Retirement Roadmap

Retirement Must Haves: Estate Planning Bare Minimums

• Mark Fricks • Season 2 • Episode 29

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Has your estate plan become a dusty relic? In this episode, Mark and Evan Fricks discuss legacy planning and how to make it a part of a robust roadmap that reflects your current wishes and complies with ever-changing laws. Discover how Advance Directives can be essential, especially if you live across state lines, and how they can possibly prevent court battles while honoring your healthcare decisions. Navigate the intricacies of beneficiary designations and how they can be a pivotal part of your legacy planning toolkit. Keeping your beneficiaries up-to-date could spare your heirs from the cumbersome probate process, especially after life changes or corporate shifts. Having an adequately equipped estate plan can protect your family and can help your estate transition smoothly according to your wishes.

Have a topic or question you'd like Mark and Evan to address in a future episode? Email us at info@masterplanretire.com or call 770-980-9262.

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Call 770-980-9262 to speak directly with someone about your retirement planning needs.

https://masterplanretire.com/

Catch all episodes of our podcast at https://www.masterplanyourretirement.com/resources/episodes

Listen to Mark Fricks on Saturdays at 12:00 p.m. on XTRA 106.3 FM WFOM.
Sign up for one of our upcoming events at https://www.masterplanyourretirement.com/events

Purchase Mark’s book, The Road Less Traveled: Turning Your Retirement Worries Into an Excursion of a Lifetime, on Amazon: https://a.co/d/4fx94Al

Advisory services offered through MasterPlan Retirement Consultants, Inc., a Registered Investment Advisor in the state of Georgia. Insurance, tax and commodities services offered through Fricks and Associates, Inc. dba MasterPlan Retirement Consultants. The aforementioned are affiliated companies.

Speaker 1

Hey folks, thank you for joining us. Welcome to Retirement Roadmap with Master Plan Retirement Consultants. My name is Evan and with me, as always, retirement Planner Mark Fricks. Our discussions can draw from a wide range of retirement topics, and not every point will apply to every individual. Everyone has a different circumstance and situation, so what may apply to one may have no bearing on another. This is one reason seeking a financial professional can be so important. You have a plan made specifically for your needs and your life. But all that disclaimed, there is one recommendation that is the most important for every single adult person an up-to-date estate plan. Regardless of how low the probability is that you'll need your estate plans today, there is a 100% chance you'll need them at some point, and that point is unknown. If you don't know where to start, today's discussion will outline some vital points that require your attention.

Speaker 1

So Mark we already have discussed in the past the importance of an estate plan. How many complete estate plans do we see come across our desks? Or the new clients, would you say?

Speaker 3

you know what we mostly see, or really really old documents yeah, so many people get their documents done, like when they have children, and then they come in here. They're age 50 or 55 or whatever, and I mean they're just would they work?

Speaker 3

mmm, maybe, but probably not the way they'd want them to work, especially when it comes to powers of attorney and health care directors, because those have aged out, the laws have changed. But yeah, they come in with this two page will from you know, 1982 or whatever. And it's just one of those. Things is so easy to put off. You know you don't want to think about what they mean. It's so easy to put off. You don't want to think about what they mean. It's on your list or whatever. But that's mostly what we see. Maybe 20% don't have anything, but quite a few people just have really old documents.

Speaker 1

I just came across a new client's will and it was made in the 80s and 50% of their heirs are no longer living within that will.

Speaker 3

So that's something that's certainly, and maybe the backup executor or executress might be gone as well, or the spouse or whatever. So it really. And the problem is it gets tied up in court. We'll talk about that some today as well, but you get tied up in probate. It comes down to judge's decisions, it comes down to state law and it can really. I love it. What you say is the greatest gift you can leave your family are complete documents. They're updated, properly executed.

Speaker 1

Well, that brings us to the first bare minimum, and that would be advanced directives as an estate planning priority. This is basically a combination of a health care power of attorney and a living will.

Speaker 3

Right, and you need one state-specific. So whatever state you're living in, it needs to be based on that state's laws. This is not a federal form, this is a state form, and so, as we talk about this, there's actually three sections to this form, at least in Georgia. Again, this could vary, but primarily, the most important section is number one is who's going to make your health care decisions if you can't communicate? Ok, whether it's a long term situation, whether it's a short term, maybe I've been in an accident or whatever, and they need to do surgery. That is not an automatic spouse decision, and so you really need to have that paperwork together. And if you spend time in more than one state maybe you live in Florida half the year, in Georgia half the year you should have one for both states as well, because, again, the laws are different.

Speaker 3

Section two is what I call the unplug me part, so it's the living will. How do you want to be treated in the last days? How do you want to be kept alive or not kept alive? What machinery, machines, things like that, and so this is language that frequently changes because of technology. You know what they could have done 20 years ago. You know they could do so much more now perhaps. So you have to be very careful how you word this.

Speaker 3

The document in Georgia and most states is actually very fluid. In Georgia it does not even have to be notarized. You can actually go back and add language, things of that nature. So that's part two, and part three is guardianship. So what happens the very final days and after you pass away, who's in charge of your person, funeral home arrangements, things of that nature, who can authorize an autopsy and things that go along with that. So that's the three parts that you need to have, and it's important that you have someone whether it be your spouse or whoever the backup may be to make those decisions. That can do it in a way that's not too emotional, because these are your wishes you're putting down. You want those wishes honored. You don't want somebody coming in panicking and changing stuff and things of that nature. So you want them to be somebody that can be cool-headed in an emergency situation.

Speaker 1

And it doesn't hurt to have a medical background, it's not required but it doesn't hurt Well, and that being said, these can be difficult decisions to make for yourself period. But then to think about not having these in place and these directions in place your heirs in this moment of grief or emergency having to, it's hard enough to remain calm, but to have to make these heavily highly emotional decisions, this goes a real long way in going ahead and laying out your desires there.

Speaker 3

And can you imagine maybe having to go to court to get the right to make that decision?

Speaker 3

when somebody's yeah, I mean, it's so important and actually in Georgia, the health care directive is complimentary online. Make sure you don't go to a website that's trying to sell you one, but it is a complimentary. You may want help filling it out with an attorney or somebody that knows what they're doing, because the language can be a little legalese, right, but that is a document that is so important that it is available online and I would encourage you to pull that down and get that filled out.

Speaker 1

And then the next document kind of goes hand-in-hand with the advanced directives, that would be the durable financial power of attorney.

Speaker 3

Right. So this is another living document. In other words, this is a document that is used when you're still alive, okay, and it allows someone to make financial decisions for you. It allows someone to access your financial accounts to take care of you, whether, again, maybe it's a two-week period, maybe it's the rest of your life, where you can't make those financial decisions, whether it's because of memory or just the health situation you're in. So that's again critical, because just because you may be a beneficiary of an account you haven't passed away yet, so you can't get the money while the person is still alive. So you want the ability to be able again to go to that bank account, that IRA, to withdraw funds, to be able to either take care of you or keep the bills paid, keep the mortgage paid, things of that nature.

Speaker 1

And if you're married, this is 99% of the time going to be your spouse. But also it's important to consider backups on these documents as well.

Speaker 3

Absolutely. It could be a common accident. It could be a very short time between when maybe you need it for one and then you need it for the other, especially as we get older, into our 80s and 90s, more likely that that kind of situation will happen. So you definitely want at least one good backup to that.

Speaker 1

And not to go too far off topic, but this is a good opportunity to also say the need for immediate liquidity if something were to happen to your spouse. A lot of times, if two spouses have separate checking accounts, maybe they're not joint or they don't have access to the other. Once someone is reported deceased, you don't have access until you have the death certificate, and then there's a process in getting access from there. So having joint accounts is really important, with enough liquid money there and because a funeral home is going to want their money yeah.

Speaker 1

Fortunately, there's a lot of expenses right off the bat.

Speaker 3

Yeah and I don't want to be too funny, but it is Halloween.

Speaker 1

But you don't want to be kept on ice for three weeks waiting on some funds to come in or whatever, and people say, well, we both have life insurance policies, really healthy death benefits, but those take time and you can't get that payout until you have a death certificate, which could be three to six weeks. We saw a lot Recently. We saw what eight week process.

Speaker 3

We saw one that was four or five months because they had to do an autopsy and they were behind. And ever since COVID they seem to be behind. So once you have to do an autopsy, that death certificate is not issued until after the autopsy is done. And I think with the client I'm talking about I think it was about five months she had to borrow money from her 401k at work to be able to get expenses paid.

Speaker 1

Now I remember who you're talking about. Okay, so the next topic if you're an adult with any retirement-specific investments, iras, 401ks, annuities or any privately held life insurance, you'll likely need to designate beneficiaries for those accounts and policies.

Beneficiary Designations and Estate Planning

Speaker 3

Very important that you don't put down to your estate. If you list your beneficiaries as your estate, which sounds very simple and easy, that's got to go through probate. And if you don't have a will, that's even worse. But even if you have a will, that's got to go through probate. And if you don't have a will, that's even worse. But even if you have a will, it's going to go through the will. And I tell you what the beauty of having a beneficiary is it goes straight to that beneficiary. There's no holdups, there's no contesting of it, there's no waiting for probate.

Speaker 3

We've seen claims be paid out in 10 days to two weeks, and so make sure you have beneficiaries lined up. Don't assume either. In fact, with our clients we do a beneficiary audit every two to three years because maybe it got lost. I mean, when you have mergers of insurance companies or banks or whatever, I've seen beneficiaries lost and suddenly, if you don't have some kind of proof, then it's going to go through your estate again. So we do a beneficiary audit as things change, as wills get updated. You need to take a look at that as well if you end up getting a trust.

Speaker 3

So you know, having documents is very important, but having a plan around those documents that's what we call an estate plan, making sure all those pieces work together. Do the beneficiaries match up with your wishes in the will and vice versa, because, again, the will is not going to control those beneficiaries. Make sure you have backup beneficiaries. And then you get into the concept of, let's say, I'm leaving my life insurance policy to my two kids and they have kids, so do if one of those beneficiaries passes away before me. Do I want it to go to their kids or to my other child? That's a specific language and, again, so you might need to get help with that. That's part of what we do as holistic retirement planners is we help plan that estate, not just write documents. Now, we're not attorneys, we don't write documents, but we have several attorneys as part of our team. But we get together with the attorneys to get that plan together. Make sure it all links in to not only all of their accounts but their entire retirement plan?

Speaker 1

Absolutely, and we're talking about retirement accounts specifically right now, but that also goes for checking savings, anything else like that that doesn't typically have a beneficiary, but you can put on there what is called a TOD or transfer on death or POD, payable on death.

Speaker 3

Yes, great. A lot of people don't realize this. But if you've got a checking account, if it's joint and you pass away, it's automatically going to go to the partner, the spouse. But the second passing where does it go? It goes through probate. If it's a single account, again it's going to go through probate. So add a TOD or a POD. You just go to the bank, ask for the form, fill it out, sign it and now that money, if you pass away and you're checking savings CDs, go straight to that beneficiary. It's a beautiful idea. Many people are not aware of it. Very important that they know that.

Speaker 1

Yeah. So the next step if you're an employed adult with company benefits, you'll likely need to designate beneficiaries for those benefits. For example, most benefit packages have a modicum of company paid life insurance. If you don't name a beneficiary, no one will receive that benefit. It's unlikely and unfortunate that that's the case sometimes. Also pensions, things of that nature. If you are receiving a pension or are planning to receive a pension, make sure that you have your beneficiaries set up on there.

Speaker 3

if the pension has a beneficiary, I think the most likely area that we see beneficiaries missed is on company accounts. You know you join a new company and maybe you have a group health policy and you know either you don't think about it or maybe it only has room for one beneficiary. Well, you work for that company 20 years. Maybe that beneficiary passes away, or maybe you divorce that beneficiary. Well, you work for that company 20 years, maybe that beneficiary passes away. Or maybe you divorce that beneficiary and now there is not one on there or whatever, or maybe they're still on there. So be very careful with the company plans, whether it be group health, whether it be 401k, as you said, thrift savings plans, 457bs of course all of those. Audit those every once in a while, make sure that they are correct. Of course all of those. Audit those every once in a while. Make sure that they are correct.

Speaker 1

Okay. So I do want to take a moment to remind everyone to check out our website, masterplanretiredcom. There are estate planning checklists. There's an actual checklist, step-by-step, what to do when a loved one passes. So these topics we're discussing today, we actually have resources that you can download and access on our website, masterplanretiredcom. You can also schedule your complimentary consultation with one of our advisors to discuss your own retirement, have a series of reports ran for you. That is a complimentary consultation, no strings attached, and at the very least, you walk away with a lot of information on your own situation. So, again, go to masterplanretirecom or call us at 770-980-9262.

Importance of Estate Planning Documents

Speaker 3

You know the coolest thing about the website With all the resources, with all the podcasts, with all the YouTubes, with all the checklists, there's this little green button that says schedule a meeting, and you push that button and magic unfolds, my calendar pops up and you have the ability, between Evan and I, to schedule a 45 minute time to sit down and talk about whether it be your estate plan, but, hopefully, your entire retirement dreams, goals, thoughts, fears, all of that. And then, like Evan just said, from that meeting, second complimentary meeting is a series of seven to 10 reports. Let's find out where you're at. Let's find out, if you don't know where you are, you don't know how to get where you want to be, and so these reports will reveal that. So hope you take advantage of that. That is the coolest thing about our website. We pay dozens of dollars for that extra money, absolutely All right.

Speaker 1

So the next topic if you're an adult with any assets that don't have beneficiary designations this could be vehicles, houses, land, valuables, things like that you will likely need a will.

Speaker 3

A will is, as I like to say to folks. It is a dead document until you die, right. So it doesn't take effect until you pass away, right. But at minimum you need a will, because again it's going to be up for grabs. You're going to have people coming out of the woodwork. Hey, mark promised me his gun collection, mark promised me his gold coins or whatever.

Speaker 3

No, mom, I'm the favorite son, whatever it may be, as I've said probably several times on these broadcasts, is you never really know someone until you share an inheritance with them. That's Mark Twain, by the way. I don't want to steal that, so, but it's true, we see it. We see I've seen station wagons backed up to houses during the funeral, ransacking grandma's house. Well, I'm not going to say I've seen it, but I've been told about it during that week when it happened. So I wasn't across the road spying on them or anything like that. But yeah, it can get crazy. So at least a will. I mean, I don't care if you're 25 or 30 years old, just want to get on and do one of those simple ones electronically. I don't recommend that if you have a lot of assets, but for at least to give some directions. You don't want to leave a mess if something happens. Absolutely, absolutely so very important to get that done correctly.

Speaker 1

No-transcript. Lower assets without a will, you're still leaving a big problem for your heirs. Now, when you get into a higher asset level and most people don't realize that they're in a higher asset level, most people think well, I don't think I need something simple like a will. But you may qualify for a trust. It just really depends on your own situation.

Speaker 3

Yeah, there's no magic amount of money. You need to have to have a trust. It's several different things. We ask people and then we'll guide them one way or the other. It's their final decision. We'll show the positives and the negatives for each one. But a trust certainly gives you more control and I know we'll talk more about that in a minute but at least a will. And also, you said well, I don't have a whole lot of money, but do you have a spouse? Do you have kids?

Speaker 1

That's much more important. For sure, this is ultimately a conversation to have with your estate planning attorney and your advisor, but probate is remember. Wills go through probate and probate is ultimately left to the judge's interpretation of your will. So keep that in mind as well. Sometimes that is all the push people need towards a trust as well.

Speaker 3

Yeah, the first step in probate is after filing is the judge has to okay the will. What if you missed? I saw a will recently that they scratched down something and initialed it. That judge could kick that will out because who knows if that's really because it wasn't notarized after the change, right? So it's just. It's that judge is going to say this is missed. This is incorrect. This language is, you know, complicated or fuzzy or whatever. It doesn't really. It's not really clear, or I'm not going to ride shotgun over all these wishes. Just split the money up and let everybody have it. I don't care about what they want to hear. Just split the money up and let everybody have it. I don't care about what they want to hear. So it's very important that that you understand what probate is and that way you can make a better decision about whether you want to avoid it or not, right?

Speaker 1

So the highest stakes estate planning need is for adult parents of minor children. It's through the guardianship provision in your will that you name those who will take on the responsibilities of raising your children. So, through the designation of a trustee, your money can be directed to care for your children.

Speaker 3

Right, so it's two pieces there. There's who cares for the children and who cares for their money. Many times it's the same person, but that's two things. You need to make sure so that money actually stays in trust until a certain age typically 18, but you could change those wishes a little bit but it's kept because a minor cannot inherit money. So you get somebody a guardian and, by the way, if you don't name a guardian, the court will Okay. And so now again you've given up control something. Maybe you did not want to happen at that point.

Speaker 1

Now, if you're a parent of adult children with assets, you may no longer need guardianship provisions unless your adult child is disabled. Now, that's another important consideration, but you'll still need a will to direct the flow of your assets, at least a will Yep, absolutely. Now. Once again, if you're an adult of significant means, in addition to your beneficiary designations, durable power of attorney, advanced directives and will again, some form of trust or trusts may also benefit you or your loved ones.

Speaker 3

Yeah. So the powerful thing about a trust is a couple of things. Number one it does avoid probate. Number two it is a private document. Your will is not private. Once you pass away, it's filed at the courthouse, it's advertised hey, mark's gone, come get it, or whatever.

Speaker 3

A will can be contested. A trust in in most cases, cannot be contested. So that's at least some of the things. And people say, well, what's wrong with probate? Well, number one it can be costly. If you need an attorney's help, which in today's environment you probably do, they're charging three, four, five, 6% of the value of the estate. So that's a pretty big cost. And again, it's not a private situation and it can be contested.

Speaker 3

The will can be thrown out for various reasons as well. So the trust avoids all that. The trust doesn't go to the courthouse. Nobody knows what's in the trust except those that have a copy of it. That would be the trustees and maybe beneficiaries. But even the beneficiaries aren't privy to the copy of the trust, and so it is.

Speaker 3

And it's also something that you can actually spread your estate out over a number of years. So you know, maybe I don't want my two kids inheriting, you know, $10 million all at once. Maybe they're great kids, maybe it's because if they inherit that money, they get into a lawsuit, maybe they get into a divorce it's subject to that. So there's other reasons to spread it out over time tax reasons as well. So that might be something that would fit you. Again, these are not recommendations. We are not attorneys, but we do work with these items every day and we can see the power and we have clients pass away and we see how these documents work as well, and that's why we are so careful about making sure everything's in order. Every second or third year, during our annual review, I go back and we look at the documents together to make sure nothing's changed Things of that nature as well.

Speaker 1

There are other add-ons or nice-to-haves that could complement your estate plans, but these documents mentioned are virtually vital for all these situations that we're discussing.

Speaker 3

Yeah, absolutely. And you know there are special trusts out there to help avoid estate taxes and maybe to save taxes while you're living Charitable remainder trust, I mean, there's a dynasty trust. There are a dozen trusts, an irrevocable trust, again, to help avoid estate taxes. These are for folks that typically are up in the millions of dollars.

Speaker 1

Okay, but those are things that we deal with every day as well, but we also mentioned the parents of adult, disabled children. There are trusts.

Speaker 3

Special needs trusts are very important. You don't want a special needs adult child that may be his own special programs.

Speaker 1

And again, needs adult child. That maybe is on special programs and again, that's not asset based on the parent?

Speaker 3

No, no. And so if my special needs adult child who's on Social Security benefits maybe they're on Medicare, medicaid, these are all based on them having a certain amount of money, and if they suddenly inherit $100,000, $200,000, $000 million or whatever, then they're going to be kicked out of those programs. So that, going to a special needs trust, it does not belong to that special needs adult, but it can be used for their care. And so again, just you know, sometimes what we don't know, as we've said many times, is the thing that will come up and bite you.

Speaker 1

So that's why we do these shows is to hopefully inform you as to what to look out for I do want to disclaim that we are not estate planning attorneys and nothing that we've shared should be construed as legal advice. However, we, as financial advisors, are trained in estate planning and responsible to offer direction. This is because our charge is not simply to help you maximize your net worth, but also to work to optimize its utilization. The options for planning after your death are sorely limited, but during life, they are only limited by the law and by your imagination.

Speaker 3

I think with us, evan, it comes down to making sure we know what those parents want. We've worked with them for years. We understand they won't enjoy their retirement, but they also want to maximize what their children, grandchildren receive, maybe build a legacy, and so you know again do you want to waste your money on probate? Do you want to waste your inheritance money on paying too much in taxes? Part of that, and again, do you want to leave a mess for your children and grandchildren as well? So it's really important and and it's just part of what we do, again, with a holistic approach, we're covering all these areas, and this is an important area and I'm glad we talked about it today yeah, important area that potentially causes the most stress, beyond just the client but the, the, the heirs and the next generation as well and don't don't be afraid of face it.

Speaker 3

I mean, none of us are immortal.

Speaker 1

Just be prepared. Yeah, absolutely. That brings us to the end of the day. Mark any closing remarks.

Speaker 3

No, just appreciate you watching and listening and plan well and prosper. Take care. This was Retirement Roadmap Radio with Mark Fricks of Master Plan Retirement Consultants. To schedule a complimentary consultation, go to masterplanretirecom or call 770-980-9262. Thanks for listening and remember plan well and prosper.

Speaker 2

All matters discussed during the show are for informational purposes only. Each individual situation may vary and the opinions expressed here may not apply to everyone. Materials presented are believed to be from reliable sources and no representations can be made as to its accuracy. All ideas and information should be discussed in detail with one of our qualified representatives prior to implementation. Advisory services offered by MasterPlan Retirement Consultants, a registered investment advisor in the state of Georgia, Mark Frick's and MasterPlan Retirement Consultants are not affiliated with or endorsed by the Social Security Administration or any other government agency.