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3 Estate Planning Must-Haves · Retirement Answers

• 0:01
  Jacob: Don't kick this can down the road. Get these things taken care of. Have the conversations with your loved ones. Make sure that you are doing what's best for them because it's gonna save them a ton of pain or a ton of time or even tons of money in the future if you get this done in place while you have the opportunity to say what you want to happen and get that written down. Welcome to Retirement Answers, a podcast built to answer your most pressing retirement questions.
• 0:26
  If you're someone who's either thinking about retirement or already in retirement, well, you're in the right place. Hey there. My name is Jacob Duke, and each week, I'll be walking through different tips and strategies to help you succeed in retirement. So let's go ahead and get started with today's show. Hey friends, welcome back to another episode of Retirement Answers.
• 0:47
  My name is Jacob Duke. I'm your host as always. This week we're going to be talking about some estate planning must haves or some different items that you must have in your estate plan that kind of applies to everyone. Regardless of your situation, anybody can have these things, and everybody probably should have these things in their estate plan to help cover themselves after death, but also perhaps if they're incapacitated before death, who's making some decisions for you? So we're talking about three main items that you should have in your estate plan.
• 1:16
  And also, if you're listening to this on the day that this is published, so if you're listening to this on Tuesday, 05/14/2024, the very next day, 05/15/2024, I'm going to be hosting or co hosting a live with Paul Rabillet, who is an estate planning attorney, and he does really good work. He has a great YouTube channel as well. If you wanna go check that out, I'll have it linked down in the description below. But we're gonna be partnering together, do a YouTube Live and talk through some different things and mistakes that people might make. And also how important it is for your financial advisor and your estate planning attorney to work together as a team to make sure you get the results that you're looking for.
• 1:53
  So that's coming up on May 15 here in 2024. If you're listening to this after the fact, you can go find it on YouTube. It'll be posted there to watch at that point. So I hope that you'll come and join us and be a part of that if you're able to. And finally, just wanted to put a disclaimer out there, I'm not an attorney, so this is not legal advice.
• 2:10
  These are just ideas and hopefully educational for you as you continue to build out your financial plan, which is a big part of that is going be your estate plan. So what are the three must haves that you need to have or documents that you need to have in your estate plan? Well, first one is a power of attorney. The second one is an advanced medical directive. And the last one is going to be a will.
• 2:31
  And so each of these have different components and there are different, levels of these different things. I'm not going to really dig into the details of that. I'm going to leave that to Paul and perhaps other estate planning attorneys out there. But just want to give you general ideas around how or why these might be important. So, let's start with the Power of Attorney.
• 2:48
  Well, the reason that you would have a power of attorney and there's different options or types you could have durable, you could have general, you could have limited, you could have springing. There's different types of power of attorney, and so what you can do is you can figure out which one you need right now, or perhaps you want to have if something happens to you or you were incapacitated, meaning you're not able to make a financial decision on your own. Who do you want to make financial decisions for you? So let's say you are at a point in your life where it's like I don't want have to deal with all that money stuff I and don't wanna have to figure all that out or rather just not think about that. You could hire someone with what's called a general power attorney, or a durable power of attorney would work as well.
• 3:25
  But also if you want to make sure that someone can make a financial decision for you if you were not able to do so for yourself, Perhaps you had an accident and you're no longer able to think for yourself and make a decision of that capacity on your own. You could have someone that has a durable power of attorney, which would continue and be available to them after you're incapacitated, or you could have a springing power of attorney. And so what that does is it allows them to make financial decisions on your behalf. So the really the question here is who do you trust? And do you trust someone enough to help make those big financial decisions while you're still alive?
• 4:00
  This is a document that's for you while you're alive. So this is someone you would be saying, hey, I want you to make my financial decisions if I'm not able to. And so who is that person? So that's a power of attorney. The next one is an advanced healthcare directive or advanced medical directive.
• 4:16
  This is one that's saying, hey, what happens if I'm not able to make a medical decision on my own? Who do I want that person to make that decision for me to be? And most of the time this is going to be a spouse. And so a lot of people think, well, if I'm married and I do have a spouse, then that's the person that's automatically just going to be there to do that. And you might be right, that might be the case ultimately.
• 4:37
  But, there's this thing called HIPAA, and technically a spouse is not entitled to your medical record. And so, whether we like that or not, it's just the rules. And so, technically, we either have to give consent to a spouse in order for them to see our records, or we have to have this either a living will or some sort of advance healthcare directive, which oftentimes those are going to be the same thing. But we have to have those things in place in order for our spouse to make decisions on our behalf. So just don't think to yourself, Oh, my spouse is going make that decision just because they are my spouse.
• 5:10
  Well, are rules in place such as HIPAA, like I mentioned, and we have to make sure we have that covered. And so what happens here too is I would say that the importance of this is to save your family a lot of stress. If you ever get to that point where it's like, hey, they're alive, but are they going be able to make a recovery? And so it's like, what do we do? What do you want them to do?
• 5:29
  You can actually write this out for them and say, here's what I would like to happen. Either keep me plugged in forever, or you can pull the plug immediately, or you can pull the plug after a certain amount of time. It's like you get to make that decision and actually give your family a lot more peace about it because what'll happen is, is I've heard about this, but families disagree on when to do what and how to do what and how to care for their loved ones. And so someone might want the plug to be pulled immediately. Someone might say, Hey, I don't want this ever to be pulled.
• 5:57
  I want to keep them alive forever. And so it's like, what do you do? Well, if you have this written down saying what you would like to do, that is the rule. Like that's what's going to happen. And so if you just eliminate the decisions for your family, it helps them avoid all the trouble and pain that could come with that.
• 6:13
  So, Advanced Healthcare Directive is the next one. And then finally, a Will, which is a last will and testament, which is different from a living will. A living will is more along the lines of an advanced healthcare directive. A directive is not always the same thing as a living will. There are different types of advanced directives.
• 6:29
  But a living will is an advanced healthcare directive. So a last will and testament is the type of will we're talking about here. But this really all it does is it guides the probate process. It tells the courts what you want to happen. There are a lot of misconceptions here about wills.
• 6:46
  Most of the time whenever I ask someone, hey do you have an estate plan? They say, Yes, I've got my will. And that's a good start. Are three things that you must have here to make sure you're on the right track in terms of building out your estate plan. But I probably wouldn't stop there.
• 7:01
  The misconceptions about wills are this, Well, if my will says it, that's what's gonna happen. And here's why that might not be the case, is because there are rules in terms of an order of operations in which your assets get distributed whenever you pass away. And so the first way that happens is by title. So let's say that you're married and you own a joint account with your spouse. Well, if you get hit by a bus, then your spouse will assume ownership of the account because it is a joint account.
• 7:29
  Now there's different types of joint accounts based on the state in which you're in and community property and all In general, if you are a co owner of an asset, such as a brokerage account, your spouse will assume ownership of it. The second step in this order of operations is transfer by designation of beneficiaries. So who do you have named as a beneficiary on your accounts, whether it be your IRA, four zero one ks, your brokerage account. So back to our joint account situation, technically if you have a joint account with your spouse, you can name a beneficiary via TOD for that account so that if both of you get hit by a bus at the same time, then it still has a beneficiary named on it. You could name a trust as a beneficiary, can name a charity as a beneficiary, you can name a kid as a beneficiary.
• 8:13
  Whatever you want to do, you can name someone, but that's one way of doing it. Also, if you have an individually owned account, let's say you're not married, well, you would probably want to name someone as the beneficiary of that account via transfer on death, or TOD. So regardless, you can have a beneficiary named on both of those types of accounts, but I would recommend doing that because that's step the in this order of operations is who is named as the beneficiary. Same thing with IRAs or 401s. Who is named the beneficiary, that's who's going to receive that.
• 8:43
  And then the third step in this Order of Operations is going to be Transfer by Will. So what you notice here is that the beneficiary designation precedes or trumps the will and what the will states. And so some of the misconceptions or mistakes I often see here is that someone says, Hey, I've got my will established and I have everything written out there, so why do I have to worry about my beneficiary designations? Well, it's because all the beneficiary designations, if you have them placed on an account, that actually overpowers what is on the will. So your will is actually null and void in terms of what it says.
• 9:18
  So for example, let's say you have a 401 ks and you name your daughter on the 401 ks as the beneficiary, but your will says I want to name my son, and in your mind everything's going to go to the son because of XYZ reason, well, the daughter is named as the beneficiary on that 401 ks, then that's who's going to receive it regardless of what your will says. So a lot of times this comes up as a problem post divorce or in blended families. Right? So if you have three kids on one side and you have two kids on another and these two spouses, they come and they get married, if you just name the spouse outright as the beneficiary, it's like, well that's their money at that point, which means you could inadvertently be disinheriting all three of your kids if you get hit by a bus. So we want to make sure that we have beneficiary designations placed on accounts, but we want to make sure we do it the right way.
• 10:09
  The will is powerful, it's good, but really all it does is tell the court or tell probate where you want your money to go and why. And so those are some different mistakes or misconceptions perhaps around having a will. Yes, you absolutely need to have one. It's a must have as we're talking about here. But just know that that's not the main thing in all of this.
• 10:30
  It's kind of the thing that catches all at the end. So it's kind of like the last thing to clean everything up. Whatever does fall through the cracks, that's what is the document that's there to help guide it. Don't make that your primary document. I'd probably say that a trust is necessary in most situations if you want to have special provisions or special thoughts around how you want money to go to different people.
• 10:51
  So those are some different basics. Those are the basic things that we should have in an estate plan. We should have powers of attorney. We should have medical directives. We should have a will.
• 11:02
  Now, what you could do is you could have a trust on top of all of that. Now, the reason you would maybe have a trust is this. Well, probate is a public process, meaning anyone can find out whatever they'd like to about everything that falls into your estate and then goes through probate. So, if you want to have a private transfer of assets, a trust would be the best way to do that. Meaning, you can say everything you want to happen with your assets via a trust, and that is a private endeavor.
• 11:30
  So if you own four houses and no one knows that you own four houses, well if you want everyone to know that you have four houses, then use probate or go through the probate process by not having a trust. Or if you want all of that to remain private, you could have a trust that owns those houses and then you could have those passed or distributed down via that trust and what it says. So just know that you have two options there, a trust, everything's private, probate, nothing is private, and really depends on what you want to do. But I would suggest most of the time that people should have a revocable living trust, even if there are small amounts of assets. It require you have a large amount of assets to have a trust, but the key there is immediacy and privacy.
• 12:08
  So if you have a will that has to go through probate, well you have to wait for the courts, have to wait for that timing, and there's often your assets are going be frozen during that time, meaning no one, even though they might have the legal right to that one day, they can't go access those accounts or do anything with that money yet. And so a trust actually springs into power or springs to where it's able to be distributed immediately. It's an immediate thing and it can be executed immediately after death. And so a trust in general is going be the way to go. Not going to talk about them in-depth today or the types or how they work, but just wanted to give you an overview of like there is another step to these three main things or must haves that you should have in estate plan, the trust is that next step and most of the time it is a good option for a lot of people.
• 12:53
  Who do you name as your power of attorney, whether it's durable, limited, springy, whatever it might be? Who do you name as the person you want to make a medical decision for you? What about a will? Who do you name as the executor of that will? Well, for a power of attorney, this is going to be someone that you really trust with your money.
• 13:10
  Right? This is someone who can make financial decisions while you're still alive. And so think of it this way, who would you write a blank check and hand it to and then trust them with all of your money? Who is that person that you could trust, entirely? And then that's who I would probably name as the person on that power of attorney.
• 13:27
  And I would definitely confirm with them first that that's what you want to happen or if they're willing to do that. But then also for the Advanced Healthcare Directive or Advanced Medical Directive, most of the time this is going be a spouse that you would name. But you want to have contingents, like who are the backups for all these people as well. Or maybe you're not married. Who's the person you want to make medical decisions for you?
• 13:46
  Is it a parent? Is it a brother? Is it a sister? Or is it a friend? Who do you want to kind of make these decisions for you, if it ever came to that?
• 13:53
  And then also for the will, who do you want executing? Who do you want the person to be to administer all the assets and kind of look and oversee what's happening? Again, that's someone you'd want to trust to make sure they're doing right by you and what the courts are ordering them to do. So that's kind of a brief overview of some estate planning Must Haves. There's obviously a lot more here and we're going talk about that some here in the live streams coming up that I mentioned earlier.
• 14:16
  But what are your action items here for you today? Well, first one is audit your beneficiaries on all your accounts, on all of your assets, and make sure that you have a primary and you have a contingent on everything. The reason I say audit is because you have likely had someone named in the past, but is that person still the person you want to receive it? So maybe you were married for twenty five years and you recently got a divorce, but you haven't updated any of these beneficiaries. Well, everything's still going to go to that ex spouse if they're still named, so you need to make sure you update that if you'd like to.
• 14:48
  Or perhaps you had a brother named as a beneficiary on all accounts. And perhaps you don't want everything to be left to your brother anymore, you'd rather it go to your kids since they are able to, hopefully handle those assets based on their age now. So that's the first thing, audit your beneficiaries, make sure you have someone named. And then also I would recommend highly that you have a contingent named on all accounts as well. Number two, make sure you have these basic documents a part of your estate plan.
• 15:14
  So a power of attorney, you need to have a advanced healthcare directive and then also a will, a last will and testament as well. And then we just talk through all the reasons why. And number three, I would say have conversations with your spouse and children about these things or your loved ones around what you're trying to do with your estate plan and why. So make sure people understand what your goals are verbally, even though you are going to write all of them down. Don't just leave a verbal estate plan to someone, have them written down via these documents so that there is no questioning it if something happens to you.
• 15:44
  Four. Work with a trusted attorney to get all this done. Many times I've heard attorneys talk about how they're reviewing estate plans and there are things that are off based on what the person had intended. And so make sure that you have a person that you trust in your corner building and creating your estate plan for you, because it's worth a lot. There's mistakes that can be made there and those could be very costly in the end.
• 16:07
  And number five, the big one here is this. I've already talked about it, but don't kick this can down the road. Get these things taken care of. Have these conversations even though they are hard oftentimes. Have the conversations with your loved ones.
• 16:19
  Make sure that you are doing what's best for them because it's gonna save them a ton of pain or a ton of time or even tons of money in the future if you get this done in place while you have the opportunity to say what you want to happen and get that written down. So I would encourage you not to just keep pushing this off because it's not important yet. It's going be important one day. And so take the time to do it now while you have the chance to make these important decisions rather than leaving up to chance via probate or just a he said, she said down the road. So hopefully this is helpful.
• 16:50
  Just a quick must have or quick starter pack for estate planning. Again, I'm not an estate planning attorney. These are some basic things that you can do to help improve or at least start your estate plan. Again, talk with a trusted attorney if you ever have questions about these things or want to work with one to get these documents in place. So hopefully this was helpful for you.
• 17:09
  I hope you have a great week. And remember, we've got live stream tomorrow on YouTube, so if you want, you can go click the link down in the description below to the channel and you can watch it there when time comes. So thank you so much. I hope you have a great week. Hey, it's Jacob again, and I wanted to extend a quick offer to you.
• 17:26
  If you have a question and you would like to have it answered here on the show, please email me at jacobretirementanswers dot net. And I'd love to answer that question for you right here on the show. Also, wanted to remind you that nothing discussed in today's episode is meant to be financial, legal, or tax advice. Retirement Answers is for educational purposes only. Thanks for tuning into this week's episode.
• 17:47
  I look forward to talking with you again next week.