The 4 Biggest Obstacles to Effective Estate Planning - Replay

My name is Brian Scribonia and on this episode of the Common Sense Financial Podcast, you would be well advised to not put off such an important responsibility to protect your loved ones. Instead, be proactive. Take steps to protect your loved ones by creating a custom comprehensive plan with the help of trained professionals and once completed, communicate the plan with your partner and family members. Then enjoy the peace of mind that comes along with knowing you have done everything in your power to provide for your loved ones. Foreign.

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Opportunities are still there. The attempt at passing down wealth from generation to generation. Consider the outcome, not just popular opinion.

And the whole teaching there is about preparedness and being ready.

There's a difference between what's real and what's true. You're listening to the Common Sense Financial Podcast. I'm your host, Brian Scribonian. Thanks for tuning in and let's get into today's topic. One of the most difficult experiences as a financial consultant is watching someone lose their spouse or partner and then witnessing the aftermath that occurs from not having a well thought out estate plan in place. I have seen it, unfortunately dozens of times when a family is left in disarray, forced to face the emotional difficulties of losing their partner or parent while simultaneously trying to figure out their financial situation. But I've also seen the opposite happen when a family is free to mourn their loved one and figure out how to move forward with their life at their own pace thanks to proper advanced planning and preparation. I don't think it's any secret that the latter situation is the better outcome for everyone involved. The question is why there are so many people who don't take time to do it well. In my experience, planning for death is an emotionally uncomfortable topic that can be easily avoided. After all, no one wants to think about how much time they have left with their people that they love, right? So the propensity is, to put it off, make excuses and take every opportunity simply not to do it. But the process for end of life planning is relatively simple in nature, but the details can be complex and is why I recommend getting professional help. In my 30 years of consulting families, I've learned that people can easily find themselves overwhelmed with the weight of the decisions they must make to ensure their finances are in order. And while many people power through the process of getting their affairs in order, people will sometimes take the do it yourself approach and as a result, often stop short. They may have a will, but they rarely take the rest of the steps necessary in an effort to avoid the legal and logistical challenges of implementing it. And while every situation is different, there are several core aspects of an estate plan that everyone should consider and in doing so, you can help your family overcome the biggest financial obstacles they'll face after you're gone. The first is related to title and legal work. I'm not an attorney, but I do work closely with them during the estate planning process to help with the coordination of the family wishes for distributing assets and taking care of surviving family members. Often when reviewing a client's existing documentation, we often find botched titles, missing or outdated legal work, and inaccurate documentation. The reason is that many clients have a complete misunderstanding of the role legal work plays within their planning, but it's not their fault. We aren't taught any of this in school and our parents most likely did not have this figured out for themselves. Many people to try to go at it on their own or with the help of one size fits all websites to save money, but unfortunately errors and shortcuts can end up costing them or their families even more than it would have if they just would have sought out the professional advice to begin with. In other words, you should work closely with an experienced team who can work closely with you to work through the details that lead to a well drafted estate plan. Another part of a well designed estate plan is life insurance. This is a big one in my opinion because at a very basic level, when a spouse passes, an infusion of capital is often needed to replace the loss of income. I mean, this is the primary purpose of life insurance when it comes to family planning. This is important because what I find is that many households rely on two incomes and or two people contributing to the family's ecosystem. Even if one spouse doesn't work outside the home, their contribution to the family must be replaced when they're gone. In this case, there is no income loss necessarily, but household expenses may increase if outside resources are needed to keep up the home, care for the other family members or fill in other responsibilities. And while life insurance is best purchased, of course, when you're younger and healthier, it's never too late to add a policy to your portfolio. I mean, it could be argued that the older you are and the more health conditions you have, the more you need it. Knowing how much insurance to have or what type to purchase can be a real challenge. Each person's needs are different and each type of insurance and individual plan has its pros and its cons. However, what you can be sure of is that the simply upping coverage from work or buying a cheap term contract from your property agent isn't necessarily a substitution for having a real plan creating to replace your contribution to your family when you're gone. Again, this underscores the importance of working with a team of professionals who have experience working through these issues and can walk you through your options. Another important but often overlooked aspect to an estate plan is budgets and cash flow. Before any decision can be made about how to use available resources, you have to know how much money your partner will need and where it will come from. Therefore, the first logical step is to understand and map out cash flow. Your cash flow may be funded by employment or a business, or it can be income generated from assets. But it's important to know how much income you are currently working with and how much that will change when you or your loved one passes. Because regardless of its sources, your cash flows into three primary areas, reoccurring obligations, irregular obligations, and of course, savings. Once you understand what your spouse and family would need if a death were to occur, you can effectively plan for it. While many people think in terms of weeks or months to be effective in maintaining control of your cash flow, it really is recommended to think in terms of years. Another area relates to debts and investments. Now, many people people's first instinct when it comes to allocating resources, especially at death, is to pay off debt, depleting available resources with the goal of reducing payments for their spouse in the short term anyways. This strategy may make some sense in some situations, but it should not be a default action for everyone just to take as their first step. The reason this requires some additional thought is because money makes money. Depending on your family's financial situation, it may be better to use the resources to produce additional income in lieu of paying off certain debts. If you pay off debt, the debt's gone, but so is the money and its ability to compound and grow in a situation that requires thought and strategy and there isn't a one size fits all plan for how to approach this. The primary thing to keep in mind is that everything is about cash flow. So any decision about how to use resources should be tested against the impact it will have on the cash flow. For instance, if there is a need to purchase an automobile, the thought may be to use some of the resources to pay in cash to avoid the payment and interest charges of a bank loan, which can both negatively impact cash flow. But there is another way to look at this scenario that could potentially purchase every vehicle you will ever need in the future. Consider the fact that if you spend a lump sum of money to purchase a depreciating asset, you have lost control of that money, never to be used again in the future. I mean, it's gone. However, if you were to redirect that money you would otherwise spend to purchase that vehicle to work on generating an income stream, you can use that stream of income to make loan payments not just once, but multiple times to purchase multiple vehicles vehicles over long periods of time. If you spend the money, you have an automobile that is depreciating and the next vehicle you need is a repeat of having to reduce resources to make another purchase. Now again, if you use the resources to generate an income stream, the bank loan is paid off over time using the income generated from your resources. And when your bank loan is paid off, you still have your money and the income is being generated. It's a rinse, wash, repeat cycle. So in summary, when thinking about your family planning, it would be in yours and your family's best interest to not simply assume things will always be the way they are now and just hope everything works out. There is unfortunately the real possibility that you or a loved one will pass away unexpectedly. And if you procrastinate and delay, you may find yourselves in the unfortunate situation of being unprepared. You would be well advised to not put off such an important responsibility to protect your loved ones. Instead, be proactive. Take steps to protect your loved ones by creating a custom comprehensive plan with the of trained professionals and once completed, communicate the plan with your partner and family members. Then enjoy the peace of mind that comes along with knowing you have done everything in your power to provide for your loved ones. And now if you want to begin working through this process for your family, you can download my Estate Planning Checklist by following the link in the show Notes. That concludes today's podcast. I'm Brian Scribonia. Thank you for listening to the Common Sense Financial Podcast. Thanks for listening to today's show. If you liked what you heard, be sure to subscribe on YouTube and Spotify so that you can receive notifications when we release new episodes. I'm Brian Scribonia and this is the Common Sense Financial Podcast.

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