Ep. 42: If you Can't Decide Tomorrow, Who Will?

In this episode, Taylor Cole, CFP® and Vic Colella, CFP®, CDFA®, revisit the core documents that form the foundation of a solid estate plan. They then take a deeper dive into the durable power of attorney, sharing real-world insight into why this powerful document sometimes creates stress for families and what steps can help ensure it is properly implemented before it is ever needed.

If you have suggestions for episode topics or would like to give us feedback, we would love to hear from you! Please email us at podcast@woodwardadvisors.com.

Transcript

If You Can't Decide Tomorrow, Who Will?

[00:00:00] Hello everyone and welcome to another episode of Your Money in 20, a podcast by your friends here at Woodward Financial Advisors. My name's Victor, your host. I am a wealth advisor and certified financial planner here at Woodward, and I'm joined by Taylor Cole. Hi Taylor. 

Hi there. Welcome back to the podcast.

Taylor's been on before, but she took a long unexplained absence. so we're glad to have her back. Taylor's also also a wealth advisor here and certified financial planner. Yeah, so glad to have you here. Our podcast today was her idea. so that's why she's here. I said, it's a great idea. You have to, you have to join me.

Thank you. and we're talking about the premise of if you can't decide tomorrow, then who will? If you don't know what that means, you're probably not alone. It's meant to be thought provoking and mysterious. I'm gonna do the disclaimer, let everyone stew on that for a moment. So, none of what you're about to hear today is meant to be advice for your specific situation.

Uh, it is meant to be informational only and hopefully start [00:01:00] conversations that are specific to your situation. So if you need tax advice, talk to a tax person. If you need investment advice, talk to a financial advisor. I know one, her name's Taylor Cole. She's great. if you need legal advice, talk to an attorney and we're actually gonna be in the legal realm today.

So. What we're talking about is, a specific part of the core estate planning documents that we think almost everybody should have. we'll talk about back in episode eight, early on we did a four critical documents of the estate plan. We're gonna review that, and we're also going to dive deeply into the fourth of those, which is the durable financial power of attorney.

So Taylor wanted to start us off with the fun fact Taylor hit, hit us with the fun fact before we continue. 

Sure. Not a whole lot of fun facts about estate planning out there to be honest with you. however, I did find that the oldest written will [00:02:00] dates back to 2061. BC, so this was actually for the son of a Pharaoh.

His name is, excuse me if I butcher this Neke. There's an apostrophe in the middle of the name. Unsure how to pronounce, for those of you who wanna ask the ai, who that is. It is NEK apostrophe URE. Yes. So have fun. Yes. So not a traditional document in the way that we think about it, but instead his will was carved onto the walls of his tomb and from there that indicated that he was gonna bequeath 14 towns.

That's amazing. I would love to own 14 towns that's above the estate planning exemption. I think. I believe you might be right there. Uh, two estates and other property to his wife. Another woman and three children. Well, you know, different time, Taylor. Different time. Alright, well with that I'm gonna bring us back to this century.

so we, we thought it might be helpful to, to [00:03:00] review what we've talked about before back in episode eight, as before. Essential documents of an estate plan. This is not meant to be exhaustive, but it covers a lot of it, and I'll just run real quickly through each one and then we can just talk a little bit about what each one is.

We wanna spend most of our time on the fourth though, so we'll move pretty quickly here. So yes, the first one is a will. This is what everyone thinks of. It determines what happens to the. Assets or things in your estate when you die. Yeah. And not just that actually. So your will, so people generally think about this as the estate planning document.

Yeah. This is kind of the first, you know, crack at what you want to happen with assets when you pass. But this is also where you designate a guardian for your minor children. So a will is not just something that older folks need. Mm-hmm. This is something that everybody needs. Additionally, the fun, another fun thing about it is you can also designate guardians for your [00:04:00] pets, right?

If you were to leave and your pets need, you know, to be taken care of. So, uh, it's also really important because it names the executor of your estate. Mm-hmm. So the person who is actually going to, uh, you know, action, do action for what you want to happen in your will. Yeah. And then one thing that a lot of folks misconception is that.

A will again is the only thing you need. It's not, I, I think a lot of folks put too much thought into a will. A lot of people don't have many assets that actually go into a will. So if you have a 401k workplace plans IRAs with beneficiaries, those things usually don't even go through the will. Mm-hmm. And of course, key for our conversation today, the only way your will takes effect is if you are gone.

So. Disability or incapacity is not at all covered in any way, shape or form. And very often that's the overlooked part of estate planning is incapacity, which could happen to [00:05:00] anyone at any age. Right? Uh, there are horror stories. We won't go in there into some of the ones that we know, but, um. Yeah. So that leads us to the second one.

So healthcare power of attorney and HIPAA release. Sometimes they're combined into different documents, but, uh, Taylor, what's a healthcare power of attorney? Yeah, healthcare power attorney is someone that you designate to make healthcare decisions for you if you were incapacitated. So think about, um, if you were in a car accident or.

You know, a vegetative state, someone that you trust that you know, uh, can speak for you while at the hospital and make those decisions. Yeah, so really important distinction. Power of attorney. Whenever you hear that, you can think incapacity is what triggers it. But there are separate roles, separate documents for healthcare and for financial power of attorney.

We're gonna be talking more about financial power of attorney today. Uh, one more before we do the advanced directive or living will. Taylor, what's this? [00:06:00] Honestly, this might be one of the greatest gifts that you could give to your family members. Uh, when we talk about these estate planning documents, this is ultimately what guides your end of care, end of life care.

So again, if you were in a vegetative state, would you want. To, you know, be taken off life support. Would you wanna stay on life support? This is where families can have a lot of tension. It's a really emotional time, and if people are not agreeing, leaving some sort of map a clue for them to know mm-hmm.

Exactly what your wishes are, makes it much easier on your family. Yeah. Yeah. It's, it's, you are the only missing voice in that moment. Which you can solve for. Yeah, by writing down your intentions ahead of time. So that one's really important. So that leaves last, but certainly, certainly not least. And the focus of our conversation today, especially as financial advisors, we're not usually part of the healthcare decision making when folks are incapacitated.

But very often, uh, the durable power of [00:07:00] attorney or financial power of attorney, durable financial power of attorney, uh, this is the document. And I'll just quickly define it 'cause we're gonna go much deeper. This is the document that in that same situation where the healthcare power of attorney comes into play, so you're incapacitated, can't make financial decisions on your own.

And that could be. Uh, age related. So dementia or, or, sort of mental deterioration with age is a classic. This is what we see maybe most often, but it could be for whatever reason, you're unable to make decisions. It could even be temporary where you are incapacitated for a long surgery in anesthesia and somebody needs to make an urgent financial decision.

I, now, this is rare, but this can spring into play. Durable means. It continues to exist with you incapacitated. That's what the durable and, and talk to an attorney if you want, the real definition. But that's the basics from, from from [00:08:00] our perspective and just practically. Um, so. Anything to add to that before we move on?

Yeah, absolutely. So I would add that it's also effective immediately. Mm-hmm. So there's a difference between a durable power of attorney and a springing power of attorney. So the durable power of attorney is effective immediately. So when in doubt, leave them out. If you don't trust the person you're naming as your durable power of attorney, then leave them out of that.

Now, the springing power of attorney is if and when you become incapacitated at that point. That is when, yeah, it springs into. Power, basically. Yeah. That's great. And uh, yeah, we're gonna talk lots more about that. So, but one of the things that triggered this conversation, so Taylor and I have a, have a mutual client who, this is a situation we've seen a number of times, but this one sort of spurred the idea for us to talk about it here.

Uh. Taylor, why don't you, why don't you sort of describe the situation at a high level? [00:09:00] Sure. So we have a new client, uh, you know, late eighties, recently moved into assisted living and very quickly had a rapid decline and was moved to memory care. We have the power of attorney, who is her wonderful daughter.

She's come in and the. Accounts are very complex. There's, there's accounts at all these different custodians, and she's very confused about, uh, you know, where everything is, what is the best move to make. But what we're hitting here is that now her mom's incapacitated and she is in memory care, so she can't make these calls and decisions on her own.

Right. And a really important distinction here is that all the right documents are in place. Absolutely, and, and we wanna focus on step two mostly today. So all the right documents are in place. That's step one. If you don't have a durable power of attorney, then [00:10:00] step one is to get one, pause this podcast and go do that.

But there are a lot of misconceptions and this situation really laid a few of them bare that. That's where it ends. So, so to make life easier for the folks who will be around when you're not here or when you're not able to make decisions, uh, that's where we're gonna focus our time. So, um, just because you have the document doesn't mean you can just go around and impersonate that person and everyone's gonna listen to you.

So, uh, Taylor, where should we start here? I, I know we have just a few random thoughts, but just that may be the first one we talk about custodians. Yeah, we can absolutely do that. So like Vic was saying, you know, having that durable power of attorney on file, having it most likely somewhere in a safe deposit box or maybe in a drawer in your desk is great.

That's one thing. However, actually implementing that durable power of attorney is where step two comes in. Mm-hmm. So. In this case, mom is now in memory [00:11:00] care and they need funds. They need to start that long-term care policy. But mom is not capable of signing that paperwork. So what we have to do with each custodian is give them a call with the power of attorney on the line, inform them what is going on with the client.

The mom in this case, let them know that we have power of attorney documentation, and then the custodian does their own due diligence. So they're gonna want that durable power of attorney document. Generally they have their own forms as well, that you have to fill out some sort of identity verification in some cases.

Mm-hmm. That can include getting the form notarized. So, because unfortunately the financial world, people get taken advantage of and so these custodians are wanting to make sure that this durable power of attorney is one the most recent document and two valid, so that when somebody calls in, they are, you know, because they have a fiduciary duty to their client potentially.

Yeah. Yeah. And, and custodian, just for, for the sake of [00:12:00] decoding some of what is advisor talk, I mean, that is your fidelity, your Charles Schwab, these are the big companies that typically your banks who hold the assets, cash, whatever the, whatever the thing is. And that, that sort of brings us to our second point.

So in this particular client situation, there were accounts at, let's say half a dozen or more different institutions, some in. Different types of registration somewhere in, uh, different types of accounts. So the process is repeated, yes, as many times as you have financial institutions, and that may not seem like a big deal if you've been used to looking at all these different locations for years.

But from experience as the advisor who's sometimes in the picture, the simpler you make your financial picture. The better it is for the folks who will survive you, who will be here when you can't make [00:13:00] decisions on your own. And, uh, sometimes there's complexity that you can't solve for. Sometimes there's complexity that you can, so in this case, there was a lot of complexity that maybe had a purpose at some point in the past, but had outlived its purpose.

So simplify is probably our next hottest tip, um, for your own sake. Certainly, uh, keeping track of fewer things if fewer places is always easier and it increases the odds that nothing gets missed. But, uh, oh boy. For the folks who'll be, because they're getting up to speed in the moment, right? If it's not easy to understand, if it's not all summarized in one place, if it's passwords and things aren't, uh, in one single location, uh, it can be an absolute nightmare.

And we've unfortunately had some of that with this client, but also we, we we're used to that. Uh, that's kind of a common thread where folks will come to us to help get organized, which we're happy to do. Um. Anything to add to that point? Yeah, I mean, just to, to [00:14:00] clarify what we mean by simplification is consolidation.

So right. Do we need all of these accounts at these various custodians? Is there better products that we could get to one place, make sure beneficiaries are set up? Um, and in that way it's all in one nice, neat place. And then when unfortunately the inevitable happens, simplifying and, uh. I just lost that word.

Yeah, no, I knew where, I knew where you were going. Consolidating. That's, I was trying, yeah, consolidating. There you go. Mean, consolidating those accounts makes it so much easier and truly a gift to leave to your family members. Yeah. And, and just one, one other note here that's related but different. Taylor brought up the difference between a springing power of attorney and a, and a regular power of attorney earlier.

So the one is immediate. As soon as you draft the document, it can be used. Often we'll have folks who are aging and are getting their kids involved, and that level of involvement is usually a sliding scale first of all. At first it's just a, Hey, FYI, here's what we've got going [00:15:00] on. Then it graduates to, I want you to come to my meetings with me, and then eventually it's.

Hey, could you do this instead of me, like helping outsource with you? Bring your kids into the loop. Uh, that Power County attorney can be used in that moment too, where they don't need to have, you know, if your son is getting involved, your son doesn't need to be on the line to call and get something done with your bank.

They can just do it for you and, and that's a convenience aspect before you're incapacitated. But we see these documents used that way all the time. And when something does inevitably happen. Yeah. They're already used to the process. Yes, absolutely. And the other thing I'd like to say is, so we're talking here specifically for step two on the durable power of attorney.

Right. Getting that implemented, go ahead and getting that, uh, on the custodian's, uh, you know, platform so that they know that's good to go. The springing power of attorney isn't something you can do step two. Mm-hmm. There is no opera. Operationalizing it until that incapacity. And then at that point you have to [00:16:00] get the doctor's note, then send in the documentation.

So we're specifically talking about durable power of attorney in step two. Yeah. Yeah. Right. And uh, this all sounds great, but a lot of folks don't get around to bringing their, you know, kids or whoever there is gonna be acting as their power of attorney into the loop. If, if you're, if you don't feel comfortable with that until, until the moment where you have to, or if they're not, you know, if they're too busy or, or if it's just challenging in some way.

You know, we're biased, I'll admit a bias here, but if you have a financial advisor who's involved, they have all the answers to the questions that that power of attorney is gonna have. We have been in some situations where you have a, a, a power of attorney that comes into place. At the sudden passing of one spouse and the other spouse is already incapacitated.

So one spouse can't make financial decisions, the other spouse is making all the financial decisions and that person [00:17:00] passes. Unfortunately, that happens more often than, uh, than I think anybody realizes if they're not in our business. But when that moment comes. That power of attorney who's stepping into a picture they're completely unfamiliar with, if they didn't have a financial advisor like us or someone, someone who was in the loop on all the financial matters of the household, that would be an untenable situation.

I don't know how it would even play out, because that person usually isn't a financial expert in some way. Um, so, so, really. Really a tough situation, but having a financial advisor is gonna do nothing but help that power of attorney because, uh, they can guide the process related things. They can tell you what to expect and help you, uh, make decisions by giving you all the information you need and, and without a financial advisor in the picture, that's all just a little bit harder.

It's possible, but it's harder. Yeah, absolutely. Get someone in your corner. Okay. We've got a checklist to close out with, um, a call to action, some somewhat. [00:18:00] Um. Taylor, why don't you run down? I think we've talked about a couple of these things, but not all of 'em. So go ahead. What, what else maybe have we forgotten?

Sure. So, uh, so one we just wanna say, so for everybody out there, not just those that are aging, but uh, you know, go out, confirm that the documents exist. Do you know where is your durable power of attorney? Is it, you know, can you locate that? Do you have it? Or your parents? Yeah, or your parents. If you suspect you are your parents' power of attorney, or could be.

Oh, this is in your best interest and theirs. Uh, so you know for sure. Make sure that they exist. Absolutely. And then review who is named, who are on those documents. This could be old data, perhaps that is a power of attorney that's 10 or 15 years old, perhaps somebody has passed away. Um, so review those names, make sure that they are who you want, uh, them to be.

Yeah. And have successors have alternates, right? If the alternate is somebody who we don't like anymore, or we don't talk to, or who isn't alive, uh, that's a reason to go talk to the estate attorney to [00:19:00] update it. Yes. And also update about every five to seven years you wanna keep this active. Good rule of thumb.

Yeah. so on top of proactively submitting that power of attorney, you, you'll also complete those required forms for the, in, you know, the internal forms for those custodians. And then make sure that they've confirmed. That, you know, durable power of attorney, just because you've thrown the paperwork over the wall will say doesn't necessarily mean that they've accepted it.

So make sure you get that confirmation. Perfect. Well that, that's our list. I hope this is helpful, Taylor, thank you so much for, for the idea. Uh, this has been, it's a bit of a lessons learned from our perspective as well, but hopefully this can help some, some folks who are listening out there, absolutely glad to be here and I'm glad to talk about this topic.

Yeah, so proper planning is a gift. Uh, step one is usually, a lot of our clients do that one well. Don't forget the second step. Um, and I think maybe that's what we'll leave you with. So thank you all for listening. Thanks Taylor again.