How to Smartly Relocate to Florida
KRIS FLAMMANG
Brad, you have a pretty interesting business history. Take us through that and tell us what led you to opening up your own practice.
BRAD GALBRAITH
I actually started my career as a CPA with Deloitte.
KRIS FLAMMANG
Are you a recovering CPA?
BRAD GALBRAITH
I am. Once a CPA, always a CPA. I keep my continuing education up to date, so I’m still a CPA, but I don't practice as one. I also went to law school, and thought I wanted to be a litigator, but after I graduated, I realized that I wanted to use my accounting, tax, and financial skills in a different way, so I started in estate planning about 25 years ago.
I started my own firm, then after about a decade I joined a large firm, and then I decided I really enjoyed having my own practice so I went back out on my own about four years ago. We have a good team, about 15 people, half attorneys and half support staff. We focus on estate planning, gifting, and a little bit of income tax planning as well.
KRIS FLAMMANG
What was attractive to you about going out on your own? What specifically was the biggest motivator?
BRAD GALBRAITH
Honestly, just having the ability to make my own decisions. When I want to do something, I don’t have to take it to a committee and wait six months for a decision. It’s probably the same reason that you are an independent financial advisor. Having that ability to call the shots for your own team is really attractive.
KRIS FLAMMANG
I'm in total agreement there. Knowing what you know now, if you could go back and give your younger self some advice, what might that be? Is there something you know now that you wish you knew when you started out?
BRAD GALBRAITH
That's a great question. One of the things I did early on is start an updating program for my estate planning clients. The idea is that once someone becomes my client, they have the opportunity to participate in an annual updating program where I take the responsibility of being proactive rather than the client.
I wish I had started it even sooner, and I wish I had pushed it harder than I did. I know you prompt your clients to regularly review their estate plan. Not all financial advisors do that, and not all attorneys do that. Which means, when something happens, often the plan is not up to date, so the client isn’t ready to deal with that event. My updating program is really intended for us to be looking out for changes in the tax laws, and changes in asset protection. It gives us the opportunity to ask our clients about changes in their personal lives, changes with their assets, or transitions they're going through. They could be moving to a new state, or retiring, or selling their business. I'm proud that we have such a robust updating program, but I think if I could tell my younger self something that would have been valuable, it would be to start that even sooner and push it harder.
KRIS FLAMMANG
That brings to mind a dental analogy we use in our practice. We tell people, “When you go to the dentist, they always want to schedule your next appointment. We're going to do that; it's just not going to hurt as much.” Is there something about your business that you particularly like right now, or is there something about your business that is really exciting to you?
BRAD GALBRAITH
Certainly, what I enjoy the most is sitting with clients, hearing about their situation and giving them good advice. The practice of the law isn't necessarily just that, there are a lot of administrative things that go along with that such as drafting the documents like wills and trusts and powers of attorney. I'm to the point of my career where I don't really have to draft those anymore. I get to give the advice and design how those are going to work, then hand it off to other people on my team who are responsible for drafting everything and getting those back into my inbox to review. Getting to know my clients well and giving them good advice is really the fun part of my practice.
KRIS FLAMMANG
The way I think about it is, every situation is a puzzle, and all the pieces look different. Putting the puzzle together for the client is the stimulating thing, or the thing that you get enjoyment out of. You have to do the other stuff because it’s a requirement of the business. Do you think people have a misconception about what you do, and if so, what might that be?
BRAD GALBRAITH
Occasionally people will admit to me that they think of estate planning as just death planning. It's something you do when you're not in good health, or shortly before your death. I don't like to treat it that way. I think of it as lifetime planning. There are a lot of things that can be done that are very beneficial during your lifetime. It doesn't have to be a depressing thing. It can really be an empowering thing.
We're talking about your ultimate legacy. Not just handing what you have to your kids and grandkids, but doing it in a way that really empowers them, motivates them. That's the exciting part of it. Rather than thinking of it as death planning, it's really opportunity planning and legacy planning.
KRIS FLAMMANG
Everybody’s scared of the unknown. I find that when you help them have a more certain future, and make those unknowns known, then you can actually see the weight being lifted off their shoulders.
BRAD GALBRAITH
You really can. That’s actually a very interesting point. During the pandemic, one of the issues we’ve had is having a lot of people coming in based on fear. I'm not a guy who drives people based upon fear, even though a lot of salespeople say you motivate by scaring people. I've never been that guy. Yet, during COVID, we had a lot of people coming to us who were motivated by fear. It just makes so much more sense to do planning in advance, so you have a plan in place just in case. It’s also a lot more pleasant to do planning way in advance when we're not fearful, when we can be thinking more about the opportunity than a soon-to-come unknown.
KRIS FLAMMANG
What do you think are the most overlooked areas or blind spots that people are not aware of? People often come in asking for something specific, and they think if they get that taken care of, they have everything covered. What are they missing?
BRAD GALBRAITH
You're right. So often people don’t just need an estate plan, they need a well-designed estate plan. Probably 90% of my new clients have already done thorough estate planning, but it's gotten out of date, and they don't realize that the plan which made sense when their children were in their teens, is no longer sufficient. Those kids are now in their 30s and have kids of their own. There are better things to do than that boiler plate plan they put into place years ago that says distribute 25% at age 25, 50% of the balance at 30, and the remaining balance at 35.
I talk a lot to my clients about protective planning. I use the term protective trusts. You can do planning in Florida, as well as in many other states, where your children ultimately are in complete control if you like that, but they are still protected in the event of a divorce, or protected from creditors. You can make sure that if a child passes away, whatever's left of that inheritance goes to your grandchildren rather than the spouse. This makes sure the assets have bloodline protection, and remain in the family.
A lot of times people just haven't thought that through. I often tell people who come in thinking they know exactly what they want, how can they know which options they like unless they know what the options are? A good example I give to people that many don’t think about, is what happens if one spouse passes away, and the survivor remarries? We've all heard horror stories where the surviving spouse remarries, then they pass away and everything goes to their new spouse. The children of that first marriage, the 50-year marriage, who they really intended most everything to go to, are cut out. We see that happen over and over.
So, what about putting a provision into the estate plan that if one passes away and the survivor remarries, they should get a prenup with that new spouse to make sure what was owned by the original couple goes to their children rather than to a new spouse? We can do that. But unless I present it as an option, most people don’t know about that.
KRIS FLAMMANG
A lot of people don’t want to think about possibilities like that, the “what ifs”. They're hoping everything goes exactly as they want their estate plan to go.
BRAD GALBRAITH
As an estate planning attorney, I think about those contingencies that they don't necessarily want to think about.
KRIS FLAMMANG
That's why you're good at what you do. Let’s shift gears a bit and talk about domicile planning. Explain what that is and why that may be advantageous for someone, especially with all the people moving to Florida.
BRAD GALBRAITH
The numbers are amazing. About a thousand people a day move to Florida. One of the books I wrote is called The Florida Domicile Handbook. We're currently working on our fifth edition, so it’s been around for a while. Florida domicile planning is really about severing the domicile from your northern state, making sure that if you change your domicile from, for example, New York to Florida, and New York chooses to audit you someday, you’ll come out just fine.
There are certain states that are very aggressive. Those are typically the higher tax states. They're also typically the estate tax states. For example, in the Midwest, Minnesota and Illinois have substantial taxes. On the East Coast, we’re talking about states like Maryland, New York, Massachusetts and Connecticut. States with significant income taxes, that also have estate taxes or inheritance taxes.
Those states are often aggressive when people try to change their domicile to a new state. Typically, it comes up in an income tax audit, especially when someone continues to have a home in that Northern state. Many of my clients, like yours, are snowbirds. They continue to have a home up north, and they go back and forth. That potentially exposes them to more risk of audit. Domicile planning is really anticipating what the state's questions may be, and planning in advance so you have the right answers to those questions.
KRIS FLAMMANG
For people who might not know, why is it advantageous for people in those Northern states to consider changing their domicile to Florida? Let's go under the assumption that not everyone knows that.
BRAD GALBRAITH
The obvious answer is taxes. More specifically, in Florida we have no state income tax. So, if you're coming from a state with a 10% state income tax, you have significant savings right there. Additionally, Florida has no estate tax, no gift tax, no inheritance tax. Plus, those people who are domiciled in Florida, who own a primary residence here, can also claim the homestead exemption under Florida law, which can have major long-term benefits.
Let me go into a little more detail on that. As long as you are domiciled in Florida before the end of the year, and you follow all the requirements for that, you have until March 1st of the next year to file for the homestead exemption. It will then relate back and you'll have the homestead exemption for the entire year. That first year, the main benefit is approximately a $50,000 exemption from assessed value, which is going to save most people $700-800. That’s nice, but the bigger benefit is more long term.
That’s because once you are domiciled in Florida and you have filed for that homestead exemption, that first year is your base year for the assessed value. From that point forward, when homesteaded in Florida, your assessed value cannot be increased by more than 3% a year, or the consumer price index, whichever is lower. Assuming 3% is the lower figure, that means in a time period like we have been seeing in 2021, when home values have gone up substantially, even if home values go up by 20% in a year, if you're homesteaded, you're locked in at just a 3% increase.
As you can imagine, over 10 or 20 years, people who are homesteaded are often paying half the property taxes of their next-door neighbor. Believe it or not, I've seen situations where they're paying only 10% of what their neighbors are paying, because they're in an area where the values have gone up so substantially over the years. So, domicile makes sense from an income tax perspective and estate tax perspective and a property tax perspective.
KRIS FLAMMANG
That’s great information. Let’s look back now. What’s your first memory of money? It could have been a first job, or an allowance, or some experience you went through.
BRAD GALBRAITH
As a financial guy, I can think back to a number of good lessons I was taught through the years by my parents. My dad was a pastor and professor at a theological seminary, and my mom was a school teacher, so I learned at an early age that money is not something you just run around spending freely. I had an allowance for doing chores, but I remember my first job was when I was 12 or 13. It wasn't an official job, a next-door neighbor said, "Hey, you're not doing much this summer. Do you want to paint my house?" I did. I worked hard that whole summer, and I was paid a good hourly wage. When I finished, I thought, “That wasn't too bad. This hard work thing can pay off.” So, one of my first financial memories, which was a good overall memory, was learning that hard work and saving is a great feeling, and is certainly something to be encouraged in my own children too.
KRIS FLAMMANG
Have you had any experiences working with clients that made you really aware of either the positive or the negative impact of wealth?
BRAD GALBRAITH
Absolutely. I can think of many examples of both, but I'll limit it to one of each. On the plus side, I remember a particular client who was charitably inclined, and one of the things he wanted to do was start a private foundation. The idea for him was to inspire his grandchildren and great-grandchildren to be involved in philanthropy, to understand the value of dollar at an early age. So, every year they would have a family meeting for the foundation, and every member of the family would be required to bring a short presentation about a charity that they would like to distribute money to.
At one such meeting a great-grandchild, maybe five years old, actually prepared a short PowerPoint presentation. No words in it, the child couldn’t read yet, but there were pictures of Big Bird and Cookie Monster, and he explained to his great-grandfather why he wanted to support Sesame Street, and why it would really make a big difference to Big Bird to have some more dollars. It was really neat to hear that he was inspiring not just the next generation, but two generations down from that to really start thinking about philanthropy.
On the bad side, unfortunately there are clients with a substantial amount of wealth whose children will take their inheritance as an opportunity to just do nothing. We also see things like gambling, and drug or alcohol abuse. So, I often talk to my clients about making sure that they're not encouraging people to do nothing. I'll talk to them about incentive trust planning. Perhaps put in a provision to match their grandchildren’s income. Or if they’re in a career that’s meaningful to the world but isn’t especially lucrative, give them two or three times their income to incentivize them to do good things and help good causes. When you put your mind to it, there are a lot of things that can be done to provide some of those incentives, and some of my clients have done that with great success.
KRIS FLAMMANG
That’s the creative side of what we do with the puzzle we talked about earlier. Your practice includes a focus in special needs planning. Why did you make that an offering of your firm?
BRAD GALBRAITH
There are not many attorneys who are all that knowledgeable in special needs planning. One of the reasons I really dove into that area of practice and learned lot was because of my own family needs. My oldest child had a stroke before he was born, and to this day, he's severely disabled. He’s 24 years old, and mentally he's at about a one-year-old level. When something like that happens in your own family, and you're an attorney, you tend to really focus in on that kind of planning and helping people with similar needs. Where I practice in Naples, most of the time, the special needs planning I'm doing is for grandchildren. I certainly work with people who have special needs children, but more often, it's grandparents who say, “I've heard that if I give my wealth to my grandchild, I may disqualify him or her from any governmental benefits.” They don’t want to do anything to hurt that grandchild. Work programs, or special educational programs, could be very important to the child. A lot of times what I do is work with the grandparents to make sure that what they do is helpful to their grandchild, not harmful.
KRIS FLAMMANG
So, your own personal experience was essentially what led you into learning more and having that emphasis in your practice. That’s a good segue to this next question. What would you say is your biggest life accomplishment so far? That could be professionally or personally or both.
BRAD GALBRAITH
I'm thinking a lot about my children. I have five kids ranging from 24 all the way down to seven.
Two are in college now. One’s at the University of Texas, one's at the University of Florida, and I went to Indiana University, so all three of our football teams are ranked in the top 20. It’s been fun to have those experiences with my children.
I have another one going off to college next year, so we’re in the middle of the college decision making for her. So, I suppose the biggest accomplishment I look at is really how I've raised my children, how their mother has raised them, and how it just seems we fell into making the right decisions, and somehow, they're doing just fantastically well.
KRIS FLAMMANG
You raise them all the same and you throw them out there and hopefully something sticks.
BRAD GALBRAITH
Exactly. Let’s go back to what I was saying earlier about how some of my clients have done the right thing for their kids and some have done the wrong things. It’s not immediately obvious to you what is right and wrong. When you're a parent, you play it by ear, you do your best and you hope it works out. So far, I'm proud to say it's worked out with my kids. So, that's a big accomplishment.
KRIS FLAMMANG
If you can be intentional, that's a lot of it right there. Outside of your practice, tell me something you are really passionate about personally.
BRAD GALBRAITH
One of the things I do that has been important to me, my entire life, is physical fitness - really competition. I competed from middle school through college, and did so at a very high level during high school. I trained in cycling at the Olympic Training Center and raced all over the country. I got back into that later in life, but a year ago I had a bad fall and broke nine bones, resulting in a lot of surgery and a lot of rehab. That was a big setback. So, I decided rather than cycling where I sprint at the end, which is dangerous for a 54-year-old, that I would do duathlon, which is running, cycling, running. It's a triathlon, but it's run, bike, run. I've found that I'm really pretty good at it. In fact, I recently qualified as an All-American and I'll be racing in the world championships next year for team USA. That’s really exciting. it's a big pastime, and it keeps me busy on a daily basis doing something that's really good for me and very healthy.
KRIS FLAMMANG
That’s very exciting, congratulations. What do you think is the most exciting part of your business right now? What’s your biggest opportunity business-wise?
BRAD GALBRAITH
We’re talking a lot about estate tax planning. I tend to work with some pretty high net worth people who need to think that if the estate and gift tax is going to change, maybe they should do something before it changes. So, there are a lot of people right now working on very large tax planning opportunities. I started talking to my clients about this a while back, sending them articles and newsletters about planning ahead for possible changes in the estate tax. Just in the fourth quarter of last year, my clients transferred a billion dollars of assets to their family, and I’m sure the numbers will be even greater this year. We're doing a huge amount of advanced estate tax planning.
KRIS FLAMMANG
On the flip side of that, what do you think is your biggest challenge or biggest obstacle?
BRAD GALBRAITH
The biggest obstacle is finding employees. We're so busy, but hiring new people is not easy. You don't want to bring in new people who are inexperienced because you need them to be up and running quickly, as soon as they get in, because I don't have the time to train them at the moment. And it’s difficult to find experienced attorneys, experienced paralegals, experienced staff members. I'm very fortunate, I have a fantastic team. I wish we had a few more people like them that would allow us to do more of that work, but it's really tough to find those people.
KRIS FLAMMANG
That is tough. We're going through some of that with our practice, and bringing on advisors. I feel your pain there. You have to expand what you would consider as a potential arrangement, such as working remotely, but there are a lot of pluses and minuses to that. Do you think commoditization has in any way affected your business or what you do?
BRAD GALBRAITH
That's a great question and it comes up a lot. I know it has had an impact on your business as well, but I would guess your response to that question would probably be the same as mine. The best defense against commoditization is to make sure what you're providing really isn't a commodity.
The perception is that an estate plan may be a commodity, but all the things we've been talking about are the things that make what I do no longer a commodity. To an observer who isn’t knowledgeable, one stack of paper might look a lot like another, but it can be very different. When you do planning that's really based upon getting to know the client, designing a plan specifically for them, rather than filling out a fill-in-the-blanks document, it sets you apart. You really are doing something very different.
In my world, they talk a lot about commoditization, and there are different approaches to how businesses can structure themselves. There are certainly those estate planning attorneys who try to compete with commoditization based upon lowering their fees. They are then incentivized to spend less and less time with the client. That's just not what I do. I spend a huge amount of time with my clients, and they appreciate that.
KRIS FLAMMANG
There’s data, there's information, there's knowledge, but then there's the wisdom component, and that’s really tough to come by on the internet. The wisdom part is how we take all this information and actually construct something that is specific to a person, and also is personal to them, and is something they can latch onto and agree with and believe in. Thank you for sharing your wisdom with us today.