Ep. 8 - Elements of an Estate Plan

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. And today we are going to talk about what makes up a complete estate plan. So we're going to talk about every aspect and component of an estate plan that you need in your overall plan. And this topic came up because several meetings I had last month, um, brought it up that people come in with the concept that they have an estate plan and maybe they come in and sit down and hand me a will or hand me a power of attorney and maybe one or two documents. But really, an estate plan is several documents that work together, um, to accomplish the total goal of the plan. So it's more than just one document for one purpose. You need a, a separate document for every purpose, and they all work together. Including those documents, you also need to plan for your financial accounts. Those accounts need to actually work with your estate plan in coordination with the documents you have. So We'll highlight what should you walk away with in your binder or your packet when you get your estate plan implemented. And these documents that I'll mention are, you know, the majority, I'd say almost every client that I work with walks away with most of these documents. And again, it varies by client, by family situation, by goals. But when we sit down and meet with clients, we analyze, do you need this? Do you need this? What would work to achieve your end goal and make sure we're covered on every base that we can think of. So really there is, I'm looking here, 8 documents that go in an estate planning package. So it goes in, in every estate plan we do, or at least, I don't know, 90% of what I do has these 8 documents. The first one is a revocable trust and see our previous episode on revocable trust. We'll have it linked in the show notes here. To go in more detail of that. But essentially, a revocable trust acts like a will, whereas it tells where you want your stuff to go and who you want it to go to. But a revocable trust avoids probate. So that is the base of almost every plan I do, is that revocable trust. The second document is a durable financial power of attorney. We had another episode on that previously, so see the show notes for the details on that. But it is a document that allows someone someone to manage your finances for you and make decisions on your behalf when you're unable. The third document is a healthcare power of attorney, and there's actually three healthcare documents that we include in an estate plan, and they all work together. So those are the third document, the healthcare power of attorney. The fourth document is the HIPAA authorization, and the fifth document is the living will. So those all three work together. The healthcare power of attorney is a power of attorney that lets someone make healthcare decisions for you. Same thing as a financial power of attorney, but this one is for healthcare. The HIPAA authorization lets you name your power of attorney and other family members who you want to be in the room when the doctor's talking. Basically gives them access to your medical information. So if you're incapacitated, they can be in the room when the doctor's talking, they can access your medical information, and they can use that to make an informed decision about your healthcare. The next one is the living will. So, that's the final document with the healthcare documents. And it's commonly referred to as a DNR, but really what it is, a living will gives your power of attorney the power to make end-of-life decisions on your behalf. How I typically draft mine, I don't say, you know, pull the plug if something happens. What I say is you name someone you trust as your power of attorney. They can use your HIPAA authorization to gather all the information and make an informed decision, and then use the living will to make end-of-life decisions if that moment comes. Um, and the genesis of that is you are naming someone you trust to take in all the facts and make a decision. Uh, so those are the 3 healthcare documents. Now the 6th document as part of estate planning package, remember I mentioned there's 8, uh, in every package. The 6th one is a pour-over will. So what this is, is a will that actually says, if I die with anything in my name, pour it over into my trust. So yes, the trust takes the place of your will in most instances, but we still have a will just in case. I say this like it's like an airbag that I hope never gets used, but it's there in case we need it. Meaning our job as an attorney is to fund the trust and make sure everything that we own gets in your trust like it's supposed to be. But sometimes something slips through the cracks, or we do not have time to achieve those goals in the timeframe before you pass away. Um, so sometimes you have a bank account that you opened 20 years ago that you forgot about, or maybe you inherit something and somehow it just does not get in the trust. What your pour-over will says is put it in my trust. Um, now why it's an airbag that I hope never gets used is because we have to file that will with the probate court. So it's not the most optimal, but it's, it's good to have. I've been using this example with clients. Jimmy Buffett passed away recently, and his estate had to file a pour-over will in Florida. So what it told me is they left something out of his trust because what the pour-over will said is put everything I own in my trust. And really, that's all we know. We don't know what he owned. We don't know who got what. We just know You had a trust and now everything's in it. Um, so it was cool to see that this pour-over will worked for, uh, the famous Jimmy Buffett, who had a lot more wealth than most of my clients. And, you know, it worked for him, so it should work for most of you. Um, so that is a valuable document that most attorneys leave out if they do not specialize in estate planning. Um, the 7th document, I think we're on number 7 now. Is a deed. The reason I include this in the package is most people own a home or own some form of real estate, and you want that real estate to get in your trust so it passes to your heirs outside of probate. So to do that, we deed the real estate to your trust, um, and it's a revocable trust, so you still control it, you still, uh, manage it. You can sell the house whenever you want. There's no restrictions on that. Even if you have a mortgage, you can assign it to your revocable trust., but it avoids probate. So there's always a deed involved in an estate plan if there's real estate involved. And the 8th one is an assignment of personal property. A lot of people are concerned about, well, where does my stuff go when I'm gone? Like your, uh, we consider personal property like your jewelry, um, car, furniture, household furnishings, anything like that, even guns. Um, could be considered gold, silver, some of that stuff could be personal property. So how do you get that in the trust? Well, we just do it with an assignment of personal property that says, I assign all my personal property to my trust. And then that enables your trustee to marshal it and divide it how your trust says. Now, in addition to that, so that's the 8 documents that we have for every estate plan, but there's sometimes a couple more depending on the situation. We were talking about personal property. Sometimes clients want to give, you know, my wedding ring to a granddaughter or a niece, or they want to give a gun to a grandson, something like that. Something, a family heirloom maybe, that they want to go to a specific person. And how we deal with that is through a personal property memorandum. It's basically at the end of the trust, it's several blanks that says where clients can go in and fill in, I want this ring to go to this person, and they just fill in the blank and sign and date. And we do that as a separate document because that changes so often and there's just a lot of household items. So what clients can take that document and walk through their house and fill it out themselves. And then that ensures that the trustee takes those documents and distributes it according to that list. Um, the other document that I see a lot in my estate plans is an assignment of business interest. So if you're a business owner, your business and its interest would have to go through probate if you don't have anything, um, transferring it to your trust. So, and most people do not want that because they want their spouse or their loved ones to be able to sell the business or step in their shoes and manage the business so they still have the income that it produces. To do that, you need to assign your business, your LLC, to your trust, and then your trustee can step in and make distributions and manage the business as you have instructed them to do. So that is the, the set of documents that we include in every estate plan. And we went over what each of them does, but they all need to work together because they have a separate purpose in how they function. You know, if you're incapacitated, these documents really become valuable so your trustee can step in and manage things for you if you're incapacitated. But what do we do about assets that aren't in the trust yet? You know, a lot of times we have life insurance that's payable on death to the trust, or even bank accounts that are payable on death to your trust. So those things are not in the trust until you pass away. Well, how do we manage those? That is where the power of attorney steps in. So the power of attorney works for things outside the trust. The trust works for things inside the trust. And then we talked about the healthcare documents. Those allow people to make healthcare decisions for you. All this is separate from financial decisions. So you need the healthcare documents, and that can be something that works with your financial power of attorney. I see this with a lot of elder law clients that I have. You know, we are applying for Medicaid to get them on Medicaid. We need to use the financial power of attorney to do that application, but we need to use the healthcare power of attorney to make healthcare decisions for them that happen within the nursing home. So those all work together along with the pour-over will, with the deed, with the assignment of business interest. It's important to have all those in your plan. Now the, the kind of final thing we hit on that is a plan is a full set of documents. Incorporated together, that goes into our process as a firm of how we manage those documents because we have to get our financial assets into the trust and incorporated in the estate plan. And by that, I mean, you know, you may have an IRA or a bank account, life insurance. They need to flow with your estate plan so they match up with your wishes. And each of those accounts have different set of rules around them. Especially when we get into IRAs, there's a lot of tax law changes that recently happened and they specifically talk about how you pass on an IRA within an estate plan. And there's a lot of rules that go around that. So I wanted to show you my firm's process, um, about how we manage the entire estate plan. And I will, for those watching on video, I'll share my screen right now. So the first one at the top of this process wheel that I'm showing, this is the process we follow. To ensure plans are done correctly. The first step is the organizer phase. So I have my clients fill out an intake form and basically get organized on what they own. So they spend time gathering all of their assets and knowing what they own, where it is, and how it's titled. And then that's given to me to review because that helps me get a big picture of everything they own. You know, I need that to, to develop a full plan. You got to have the full picture. If I'm only working with puzzle pieces, there's no way I can put the puzzle together. Um, I have to have all the pieces. So we, we get that intake and then we have a goal conversation, which is usually my first official meeting with the client. And we talk through their goals. What does their family look like? What is their end goals? How do they want things to pass? You know, most of the time in that, uh, conversation, clients tell me they want to avoid probate, avoid a headache for their heirs, minimize taxes as much as they can. And protect what they have to go to their family and remain in their bloodline, their descendants. So when we, when I get those goals, they vary for every client. When I get those goals, I step away and design a plan. That's the next step is the plan design. So I design a plan that incorporates all of their goals and their assets that they informed me about and how that can work together to achieve those goals. Once we design the plan, I present it to the client in a flowchart and a plan presentation. And we tweak it from there until we get it exactly right how the client wants. And this is unique for every client. No plan looks the same. But once we agree, we start drafting the documents. That's, you know, where the lawyer side comes in, where I draft the documents. Usually takes me, you know, 3 weeks or so to draft everything depending on how complex the plan is. And that includes all of the 8 to 10 documents that I listed earlier. So, once we draft those, we execute the documents and sign them. And then we get to the asset alignment phase. That is the key to this whole thing that most attorneys and law firms do not do. They do not go this second step. But what this is, is making sure the assets get incorporated into the estate plan. So you may be listening and think, I have a will or I have a trust, but you really don't know if your assets are actually going to work with your estate plan the way you want. That's what we sit down and analyze. You need to make sure each individual asset is treated differently and incorporated into your estate plan the way you intend. So that involves me sitting down and looking at each asset, but it also involves coordinating with your financial advisor, with your CPA, to make sure everything is aligned how we want. Now that final step, this is kind of my favorite part of my estate planning process. It's the maintenance program. And we call ours the Good Steward Maintenance Program. So what that is, is basically where I have an annual call with my clients to check in and monitor their estate plan because, you know, throughout the years, life changes, family, uh, changes, people are born, people pass away, you buy new assets, you sell assets, your goals change. And that's what we do each year is check in on those goals. But the end goal that I tell my clients is I want to be able to sit down at a conference room table with your beneficiaries, with your kids, when you've passed away and confidently say, this is what they own and this is what we do now. So it is really just eliminating the headache and the stress because we are organized and everything got to where they need it to go. So that is generally my process of how we follow. And I wanted to go over that because it not only shows what is different about our firm, but it shows what all needs to go in an estate plan. So it's more than just hiring an attorney to draft documents. It's incorporating everything. Um, the takeaways from this overall is that each plan is unique and each plan must be followed full circle to achieve the goals that you want.

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