Retirement For Life

Securing Your Legacy - Estate Planning Essentials - Ep 34

• Christian Cyr, CPA, CFP® • Season 2 • Episode 34

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To get the full RFL experience, watch the episode here at https://youtu.be/TB_Q8ENgWCg

We discuss the essentials of estate planning and why so many retirees don't have their documents properly organized. Through our game "Will You or Won't You," we explore common misconceptions and critical components of securing your legacy.

• Debunking the myth that the state takes your assets without a will – assets go through probate court instead
• Understanding which assets bypass your will (401ks, IRAs, life insurance)
• Why naming minor children as direct beneficiaries isn't recommended
• The critical differences between wills and trusts
• The importance of having power of attorney documents for both medical and financial decisions
• How gifting during your lifetime can be part of your legacy planning
• Estate planning as an integral part of comprehensive retirement preparation
• Why reviewing and updating your documents regularly is essential

Make sure your estate planning documents are current and accessible. Even if you think you have everything in order, take time to verify where documents are stored and that they still reflect your wishes.


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Intro:

Retirement for Life, your passport to a comfortable and confident retirement. The podcast that's equal parts education and entertainment, where we break down the retirement maze with a dash of fun and a heap of wisdom from your host, Christian Sear, CPA, the passionate retirement specialist and president of Sear Financial Wealth Advisors. The independent registered investment advisor specializing in the AIM retirement system.

Emma Bean, CFA®:

Welcome back to the Retirement for Life podcast. How are you guys doing Good? How are you Good? Today? We're talking about your legacy securing your legacy and we're going to cover a lot of estate planning essentials curing your legacy, and we're going to cover a lot of estate planning essentials.

Christian Cyr, CPA, CFP®:

We have self-proclaimed May as Estate Planning Awareness. Month at Sierra. Financial I did. I self-proclaimed May Estate Planning Month, but I was told by Brooke that-.

Brooke Fay:

It's October.

Christian Cyr, CPA, CFP®:

So what happened was I put out a client letter this month, client video and I really explained why we wanted to focus on trusts, wills, estates, things like this, and I declared it estate planning awareness month, and I was promptly told that it was wrong. So for us. May is estate planning month.

Andrea Brannon, CFA®-IF:

Well, maybe that just means everyone will be all set by October which is actual estate planning month.

Christian Cyr, CPA, CFP®:

We can celebrate it twice. Here's the thing about this episode the majority of people who are retired do not have their estate documents in proper order. I would say 50% of people think they kind of do, but don't understand the importance of it. Some people have their things in order, but the majority of people do not. And that's what this episode is for, and I think we're going to make it fun because we have made it into a game.

Emma Bean, CFA®:

Yeah, we have a game. It's called Will you or Won't you. We're going to be talking about wills today and trusts and things you might need later in life, so we're going to start with the game.

Christian Cyr, CPA, CFP®:

So we're going to play the game and then afterwards we're going to hit a few topics and then, you'll be out of here in, let's just say, 20 minutes.

Brooke Fay:

That's what I'd say.

Christian Cyr, CPA, CFP®:

All right, let's get started with the game. What's the first question?

Brooke Fay:

All right, true or false. If you don't have a will, the state gets all my assets.

Emma Bean, CFA®:

We hear this a lot actually like that people are nervous that they're going to go through probate, so yep, we should say that we're not lawyers so we're not giving any recommendations.

Christian Cyr, CPA, CFP®:

But this is our experience and we're just kind of talking about what we think and what we've seen. I personally, you know, I just talked to Brooke today she's been at the firm for nine years. Andrea's been here for 14 years. I've been a CPA since 1997. So it's kind of funny how you have these rules that you say I'm not an attorney so I can't tell you what to do, but literally I've been there for 30 years. You do not have to worry about your assets going to the state, right?

Emma Bean, CFA®:

Right. What actually happens if you don't have a will, it's going to go through a process called probate, but that doesn't mean that the state takes your assets. They're going to do their best to give your assets to your beneficiaries, whoever they can find. That's why it's important to have a will to state your specific wishes where you want everything to go.

Christian Cyr, CPA, CFP®:

Yeah, imagine a judge just deciding everything about your life.

Christian Cyr, CPA, CFP®:

That's exactly what probate court is If you have a will, the judge says does this person have a will? And if you say yes, judge, there was a will. He looks at the will, they review the will and if it looks reasonable no debts outstanding he will follow the instructions of the will. So I always give the example of you have two kids. Person A has a will and it says I want to split my assets 50-50. The judge looks at the will and says yeah, 50-50. But what if that person doesn't have a will? What's the judge may be going to say if you don't have a will?

Andrea Brannon, CFA®-IF:

They're going to want to know if they have any kids.

Christian Cyr, CPA, CFP®:

Yeah, and so a lot of times I've told people look if you don't have a will and you have a pretty simple situation. Perhaps the judge is just going to do what your will is going to say anyway, yeah, but there's a lot of reasons that you shouldn't just leave it up to a judge, right? Yep, so no, the state will not get your assets, is that correct?

Andrea Brannon, CFA®-IF:

Correct.

Christian Cyr, CPA, CFP®:

But you should have a will.

Andrea Brannon, CFA®-IF:

Yeah.

Christian Cyr, CPA, CFP®:

What's question number two, Brooke?

Brooke Fay:

This is multiple choice. Which of the following assets does not pass through your will A your house. B your 401k with a name beneficiary. C your coin collection. Or. D your baseball cards?

Christian Cyr, CPA, CFP®:

Okay, so let's tee this up. People sometimes think that everything they own in their entire life, everything on their net worth statement, everything on their balance sheet, is dictated by the will. That is false. There are assets that people have that do not go through your will. Typically, those assets have a beneficiary tied to them. So what were the four choices? Which one of these is not in your will?

Brooke Fay:

Your house, your 401k with a name beneficiary, your coin collection or your baseball cards.

Christian Cyr, CPA, CFP®:

What's the answer?

Andrea Brannon, CFA®-IF:

The 401k will not go through your will Anything with a beneficiary. So life insurance, IRAs, 401k typically you name a beneficiary. Importantly, make sure you have a beneficiary named, because that happens a lot that people just forget or don't double check.

Christian Cyr, CPA, CFP®:

So like what's a good example? You have an old 401k plan. You were single all your life and all of a sudden you decided to get married. Something happens to you. You have a will. It says you know the two kids get things 50-50 or whatever it is, but you forgot about the 401k, which is not covered under the will. To your point, make sure you update your beneficiaries. Yep. Lesson there, Brooke. Not everything goes through the will, Only some things go through the will. What's the next question?

Brooke Fay:

True or false. Naming your minor child as a beneficiary is a good way to leave them with money directly.

Christian Cyr, CPA, CFP®:

Is that not common sense? No, let me leave my millions to a 10-year-old. Does that make sense to anyone?

Andrea Brannon, CFA®-IF:

I know and you can name them, but you need to note that you're naming a minor and you need to have a will in place for what's going to happen with that.

Emma Bean, CFA®:

There has to be someone you know willing to help the child manage the assets. Otherwise, there would be no choice but, to you know, have the state step in and manage the assets, which is, it's not ideal. You want to name a custodian if there's a minor.

Christian Cyr, CPA, CFP®:

There's an important distinction point. Typically, wills are a good first step. They dictate what happens the day you die, but they speak nothing and cannot speak anything to what you want to happen to your stuff 10 days after you die, 10 weeks after you die, 10 years after you die. A great example is, if you have a 10-year-old, a will may not be the best tool to dictate what you want to happen with those assets for the next 20, 30 years of your child's life?

Christian Cyr, CPA, CFP®:

A trust. What does a trust do? It kind of can dictate things in the future past the date of death.

Emma Bean, CFA®:

Yeah, Whether it's a minor or a child that you don't think has responsibility, is not old enough or whatever the case may be. Special needs even If there's a specific situation where you want to help dictate what the assets do when you're gone, then you might need something like a trust.

Christian Cyr, CPA, CFP®:

So I think this is a good distinction, also when people are thinking about wills and trusts. We just made a good point. Trusts have a little bit more functionality, can look a little bit further into the future, really a flexible tool to give you options and spell those out so that a trustee can make sure that your wishes continue on past your death. So if I'm going to an attorney and I have the most simple vanilla case, maybe the attorney will decide you just need a will. You have a simple case. You have two kids. I'm going to give kid A 50% and kid B 50%. You say that sounds good, I'm going to get a will. But if you start to describe some unusual situations and how often do we ask a lot of questions and unpeel that onion and all the layers start.

Christian Cyr, CPA, CFP®:

And then you find out about. We just had a meeting today. We found out about six or seven properties we didn't know about.

Emma Bean, CFA®:

And it's like, yeah, I want my assets to be split evenly between my kids, but then the more you dive into it, maybe there's a specific situation where so and so gets this and I don't want so and so to have this until they're 25. It really depends on the situation. So the more complex, typically, that means you'll need more than just a will.

Christian Cyr, CPA, CFP®:

Yeah, and the other thing about wills versus trusts, since we're on the topic, is this idea of probate right. We were talking earlier about a judge deciding who gets your stuff. If you have a will, it makes it easier for the judge to decide who should get your stuff, but either way it's a court process. Either way there are court costs. Either way there are lawyers involved. Either way this is taking time and money and either way it can be a burden, a trust. Any asset in a trust will bypass the probate process and that can be nice for people, especially a lot of cases. We have what. We have a home. How long does it take to sell a home? Make sure everyone's paid, make sure the mortgages pay off, make sure that if you have your home, for example, in a trust, you don't have to do anything with that.

Christian Cyr, CPA, CFP®:

How about this situation? I have a situation right now in my aunt's estate. It's a simple estate. She does not have a trust. She had a will. The amount of money sitting there is waiting to be distributed, but we're going through the probate process. This has now been month three and we're still not even halfway through the probate process. So if you have a son or a daughter who you want to get some money right away to. A trust could potentially help you facilitate that quickly, because with the trust you bypass all this probate stuff, All right.

Christian Cyr, CPA, CFP®:

So the answer to that question was no, don't leave the minor a million dollars.

Emma Bean, CFA®:

Without at least having some sort of custodian or guardian or something, something in place, some sort of plan in place, brooke?

Christian Cyr, CPA, CFP®:

what's the next question?

Brooke Fay:

Okay, this one's multiple choice. What is a medical power of attorney and or advanced healthcare directive? A? A will you update with you know, will or trust?

Emma Bean, CFA®:

These are documents that you put in place to help you know things go smoothly while you're still around. So we have financial power of attorneys, but in this case we're talking about a medical power attorney, healthcare power of attorney. This is something that you know it can. It basically directs how you want things handled while you're still around.

Christian Cyr, CPA, CFP®:

Yeah, yep, I think that's a big distinction that people don't understand. We've been talking about wills and trusts. Both of these documents dictate what happens after you're gone. I've often said that Perhaps a document that's even more important is the power of attorney documents, because when you are still around, sometimes those decisions that you need to put upon your loved ones, the people that you trust, can be more important while you're still alive than when you're gone. So we talked about just now Brooke said advanced health care directive, medical power of attorney. What's an example of when you would need a medical power of attorney?

Andrea Brannon, CFA®-IF:

I mean there's times where a doctor may not want to listen to what the spouse is saying that their loved one would want. So with that power of attorney you can say this is what he said he wanted, or she said she wanted, and you know I have the right to make that decision.

Christian Cyr, CPA, CFP®:

Absolutely, and I know I go back to my aunt, was with her at a lot of healthcare visits. First question they ask who's the medical POA here, who's responsible for the healthcare of this person? Because if there's nobody, ultimately it's the doctor's responsibility to give the best care that they deem possible. And a lot of times I like to use the example of a husband who goes into a coma. Doctor says I think we should do this and the spouse, who's been married to that person for 50 years, says, like Andrew just said, no, no, no, no. My spouse and I have been together for 50 years and we decided we've talked about this, we want this to happen. If the doctor doesn't have a power of attorney in hand, he has the right to make the decision, despite the fact that you've been married to this person for 50 years.

Christian Cyr, CPA, CFP®:

And it can be more than just sitting at the doctor right, and it can be more than just sitting at the doctor right. You can give additional information about how you want to be treated, what your preferences are, what your beliefs are.

Emma Bean, CFA®:

Access to your medical records, you know if you're helping somebody that is not able to access that on their own. And same with the financial it's a similar thing. Financial, it's a similar thing. But if you aren't able to access your accounts or get information on even your taxes, having a financial power of attorney allows another person to help you out and gain access to your accounts for you. So if there's someone you trust, it makes sense to have somebody on file that can help you in a time of need.

Andrea Brannon, CFA®-IF:

And I also wanted to add really quick if you even have a college kid, once they're in college and they're 18 years old, even if you're there paying for their health insurance, you don't get to know about that stuff. So, without that power of attorney, you're in trouble, right.

Christian Cyr, CPA, CFP®:

And like you, can't see your kid's grades, that's another thing.

Andrea Brannon, CFA®-IF:

Yeah, I know, even though you're paying the bill.

Christian Cyr, CPA, CFP®:

Okay, so let's be clear If there was one thing so far that you would take away from this podcast. Every person, I believe, should have at a minimum three legal estate planning documents. Every person should have a power of attorney for their medical wishes. Should have a financial power of attorney for people who they trust to help them with their financial needs or any type of other legal issue.

Christian Cyr, CPA, CFP®:

If for some reason they are capacitated, every person should have those POAs. So if you're married, that's two times two equals four. But the third document is a will and, as we decided or said, and maybe even a fourth document would be a trust. How have attorneys help you when you're still around? Wills and trusts help you when you're?

Emma Bean, CFA®:

gone. I think we should talk about gifting, Whether it's charitable gifting or gifting to your loved ones. A lot of the times, your legacy means how you want to leave your money behind. So an important thing you know, while you're still living, you can gift your money while you're still alive, whether it's to charity we have clients that gift their RMDs and it's a tax benefit as well but also gifting your money while you're still alive can be a good legacy People think of while they're gone as their legacy, but you can start doing things like that now too.

Andrea Brannon, CFA®-IF:

Yeah, I have clients all the time that say you know what I want to give this, while I can see them enjoy it.

Christian Cyr, CPA, CFP®:

Yes, I hear that a lot too. I think that the gifting aspect of estate planning is often overlooked. I agree with you, there's a lot that should be considered. I think some people don't think about it until it's too late. Some people, like me, think about it too much too early. Not like I'm planning my own demise, but I was just looking today. I have like a 15-step process of what I'm going to do now between now and the end of life, of what I'm going to do now between now and the end of life. But I do think that the reason we deemed May a state planning awareness month, the bigger picture is that for a complete financial advisor, I think about just some basic things investing, social security, taxes, estate planning.

Christian Cyr, CPA, CFP®:

And if you kind of are insular and you look at just any one of those four things on its own, really how difficult is a tax return? Obviously I don't mean to put down my brethren, the CPAs, but I mean, let's be honest, some people, a lot of people, can go and get their tax return done free or pay $35 or $45 at Intuitcom. By itself it's a commodity. Perhaps in some cases it could be argued that investing on its own is somewhat of a commodity. Perhaps it could be argued that Social Security can be boiled down to a simple calculator online where, as long as you know when you're going to die, the answer is clear and, honestly, most attorneys would tell you.

Christian Cyr, CPA, CFP®:

The X's and O's of a trust or a will are pretty straightforward. I mean, you can go to legalcom or whatever it is and pay $500 and get a will completed for you with those power of attorney documents, and so the bigger thing for us you know this is the Retirement for Life show. We are Sear Financial Wealth Advisors. We are telling people that we are going to help you with your full, entire financial picture, be the general contractor of your financial life, and the amazing thing that happens is is when you take four or five different simple commodities and you try and put the pieces together. That's where it gets difficult, and the magic happens is when you put all of these pieces together. For us, we found that the estate planning piece was, as I said at the beginning of the show, the most overlooked part of that, and so I think it's just important for us to bring awareness to estate planning. People need to focus more on this because it has equal importance and weight to all those other things I mentioned and perhaps more weight.

Emma Bean, CFA®:

So if you have like an old will out there, make sure you review it and it's, you know, according to your wishes. Same with beneficiaries on all your accounts. That's one of the easiest things you can do, but oftentimes it's overlooked or out of date. One of the easiest things you can do, but oftentimes it's overlooked or out of date. So keep an eye on your estate planning and make sure your wishes are going to be followed through when you're gone.

Andrea Brannon, CFA®-IF:

Yeah, I think a lot of times we are responsible with that stuff when we have kids, but you know, a lot of times once they're out of the house we forget we don't need to list a guardian anymore. We need to update this stuff. So play a game really fast, yeah.

Christian Cyr, CPA, CFP®:

All right, you're the customer, I'm you, I'm Andrea, the financial advisor, and you've asked this question a million times, so just give me kind of a typical answer. Do you have a will? Customer?

Andrea Brannon, CFA®-IF:

I think so I'm not sure where it is Okay.

Christian Cyr, CPA, CFP®:

That answer means get your stuff looked at, maybe it needs updated. Yeah. I'm going to ask you another question what year did you get that will done.

Andrea Brannon, CFA®-IF:

Oh gosh, Maybe when I first had my daughter.

Christian Cyr, CPA, CFP®:

If you don't know the answer to that question, here's another question. Hey, mr Customer, where is the will located?

Andrea Brannon, CFA®-IF:

You know, I'm not really sure. I think it could be in my safe, or maybe even the safety deposit box.

Emma Bean, CFA®:

I don't know, I don't know where the key to the safety deposit box is.

Christian Cyr, CPA, CFP®:

There's another question. Hey, Mr Customer, good to see you today. Do you have a power of attorney?

Andrea Brannon, CFA®-IF:

What's a power of attorney?

Emma Bean, CFA®:

Or I do have it, it's not on file with any of my financial institutions, or I do have it.

Christian Cyr, CPA, CFP®:

It's not on file with any of my financial institutions, or I think I have it Right. Okay, that's not the right answer for who gets your millions of dollars when you die. That's not the right answer when you have three children and you want to make sure that they're treated a certain way.

Christian Cyr, CPA, CFP®:

That's not the answer when your husband, maybe, is prone to heart attacks and could end up in the doctor's office next week and you don't even have anything that can manage his health care. Make sure, even though, May Brooke, can you write whoever's in charge of estate plan awareness month and tell them that they should make it October and May?

Brooke Fay:

Yeah, yeah, let's do that Okay.

Christian Cyr, CPA, CFP®:

So it's official now. May and October are estate plan awareness month, and it's May.

Outro:

So make sure you're aware of your estate plans, investment legal or tax advice. Material presented is believed to be from reliable sources, and no representations are made by our firm as to another party's informational accuracy or completeness.

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Christian J. Cyr, CPA, CFP®

Host
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Andrea Brannon

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Emma Bean, CFA

Co-host