Speaker 0 00:00:02 <inaudible> what's up, everyone. Welcome to the finance for physicians podcast. I'm your host, Daniel Raimi. Join me as we dig into what it looks like for physicians to begin using their finances as a tool to live better lives. You can learn more about our
[email protected] let's. Jump into today's episode. What's up guys, hope you're having a great day. I wanted to talk today about something that's really important. Um, also very commonly overlooked and that is estate planning. It's one of those things that most of us know we need to do probably should get done,
Speaker 1 00:00:44 But for whatever reason, it always seems to kind of fall down on the to-do list and is at the end of the day, very difficult to get done. I think, you know, it's one of those things you just thinks probably not going to ever come into play. So it's very easy to procrastinate. Um, I think it's also kind of a daunting task. There's a lot of, uh, big terminology that's out there and it feels complicated and personal. So today we're going to talk, talk about kind of some of the basics of, of how it works and try to clarify some of this terminology. It's not, not quite as intense and scary as it seems on the surface and ideally help you, you know, get it done, how you need to get it done, because I think that's the most important thing is that you have something in place.
Speaker 1 00:01:33 So there's, there's a lot of different estate planning tools out there today. We're going to focus on the basics. So these are documents that really everyone should have, whether you're married or single or have children. Now, I think it becomes more important to have it as you, uh, as your life gets more complicated, particularly if you have children or people dependent on you, that kind of ups the ante on all this stuff. But I think it's important to have for anyone, no matter who you are, and especially these basic documents we're going to cover. So the basics there's really like three kind of basic documents everyone should have. And I kind of grouped these in with like estate planning documents. So the first one would be financial power of attorney. And we'll talk about each of these, a little more. So financial power of attorney, second one healthcare documents, and then the third a will.
Speaker 1 00:02:40 And so I'm sure you've heard of, you know, the will and power of attorney and, and I'm sure you've heard of some of these healthcare documents we'll talk about, but, but these are the basics. Everyone should have these, it gets complicated as you start to dig in, but at a minimum, I think this a great starting 0.1 other point of clarification before we get into each of these, everyone has their own individual document. So for example, on a will, uh, there's no like family will, it's just like each individual has to have their own individual will. Same with power of attorney. Each person has to have their own. So if you're married, it's like you have to have one. Your spouse has to have one too at the end of the day it's instead of three it's six key, uh, baseline documents. So every individual should have each of these three.
Speaker 1 00:03:34 So power of attorney for financial affairs. Um, first of all, what's the purpose of this? So the reason for having a financial power of attorney, essentially your designating, someone it's like legally able to conduct your financial affairs on your behalf, if you, if you need them to, or if life changes, um, you know, you're unable to maybe and disability, you know, being the most common thing people think of. So, but it doesn't have to be for disability. It's really just for designating someone to conduct your affairs. It could be, um, let's say a lot of people in the, like the military kind of pushes their people to go overseas to do this. Um, while they're away a lot, a lot of times they'll set up the power of attorney so that, uh, their spouse or someone close to them can take care of their financial affairs while they're in another country.
Speaker 1 00:04:38 Uh, so that's a type of power of attorney. So what ultimately what you're doing is you're designating a person. That's the most important thing is you're designating a person, uh, the attorneys, the lawyers, the contracts we'll call it like an attorney. In fact, that's like the, uh, legal terminology, or sometimes they call it an agent. So you're designated really, it's just, uh, an individual, uh, that's going to be able to conduct, uh, financial affairs on your behalf. So the biggest thing really, um, I think there's two big things, but the number one thing you have to decide in order to be ready to get this in place is who is the person. So who are you going to name to take care of your financial affairs in the event you're unable. So the type of person you want to name for this kind of thing, ideally, they're very trustworthy, good with money, you know, close to you and organized, that'd be the perfect type of candidate for this type of thing.
Speaker 1 00:05:39 Cause they're going to be handling your money. Typically, uh, couples, married couples designate their spouse as the first person to be financial power of attorney. And then they have a backup, uh, or successor power of attorney or attorney in fact is the technical terminology, uh, that will back up in case something happens to both spouses, but ideally you have that person in mind before you go into the process. So you kind of, once you have that in place, the rest of it is pretty straightforward. It's just a matter of signing the documents. The other thing you have to decide on is the type of power of attorney. So there's a few different types, uh, or terminology that they use. So durable power of attorney is one example. That's probably the most common route, uh, married couples take. And so what a durable power of attorney is, is it's in place now and ongoing, even if you become incapacitated or disabled.
Speaker 1 00:06:40 So it's like a ongoing power of attorney you set up. And so a lot of states will like cancel or make existing power of attorneys void if you become incapacitated. So the durable power of attorney, like specifically states that you want it to remain in effect, especially if you become incapacitated. So, like I said, this most common setup for married couples, um, it is giving up, you know, more control, uh, because they, a lot of times we'll have power of attorney, even if you're not disabled or disabled, but, um, the most common use of it is if you become disabled, um, and are unable. So that way your spouse can step in and kind of start taking care of business. The other common type is called a springing. So you've got durable. It's the one we just talked about and then springing power of attorney springing is only becomes effective if you become incapacitated, you know, per your physician.
Speaker 1 00:07:41 So springing is more restrictive. Um, and then you have to get that qualifying event and then it becomes effective at that point. So that's giving up less control, but, uh, I've heard of it being challenging to kind of get it, uh, officially honored. And if neither one of those are specified, I guess, most power of attorneys, like I mentioned, will basically go away if you become disabled. So most of the time you're going to want either one of those. And majority of people are going to select a durable power of attorney. That's the most flexible setup. It's going to be the easiest on the person you named to get stuff done. So I think the question though is like, what about, what if I don't have one? Like, what's the big deal? Like, you know, what's the worst that can happen. That's kind of the question I would ask is, um, if I don't have one of these, you know, what's, what's, what's my risk here.
Speaker 1 00:08:31 Uh, so if, you know, if you're, if life is good and nothing happens and you're able to conduct your financial affairs forever, you know, it is non never an issue, but this type of planning is more for worst case scenario. So with worst case scenario, you have to kind of plan for the unexpected. And so in the worst case scenario, you're say disabled. So you have a auto and you know, you're out of commission and maybe you're not even conscious, you're maybe you're in Tacoma for a long period of time or something. And so the problem is just, you don't think about all the financial stuff you got to take care of, and maybe there's things that you want to take care of because of what has happened in that event. So the simple, obvious stuff is like, you gotta pay your bills, you gotta balance your checkbook.
Speaker 1 00:09:22 You gotta log into accounts, you gotta make sure, um, you know, money gets moved around and if stiff stuff gets off, you gotta fix it. But some of the other thing, things that sometimes pop up is maybe you need to change a beneficiary for life insurance, because maybe you're probably not going to make it out of the coma. And so maybe there's some, um, major like potential lawsuits looming as a result of the accident that caused it. And you want to, in an ideal world, you want to kind of try to protect that money from a life insurance policy say from potential creditors. So that's kind of a unique circumstance where once you're disabled, it becomes very difficult and maybe even impossible to change something like a life insurance beneficiary. It's going to be difficult either way, but if you have a power of attorney already in place, that's one of the things that it specifically grants power to is it's like, it's going to say my spouse, like it'll specifically say it in the documents.
Speaker 1 00:10:32 Like my spouse can change my life insurance beneficiary if they deem it necessary. So really the reason you're getting it is so that, um, the basic stuff doesn't, doesn't fall through the cracks and then some of the more unique stuff so that it can still be taken advantage of as you know, as if you were able to make those decisions. Um, some of the other examples, uh, that you might see, so this is one you probably don't think about. It's like filing your tax return, you got to, you know, sign off file tax return on time. It's like a deadline based thing. So if it happens to be around that time, you know, you need to have somebody to do that, or even hiring somebody to represent you in court is in the dicey situation that that can come up. But at the end of the day, it's, it's, there's a million different examples of things.
Speaker 1 00:11:20 And that's kind of the reason you want to do it is so that those kinds of things you may be able to think of, but maybe you can't even think of, cause you never know. Um, you've got that person just already ready. Um, they're able, it's, it's somewhat, uh, not as, not near as painful now, even with a solid power of attorney, there are, uh, some financial institutions that like want to have you used their own version of a power of attorney, which is kind of annoying, but ideally you, um, I mean, if you're concerned about it, you can check with the financial institutions or as you get a more complex stuff going on, you can kind of run it by your, um, your contacts at the different institutions and say, Hey, does this power of attorney work for this specific account or situation? And they can, or they can even keep it on file.
Speaker 1 00:12:17 So it's good to have all circle back to this, but it's good to have these kinds of documents on file with the related parties, uh, so that they can, at minimum, they can say, yeah, that looks good. Um, and in a worst case, they kind of already have those documents and they can just refer to them. So that's, that's the, the, the financial power of attorney. The main thing is having somebody able to take care of your finances in that mostly worst case scenario, but sometimes, um, maybe just you're out of the country or unable you're, uh, for a certain period of time due to non, uh, health reasons. The second big, uh, document I mentioned or documents I mentioned was the healthcare documents. These get, I wish they would come up with like one simple term for these things, but, uh, there's a bunch of different terms that they use for these healthcare documents that you probably have heard, like living will healthcare, power of attorney, healthcare, proxy, healthcare surrogate.
Speaker 1 00:13:23 These are some of the terms that you hear thrown out. These are all kind of in this category of the healthcare documents, but from a broad standpoint, everybody I think should set up some basic healthcare legal documents that clarify the kind of medical treatment you want and your end of life wishes, and then designate someone close to you to make sure that's all honored. So this is really for, for your family. Like, so that, cause what happens is this kind of situation. So this is really applicable, you know, in a BA in a worst case scenario as well, like when you're incapacitated and, or, or terminally or on the edge where you're not sure if, you know, say they, the pull the plug scenario, that's, that's a common example. So that's when this becomes applicable. And so what happens is families kind of, when it's unknown, they tend to just sometimes often they fight about it or they're just at odds and nobody knows what to do and everybody's freaked out.
Speaker 1 00:14:23 And some people were emotional. Some people were, um, you know, unemotional and there's, so it's ripe for arguments or unknowns. And this sort of a document at minimum is just your way of putting it out there saying, Hey, I thought about it while I was sound of mind. And here's what I'd like to see happen. Um, so that you guys know this and it's, I would say, it's not, it's not going to keep them from arguing or having problems or being, you know, in a pinch, but it reduces the chances of family disagreement or a lack of clarity. And it increases the likelihood that it's, you know, somewhat, uh, I w I'm not going to say smooth but less, uh, volatile, and it's, it's always going to be a dicey situation, but it, it, and that's the thing it's like, those sorts of situations are always going to be painful and dicey.
Speaker 1 00:15:25 And so anything you can do ahead of time that will reduce that pressure is good. So that's really what the, these healthcare documents are doing is you're kind of just clarifying it for your family that, Hey, here's what I'd like to see happen. And they are, I guess, legal documents. So they could become like more of a formal, um, way to make sure something happens. But in most cases it's just clarifying for the family. So there's two basic like, uh, versions of these are most common versions. Um, the living will, I mentioned already, that's like a, that's where the end of life wishes are covered, um, that kind of falls under this healthcare documents category, and then the power of attorney for healthcare. Uh, that's the kinda second, uh, big document. And sometimes they're combined into one, I think it's simpler. If you can just kind of have it all combined, but it's going to depend on your state and your specific, uh, goal and all that.
Speaker 1 00:16:26 But, um, so the living will takes care of end of life decisions. Um, and healthcare, power of attorney is going to be like naming the person they call the technical term adult in terminology is the healthcare agent. Or, uh, sometimes they call it attorney in fact for healthcare or healthcare proxy or surrogate. So there it's, like I said, there's a lot of different terms that make this a little more confusing, but really you're N you're naming a person responsible for making sure those wishes are followed. So two big things you want to make sure you do with these healthcare documents, number one, line out how you would like your healthcare or medical treatment, uh, end of life wishes, how you would like all of that to look number two, designate the person that makes sure it happens. So sometimes it's hard to know who to select for this one.
Speaker 1 00:17:23 I think it's a little different, like you want to have somebody that's good in high pressure settings and can make like very tough decisions, even if it's personal and ideally they're not going to get like super emotionally, uh, tied into it. And it's, as I mentioned before, it's really just to kind of keep the disputes, um, to minimize those disputes and make sure, um, everybody is, is as aware of what you would like to see happen as possible. Um, the, the third big document is the will. So sometimes people call it a last will and Testament. So this is probably the one most commonly people think of, um, the will. The purpose of the will is to, I mean, at its most pure form, it's just to state your final wishes at death, uh, and the courts would be the ones enforcing it. So it's just your way of lining out what you would like the final things to be had to happen at the end of your life.
Speaker 1 00:18:23 And so some of the specific issues you typically see covered in the will are to name a person, they call it an executor or a personal representative. So that's the person you name in the will. That's going to make sure it all happens. So if, if I'm the executor, I'm going to be responsible for reading your will understanding it and going through it and make sure all the things, the check boxes get checked and the accounts get divvied up and it gets processed and the courts are happy and everybody essentially the state gets closed out. So it's a kind of a one-time exercise. If something were to happen to you, if you pass away or when you pass away, your executor is the responsible party that takes your will and make sure everything happens. So ideally the executor is, it's kind of like the person you would probably think of when you name the, a financial power of attorney.
Speaker 1 00:19:24 Ideally, it's somebody that's, um, you know, definitely trustworthy, but good at getting stuff done like organized and ideally they're good with money as well. Another big thing that you're going to be naming in your will, if you have, uh, children or dependents is the guardian. So that's just, uh, spelling out the person who would take care of your children, um, your minor children, if something happened to you and that's, this is probably the most common reason people with children think about getting estate planning, or this is probably the number one worry people have is like their children. Who's going to take care of them. If something happens to them, it's also probably one of the most difficult decisions because it's like, there's nobody good. I mean, you know, of course you think I'm the perfect parent and that's how we all think. But, uh, you started looking around and you're like, well, no, nobody's actually gonna do it, how we would do it.
Speaker 1 00:20:19 And there isn't really the perfect candidate. So it's difficult to decide, but ideally you have someone in mind now, if it's just one spouse that passes away, that's straightforward. The other spouse is the guardian, but it's more for if both spouses pass away and there's children involved and it's just naming, you know, say it's your, um, sibling or your parent they're named. And it's, it's kind of going back to the disputes and family conflict. Most of the time, it's more of, um, if you pass away without this kind of document, like the family's probably going to have arguments like, hi, you should be it. Or you, you know, maybe the grandparent on the first spouse side comes forward and then maybe the grandparent on the other spouse's side also comes forward and then maybe sibling, and they're going to have to go to the court and say, you know, there was no will.
Speaker 1 00:21:12 So we need to each bring our case to the courts because we don't know. We think you probably, we should've, we probably would have been the ones that they would have selected. And so that is right for like arguments and family trauma and, and also potential for you or your children to end up with not the right fit. So all you're doing is naming that ahead of time and getting it all out on the table. You also typically have a successor guardian in case something happens to the guardian. And cause a lot of times these documents you set in place and you just forget about them and they stay, you know, the average person doesn't update their will very often. So, you know, that's why it's good to name backups. So the successor guardian is like the backup to the primary guardian. And they're going to take you to be there named specifically to take care of your children.
Speaker 1 00:22:04 The other big thing the will would do is designate how all your assets are divided up. So just to clarify, it's for those assets that don't have existing beneficiary designations. So like invest, uh, you know, retirement accounts are gonna typically have a beneficiary. So like they're going to already have somebody listed that the money goes to. If something happens to you or life insurance, especially you're already going to have filled out the form that says, if I pass away, it goes to my spouse. If my spouse is not around, it goes to my children or something like that. So those kinds of assets like supersede your will. They're going to be passed on based on what your beneficiary designation is, no matter what. So the will is going to designate any assets that don't have a beneficiary designation and how they need to be divided.
Speaker 1 00:22:56 The classic example would be like your savings account or checking accounts, or, you know, cars, personal assets, sometimes like businesses. You don't have that spelled out. These can be substantial assets, but ideally you name in the will. Like how do those assets get directed? Did they go to a trust? Do they go to the children? You know, how's it all get split up. And then there's a bunch of things a will can do. But the last one I'll mention like most common thing is sometimes the will, will create a trust, a trust. I'll talk about it in a second, but a trust gets created so that the money can go somewhere. Instead of going to individuals, it might go to a trust. They call this a testamentary trust. So this is like a, you know, a place to direct the money instead of directing it to like, you're an individual, like say your children say you want to pass the money to your children.
Speaker 1 00:23:56 In certain cases, it's, you can set up a trust that is for benefit of your children. That is preferable to just passing it outright to their children, to your children. So I'll talk about a little bit more about why trust makes sense, but you can set up a will that creates a trust at your death and that, that they call that a testamentary trust. So all that can be covered in a will. Wills can get pretty complicated, especially if you're starting, if it's creating trust or that sort of stuff, or if you have complicated assets, you can even specify like how things get divided and be very specific, but it doesn't have to be complicated. Um, it can just be very straightforward, but the real big emphasis here is like getting it done. And that's what all this stuff. So I think, you know, a good question to ask is, well, what happens if you don't have a will and you pass away.
Speaker 1 00:24:55 So that depends on your specific state laws, but what happens is it defaults to the state like rules or guidelines so I can tell you like, so I live in Tuckey, in Kentucky, the laws for, um, how this works, if you don't have a will. So it's, they're kind of a unique and there, the problem is most of the time, they're not in line with what your wishes are. So in Kentucky, if you're married, half of your assets go to your spouse and then half go to the next of kin like parents or children or siblings, which whichever, um, you know, if you have children, it'll go to your children. If you don't have children, it'll go to the parents or siblings. So, um, most people want 100% of their assets to go to their spouse. Um, but in Kentucky it defaults you to going half and half.
Speaker 1 00:25:46 So if you don't want that to happen, um, if you want to have like a hundred percent go to your spouse, you have to have a will in Kentucky. So there's a lot of other things. So if you don't have a wheel, you can go, you know, you can Google it. Like what happens if I pass away without a will in XYZ state. And I think they call it intestate succession in Kentucky, like Nolo has like NOLA is a website that does, uh, legal documents. So they have like articles on how it works in all the states, if you die without a will. So that's a good resource to kind of understand what that looks like in your situation. But, um, ideally though you have that spilled out ahead of time, especially if you have children because that guardian comes into play. So just a quick recap, first big document, financial power of attorney.
Speaker 1 00:26:38 That's the one naming somebody to conduct financial affairs, number two, healthcare documents, that's where you're lining out your healthcare wishes and naming the person to make sure it happens. And then the third big document is the will and that's to, um, state your final, final wishes at death. So those are the big three. I think everybody should have those individually. And so just a couple kind of tidbits on a little bit more info on that. I think something to clarify, like the person that you name is, you know, a, a lot of times they're going to be held to like a pretty high legal standard. So it it's not, um, the courts, uh, are going to kind of get your back on this. So it's, sometimes people worry about those kinds of things, but this whomever you name, first of all, they should be trustworthy so that you don't have to worry about this.
Speaker 1 00:27:35 But, um, they are also held to very high legal standards. If, if like you're an executor or if you're a guardian or if you're a healthcare power of attorney or your financial power of attorney, those kinds of roles are going to be held to high standards. One thing I've seen is, um, people will name those, uh, other people, like I just mentioned, and they will either not be comfortable with or procrastinate bringing it up with them. So that's definitely a no-no you need to like tell the people, ideally you talked to him before, but at the latest you're talking to those people after you have the documents in place and saying, Hey, by the way, I got this in place, you're the XYZ. Like, you're the power of attorney, uh, for me, or you're the backup power of attorney or you're the guardian for my children.
Speaker 1 00:28:28 Hope that's okay. You know, ideally you tell them, and for the guardian, like, I think it's important to say, Hey, um, here's my entire estate plan. Like you're the guardian in case something happens to me and my spouse, but I'm also just so you know, here are the other people that we've named. So here's the executor so that, you know, who's going to be handling that stuff. And then here's like all my contact people like my banker and my financial planner and my accountant. And here's how to get my stuff. Like you can go in my bedroom and the top right drawer, or you get on my Dropbox and go into this folder. And here that's where all my important stuff is, and you're not going to have to worry about money. So I think that's super important for the guardian to tell them you have your stuff in order, here's a summary of it.
Speaker 1 00:29:23 Here's how to get more information and financially they will be taken care of. So that they're not going to be, you know, in a pinch with taking on your additional dependence. So the guardian typically it's a little bit more of a conversation, but, uh, with the power of attorney, it's like, you know, and the healthcare decisions, I think that's more of a, Hey, by the way, you're this, and here's the documenting. And if you need more info, like you can talk to these other people that would be involved. So I think that that's a good followup activity is, is, um, make sure to have good communication and tell those people involved in giving them at minimum, like the high level and the executor, just little side note on that, the executor, I would say probably should have a little bit more info, kind of like the guardian, but they need to know where everything is, um, who the people are like, ideally they know like a summary of all the insurances you have, like, especially life insurance and who the contact person is for all your accounts.
Speaker 1 00:30:28 Ideally, that's all organized and all linked to like an organizer document for estate planning. There's a few good tools that, that are out there that can help you kind of get all this organized so that you can just kind of hand it over. Plus, it's going to be good to have it organized for your own benefit. So one of the hurdles we see sometimes happen with this is it's sometimes difficult to, to pick, uh, just one person, especially like the guardian. I think that's a dicey one for some families. So when you're unsure, I mean, ideally you come to an agreement and each spouse like, you know, comes to a combined one that they want to select, but if you really just cannot select, like, let's say, I want, um, my sister and my wife wants her dad. Um, and we just can't agree. I get, you know, at minimum it's still worthwhile to get it in place.
Speaker 1 00:31:26 So you can always just say, you know, I get to name. So in my will, I might have my sister named as guardian. And then in my wife, will, she has her father named as the guardian in the event, both of us pass away. So that's better than having nothing. But, um, it does kind of create a little bit of an awkward situation. It's like, when you talk to, if you, if she's talking to her dad, she's going to be like, well, you know, if I die second, then you're the guardian versus if Daniel dies second, it's his sister. So, and it could get a little, still a little dicey with it as far as like how they determine that. So ideally you have one person selected, but you still need to get these type of documents in place and you don't have to pick the same person, uh, for things like that.
Speaker 1 00:32:19 So compromises, um, you know, sometimes you, you got to compromise a little bit to get it done. The other big thing we've seen, um, often happen is you just need to remember, you're not done until the documents get signed in a lot of times notarized in states. So a lot of people get the documents and they feel kind of like it's, they can check off the check box. They're like I've gotten through the hard part, but I think in some cases, the actual signing of it or getting it signed or reviewing it and getting it signed and notarized is a huge hurdle. It's been like a massive hurdle, especially COVID it's like, how do I find two witnesses and a notary during a pandemic? And so just keep in mind, like you're not done until it's signed and notarized and, you know, formal and in place.
Speaker 1 00:33:06 And really, I don't think you're done until you've shared it with those parties involved. So I think it's good to just think about it that way you're not done until it's kind of formalized and shared. And then that's when you're really kind of everything's in order and zipped up. And then the last thing I'll mention about, um, about kind of related follow-up things, once you have it done, just something to remember is, think about beneficiary designations, those need to be changed. Sometimes they do at minimum when you're doing estate planning stuff. So like when you're getting wills or, you know, getting all this done, it's, uh, it's good to look at all your beneficiary designations at minimum, understand what they are and if need be change them so that they're reflecting, whatever changes you make in your estate plan. But the main thing, as I mentioned is getting it done, uh, getting it signed, getting it shared with the parties, making sure they're aware who, what their role is and, and just getting so that you can check it off your checklist, uh, in certain states.
Speaker 1 00:34:14 So how do you get it done in certain states? Uh, you can actually for a, will, you can do, what's called a holographic will. That's like the least formal, probably the, I guess, theoretically the easiest route to get it done. So you can right hand, it has to be handwritten like a handwritten will then sign it off. And that will fly in certain states. Ideally you have more of a formal outline that covers all the bases you need to cover. Cause with a holographic you're like, I don't even know what to write. So ideally you have more of a formal outline so you can get, so the second level would be, you can go online and get like legal documents, um, from like a legal zoom or a Nolo, or, uh, there's some companies that have popped up that do this, like will and trust, I think is one of them, but they'll do like boiler plate, uh, state specific documents for like the core three that we talked about.
Speaker 1 00:35:07 And sometimes even the trust documents that are a little bit more complicated, they'll do those all for you and have them like, and maybe it's a hundred bucks or less, so fairly, very inexpensive. They spit out the documents, you pre-fill them. And then print them out and get them signed. One little word of caution with this is it seems easy and like low cost. And especially if you're a DIY or you're like, Ooh, that's the best option. But I have seen people spin their wheels so much with that route. It just seems that this is a difficult topic to navigate sometimes. So there's zero help when things get in any way dicey. So for example, the beneficiary thing, uh, or I'm sorry, the guardian decision, if you have any like disputes with that, if you're just doing the online boiler plate version, the tendency will be to just drop it for a while and like, think about it.
Speaker 1 00:36:05 Or if you, um, let's say you want to do something a little special, like, or you want to go off of the boilerplate documents that, you know, that's going to be very difficult or maybe impossible to do. And then just the act of getting it signed and notarized, there's zero help provided for that. So our preference, the third route would be to get an attorney, like particularly in a state attorney, like someone that specializes in doing these kinds of things. Uh, ideally you hire an attorney to kind of work you through the process. So I don't think, I mean, the legal documents are, are important, but like most of these attorneys are using boilerplate documents. I mean, they definitely make sure that the documents are well-written and they have their own versions of them. And I think that they're going to be the most reliable documents, um, if you work with an attorney, but I think what you're really paying for is having someone to walk you through the process and a little bit of an accountability to make sure it gets done and follow up with you.
Speaker 1 00:37:13 So I think working with an estate attorney would be, you know, when in doubt the preferred route, it just it's going to cost the most money. I would say, like, I don't know, 500 to 2000 is probably maybe even 3000, like 500 to 3000. Is the range not for just those basic three, those basic three-year probably going to be like 500 to 1500 maybe, but for costs. Um, if you're working with an estate attorney, it typically gets more expensive when you set up a trust and those sorts of things. But I would lean towards that when in doubt, mainly because you can pay them and schedule the meetings and they're going to kind of make sure it gets done. So those are, those are the basic documents I did mention, uh, the trust, uh, uh, earlier a bit. So I'll hit on like a couple of quick things on, uh, on trusts and how they work.
Speaker 1 00:38:03 This is like a big, huge topic in itself. So we'll focus on like the very, very core, um, principles of what a trust is and how it works. Um, kind of like the five minute overview for today. And if you want to, if you want to understand more about this, like we can definitely dig into this and cover more specific types of trust or how they work in separate in different episodes. So give me a shout if you want to dig into this more, but at its core, a trust is really just a, I mean, at the end of the day, it's just, you're just writing down. You're just creating a UN entity, uh, or like a bucket, a legal entity that can, um, hold assets. It doesn't have to hold assets. That's, that's what a lot of people don't realize with a trust. You can have like an empty trust you can be like, and that's probably the most common trust you don't have to be.
Speaker 1 00:39:01 You can be alive and have a trust. Like I have a trust for our family. They call that a living trust. That's like the terminology for it, but anybody can create a trust. So let's say I want to create my trust. I'm like, okay, I want to, um, I, I want to have a bucket to be able to put money into, uh, for various reasons. Um, I can just go to an attorney or even go on one of these websites and get the document and make sure it's signed. And there it is. I have this entity. So like the Daniel Ren trust, for example, um, I can create the trust. There it is. It's like a bucket of, you know, I can send money to it if I wanted to, or I can just leave it empty and just let it hang out. So you're probably thinking, well, why in the world would I want to empty bucket to eventually put money into, uh, so that's, that's the trust that the thing about a trust is you can detail, like you can kind of, you're going to be like writing up the owner's manual.
Speaker 1 00:40:00 So the big thing about a trust is you can say, not only am I creating this empty bucket for future use, but the bucket has to be managed by my trustworthy brother. Who's very good with money. Like they call that the trustee. So you name the person responsible for managing it. And then he has to use the money in there for benefit of my children. And then here's exactly what he's going to do with it. He's going to use it to take care of their basic needs. He's not going to spoil him. Uh, he's going to let the money that the money above and beyond that basic needs, let it build up. And he's not gonna release any of that extra money to the, to my children until they're X age. So like, you can say never, you can say age 30 or 25 or 40, you can, you can designate, or you can say the leftover at age 40 goes to charity.
Speaker 1 00:41:02 Um, you can see it's almost like a unlimited flexibility, but you can set up this owner's manual. That's like, so my brother is going to manage it and here's the owner's manual. So if he were to be managing and he just uses that owner's manual and he's like legally bound to manage it on behalf of what those wishes were. So a lot of people create it for estate planning. So if I, so the trust I would create, you know, in that scenario, my brother's managing it. It's typically used for if I'm not around. So maybe I want, maybe I have life insurance that I have bought for my family in case something happens. But if some, if it's both knee, if both myself and my spouse pass away, or if maybe I'm single, then I don't want to just pass it outright to my children.
Speaker 1 00:41:53 Cause it's a pretty large dollar amount. I would rather have like some stipulations on it. Like, so what happens is if I pass say I have $3 million of life insurance and I want to pass that to my children. If they receive that, they, they don't just get the money. If they're like, you know, minor, it goes into a custodial account and then someone else gets assigned management responsibility. And then, but eventually they do get it at a certain age based on whatever state you're in. But it's, you know, 18 to 21 on average, they will get the reign remaining proceeds, no matter what you say. So it kinda just, um, most people don't like that scenario of their child getting the remainder of all those monies when they're 18 or 21. So that's a classic reason. A lot of people set up a trust so that if something happens to them, they can direct their life.
Speaker 1 00:42:48 Insurance proceeds straight to the trust and the trust will have the owner's manual and it, it can be more detailed and line it all out and name a person and make it all formal. So that's, that's just one reason you create a trust. There's a million reasons. People create trust. Sometimes they fund it while they're alive and living, maybe for estate planning reasons or to protect their money from creditors. Um, they get it out of their like name and put it into this entity. And then other times they don't fund it and they wait until they pass away and then it gets funded. And at that point in time, so there's a, there's a bunch of different reasons, uh, to, to set one up. And I think in most cases, it's, it's definitely better to have a trust, especially when you have children. And, uh, like for example, in our planning firm, most of our clients have trusts.
Speaker 1 00:43:42 They're not necessarily complicated, but they, the most common reason we see people setting them up is for that scenario, I just talked about like avoiding giving their minor children, like large sums of money without like some specific game plan in order. But like I said, there's a lot of different reasons to set it up. Um, it does cost more money to set one up, but I think if you're going to be doing, if you're going to be going through that estate planning exercise to create the basic three documents, I mentioned it typically is going to come up like the trust idea or concept, especially if you're working with an attorney. So it would be good to think about like pros and cons of why you might or might not have it and at least understand those basic concepts with it. So yeah, the basics. So let's do a quick recap, basics, financial power of attorney healthcare documents, which would be like the living will and a healthcare power of attorney.
Speaker 1 00:44:38 And then you got your will. And then in some cases you might have a trust set up and that gets a little more complicated. It allows for a lot more customization, but as I said, main thing is you get it done. Um, ideally you have all this in order. And I think that will be one less thing you have to worry about. All right, that's all we got for today. Uh, we'll look forward to talking again. Next time. Definitely send me an email or reach out if you want to dig into the details of this like estate planning is a monster topic so we can get into all kinds of stuff with it. But I just wanted to hit that basics for today
Speaker 0 00:45:14 As always. Thank you so much for joining us today. If you found this valuable, please give us a review on iTunes and share with a friend. Also check out our
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