Ep. 25 - AMA - Ask Me Anything About Estate Planning

Welcome to the Good Steward Law and Wealth Podcast, where host Ledly Jennings explores law and finance to help listeners become better stewards of their wealth. Each episode covers the latest trends and strategies in estate planning, elder law, investment, and wealth management. Tune in for the knowledge and tools for financial success and security.

Welcome back to the Good Steward Law and Wealth Podcast. Glad to have everyone here today. And today we're going to have kind of a fun episode where I had several, uh, put out a request for— and I guess the young people call it AMA, ask me anything— um, questions on estate planning and got a lot of answers back. Some of it I kind of expected, some of it I didn't. So really what I'm going to do is just kind of run through some of these questions that I got and just try to answer them. And we went through them beforehand to kind of get them in order that made a logical sense. And I'll just go through them as much as we can get to in this episode. And hopefully some people had questions on this, so hopefully everyone will find it helpful and useful. So let's start. We had, and I won't read the names of these submitted because maybe you don't want to look dumb for, but there is no dumb questions. I'll start with that. The first one I got that I think is a good starting point is, at what age should I start thinking about estate planning? And my answer to this is one that really no one does, but really when you turn 18, you need to get an estate plan, specifically power of attorneys. You may not have many assets, but you need power of attorneys once you turn 18. And usually this falls under the responsibility of the parents. Parents, when your kids turn 18, you need to get them power of attorneys because there's two, like we talked about, there's two different kinds of power of attorneys, healthcare and financial.. And when your kids turn 18, you are not their healthcare decision maker anymore by law. Now, you may be appointed that because you're the next in line, but if they're under 18, you're their guardian. So a doctor is going to take whatever you say. If they're over 18, then they need it in writing. So you need a healthcare power of attorney. And then same for financial power of attorney. You can't make financial decisions for them anymore because they are 18. And I hear about this a lot with colleges. You're paying for their school, but the colleges will not release the grades to them, to you as parents, unless they authorize you to or your power of attorney. So that's something to think about if you want to make sure your kids are actually doing good in school and get a power of attorney in place. Let me see what else I have here. The next question is, I have a house and a 401(k) and a car. Why do I need an estate plan? This happens a lot. I get this exact scenario in my office a lot with younger families. You know, you have your house, you have a good job, you have a retirement account. So why do you need to bother with the trust or any of that? Well, I could go on and on about this, but one, the basic parts of an estate plan, like we just talked about, you need power of attorneys because you want your wife, or if y'all are both in the same accident, someone else to make medical and financial decisions for you when you're gone. Because if you're in the hospital incapacitated, your kids still need to have lunch money. They still need to eat. Someone needs to be able to access your bank accounts to take care of them. And the second thing is just the 401(k) as an example. After, you may make your wife or your spouse the beneficiary of that account, but if something happens to both of y'all, you do not want your entire 401(k) to go to your underage kid. Now, most states have laws that they can't inherit these assets until they're at least 18, but still, if you have a $300,000 401(k), I would as you imagine, you don't want an 18-year-old getting their hands on that. So it's important to have an estate plan that, um, covers that and lets you progress that age a little bit, make it whatever it is, 25 or 30. Um, so even if you don't have much, you need an estate plan, especially with young kids. Um, next question, let's see. What happens if I die without a will? And the episode right that I did right before this, the previous episode, we talked a lot about a will. But if you die without a will, you still go to probate. It's just called intestacy probate, and your estate would follow what the statutory standards are. So the state says who gets what and how they get it. That's assuming if you don't have a will and if you don't have beneficiaries designated. My last episode was about the uselessness of a will, especially if you have beneficiaries designated or joint owners, or if you have a trust. I always say that a will should never be used. But if you died without a will, and I think your question is about without any planning in place, you would go to probate. And the next logical question I saw was, what's the difference between a will and a trust? Well, they both, in a simplified manner, they both tell where your assets go and how they get there. But a will does it in the court system, in the public eye. A trust does it privately at a conference room table and/or in the privacy of your own home. And in addition, a trust can have a lot of other benefits, whether it's asset protection, whether it's tax protection. You know, there's all kinds of bells and whistles to a trust that can't be added to a will. Next one in that line was, do I need a trust or is a will enough? And it just depends on your family situation. I usually look at a few factors. It doesn't really matter your net worth or how rich you are. It just matters the type of assets. And maybe you own a lot of real estate, or maybe you own a lot of different types of accounts that could play into it. I look at family. If you have young kids, usually a trust always makes sense. If you have kids with alcohol or drug problems or special needs, then a trust usually makes sense. So really it just depends on your family. Another reason a trust makes sense is blended families. If you are second marriages and you have kids from previous marriages, then a trust usually solves that. Um, and then next question: does a will avoid probate? The answer is no. I think I go over this in about every prior podcast that a will does not avoid probate. Um, and then some more specific questions is, can I disinherit my family member or do I have to leave them $1? This is actually common. I see this all the time in wills and trusts. They say, I am leaving my son so-and-so $1. I don't know where that came from or why people feel the need to do that. You do not have to do that. What you do need to do is specifically name the person you want to disinherit. Like say, I am disinheriting my son, John. You need to name them because if you don't do that, they may have an argument that you accidentally left them out. Maybe the attorney made a drafting error or something like that. So you want to specifically name the family member that you're leaving out. Um, can my assets pass to my heirs protected? That's a great question, and that is why I do what I do. Because yes, if you meet with me or get an estate plan done by someone who knows what they're doing, then your assets can pass to your heirs protected. Meaning in a trust, you can pass things to your heirs that are protected from divorce, from creditors, or bankruptcy. So anything you leave your kids stays with them and no one else. So the answer is yes. Can I prevent my child's spouse from getting part of their inheritance? Yes, that is the main benefit of a trust. When people come to me and they say, I love my son-in-law, but I want to make sure this stays with my daughter and my grandkids. You know, it happens a lot with family farms or land or cabin. Yes, a trust can ensure that happens. Let's see, what kind of trust is best for my family? And this is good because it's really broad, but generally there's two kinds of trust: a revocable one and an irrevocable one. And revocable is good for really everyone in some form or fashion because its main purpose is to avoid probate, um, and it gives the family complete control of the assets while they're living. So I could set up a revocable trust and I can change it whenever I want, I can do whatever I want to with it. Now, an irrevocable trust, you lose a lot of that flexibility, but there are benefits of an irrevocable trust like protection from estate taxes or maybe long-term care costs. There's a lot of benefits. So it just depends on your goal. When y'all come to talk with me, that's the first thing we sit down and say, what's the end goal? What are we protecting for? What do we want to have happen? And then I can tell you specifically if it's revocable or irrevocable. Um, does a trust protect from nursing home care? Great question, and generally it can. A revocable trust does not protect from nursing home care. That needs to be said out there. A lot of people think they have a trust, they put their assets in it, it's protected from long-term care or the nursing home. It is not if it's revocable. Now, if it's irrevocable, it can. So how I usually explain this to people is if you want protection from nursing home care, first off, go listen to my episode on that. You can scroll back up. It's one of the first handful episodes we did on long-term care. But either you have to pay for your own care out of pocket, which is right now about $8,000 to $9,000 a month, or you can get on Medicaid and they pay the bill., but to get on Medicaid, you have to be broke. You can't have more than $2,000 in your name. So how some people get around this is they move assets out of their name into an irrevocable trust. And if they make it 5 years, because there's a 5-year lookback period, then it's out of their name and it's protected from long-term care, meaning if they have nothing else in their name, they could get on Medicaid. So that's more of a specific conversation. Again, this is all educational, so don't take any of this and run with it, but come visit with me and we can talk about your situation. We got time for a few more. Let's see. What if my trust owns nothing? Well, I don't know why you would pay for a trust that owns nothing unless it's by accident, because I always tell my clients, this is a stack of papers that cost you a lot of money. Until we put things in it. Meaning your trust is worthless unless you put your house in it, put your assets in it, or make all of your assets go into the trust when you're gone. So we call that funding the trust. An unfunded trust is worthless. Get your assets in the trust. And a side note, because this came up the other day, just because it's listed on a schedule in the back of your trust does not mean the asset's in there. As an example, we have some trusts that come to me that say, I'm putting all my assets in Schedule A in my trust. And we look back at Schedule A and it says their house, their farm, their car. But then we actually get online and pull the deed and the house is still in their name, the farm still in their name. So it never actually got in the trust. A schedule is just an organizational document to let your trustee know what all is out there, but it really means nothing. So you do the work to put your assets in your trust. How can I protect my estate from lawsuits and creditors? Sorry, I couldn't really read that one. Same thing as protecting from divorce. You can protect your estate from lawsuits and creditors. And by estate, that means when you're gone. So once you pass away, we can leave things through a revocable trust in a protected manner that protects from all that. Now, if you're wanting protection from that for you while you're living, then we need to have a deeper conversation because that has a lot more intricacies of how you can protect things in that manner. But generally, we think about irrevocable trust in that realm of things. What's the difference between power of attorney and healthcare directive? Well, there's a lot of differences, but there's two different kinds of power of attorneys. First off, financial and healthcare. So financial one controls just your finances. Health care controls just your health care. But I think what you're talking about with health care directive is like a living will. So what a living will says is you authorize your power of attorney to make end-of-life decisions for you. So that's a— you're directing them— health care directive. So that's the difference. It just says that they can make end-of-life decisions for you and what you would want done, but it doesn't name that person because your power of attorney names that person. Um, there's also a third document involved in healthcare is a HIPAA authorization. Sometimes it's thrown in there with the living will or the power of attorney. I do three separate documents just to make everything clear, but HIPAA authorization means they can be in the room when the doctor's talking, have access to medical records, that type of stuff. Um, what happens if I become incapacitated and don't have a power of attorney? Good question. So that is guardianship. So if you're incapacitated and you have no estate plan, then your heirs or whoever is in charge of you or wants to be in charge of you has to take it to the court system and enter a guardianship proceeding. So That's how that works. So, and I always tell clients, is if it's in the court system, it's out of your control. So they may name someone you love and trust, or they may not. So why not have a power of attorney where you name someone you know and you trust to make decisions for you, to take all the guesswork out of it? That's why usually a power of attorney is where I start in almost every estate plan, because everyone needs one. I think we've mentioned that at least, uh, 3 or 4 times by now. Um, how often should I update my estate plan? That just depends. Um, if you're a client of Ledly Jennings Law, then we meet once a year if you're part of our maintenance program to update your estate plan. But generally, my advice on that is anytime a major life change happens. Um, think death of a beneficiary, of a trustee, of someone that's named in your estate plan in any manner. Or maybe you have birth, you add new kids or new grandkids and we want to add them in. Those are kind of the main ones, but also a major change in your assets. If you have a major change in something you own, we need to update it. And major change in health. If you have a health problem or old age, we just need to update it. I'd say most of the time a trust needs to be updated every 3 to 4 years just because that's kind of how often life changes. But not always. It's worth a conversation though to keep your estate plan updated. Just check in with your attorney regularly and make sure that assets got in the trust. I always say I want to know what's in the trust so when you pass away, I can sit there with your spouse or your loved one and say, this is what we own, this is what we do now. So they have someone walking them through the process whenever you pass away. That's the last thing they want to think about when they're mourning your death is trying to figure out, you know, what all accounts you own, how do we pay these bills, where's everything at. We want to at least take that headache off of their hands. And then, oh yeah, this one kind of made me laugh. Does Matthew Stafford really use trust and will for his estate planning? And the answer is no. I would assume so. Well, backstory: Matthew Stafford is a famous NFL quarterback, very rich, probably has a lot of money. Trust and Will is a service that produces trusts and wills for people completely online. So you create your own trust and will. And this kind of— I went on a rant about this at maybe last year's Super Bowl. They had a commercial, Matthew Stafford was advertising for Trust and Will, and I was— I just said there is no way that he is using trust and will to do his estate plan. And if he is, he's going to owe a lot of money when he dies. All that to say is there's a lot of softwares out there, especially with AI nowadays, that you can create your own estate plan. Sometimes that's okay. But if you are very rich like Matthew Stafford, you do not need to do that. And if you want to ensure that it's done right, Don't do that. I really say anyone can draft the documents, but what you pay me for is the advice and to make sure it's done right. So be very careful with these third-party software services. And yeah, there's just no way Matthew Stafford would trust himself with the trust and will. But that's all I got. I'll try to do these every so often. So if you have some questions, Just email them to info@ledlyjenningslaw.com and we will answer them probably right then through that email, but also we'll answer them on a podcast for everyone else eventually. And if you have more questions, you know, this is all just general advice, but set up a meeting with us and we can talk through your personal situation because none of this will work for you unless I know your exact assets, your family situation. Then I can offer tailored advice that's, you know, toward you. So give us a call, set up a meeting. We're happy to talk with anyone. And thank you for listening to the Good Steward Law and Wealth Podcast, where we believe that everything is a gift and it's our job to manage that gift to the best of our ability.

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