Estate Planning Can Be Simple

Estate planning is important because it gives you control over what happens with your assets, big or small, your family, your healthcare decisions. Many people assume it's for the wealthy, virtually anyone who owns any amount of property or has savings, has children, needs an estate plan. That leads into some of the key reasons why estate planning really matters. Wiser Financial Associates Jen and Michael break this down for you, piece by piece. One of the biggest is protecting your loved ones. They share that while Estate planning is a big deal, they also relate how simple Estate planning can be. Thanks for listening. 

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Wiser Financial Advisor – Estate Planning can be Simple

Hi Everyone, and welcome to the Wiser Financial Advisor podcast, where we get real, we get honest, and we get clear about the financial world and your money. This is Josh Nelson, a Certified Financial Planner, founder and CEO of Keystone Financial Services. Let the financial fun begin!

Michael: Alrighty, welcome everyone to this week's episode. My name is Michael Stevenson and today I'm joined by Jen Walenter. We’re both associate advisors here at Keystone Financial Services. We have a fun topic this week, I think: estate planning.

Jen: Yes, and estate planning is a little like buying an umbrella. The day you buy it, the sun is shining and you wonder if you'll really need it. But then the day you need it, you're very glad it's there.

Michael: Exactly. It’s like the windshield scraper I have in my truck. I park inside sometimes, but then there are days when it's snowing heavily and I need this thing to clear my windshield when I go home. Same thing with an umbrella. How many times do we whip it out? Not often, but when you're at the sports park watching kids play and all of a sudden a storm's rolling in, you need that umbrella.

Jen: And you're so glad you have it.

Michael: Estate planning is not something that people typically want to talk about. I wouldn't say that it's a Thanksgiving meal conversation. But maybe once every few years, it’s useful to ask, “Should we get things updated? Are we in the right spot? What do we have?” Or maybe this is a brand new topic to some of the listeners here. If you’ve never thought about it, the questions change. “What should I do? What exactly are we walking into when we say estate planning?” For somebody who has no idea what estate planning is, let's break it down for them. What exactly does that mean?

Jen: Yeah, that's a great question. A lot of times people feel like, “Oh, I'm not rich enough. I don't have a house big enough. I don't have that many assets to warrant an estate plan.” That's simply not true. Estate planning is important because it gives you control over what happens with your assets, big or small, your family, your healthcare decisions, if you become incapacitated or pass away. Again, while many people assume it's for the wealthy, virtually anyone who owns any amount of property or has savings, has children, needs an estate plan. That leads into some of the key reasons why estate planning really matters. So we'll break this down, piece by piece. One of the biggest is protecting your loved ones.

Michael: You bring up one of the topics that starts showing the value of estate planning, which is when you have minors, whether your own kids or maybe grandkids that you're the guardian of. Estate planning makes sure they're being taken care of in the event that you are no longer there. That's where you see example after example of people that didn't have a plan about who's going to take care of my kid in the event that I and my spouse pass away, or grandparents pass away. It's incredibly important to have a directive, a will that says, “Here's what I want to have happen with my assets, my loved ones, the people that I need to make sure I'm taking care of.”

Jen: Because choosing a guardian for your children might feel uncomfortable, but it's better than letting Aunt Karen and Uncle Bob argue about it in court.

Michael: Exactly. Somebody's gonna make the decision. If I and my spouse are doing a joint will or trust together, it's either going to be us, or it's going to be a guy I don't know. I'm hoping he does the right thing, but he's a judge. It's a court saying, “You know what? Here's what I think Michael (or any guardian) would want to have happen.” I would much rather make that decision myself.

Jen: Yeah, absolutely.

Michael: And it can be something simple. A will doesn't have to be a 50-page document. It can be something as simple as a handwritten note. You’ve got to date it, sign it, make sure you can have some proof on that page that yes, this is me. A notary is even more helpful. You want to essentially say, This is what I want to have happen. So, a will doesn't have to be complex. And I think a lot of people think it does.

Jen: Right. And then talking about naming a guardian for a child, one famous example that we could bring in is Heath Ledger. Many people know that Heath Ledger unfortunately passed away. He was very young. He starred in several big movies, but he passed away unexpectedly.

Michael: Yeah, he had about a $20 million estate. His original will just named, I believe it was his parents as beneficiaries to his estate. Obviously, later in life he had a kid, but he never went back and updated it. So his daughter got left out of the estate and had nothing. Thank goodness, the family did the right thing and awarded the estate to his daughter. That's not always gonna be the situation though, right? If the family had not been a fan of the daughter or if there was another kind of conflict in that family, they might not have done the right thing. The document could hold that said “It all goes to Mom and Dad. I'm so sorry, but there's nothing for you.” Terrifying to think of, for her and for anyone else thinking about estate planning. What's on the documents is going to be what holds up in court, whether that's a will or a trust. So it's important not only to have estate planning documents, but also to keep them updated.

Jen: And you bring up a good point, one where I think a lot of people mistakenly believe estate planning is a one and done thing. It’s really best viewed as an ongoing process rather than that one-time event because of things like major life events such as a marriage, a divorce, birth of a child, starting a business, retirement, significant changes in wealth. All of these moments do play into your ultimate wishes as they fall. So it is so important to not only have a will written, but also to review it maybe every couple of years to make sure it reads according to what you want and encompasses any recent changes that have impacted your life.

Michael: What we’re saying is, have a will. Just have a will.

Jen: Have a will.

Michael: I'm thinking of how Prince passed away without a will. Prince. 

Jen: The big artist, Prince.

Michael: Yes. Think about how many advisors he had in his life. I can't speak and say that someone advised him about it or not, but my goodness, Prince didn't have a will. No trust, no estate planning documents, no POA, absolutely nothing. It took six years of probate for the estate to fully settle. Goodness gracious, siblings of his, whoever the family members were that were beneficiaries of his estate, it took six years for things to get paid out. It was $150 million estate. But you think about somebody like that with an extremely complex estate including royalties, property, assets, checking, savings, all these different things, cars, clothes. I mean, the amount of things that he probably had in his house. Collectibles, things that were extremely valuable, all being decided by a court through the probate process. Think of the attorney's fees that were brought into the picture.

Jen: The family members potentially arguing over, I want this, I want that.

Michael: You had two different LLCs owned by his siblings, and then outside ownership. Those organizations, those associations, whatever they were, those were the beneficiaries of the estate. So you have a lot of people that have interests in this estate, as well as a lot of projects or future plans relying upon this estate, potentially. Wow. That's a good example. Get a will. They can be created in simple software. There are things you can do to get a will. You don't have to go pay $5,000 and see an estate attorney and have him draft a will. You can do it yourself. Obviously, doing it through an approved software program is gonna help with the validity of it. I would advise against just taking out an 8 by 11 piece of paper and writing a handwritten note and going to your bank to have it notarized. If you're thinking about estate planning, let's do it the proper way. But what a great example of ”Just go get a will. Make sure you're putting your wishes on paper.”

Jen: Absolutely. Because what that also does, like you were saying, is it helps avoid delays and administrative burdens, right? All of the complexities of somebody guessing what should happen to all of your stuff if you don't make that clear. Can you tell me, Michael, what else can a will help establish? There are things like preserving family wealth or planning for incapacity. Could you speak to that?

Michael: Yeah, absolutely. Proper planning can really help minimize: 1) unnecessary taxes, 2) unnecessary legal costs going through a probate process, and 3) administrative expenses if somebody's having to be paid to administer this estate. Having a will can help preserve family wealth. It also can provide strategies to protect assets for future generations. So if you're doing estate planning now, you can incorporate planning that says” When I die, here’s how I want my estate to be distributed to my loved ones.” You can create charitable clauses for that. Maybe there are beneficiaries with special needs. All of these planning topics can reduce those unnecessary expenses and preserve your wealth, preserve the legacy you've built.

Jen: Well, and when planning for incapacity, some people don't really understand what needs to happen in case you're incapacitated. A lot of people assume that their loved ones can take care of it. But if you're incapacitated, you might have to get the courts involved for something as simple as paying your bills. So, you want to name a power of attorney on file, somebody to help you with your financial life, somebody you trust who can help you. Because if you do not have that on file and you are incapacitated, somebody's probably going to have to go to a court to set themselves up as a representative to help you with anything. At the end of the day, that's not something any one of us would want to do, because that's time-consuming and then that's more money thrown at something that could have been planned for in advance.

Michael: Yeah, and it is a job. It takes a lot of time to be a power of attorney for someone who is incapacitated. Depending on the individual, they might have a full-time job. It could be a big burden to somebody who's a full-time employee somewhere. Okay, mom or dad or aunt, uncle, grandma, grandpa are incapacitated. I now have to go make sure all their bills are paid, make sure the house is being taken care of, the lawn's being cut. They also have their own lives, right? So, to be a POA for someone is an incredibly important role. I think one of the best ways to handle a POA designation is to go talk to that person beforehand, right? And most people do let them know, “Hey, I'd like to name you as my POA in the event that I'm incapacitated.” That way, they can be prepared and say okay. Then they have a vested interest in what's ongoing while you're still well able to take care of yourself and making sure your bills are being taken care of now. Would it be easy to take over in the event you were incapacitated? So, let your POA know if they're named your POA, and communicate ahead of time while you're making that designation.

Jen: Essentially, with estate planning, the whole goal we have is to help everyone understand that by planning a lot of these things in advance, you can avoid unnecessary delays, some surprises, and maybe things happening that you really don't want to have happen. We understand it's not fun to do estate planning. We know it eventually leads people to talk about death, and that's not a fun topic for many people. But it's something where I think, Michael, you and I both have experiences. We've been in this field for quite a while and so we have seen that one of the greatest gifts you can give your loved ones is your own estate plan laid out, having thought things through and showing how you would like to see things happen after you pass away. It is truly something that gives peace of mind.

Michael: Great example, I had a past client where, unfortunately, the father passed away. He and his brother were the beneficiaries to that estate. Okay, how can we help out? And he said, “Actually, it's pretty much all taken care of.” He got through his dad's estate and I believe it was just a short couple months because everything was thought out, dealt with beforehand, named the trustee on the trust, all of the assets in the trust, beneficiary deed on the house, beneficiary deed on the cars. This type of estate planning didn't have a ton of assets. It wasn't that he had property in 40 different states. It was all here in Colorado,  a very simple estate, didn't need a whole lot of work done. Just the fact that he had it all consolidated inside the trust made it easy for somebody going through a difficult time, right? He’d just lost his dad, lost his mom years ago. That alone is an emotional burden. What if it were a situation of then having to take care of all the stuff, all of the assets? Where are the accounts? The house, what are we going to do with that? The cars. It was already settled because it was inside the trust. What a great example. Way to go, Dad. You pre-thought. You had a plan. The logistics side was very easy. The emotional side is not. But that's a prime example of having your estate wrapped up inside of a trust.

Jen: Yeah, it's giving somebody the key recipe to that fabulous cake, right? You make it very clear how many cups of flour, how many cups of sugar, you know, is there salt? What's the secret ingredient? Is it cinnamon? Is it almond extract? So, when it comes down to it, every detail is listed out to be able to do this thing. That way, there truly is that peace of mind, knowing it's written out, and how to work through that process. 

Michael: Yeah. And not having to go to probate, not having to go to court for any asset is a huge plus. You're saving time, you're saving more emotional stress on revisiting topics. When you don’t need to go to court, it helps maintain privacy of your family's estate and what's in there. It also avoids the delays, right? Because probate often can take a long time. In the example of Prince, it took six years. In other situations, it might be that you’ve gotta wait six months to even go to court or something like that. I think we've had an example here of someone who had to revisit probate multiple times because assets were found.

Jen: Yes, that they were not aware of, that they suddenly stumbled upon. And it restarted that clock because they had to introduce this asset into probate. 

Michael: Right. You think the estate's settled and then, oh, wait, my brother had a property in another state. Now that's included in the estate. We’ve got to reopen probate. There was no beneficiary deed on it. Who knows what the situation is, but restarting probate over and over again. Now we’ve found this bank account that had 5 bucks in it or something like that. That kicks it up again. So, avoiding probate is often an important thing to our clients, to people who want to have their estate plan documents in order. Staying out of probate would be great for the family, because that's what often brings up the most stress due to the delay, and also not having the assets settled could be a stressor because who knows what is needed around the estate. if all of the assets were tied up in property or business or something like that, there's not much liquidity. Then if anything that is liquid is held up in the probate process, this can now create more stress.

Jen: Another big question that we often get is, ”What kind of estate planning documents do I need?” Full disclosure, we are not estate attorneys. Right here at Keystone, we help clients with financial planning with a key element being estate planning. We just want to make sure you have all your documents. Some very common documents that we are aware of that help clients in their financial planning are things like a will, a durable financial power of attorney, a health care power of attorney, an advance health care directive or a living will. Also things such as beneficiary designations on retirement accounts, insurance policies, brokerage accounts, and then of course a trust when appropriate.

Michael: Yep, exactly. All of these things should and can be revisited at different moments in your life. Ones that come to mind are if my spouse passes away, I should revisit things because she was probably primary beneficiary on any accounts, whether that's retirement account or checking or savings. Contingents then should be moved up to primary. If you're going through a divorce, that's one I've seen before where there’s a 401k at work, someone gets divorced, revisits it 10 years later and realizes, oh my goodness, the ex-spouse is listed as beneficiary. And they ask me, what would have happened if I passed away? That account would have gone to your ex-spouse, and obviously that's not what he wanted. Those moments in life when things are changing drastically, when it's a big milestone, you should revisit these things—your will, your trust, your directives, your POAs, beneficiary designations, all of that should just be wrapped up together and reviewed to make sure that it is what you would want to have happen. And it's something we're doing a lot with our clients, right? And during our reviews, taking a look. Are beneficiary designations what they should be? If you have a trust, are the designations matching the trust? If they are, great. If they're not, maybe we should just name the trust as the beneficiary. And that way we know that things are rhyming together and a part of the same plan. These are simple things. It doesn't take a lot to get these documents correct.

Jen: Yep. What are your final thoughts on estate planning?

Michael: As you're probably listening to this conversation here, you're thinking about your own situation. What property do I have? Do I have kids? Do I have my estate plan? If you have one, you're probably thinking about when was the last time I visited that? If it was five years ago, 10 years ago, it’s probably worth taking a look at it now. It's not that you have to redraft your documents. You maybe don't even have to make amendments. You just need to review it and make sure your wishes are still the same today as they were five, 10 years ago. The other side to it is, how easy it can be to do this. I think there are a lot of online programs that have surfaced over the last 5 or 10 years where you can go get estate documents done online, print them out, take them to your bank and have them notarized. And there you go. I have a POA, I have a will, I have a trust. Now, getting the expertise of an estate attorney is probably a good thing to do if you can.

Jen: Especially if you have a more complex situation.

Michael: But if it is something simple, an online solution may be enough. And we've even directed some of our clients to online solutions. So if you're sitting there thinking I might be interested in that, just contact us and let us know. We can connect you with some of those online resources. Like Jen said, we're not estate attorneys, so we're not going to draft any legal documents. We're not going to draft your trust or will, but we do have trusted professionals in the area, people we can reach out to and refer you to because it is important. 

Your final thoughts, Jen. What are you thinking about this, and what should people be thinking about after leaving the podcast?

Jen: I think you hit the nail on the head. Everything you just said was spot on. It's one of those things where we don't really like to think about our own death and we don't really like to think about the what ifs, but it truly is something that is so important to integrate into our financial planning. Here at Keystone Financial Services, we know it's an element that affects your plan at the end of the day. Most people don't avoid estate planning because they don't love their families. They avoid it because they're busy, uncomfortable, overwhelmed, or convinced that they will do it later. But our job isn't to pressure people. It's to make that process simple enough so that they can finally move it from the someday list to the done list.

Michael: Yep, absolutely. Great, great points there. We hope you guys have enjoyed this week's episode on estate planning and how simple it is. We'd love to be a resource for you. If need be, contact us, visit our website, and I guess we'll just sign off here today.

Jen: Yeah, sounds good. Thanks, Michael.

You can learn more about us, schedule a conversation, or reach out with questions anytime. We'd love to hear from you. The best way to find us is just going to our website at www.keystonefinancial.com . if you enjoyed the Wiser Financial Advisor, please subscribe on your favorite podcast platform, leave us a rating and a review and share this episode with a friend, family member or coworker who might benefit from it. This will help us reach more people, and sharing episodes is one of the best ways that you can support the show. Thanks for listening to the Wiser Financial Advisor podcast. 

Until next time, keep asking good questions, stay curious and make wise financial decisions. Take care and God bless.

The opinions voiced in the Wiser Financial Advisor show with host Josh Nelson are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine what may be appropriate for you, consult with your attorney, accountant, financial or tax advisor prior to investing. Investment advisory services offered through Keystone Financial Services, an SEC registered investment advisor.