s better just to have it done right the first time, and then you can forget about it.
[00:23:39] Albert Gillispie: Yeah.
[00:23:40] Austin Ramsey: That’s good.
[00:23:41] Albert Gillispie: And it makes me think of Dave Ramsey. A will shouldn’t be a secret. It should be well known to the family, well documented, because what a time to navigate something with logic—whenever this family member you care about has passed away, and everybody is just in grief. Like, they’re going through grief and trying to navigate all the intricacies of the estate when you’re at your peak emotional state.
[00:24:11] Albert Gillispie: And try to run the business. Try to continue operations. Yeah. It’s like, "Okay, if you want to pass away and ruin your entire family, don’t put a will in place. Make them just figure it out."
[00:24:24] Austin Ramsey: That always goes well.
[00:24:26] Albert Gillispie: Give us a juicy story on the negative side. Like, what have you seen go...
[00:24:37] Austin Ramsey: Typically what I see is just your classic scenario of not understanding what the implications are of a will with a blended family. We run into that quite a bit. Classic scenario is parents—husband and wife—they each have children from a prior marriage. And they go and get simple wills done, whether that's online or maybe with an attorney or whoever. But they have simple wills, and simple wills say, "If the husband dies, everything goes to the wife. If the wife dies, everything goes to the husband." And then upon the second death, everything goes to the kids equally.
[00:25:18] Austin Ramsey: So, again, the classic scenario, which I've seen several times: one of the spouses dies, so all the assets—meaning the business—go to the surviving spouse. And then the surviving spouse decides that it’d probably be better if they changed their will to leave the property just to their kids. Then the surviving spouse dies, and mom or dad’s business now goes to the second spouse’s children only.
[00:25:49] Austin Ramsey: There are some pretty devastating consequences for that, as you can imagine. The other problem that I run into a lot is just the estate tax for it—not understanding that, you know, mom or dad was very successful, and they built this big business, and it's worth a lot of money. And that’s great; now we’re going to inherit it. But first, you’ve got to pay estate taxes on the value of the estate, and not properly planning for that. Then the heirs have to determine a way—or come up with a way—to pay those taxes.
[00:26:24] Austin Ramsey: Luckily, the exemptions right now are high. Just to let you know, this year, they’re 13.61 million per person. So for a married couple with a community property business—meaning it’s a property that was started during the marriage, and so you can really think of it as husband and wife owning it—even, or if you have your partners in your business, whatever your portion is worth between you and your spouse, you’ve got roughly 27 million to work with in value.
But I typically tell people, you’d be surprised how quickly you can reach that if you build your business up correctly, and you add all your other assets in. So, making sure that if you do build that great business, that as much as possible of it goes to your kids and not other places.
[00:27:06] Kellen Ketchersid: Wow. And thinking about the taxes on that and the amount that could end up being for some families, it’s pretty big.
[00:27:13] Austin Ramsey: I’ve seen some pretty shocking estate tax bills. I’ll bet you have. Sat in the room and watched clients write checks for estate taxes for a lot of money. Yeah. And it’s never fun. They never enjoy it.
[00:27:27] Albert Gillispie: Yeah. So, can you walk me through that? What you just described—the 27 million—you know, we call it the exemption amount, exemption, unified credit.
[00:27:36] Albert Gillispie: So, walk me through properly set up versus not properly set up. What’s that ballpark? What does the tax burden look like?
[00:27:46] Austin Ramsey: So let's say you’ve got a 40-million-dollar business, and you’re set up properly with your operating agreement where you have certain restrictions in place.
Those restrictions are really good—not only for your business but also for your estate planning—because we like to utilize, in the estate planning world, valuation discounts.
So typically, whenever your business is tied to a buy-sell agreement, when it’s tied to a management structure where some of the minority owners—or even the owners in general—don’t necessarily have control of it (there are other people in control), there are certain mechanisms in place for electing a manager, electing officers. Meaning that just because you own part of the business doesn’t mean you control it.
So, that sort of lack of control and the lack of marketability (because it’s tied to a buy-sell, because it’s tied to these control restrictions) typically allow you to discount the value of the business for estate purposes which is important because, the way the estate tax works, the less you own, the less you pay. Right.
So by discounting the value of the business, normally you think, "Well, why would you want to do that?" But it’s accurate in the estate planning world because generally when you have those lack-of-control and lack-of-marketability factors in play, you’re not going to get a dollar-for-dollar value if you wanted to go to the market and sell it.
And so, you do get to discount the value of it, which means fewer estate taxes—whatever taxes would otherwise be payable.
[00:29:18] Austin Ramsey: So, let’s say you’ve got a 40-million-dollar business; you get roughly a 25 to 30 percent discount on the value of it in the valuation. So now, you’re hovering close to that getting-under-30 mark.
[00:29:29] Albert Gillispie: Yeah.
[00:29:30] Austin Ramsey: Even if there is a little bit of tax remaining, having it properly tied to it—or properly having life insurance in place, ready to kick in to pay that tax—is very helpful. Estate planners love life insurance because it can be there to pay taxes; it can be there to give additional dollars to heirs that they otherwise wouldn’t have gotten and provide that instant liquidity. I work with a group who specializes in life insurance, and they call it "contractual liquidity." That’s what it is—you’re getting cash inflow when you really need it at a certain time, and that’s certainly going to be whenever there’s potentially taxes owed.
[00:30:12] Albert Gillispie: Cool. So if I’m following you correctly, your 40-million-dollar business example—you know, without the proper documentation, your kids are paying taxes on that 40 million less the 27 million. So, they’re paying taxes on 13 million when it passes to them versus the controls you put in place to decrease the value, where they’re paying taxes on a 30-million-dollar business. And the difference of that is 3 million, and life insurance can cover that.
[00:30:48] Austin Ramsey: Think about that example. I didn’t finish that out. I’m glad you brought that up. So let’s say 40 million—let’s say we get some discounts on the valuations, and now we’re down to 30 million. Then, we’re going to subtract our roughly 27 million. That’s 3 million that we now consider taxable. We subtracted the unified credit (that’s what everyone gets to pass on tax-free). So, just as you can imagine if you own less than 13.61 million at your death, or you and your spouse combined own less than roughly 27 million combined at your death, your heirs will not pay estate tax on those dollars. So, if that leaves 3 million in value, the estate tax rate is basically 40%.
[00:31:30] Austin Ramsey: It’d be 40% of 3 million. Okay, and then if you’ve got life insurance kicking in right then, they could pay that tax. Now, they’re not having to worry about paying taxes. They’re now off and running. The business is not saddled with those taxes going forward. They’re in the best possible position.
[00:31:48] Austin Ramsey: Now, one thing to be aware of in the estate planning world—and this is going to affect a lot of business owners as well and how that relates to estate planning—is that tax bill is going to sunset at the beginning of 2026.
[00:32:00] Austin Ramsey: Yes, so part of that sunset is going to be the estate tax, the unified credit, and they think it’s going to go—this is the big guess; if you had a crystal ball, we could figure out exactly what’s going to happen, but nobody really knows—but the sunset basically says those exemptions are going to get cut in half, but also allow for inflation. The typical number, just for discussion purposes, that I’ve been hearing is it’s going to go to 7 million per person. So, going from 13 to 7 is a pretty big deal. We’ll see if it happens or not. They could come up with some other extension or a new tax bill or something, but it’s just something for people to be aware of.
[00:32:34] Austin Ramsey: It’s like, stupid policy has real implications.
[00:32:48] Kellen Ketchersid: Well, that’s just one of probably many caveats that you could give us. So, for the people who are listening: only an attorney can tell you about your unique situation. If you’re not married, that’s already a variable that you threw out there. Now, your exemption is cut in half, and I’m sure there’s a lot more that you could talk about.
[00:33:06] Austin Ramsey: You just talk about being married. That reminded me—I do work with a lot of clients who are in a blended family situation. They’ve got a business, and they have two goals: they want to provide for their spouse, but then they want it to go to their children. Well, that takes some estate planning because that’s not going to happen on its own. You have to set up your estate plan that way to make that happen.
[00:33:34] Kellen Ketchersid: I can think of some family members that I wish had talked to you 20 years ago, but we won’t get into that.
Planning for the Future
[00:33:38] Albert Gillispie: So, what are you working on now that you're excited about? I mean, obviously you've been an attorney for 10, 15 years. What’s new? What’s something you’re excited about that you’re working on?
[00:33:52] Austin Ramsey: We mentioned the sunset of the current tax bill. That means that the remainder of this year until we know what’s going to happen, plus next year, is going to see a flurry of planning and people wanting to go ahead and use those exemptions before they go down. So that means there’s going to be a lot of really interesting and unique gifting techniques that we’re going to be using involving businesses.
[00:34:20] Austin Ramsey: We’re going to be getting a lot of businesses appraised next year, figuring out what they’re worth, figuring out how we can gift and/or sell those business interests to the client’s heirs, their children, or trusts for their children. There are all sorts of different techniques for how you pass on that business in the most estate- and gift-tax-efficient way possible.
[00:34:47] Austin Ramsey: So that’s where our expertise really comes in. Because we sort of geek out on those techniques and those tax details, we get to then utilize them. And it’s fun in our world to really use those strategies to get businesses transferred in the most tax-efficient way possible. You’ve only got a certain amount of exemption you can use, right? 13.61 million.
[00:35:08] Albert Gillispie: Yes.
[00:35:09] Austin Ramsey: How can we leverage that? How can we squeeze the most out of that to get the client in the best situation possible? And that’s where we come in. Again, I go back to the word "puzzle." It’s a puzzle; it’s a problem-solving event.
[00:35:23] Austin Ramsey: And that becomes fun.
[00:35:24] Albert Gillispie: That is fascinating. So, there are strategies and techniques to utilize how the code is written today to get the biggest benefit now rather than in 2026 when the new exemption goes into effect. And so, you’re running at full steam trying to serve as many clients as possible.
[00:35:49] Albert Gillispie: That’s fascinating.
[00:35:51] Austin Ramsey: What a game. It is. And so we saw it back in 2012. When I first came out of law school, I graduated in May of 2012, took the bar in July, and started practicing the next month. Well, the same what we call the estate tax cliff happened then as well. It was going to go back to a million. They ended up extending it, but we thought it was going to go back to a million—from 5 million to 1 million—which was a huge deal to a lot of people. So I came out of law school and had to just jump right in and learn it pretty quickly—some of these techniques—and it was fun. Looking back, it was one of the best, it was scary at the time, but it was one of the best training models that I could have had. I learned it very quickly. Now we’re starting to see that happen again.
[00:36:28] Austin Ramsey: And, I’ll get to use a lot more of those techniques again, which is going to be fun.
[00:36:44] Austin Ramsey: Very cool.
[00:36:45] Albert Gillispie: That's wild.
[00:36:45] Austin Ramsey: Yeah.
[00:36:46] Albert Gillispie: So, we try to keep these to 40-ish minutes—we’re getting close. So, we’ve got a couple more questions I want to get to. We’ve had a lot of practical nuggets for business owners, but do you have one more, just really nuts-and-bolts tactic that you recommend for business owners and leaders that they should put into action?
[00:37:10] Austin Ramsey: So, as far as anything we haven’t covered, I’m not positive of that. I mean, really, I think your first thing is going to be your entity formation, then get your insurance in place. Honestly, what I would say to people—what people sort of forget about or put on the back burner—is their will. And one other thing I’ll then say—which, just as I’m saying that, made me realize I’ve got a better answer for your question—not only do they forget about their wills, but they really forget about their powers of attorney.
[00:37:45] Albert Gillispie: Okay.
[00:37:46] Austin Ramsey: Meaning, you know, a will comes into play if you die. Your power of attorney comes into play if you’re alive but incapacitated. And so, having a power of attorney in place—a statutory durable power of attorney (this is what I call the financial power of attorney)—this is where you say, "If I’m incapacitated if I have an accident and I’m out of it and can’t handle my own affairs, this person is going to step in and take care of my financial matters." Having that in place so you know that if your business can’t run unless someone has authority to run it, then if you become incapacitated, you’ve got a big problem. So, you need to have that statutory durable power of attorney in place so that if something happens to you—**you have a heart attack, you're out of it, have a car accident, you're out of it—**you’ve already named that person to step in and manage things until you get back in the game.
[00:38:44] Kellen Ketchersid: That's awesome. That’s such good advice. We can pass that kind of wisdom on to our consultants and then send them to people like you.
[00:38:51] Albert Gillispie: That's right. Okay, fire-round questions. Okay, Kellen has prepped you a little bit—and maybe he’s prepped me some—but what are your top three business or personal development books that you recommend or that you’ve enjoyed?
[00:39:12] Austin Ramsey: You're not gonna like my answer. Okay, come on. I don’t read. Law school ruined me on reading, unfortunately.
[00:39:19] Kellen Ketchersid: Oh, it breaks my heart.
[00:39:20] Austin Ramsey: I pretty much stopped reading after that. So, I don’t read.
[00:39:23] Albert Gillispie: You do a lot of reading as an attorney, though.
[00:39:25] Austin Ramsey: I read all day. Pretty much reading different legal documents. And once you get done with that, I don’t want to read anything else.
[00:39:29] Kellen Ketchersid: So, nothing like a light legal reading?
[00:39:31] Austin Ramsey: I’m good after that. I’m good on the reading.
[00:39:39] Albert Gillispie: Are you a podcast guy?
[00:39:41] Austin Ramsey: I’m a podcast guy.
[00:39:42] Albert Gillispie: Okay, what’s like your top couple of business podcasts that you like?
[00:39:45] Austin Ramsey: I don’t really even have a business podcast. When I listen to something, it’s really to sort of check out of that legal world, I guess you would say.
[00:39:54] Austin Ramsey: Yeah, legal world. So, mine’s going to be a mixture of comedy and history podcasts.
[00:40:02] Albert Gillispie: Okay, what are those?
[00:40:06] Austin Ramsey: I’ve got a good one for you. It’s called Legends of the Old West.
[00:40:06] Kellen Ketchersid: I haven’t heard it.
[00:40:06] Austin Ramsey: It’s all historical. I think it’s called Black Barrel Media. That’s an awesome podcast company, and they produce some really cool stories. You know what I mean? It’s all Western stories—so Jesse James, Billy the Kid, all those types of deals. They tell the historical side of that, and so it’s interesting for me.
[00:40:26] Austin Ramsey: And then, yeah, just some Short History Of, or The Rest is History—those types of podcasts I think are interesting.
[00:40:35] Kellen Ketchersid: Legends of the Old West. All right. I’m going to check it out.
[00:40:40] Albert Gillispie: I’m going to give that a listen.
[00:40:40] Austin Ramsey: It’s really cool.
[00:40:43] Albert Gillispie: All right, last one. What is one piece of technology that you’ve bought or downloaded or whatever that has made a huge impact on your life that not many people know about?
[00:40:55] Austin Ramsey: That not many people would know about? It’s going to be, unfortunately, something everyone knows about—it’s going to be this thing in my pocket—the cell phone. In the legal world, that was huge when everyone got BlackBerrys. I mean, it really changed the game as far as being able to actually communicate with your clients 24/7, you know, for better or worse.
[00:41:05] Austin Ramsey: So really, just having that capability has been huge for me to be able to handle some things that maybe were more urgent.
[00:41:29] Austin Ramsey: You know, so, the only thing I can think of really, other than that, would be—I’ve had a laptop at work, but I didn’t want to bring it home with me, so I got an iPad. So I ended up getting the keyboard that goes with the iPad, so now I can go through emails a lot more efficiently too. As I get older and try to type with my thumbs on the phone, I’m deleting and trying again a lot.
[00:41:53] Austin Ramsey: Okay. So I got the keyboard that goes with that iPad, and that was a game-changer for me.
[00:42:00] Albert Gillispie: There you go.
[00:42:00] Austin Ramsey: Yeah.
[00:42:00] Albert Gillispie: Okay, how can people get in touch with you? How can people do business with you?
[00:42:05] Austin Ramsey: So, generally, what I would say is go to our website: lcalawfirm.com, I believe, is what it is. It’s Lynch, Chapel, and Alsup, and you can find all of our attorneys there. Look at our practice areas to figure out what types of legal issues we handle for clients, and then figure out which section you need to contact. Look for one of those attorneys; we’ve got all of our contact information, email, direct line. We also have the main line if you’re not really sure who to call—you can do that as well. There’s also a contact feature on the website where you can submit a question or a referral request, and you can get in touch with us that way.
[00:42:46] Albert Gillispie: Awesome. Well, thank you.
[00:42:47] Albert Gillispie: Thank you for making time.
[00:42:48] Austin Ramsey: Thank you for having me.
[00:42:50] Kellen Ketchersid: This is great. Appreciate it. Learned a lot today.
[00:42:52] Albert Gillispie: Hopefully, it helped. Yeah, no, that was great for that subject. That was practical. I appreciate it.
[00:43:05] Albert Gillispie: Well, I hope you enjoyed that conversation. I know we did. Yeah. So many good things. And if you enjoyed that episode, if you enjoy the lessons learned and want more like that, go ahead and click subscribe and keep coming back because there’s more where that came from. Thank you so much for listening. And if you’re a business owner and feel stuck—if you feel like you are a slave to your business and are forever destined to work in your business and not on it—go to our website: www.stagcoaching.com, and fill out our free business assessment.
[00:43:35] Albert Gillispie: In just a few minutes, you’ll be able to understand what is going wrong with your business. This business assessment can diagnose your business in just a few minutes, and then we can get on a call together and discuss how to attack your business. It’s free. It’s easy. And it’s on our website. Thank you so much.
