RPF-0049-An_Introduction_to_Estate

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00:00:15.000 | Okay, right now we showed you the Jackson family reuniting on tour amid a feud that has really driven a wedge between the siblings.

00:00:23.000 | Many are asking if all the drama is over money from Michael's reported billion dollar fortune.

00:00:28.600 | Tonight we examine how this kind of tug of war has plagued many star families in Hollywood.

00:00:34.200 | The next thing to look for in the Michael Jackson estate is are the siblings going to come forward and try to challenge some type of legal action against the executors or the validity of the will.

00:00:44.200 | At stake in Michael Jackson's estate, a reported one billion dollars that is said to be growing by the day.

00:00:50.200 | 40% of the net income from the estate reportedly goes to Michael's 82 year old mother, Catherine.

00:00:55.200 | 20% is distributed to charity, the remaining 40% is split between his three children, Prince Michael, Paris, and Blanket.

00:01:02.600 | The trustees will control the children's money until they're age 40.

00:01:06.600 | So we're looking at a very long term issue going on with the Jackson family being able to get along with the trustees.

00:01:13.600 | Husband and wife attorneys, Andrew and Danielle Mayores, authors of Trial and Heirs, in stores now, say Michael Jackson's will isn't the issue here.

00:01:22.600 | There's all this talk about challenging the will, is the will valid or not, but really it's the trust that says who gets what and when and how they get it.

00:01:30.600 | The Mayores, who don't represent any of the Jacksons, say the family's matriarch isn't the one with the power.

00:01:36.600 | Catherine Jackson doesn't control the money, the executors control the money.

00:01:39.600 | So fighting over who's going to control Catherine Jackson or can she be in control of herself, there's no reason for it all.

00:01:46.600 | Those executors, Michael's long time attorney, John Branca, and John McClain, a music executive at Interscope Records, are reportedly the cause of the rift in the Jackson household.

00:01:55.600 | Some of the family supposedly upset that they're making millions off of Michael's death.

00:02:00.600 | But this isn't the first celebrity death to spark an estate feud in Hollywood.

00:02:05.600 | What we call as estate lawyers, the granddaddy of them all, is the Anna Nicole Smith case.

00:02:11.600 | That lasted 16 years and made it up to the United States Supreme Court twice, which is very unusual.

00:02:17.600 | And in this case it was all because a 26-year-old stripper married an 89-year-old billionaire.

00:02:22.600 | Anna Nicole died in 2007.

00:02:24.600 | Three years later, a court ruled against her estate receiving any of the $300 million she had asked for.

00:02:30.600 | But not all star passings spur lawsuits.

00:02:36.600 | What's been going on for several years is the James Brown estate. It's been played out since he passed away in December of 2006.

00:02:42.600 | Tommy Ray Heine, who considered herself James Brown's widow, crying to cameras after his death and barred from his estate and banned from seeing his body.

00:02:51.600 | We have a child. I love him with all my heart. I'm dying here without him. It's killing me.

00:02:57.600 | Was he married and should his children get anything? Those questions are still being fought over.

00:03:04.600 | Frank Sinatra avoided an estate battle between his kids and fourth wife Barbara the old-fashioned way with a threat.

00:03:11.600 | He had his children and he was married to Barbara and he was worried there might be some friction.

00:03:16.600 | So he specifically put a provision in his will that if a beneficiary filed any one of 13 different legal actions, they would be disinherited and not get a penny.

00:03:25.600 | And it's important to note that in the case of Michael Jackson's will, an earlier challenge was rejected by the LA Superior Court, the California Court of Appeals and the California Supreme Court.

00:03:36.600 | Hi, I'm Danielle of Trial and Errors.

00:03:41.600 | And I'm Andy. James Gandolfini recently passed away tragically at the age of 51 after a sudden heart attack.

00:03:47.600 | Strangely, given the size of his estate, he used a will as the primary tool to pass his assets on to the next generation.

00:03:54.600 | And because of that, we're seeing lots of estate taxes that could have been avoided.

00:03:58.600 | And on top of all the estate taxes, we have something else interesting going on.

00:04:02.600 | Supposedly there's brewings of trouble between his first wife, the mother of his 13-year-old son, and his widow, who is the mother of his young daughter.

00:04:12.600 | Could be fighting. We'll see. Because it's a will, though, it's going through the probate court.

00:04:17.600 | And that's the problem with using a will. One of the problems is that every will has to pass through probate court in order to be effective.

00:04:23.600 | Probate court is expensive, it's time-consuming, it's a breeding ground for fighting, and it often leads to trouble.

00:04:30.600 | It does. But of course there's something else with his estate, and we see this a lot.

00:04:34.600 | A lot of times parents leave money to minor children.

00:04:37.600 | In this case, it's millions of dollars that they'll be receiving at the ages of 21 and 25.

00:04:43.600 | Maybe not the best idea.

00:04:45.600 | It's interesting because we saw this exact problem play out in the Whitney Houston estate.

00:04:50.600 | Whitney Houston left the bulk of her assets to her daughter, Bobbi Kristina, with the large chunk coming at age 21, the rest at 25, and then at age 30.

00:04:59.600 | And Whitney Houston's family didn't like it. They went to court to try to change things, saying that's really not what Whitney Houston wanted.

00:05:05.600 | Yeah, most parents don't want their kids getting hundreds of thousands of dollars in their 20s, let alone millions of dollars like we have in the Gandolfini estate and the Whitney Houston estate as well.

00:05:16.600 | So this all could have been avoided with some proper planning.

00:05:19.600 | With the Whitney Houston effort, they failed. They were not able to change the will.

00:05:23.600 | So Bobbi Kristina is getting money starting at age 21.

00:05:26.600 | And we expect the same thing's going to happen with James Gandolfini, that his wish is in his will.

00:05:30.600 | Even if the family doesn't like it, even if they think they're not ready for it, they're going to be stuck with it.

00:05:35.600 | Stay tuned. We'll keep you posted at trialandheirs.com.

00:05:38.600 | In your book, which comes out in November, you talk about a lot of famous people who had problems with their estates.

00:05:46.600 | One big example was Jimi Hendrix. Most people don't know this.

00:05:50.600 | When he passed away, there was no will, there was no trust.

00:05:53.600 | And so under the laws and the state that he lived, his dad received everything.

00:05:57.600 | The individual who received under Jimi's dad's estate, Al, was an adopted daughter, Janie, who Jimi barely even knew. She was a child.

00:06:07.600 | Long story short, Janie controls, to this day, Jimi's legacy. And he barely even knew her.

00:06:13.600 | If he had done a will or a trust, he could have had his brother, someone he was close to, someone he knew, control his legacy, but he doesn't.

00:06:21.600 | Steve McNair, tragedy, recently, Tennessee Titans quarterback, murdered, died without a will also. Tell us about that case.

00:06:28.600 | He didn't have a will. So his wife filed to open the estate, listed Steve McNair's two children as heirs,

00:06:34.600 | and didn't list his other two kids that weren't from her, they were from prior relationships.

00:06:39.600 | So already we're seeing, from very early stages, the beginnings of what's probably going to be a fight, because he didn't do his proper planning.

00:06:47.600 | The richer they are, the harder they fall. This morning we are sitting down with celebrity bloggers for Forbes and lawyers Danielle and Andy Mayores.

00:07:01.600 | Thanks for being here.

00:07:02.600 | Thanks for having us.

00:07:03.600 | Well, they specialize in not only celebrity legal news, but their money. How are you doing today?

00:07:08.600 | I'm doing great.

00:07:09.600 | Thanks for coming back. We talk about these celebrities and we think, there's no way I could be connected to that kind of celebrity and their status and their money.

00:07:17.600 | But sometimes those situations do apply, even though they're pretty outrageous, to our own kind of real life situations.

00:07:24.600 | For instance, Tony Curtis.

00:07:26.600 | Yep, Tony Curtis is an interesting one. A lot of times, loved ones pass away and the kids want to claim one of their personal effects to remember their parent by.

00:07:35.600 | But in Tony Curtis' estate, that did not happen. Tony Curtis' widow, his fifth wife, just sold a bunch of his personal effects, about a million dollars worth, at auction.

00:07:46.600 | And his children did not receive one penny from the sale or they weren't even offered any of his personal effects.

00:07:52.600 | Tony actually cut out all of his kids, and this includes Jamie Lee Curtis, the actress.

00:07:57.600 | His wife, 42 years younger than he was, she got everything. So this does happen. Second marriage situations are common.

00:08:05.600 | Or fifth marriages.

00:08:07.600 | So that's where we see fighting. You don't have to be a celebrity or a millionaire to have these same kind of legal problems.

00:08:13.600 | Right, right. So it does happen, even on our level.

00:08:17.600 | Zsa Zsa Gabor, this is really strange. Now this would be way out there if this did happen to us, but it's weird.

00:08:24.600 | This one is not one that's probably going to happen to most people, but we can still draw lessons from it.

00:08:29.600 | Zsa Zsa Gabor is 94 years old, and her husband, again, is a ninth husband, so again, a multiple marriage situation.

00:08:37.600 | He wants to explore having a surrogate mother and an egg donor so she can legally be a mother again, just so he says she can have a child to carry on the Gabor name.

00:08:48.600 | Okay, wait a minute. She's 94, in and out of the hospital.

00:08:52.600 | Right, and she's been given her last rights, if I recall, several times.

00:08:55.600 | That's right. She's in and out of the hospital on a weekly basis, doesn't know when she's home or at the hospital many times, has had a leg amputated, and she's going to be a mother?

00:09:03.600 | So you can only imagine what her daughter thinks of all this.

00:09:06.600 | And again, she's on the outside looking in, and it's another family fight between the spouse and the child of a prior marriage.

00:09:12.600 | And that's what everyone can learn. Even though the Zsa Zsa thing is a little out there, I would definitely say we can all agree on that.

00:09:18.600 | The issues between, in her case, a ninth marriage situation and her daughter fighting over control of medical and financial decisions is very common, and that's why the planning is so important.

00:09:29.600 | [Music]

00:09:45.600 | Welcome to the Radical Personal Finance Podcast for today.

00:09:49.600 | This is episode 49, and today is Wednesday, August 27, 2014.

00:09:55.600 | Today, let's do some hardcore financial planning, and let's dig into estate planning.

00:10:02.600 | Won't that be fun?

00:10:05.600 | [Music]

00:10:18.600 | I really hope that the first thing that came to your mind was the idea that estate planning would be fun.

00:10:23.600 | But I happen to know that for most people, it's not.

00:10:26.600 | I played those clips. All of them are featuring various news interviews by the authors of a book called Trial and Errors.

00:10:34.600 | I haven't read the book yet, but I was looking for some interesting clips to play for you that would show kind of the extreme side of estate planning, the radical side of estate planning.

00:10:45.600 | I figured that those qualified. How interesting to sit through and listen to the various celebrities and listen to the nuts and bolts of their lives and to look at their documents and look at what they have done.

00:10:55.600 | In one way, I think it's a little voyeuristic and a little invasive, but in the other way, I think it's instructive.

00:11:01.600 | It's instructive for us, and it can give us some ideas as far as how we can do a better job with understanding estate planning.

00:11:09.600 | My mission today, and I am determined to accomplish it, is to give kind of an introduction and an overview of the art and science of estate planning.

00:11:18.600 | Estate planning is one of those very important aspects of financial planning, and it's probably many people's least favorite aspect because they don't see the importance of it and also because it is one of the most technically complex aspects of planning.

00:11:33.600 | But like with most things, it can either be very complex or it can be very simple and straightforward.

00:11:39.600 | So today, I'm going to try to give you kind of an overview and an introduction to the subject, and then we will follow this series through in detail through every aspect of estate planning, I promise.

00:11:51.600 | We'll go from the very, very simple to the extremely complex and extremely in-depth.

00:11:56.600 | We'll talk about the "What do I do with a $10 billion estate?"

00:12:00.600 | We'll talk about the planning techniques for millionaires.

00:12:03.600 | We'll talk about the planning techniques for broke people.

00:12:05.600 | And I'll walk you through and try to share with you every bit of knowledge that I have about estate planning, and I'll try to do it in an interesting way.

00:12:16.600 | By the way, some of these shows are going to be specifically for financial planners, and some of these shows will be appropriate for the layperson.

00:12:23.600 | There's no secret knowledge in the financial planning for the financial planner, but I would expect that if you're just listening for your own knowledge,

00:12:31.600 | if you may not have an interest in the technical, complex aspects of estate planning, when we get to how to set up a, I don't know, a QPERT, a Qualified Personal Residence Trust,

00:12:43.600 | and when to use it and when not to use it, and when we get into something like that, if you don't fit the scenario, skip the show on QPERTs.

00:12:51.600 | But if you're a financial planner, you need to understand what a QPERT is.

00:12:56.600 | A QPRT is the acronym.

00:12:58.600 | You need to understand what that is, so that's where this will be applicable for financial planners.

00:13:04.600 | Before we get started, a couple of quick things.

00:13:06.600 | A, I am not an attorney.

00:13:08.600 | I am a financial planner, and so this show is not going to be legal advice, and I do not have any background as an attorney to be able to give you an attorney's perspective.

00:13:19.600 | This is going to be my best effort to give you some ideas and give you some information that has been helpful to me.

00:13:26.600 | In many ways, I think that it's actually a good thing that I'm not an attorney because I'm not encumbered by all of the background that attorneys have.

00:13:34.600 | I come at it from a financial planning perspective, which I think is in some ways more practical, just because of a broader level of experience,

00:13:41.600 | and I'm not encumbered by knowing every little jot and tittle of the financial law of the law.

00:13:49.600 | So hopefully that will be helpful, but I'm going to do my best to give you accurate information,

00:13:54.600 | but you're going to have to take with it and apply it in your situation, and I'll tell you where my information is specific to me.

00:14:05.600 | I'll tell you where I may be wrong about something and where I'm pretty right about stuff.

00:14:09.600 | First off the bat, estate planning, if you are a financial planner, estate planning is this very wonderful aspect of financial planning,

00:14:17.600 | where it's a combination of art and science. It really is. It's art and it's science.

00:14:25.600 | In some financial planning situations, you can look specifically at what are the rules, what's the science, what's the legal framework,

00:14:31.600 | and the answers are immediately apparent. And in others, there's a bit of art to it.

00:14:35.600 | And if you are going to practice as an estate planner in some capacity, you need to be able to integrate the art and the science both.

00:14:43.600 | You need to be really good, if you're a planner, at understanding what your client actually wants to do,

00:14:48.600 | because there may be many, many, many, many ways to achieve the same thing,

00:14:53.600 | but a deep understanding of what your client is actually trying to do is going to help you to select the right option.

00:15:02.600 | Estate planning is incredibly personal and incredibly difficult for many people.

00:15:08.600 | It's probably the one area of planning that's pushed off by more people to the future because they find it to be overwhelming

00:15:15.600 | and because they find it to be uncomfortable to look at, and yet it's incredibly important.

00:15:20.600 | It's also difficult for people because most people don't actually know what they want to accomplish with their estate plan.

00:15:26.600 | In many ways, the bulk of a planner's work is trying to help a client to figure out what they want to do,

00:15:32.600 | what they want to accomplish. Once you know what you want to do, you can quickly determine a plan.

00:15:36.600 | But if you don't know what you actually want to do, then it's very difficult to accomplish that quickly.

00:15:42.600 | Today, we're going to talk mostly about the non-tax aspects of estate planning.

00:15:48.600 | With estate planning, I'm going to define the term in just a moment and give you some historical background

00:15:54.600 | on the art and science of estate planning. But there are two primary aspects to it.

00:15:59.600 | There's a tax aspect and there's a non-tax aspect.

00:16:03.600 | The tax aspect, there's two primary tax systems under which we need to consider,

00:16:08.600 | two primary tax systems under which we operate.

00:16:11.600 | Those two primary tax systems are income taxes and transfer taxes.

00:16:17.600 | Income taxes and transfer taxes. Income taxes are relatively straightforward.

00:16:21.600 | We're used to dealing with those every year.

00:16:25.600 | They can come into play in many ways in an estate planning capacity,

00:16:30.600 | both in trying to defer the income taxes, trying to make sure that we're planning properly for them.

00:16:35.600 | This may be ordinary income taxes, capital gains taxes. All of these are applicable.

00:16:39.600 | All the normal things we're talking about with income taxes.

00:16:42.600 | Most people are fairly familiar with income taxes. Fewer people are familiar with transfer taxes.

00:16:48.600 | Income taxes involve three major aspects of the tax code and a fourth minor aspect.

00:16:54.600 | The three major tax systems that function under the transfer tax system are estate taxes,

00:17:01.600 | generation skipping transfer taxes, commonly called GST taxes, and gift taxes.

00:17:07.600 | Those are the three primary transfer tax systems.

00:17:10.600 | There's a fourth more minor called the Qualified Domestic QDOT.

00:17:17.600 | Qualified Domestic Order Tax. It's called a QDOT.

00:17:22.600 | I can't remember if it stands for order. Let me look it up real quick.

00:17:25.600 | I had to pause and go look it up.

00:17:27.600 | That should show you how complicated in many ways estate planning is.

00:17:31.600 | Here I am. I work in this stuff all the time and I get mixed up on my acronyms.

00:17:35.600 | What happens in the financial world, you kind of get used to just dealing with the acronym.

00:17:39.600 | QDOT, that's what it is, or it's a QPERT or it's a QUADRO.

00:17:44.600 | You get used to just dealing with the acronyms.

00:17:47.600 | QDOT just says Qualified Domestic Trust. That's what it stands for.

00:17:52.600 | They toss the O in there so it's not a QDT, I guess.

00:17:55.600 | I get that confused in the past with a QUADRO, which is a Qualified Domestic Relations Order.

00:18:01.600 | A QUADRO is basically in a divorce situation, which entitles a divorcing spouse to have a claim on a deferred pension plan.

00:18:12.600 | A QDOT is a trust system that allows a non-citizen spouse to be able to avoid some of the federal taxation that they would otherwise be subjected to.

00:18:24.600 | Let's get back on track.

00:18:25.600 | Under transfer taxes, there's the three primary estate taxes, generation skipping transfer taxes, GST taxes, and GIF taxes.

00:18:32.600 | Then the fourth minor one, which is Qualified Domestic Trusts, QDOTs.

00:18:37.600 | That would be tax planning, but there's a common misconception that estate planning is all about tax planning.

00:18:44.600 | Generally, if you ask somebody and you say, "Hey, listen, have you done your estate planning?"

00:18:48.600 | They're thinking about tax planning, but there is a tremendous need, probably even more important need, to do non-tax planning.

00:18:56.600 | There are a lot of things that I would bring in under non-tax planning.

00:18:59.600 | It could be everything from who would be the guardian of my children, from as simple as that, up to as complicated as at what age do I want to release funds to my children?

00:19:09.600 | You heard in the example there, evidently, James Gandolfini's will states that his assets would be released to his heirs at the age of 21 and 25.

00:19:19.600 | Well, that would be non-tax planning.

00:19:21.600 | When do you want your kids to receive money and how much do you want to receive?

00:19:25.600 | That's probably, in many ways, a far more important aspect of planning than the tax planning.

00:19:33.600 | There's really so much more than dealing with property.

00:19:40.600 | Estate planning is so much more than just dealing with the property that somebody leaves behind at death.

00:19:45.600 | I like to define estate planning as everything surrounding the accumulation of an estate, the conservation of an estate, and the distribution of the estate.

00:19:57.600 | Most people are thinking about it purely as distribution, but I think of it as accumulation, conservation, and distribution.

00:20:05.600 | Part of my estate planning is the current financial planning to build an estate.

00:20:11.600 | How do you do that?

00:20:13.600 | Let me explain what I mean.

00:20:15.600 | I have a very large estate right now, but I have proportionally a much smaller level of actual assets.

00:20:25.600 | The primary amount of my estate is life insurance.

00:20:28.600 | At this stage in my life, I haven't accumulated huge amounts of money yet.

00:20:33.600 | Therefore, in order to insure my estate, I've insured it.

00:20:39.600 | In order to insure that my spouse receives substantial funds to be able to maintain our lifestyle and to be able to perpetuate our financial plan and our dreams, I've insured it with life insurance.

00:20:52.600 | That's all life insurance is, and that's why it's such a powerful tool.

00:20:55.600 | If I continue working on my financial plan, building my businesses, saving, and investing wisely, I expect that over time that plan will reap the appropriate dividends and rewards.

00:21:07.600 | I've done pretty well. I've done better than many people my age and worse than many.

00:21:13.600 | The point is that I'm working a plan over time, my own personal financial plan.

00:21:20.600 | The beauty of insurance is that I've insured and ushered and ensured my estate in order to assure my spouse that she's going to be okay.

00:21:34.600 | That's really meaningful. That's part of my estate planning.

00:21:37.600 | Although it usually would get segregated in the aspect of financial planning over to life insurance planning, that is part of my estate planning.

00:21:45.600 | That's a major part of my estate planning, is trying to make sure that no matter what happens, my plans and my dreams are still carried out.

00:21:56.600 | I figure if I'm still here, I could make many mistakes financially, but if I'm still here, it's reasonable that under my current financial plan that I'll be able to accumulate wealth that will assure us of our lifestyle.

00:22:09.600 | But I want to make sure that that wealth is there for my family if I'm not here, if I'm not able to continue working my plan, and that's life insurance.

00:22:16.600 | Estate planning is everything about the accumulation of an estate, and it's about the conservation of an estate.

00:22:23.600 | For example, one part of estate planning under the conservation of an estate would be making sure that I would put something like long-term care insurance into that.

00:22:32.600 | Let's say that I'm working with a client, and this client has substantial assets. They're well suited for retirement.

00:22:38.600 | They have significant goals that they would like to accomplish at their death.

00:22:42.600 | Maybe those are charitable goals. Maybe those are legacy goals of an inheritance, a financial inheritance that they would like to leave behind for their children or other beneficiaries.

00:22:51.600 | Well, one of the risks that faces them is what if we have large medical bills?

00:22:57.600 | What if they were to face maybe early-onset Alzheimer's, and this client retired early at the age of 50 and at the age of 52 experienced early-onset Alzheimer's and needed 15 years of care?

00:23:09.600 | Well, that could destroy the estate.

00:23:11.600 | So we want to make sure as part of our estate planning, we want to make sure that that estate is conserved.

00:23:17.600 | So accumulation, conservation, and ultimately distribution.

00:23:22.600 | Let's talk a little bit about the historical background of estate planning.

00:23:26.600 | You might find this interesting. I always find the history to be interesting, and it helps me to think.

00:23:32.600 | Because a lot of times in the modern world, we get so caught up in saying, "Well, this is the way that things work," and we don't recognize that there's very little new.

00:23:41.600 | As Solomon said, there's nothing new under the sun.

00:23:43.600 | You know, people, prudent people, have always sought to make sure that their financial affairs would be resolved in an appropriate way.

00:23:58.600 | They've worked hard to assure that no matter what happens, that their spouse or their children would be cared for.

00:24:05.600 | And that has functioned in various ways throughout history.

00:24:10.600 | In today's world, we immediately jump to financial documents, saying, "Well, you need a will. You need a trust."

00:24:17.600 | Because our society is largely regulated by the rule of law.

00:24:22.600 | Everything is very formal, and everything is run through the court system and through a legal system.

00:24:29.600 | And that's fine. That's good. That's positive.

00:24:31.600 | But people have, since time immemorial, people have been saying to a friend, "Hey, listen, if I die, would you take care of my family?

00:24:42.600 | I'll make sure of this, but will you take care of my children?"

00:24:45.600 | And this has been recognized for a long, obviously for a long time.

00:24:50.600 | Over history, different cultures have had different solutions for the possession of property.

00:24:56.600 | And so property wealth is where things get the stickiest.

00:25:01.600 | The primary, I mean, since people have owned property, and since humans have owned property and have valued possessions and property,

00:25:11.600 | there's been a need to dispose of that property in an orderly way at the death of the owner.

00:25:16.600 | And so different cultures have different solutions.

00:25:19.600 | In some cultures, all possessions are held communally.

00:25:23.600 | And so all possession may belong to a family or to a tribe.

00:25:27.600 | And so individual property rights are not recognized.

00:25:30.600 | Some cultures historically have recognized individual property rights,

00:25:34.600 | but that property was passed perhaps through a mother or through a father or through both of them.

00:25:41.600 | And this has varied across cultures.

00:25:44.600 | The earliest mention that I'm aware of of formal written instructions occurs from about the year 2500 B.C.

00:25:55.600 | It's actually 2548 B.C.

00:25:58.600 | And there was an Egyptian papyrus that was unearthed that was written and witnessed by two scribes

00:26:04.600 | where an Egyptian had certain property allocated for his spouse, for his wife,

00:26:10.600 | and appointed a guardian for his minor children in a written way.

00:26:14.600 | That's the earliest mention that I'm aware of of formal estate planning in a written way using written documents.

00:26:22.600 | The ancient Greeks had a system of wills.

00:26:25.600 | It's interesting. I'll link to a Wikipedia article in the notes.

00:26:29.600 | But if you check out the Wikipedia article, there's--I'll just read one paragraph here.

00:26:35.600 | According to Plutarch, Solon "is much commended for his law concerning wills.

00:26:40.600 | For before his time no man was allowed to make any, but all the wealth of deceased persons belonged to their families.

00:26:47.600 | But he permitted them to bestow it on whom they pleased,

00:26:50.600 | esteeming friendship a stronger tie than kindred, and affection than necessity,

00:26:55.600 | and thus put every man's estate in the disposal of the possessor.

00:26:59.600 | Yet he allowed not all sorts of wills, but required the following conditions in all persons that made them.

00:27:04.600 | I'll read to you, there's looks like about six conditions.

00:27:08.600 | And you can see how the conditions that--and this is how history relates to what we do now.

00:27:15.600 | For example, you must have heard, even if you've never done a will,

00:27:18.600 | or even if you've never sat in an attorney's office, you must have heard from movies,

00:27:21.600 | "I being of sound mind." Where does that come from?

00:27:24.600 | Well, listen to these requirements for a will to be valid in ancient Greece.

00:27:29.600 | Number one, that they must be citizens of Athens, not slaves or foreigners,

00:27:34.600 | for then their estates were confiscated for the public use.

00:27:38.600 | Two, that they must be men who have arrived to twenty years of age,

00:27:42.600 | for women and men under that age were not permitted to dispose by will of more than one medim of barley.

00:27:49.600 | Three, that they must not be adopted, for when adopted persons died without issue,

00:27:54.600 | means without children, without progeny,

00:27:56.600 | the estates they received by adoption returned to the relations of the men who adopted them.

00:28:01.600 | Next, that they should have no male children of their own, for then their estate belonged to these.

00:28:07.600 | If they had only daughters, the persons to whom the inheritance was bequeathed were obliged to marry them.

00:28:13.600 | Yet men were allowed to appoint heirs to succeed their children,

00:28:16.600 | in case these happened to die under twenty years of age.

00:28:19.600 | That they should be in their right minds,

00:28:21.600 | because testaments extorted through the frenzy of a disease or dotage of old age

00:28:28.600 | were not in reality the wills of the persons that made them.

00:28:31.600 | So that's where the "I" being of sound mind comes from.

00:28:34.600 | That they should not be under imprisonment or other constraint,

00:28:38.600 | their consent being then only forced, nor injustice to be reputed voluntary.

00:28:44.600 | So you can see here where the contracts that are enacted under duress is not a valid contract when you study contract law.

00:28:53.600 | And you can see that this traces back to ancient Greece.

00:28:56.600 | That they should not be induced to it by the charms and insinuations of a wife,

00:29:01.600 | for, says Plutarch, the wise lawgiver with good reason thought that no difference was to be put between deceit and necessity,

00:29:09.600 | flattery and compulsion, since both are equally powerful to persuade a man from reason.

00:29:15.600 | Wills were usually signed before several witnesses who put seals to them for confirmation,

00:29:20.600 | then placed them in the hands of trustees, who were obliged to see them performed.

00:29:25.600 | At Athens some of the magistrates were very often present at the making of wills.

00:29:30.600 | Sometimes the archons were also present.

00:29:33.600 | Sometimes the testator declared his will before sufficient witnesses without committing it to writing.

00:29:39.600 | Thus Callius, fearing to be cut off by a wicked conspiracy,

00:29:43.600 | is said to have made an open declaration of his will before the popular assembly at Athens.

00:29:48.600 | There were several copies of wills in Diogenes, Laertes, as those of Aristotle, Lyco of Troas, and Theophrastus.

00:30:00.600 | Once it appears, they had a common form, beginning with a wish for life and health.

00:30:04.600 | So, interestingly, in ancient Greece, I just thought that was interesting when I was researching this show,

00:30:08.600 | they are the ones who had a system of wills developed.

00:30:12.600 | The Romans also had a system of wills.

00:30:14.600 | In the Roman system, there was a forced heirship, which would not permit someone to disinherit their dependents.

00:30:21.600 | And so there were certain things that were acceptable and that was not acceptable.

00:30:24.600 | And so by not being able to disinherit their dependents, this would ensure that the dependents would not become a burden on the state.

00:30:34.600 | And so that actually continues through to modern day, today,

00:30:38.600 | especially in civil law jurisdictions where the judicial system is based more on Roman or Napoleonic code,

00:30:45.600 | French code, rather than the English common law.

00:30:48.600 | So in case you're not familiar with the legal structure of our country,

00:30:52.600 | there are two primary, in my understanding, and I'm not an attorney, never gone through law school,

00:30:57.600 | but in my understanding, there are two primary legal systems.

00:31:00.600 | There would be the English common law system, and that's where most of our laws come from in most of the country.

00:31:06.600 | And then there would be the civil law system.

00:31:09.600 | And so the best example of that would be in Louisiana.

00:31:12.600 | In Louisiana, there is a markedly different legal structure than the rest of the country

00:31:17.600 | because Louisiana was based upon French law, which traces back to Roman law.

00:31:24.600 | And in the civil code, it was much more about here is what the specific statutes are

00:31:29.600 | versus the English common law tradition where everything comes out of the legal tradition.

00:31:34.600 | That's my best influence.

00:31:35.600 | If any of you are attorneys and I've got that completely wrong, then let me know.

00:31:39.600 | Feel free to comment on today's show, which is episode 49, radicalpersonalfinance.com/49, set me straight.

00:31:46.600 | The biggest influence--so now civil law and common law have merged in many places,

00:31:53.600 | and there's influences both ways.

00:31:56.600 | But because the biggest influence on our legal code is English common law,

00:32:00.600 | the history of wills would go back to the year 1540.

00:32:05.600 | And so in 1540, there was a law passed called the Statute of Wills.

00:32:10.600 | And in this Statute of Wills, it gave somebody a testamentary right over the disposition of their property, specifically.

00:32:18.600 | And it gave the right to everyone except married women, infants, idiots, and the insane.

00:32:24.600 | So with written instructions, everybody except married women, infants, idiots, and the insane.

00:32:29.600 | I pulled those words, I think, from the Wikipedia entry that are one of the textbooks that I have.

00:32:36.600 | And that gave them the ability to dispose of their property with written instructions.

00:32:41.600 | Now, what about taxes? So interesting thing, if you go and study the estate tax system--

00:32:46.600 | so we're crossing over from just the legal system over to the estate tax system--

00:32:49.600 | the first estate tax in the U.S. was implemented in the year 1797.

00:32:54.600 | This has been with us a long time.

00:32:57.600 | That's why I don't expect necessarily it to go anywhere for any time soon.

00:33:00.600 | It was implemented in 1797, and then for the next 100 years, it went in and out of force.

00:33:07.600 | It was repealed, it was reenacted. Repealed, reenacted, based upon various maneuverings in the legal system.

00:33:14.600 | It was actually, in 1895, indirectly held to be unconstitutional.

00:33:19.600 | So in 1895 was the case of Pollock versus the Farmers' Loan and Trust.

00:33:24.600 | And this was the court case that declared the income tax itself unconstitutional.

00:33:29.600 | So the income tax had been established previous, and in that court case, found it to be unconstitutional.

00:33:35.600 | Later, that was why Congress later went on to pass the 16th Amendment,

00:33:39.600 | which explicitly authorized Congress to enact a tax system authorizing the income tax.

00:33:47.600 | And then in 1898, the federal estate tax was again imposed under the War Revenue Act.

00:33:54.600 | So the federal estate tax has been with us for a very long time, 1797 up through today, and officially again since 1898.

00:34:03.600 | Now you can see, even in that 100 years of the law being repealed, reenacted, repealed, reenacted, that it changed dramatically.

00:34:12.600 | So one of the biggest challenges of practicing in the area of estate law is the frequent changes of the law.

00:34:19.600 | And I won't go today over the recent history, but even in the time that I was working as a financial planner,

00:34:25.600 | the thresholds and the tax brackets for the estate tax system have changed dramatically.

00:34:32.600 | Today, under today's law, they're fairly high.

00:34:35.600 | They're over $5 million of exemption for the estate tax system.

00:34:40.600 | So in essence, if your wealth is -- I mean, this is a gross generalization --

00:34:45.600 | but if your wealth is not more than $5 million or $10 million for a couple, you don't need to worry too much about estate taxes.

00:34:52.600 | But that's -- over the last 10 years, that number has ranged down to very low numbers.

00:34:58.600 | So this system is changing all the time, and I expect it to continue to change,

00:35:02.600 | although the most recent laws, unlike, for example, George Bush had -- under his administration,

00:35:10.600 | some of the estate tax laws had been changed, and they were -- that's why they sunsetted a few years ago.

00:35:15.600 | And there were a lot of changes.

00:35:17.600 | I'm trying to make this show more general and not get so specific with it,

00:35:21.600 | which is why I'm avoiding going through all the numbers and everything like that.

00:35:24.600 | But the point is, under today's system, the laws are -- the future is fairly well established.

00:35:31.600 | But it does change, and estate taxes, they blow with the political winds, in my opinion.

00:35:38.600 | They are often, often changing.

00:35:41.600 | It's important that you recognize that estate planning is very state-specific.

00:35:46.600 | It's very state-specific.

00:35:48.600 | So I live in Florida, and I'm familiar with Florida state law, but I'm not familiar --

00:35:53.600 | I have no idea how state planning really works in Louisiana.

00:35:56.600 | So be aware. I will stick to what is generally accepted and generally true,

00:36:01.600 | but you will need to research your own state law.

00:36:04.600 | I am not qualified in any measure to talk about your state law.

00:36:08.600 | It's very state-specific.

00:36:09.600 | One of the biggest -- best examples of this is that a major influence in estate planning is,

00:36:14.600 | do you live in a community property state or a non-community property state?

00:36:19.600 | I will do a show in the future on community property versus non-community property

00:36:23.600 | and explain in detail what that means.

00:36:26.600 | But in the United States, there are nine states that are community property states.

00:36:31.600 | And in essence, basically what a community property state law would say,

00:36:37.600 | in the laws in which community property is the law -- excuse me.

00:36:41.600 | Let me try again.

00:36:42.600 | In the states in which community property is the law, then basically what that says is that

00:36:48.600 | most property that is acquired during the marriage, with the exception of gifts

00:36:52.600 | and inheritances, is owned jointly by both spouses, fully.

00:37:00.600 | And then it's automatically assumed, unless there's specific evidence that would say something different.

00:37:05.600 | Well, that's different than in a non-community property state,

00:37:08.600 | and I'm not going to go any deeper into that.

00:37:10.600 | Most of the states that are community property states are in the western United States,

00:37:15.600 | because in my understanding, the community property system comes from Mexico's

00:37:23.600 | ganancial community system, and that comes from Spanish law,

00:37:28.600 | which came out of the Roman civil law, and originally from the Visigoth Code.

00:37:35.600 | When I was researching this, it goes back to the Visigoth Code.

00:37:38.600 | It's kind of interesting.

00:37:40.600 | And so you can see that you can trace back the history of it.

00:37:46.600 | Same thing in Louisiana.

00:37:48.600 | So Louisiana is one of the nine states, and that comes from the French system,

00:37:51.600 | which was based upon Roman civil law as well.

00:37:54.600 | That's the best of my understanding.

00:37:55.600 | So there are nine community property states.

00:37:57.600 | You should pay attention to whether you live in one of these states.

00:38:00.600 | These nine states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

00:38:11.600 | And then Alaska is a separate property state, but it does permit couples to opt into a community property arrangement.

00:38:18.600 | So that would be the wild card there.

00:38:20.600 | So if you live in one of those nine states, you should especially be familiar with what community property is and how that works.

00:38:26.600 | Another aspect of estate planning that is important is are we talking about death planning,

00:38:31.600 | or are we talking about something that is not only about death planning?

00:38:36.600 | Death planning is what many people assume estate planning to be, and I've already talked about it.

00:38:40.600 | I think it's more than that.

00:38:42.600 | But incapacity planning is a major issue.

00:38:45.600 | So estate planning would come under--I would include things like incapacity planning under the purview of estate planning.

00:38:54.600 | So incapacity would be what do I do if somebody is mentally impaired?

00:38:57.600 | What do I do if somebody has special needs?

00:38:59.600 | What do I do in the case of disability?

00:39:01.600 | If I have, for example, a wonderful estate plan that accounts for all of my needs at death,

00:39:10.600 | but then I'm disabled and I have a stroke and now I can no longer communicate, well, what do I do for that?

00:39:16.600 | That's all part of estate planning.

00:39:17.600 | So a good estate planner is going to make provision for that situation.

00:39:20.600 | It's going to be part of the overall planning situation.

00:39:23.600 | I meant at the beginning of the show to give you a quick outline of where I'm going in today's show,

00:39:27.600 | and so I'll do that real quick so you can know what to expect in the rest of this show.

00:39:33.600 | I'm going to go over some basic estate planning documents, and then I'm going to talk about does everybody need a will?

00:39:38.600 | What if I die without a will?

00:39:41.600 | How do I do estate planning for myself?

00:39:43.600 | And then should I do it myself?

00:39:45.600 | And that's going to be the primary point of today's show, and that's when I anticipate today's show finishing.

00:39:50.600 | So if you're interested in how do I do it myself and should I do it myself, then stay tuned for that.

00:39:55.600 | Let's talk about some basic estate planning documents.

00:39:57.600 | Let me just quickly explain what they are.

00:40:00.600 | In essence, these come down to essentially four or five, depending on how you categorize them,

00:40:04.600 | four or five basic estate documents.

00:40:07.600 | The first is a will, and that's what everyone thinks of as a will,

00:40:12.600 | and a will basically says what happens to my property when I die,

00:40:17.600 | and then who do I appoint to settle my estate.

00:40:20.600 | So using layman's terms, non-attorney speak, basically who takes care of my stuff,

00:40:26.600 | who does my stuff go to, and then the most important aspect of a will,

00:40:30.600 | who do I establish to be the guardian if I have minor children, establishes guardianship.

00:40:35.600 | So a will basically says what happens to your stuff.

00:40:38.600 | Importantly is you need to remember that a will only governs your stuff.

00:40:45.600 | A will only says what happens to the stuff that you own that's not governed by contract law.

00:40:51.600 | So there are a lot of assets that you have that are not going to be affected in any way by your will.

00:40:57.600 | So for example, if you've established a trust of some sort,

00:41:01.600 | any property that you've transferred to the trust is not affected by your will.

00:41:05.600 | If you have a life insurance policy, the life insurance is--

00:41:08.600 | the death benefit and life insurance is not affected by the will.

00:41:12.600 | If you have money in some sort of retirement account, an IRA, a 401(k), or something similar,

00:41:17.600 | the money that's in that retirement account is not affected by your will.

00:41:21.600 | That is a contract that has a listed beneficiary.

00:41:24.600 | And so the money goes to the listed beneficiary on that account,

00:41:27.600 | and then the money goes under the life insurance policy to the listed beneficiary on that account.

00:41:32.600 | And those beneficiary designations would have a primary beneficiary

00:41:36.600 | and a contingent beneficiary if you've established them.

00:41:39.600 | So you would establish a primary--first this person.

00:41:41.600 | If this person is dead or doesn't want the money or disclaims the property, it would go to the contingent.

00:41:47.600 | And then if the primary and the contingent don't receive it, then it may revert back to your estate,

00:41:51.600 | and it then may become an asset of your estate and be governed by your will.

00:41:54.600 | But in general, it's not going to be governed by your will.

00:41:56.600 | It's going to be governed by who is the beneficiary.

00:41:59.600 | Any securities or investments that you hold in a transfer-on-death account

00:42:04.600 | or any bank accounts that are payable on death bank accounts--

00:42:07.600 | so that would be basically in the brokerage--security brokerage world or in the banking world,

00:42:12.600 | that's how you establish a beneficiary designation is you establish it as a transfer-on-death

00:42:16.600 | or a payable-on-death account.

00:42:18.600 | That's not going to be governed by your will.

00:42:20.600 | Any property that you own with someone in some sort of joint tenancy

00:42:25.600 | or tenancy by the entirety's ownership arrangement--

00:42:29.600 | and don't let those words intimidate you.

00:42:31.600 | I'll go through them in a future episode.

00:42:33.600 | Then that's not going to be affected by your will.

00:42:37.600 | So all of those assets are going to be based upon the contract.

00:42:43.600 | It's not going to be based upon the will.

00:42:46.600 | So a will can do a lot, but there's also a lot that a will cannot do.

00:42:52.600 | So the most important reasons to have a will is probably going to be with guardianship

00:42:55.600 | and then to dispose of any property that you have that's not affected by contract law.

00:43:03.600 | Now, another part of your basic estate planning documents is going to be a trust.

00:43:08.600 | So you may or may not establish a trust,

00:43:10.600 | but these documents are not necessarily mutually exclusive.

00:43:14.600 | So an example would be you could establish a trust in your will.

00:43:18.600 | That would be called a testamentary trust.

00:43:21.600 | It's a trust that's established by your last will and testament upon your death.

00:43:25.600 | So a trust may--your will--the will can mean many things.

00:43:28.600 | I'm trying to stick with a high-level discussion today.

00:43:31.600 | So the first basic estate planning document would be a will.

00:43:33.600 | Second would be any trust that you have,

00:43:35.600 | and that's a very nebulous term that could cover a range of types of trusts.

00:43:39.600 | Next would be powers of attorney.

00:43:42.600 | So you would have a power of attorney for health care decisions,

00:43:46.600 | or you would have a financial power of attorney,

00:43:48.600 | so a power of attorney for financial decisions.

00:43:50.600 | And then last would be--commonly called a living will,

00:43:53.600 | more technically called an advanced medical directive.

00:43:56.600 | And a living will or an advanced medical directive

00:43:58.600 | would basically express your wishes for any life-sustaining issues.

00:44:02.600 | Think of the news articles, everything surrounding the awful case with Terry Shivo

00:44:07.600 | some number of years ago.

00:44:09.600 | What happens if you're on life support?

00:44:11.600 | What are your wishes?

00:44:12.600 | Do you wish to be held on life support, or do you wish to not be held on life support?

00:44:16.600 | So that would be--those are the basic documents.

00:44:19.600 | And a good estate plan is probably going to include all of them,

00:44:23.600 | but each of them serves their own unique purpose.

00:44:26.600 | The most common things that I see from talking with attorneys,

00:44:31.600 | the primary problems actually don't come with the will.

00:44:34.600 | The primary problems often come with the powers of attorney

00:44:38.600 | and with the medical directives.

00:44:40.600 | And if somebody has not designated a power of attorney for health care decisions

00:44:43.600 | or a power of attorney for financial decisions,

00:44:45.600 | or if they've not established their own medical directives,

00:44:49.600 | that's where a lot of the problems come in, is in dealing with health issues.

00:44:55.600 | So I won't go deeper into that discussion right now,

00:44:58.600 | but just be aware that the will is not an end-all, be-all in estate planning.

00:45:03.600 | I now want to tackle--

00:45:05.600 | [makes noise]

00:45:06.600 | I now want to tackle a topic.

00:45:09.600 | In case you don't know, I think--I've never been diagnosed,

00:45:11.600 | but I think I'm actually mildly dyslexic.

00:45:13.600 | I'll often wind up twisting my words a little bit,

00:45:19.600 | and the wrong word will come out,

00:45:21.600 | so you'll have to be patient with me when I do things like that.

00:45:24.600 | I've never been formally diagnosed, but I sometimes wonder if that's just normal

00:45:27.600 | or if I'm mildly dyslexic.

00:45:29.600 | From the best of my knowledge, that may be a sign of dyslexia,

00:45:32.600 | but I'm not an expert on that.

00:45:34.600 | So the next topic I would like to tackle is, does everybody need a will?

00:45:40.600 | And this is something that you often hear.

00:45:43.600 | What I've always--annoys me is when I hear a radio announcer or an advertisement,

00:45:49.600 | "Everybody needs a will.

00:45:51.600 | If you are over the age of 18, you need a will."

00:45:54.600 | And I think this is one of those things that is--again, it's probably generally true.

00:45:59.600 | I wouldn't really disagree with it, but it's not always true.

00:46:03.600 | And so here would be how I would think it through.

00:46:06.600 | I don't think everybody needs a will.

00:46:09.600 | If you think about what a will is primarily good for,

00:46:12.600 | here are the three things that a will is primarily good for.

00:46:15.600 | Number one, it is good if you have dependents.

00:46:21.600 | It's good for establishing a guardianship for your dependents.

00:46:24.600 | So if you're a parent and you have children, you need to establish a guardian

00:46:28.600 | for those children, the person that you would choose to care for them if you were to die.

00:46:35.600 | If you die without a will--it's called dying intestate.

00:46:39.600 | Being intestate means dying without a will.

00:46:43.600 | If you die without a will, the court's going to appoint a guardian.

00:46:45.600 | So it's not the end of the world if you die without a will and you don't appoint a guardian.

00:46:48.600 | It just may not be the same person that you would choose to be your children's guardian.

00:46:54.600 | So if you have a specific idea of who you would want to be your children's guardian,

00:46:59.600 | your child or your children's guardian, then you should designate that in your will.

00:47:03.600 | The second thing that it's good for is it's good for addressing the disposition of any property

00:47:07.600 | that is not covered by contract law or by some other ownership arrangement.

00:47:12.600 | So I could pretty easily get rid of--most people don't have a lot of this property.

00:47:18.600 | The example would be this.

00:47:20.600 | Most people, their primary assets, if they have it, is their home.

00:47:24.600 | Usually their home is--if they're married, their home is often a joint tenancy relationship.

00:47:29.600 | So if I die, my spouse automatically--my wife and I are joint tenants on our home.

00:47:34.600 | We both own the property.

00:47:36.600 | In the state of Florida, it's standard that we use a tenancy by the entirety's designation.

00:47:41.600 | So we each own an equal undivided interest in the home.

00:47:44.600 | So if I die, she automatically inherits the home.

00:47:46.600 | It's not governed by my will.

00:47:48.600 | It's governed by the ownership designation.

00:47:50.600 | Most people have a majority of their assets held in a 401(k)

00:47:56.600 | or maybe it's a life insurance policy, something like that.

00:47:59.600 | So the majority of my assets right now, if I were to die,

00:48:01.600 | would come in from a life insurance policy.

00:48:03.600 | I have $2.5 million of life insurance, so my wife would get the $2.5 million,

00:48:08.600 | and that's more than the value of our investment assets in our house

00:48:11.600 | and the equity that we have in our house, and it's more than the value of my business.

00:48:14.600 | So most people probably don't have a lot of property that's going to be judged by the will.

00:48:21.600 | And then the third thing is to designate who would be the executive of your estate

00:48:24.600 | and the administrator of your estate.

00:48:26.600 | So I can easily design a situation where somebody doesn't need a will.

00:48:31.600 | Let's say somebody is 20 years old, they're unmarried, they don't have any children,

00:48:35.600 | and the bulk of their assets are held in a 401(k) and they don't own a house.

00:48:40.600 | You don't need a will. What's a will going to do for you?

00:48:42.600 | Now, you probably should set up a durable power of attorney for financial affairs,

00:48:45.600 | and you probably should set up a power of attorney, a health care power of attorney.

00:48:50.600 | You probably should establish a living will, so you might as well,

00:48:53.600 | if you're going to be prudent and responsible and take care of all that stuff,

00:48:56.600 | you probably might as well just write a will, say what happens to your car

00:49:00.600 | if you haven't owned a car free and clear, but it's probably not that big of a deal.

00:49:06.600 | I mean, what happens if you die without a will?

00:49:08.600 | So this is going to be different in each state, but what you would want to do is just see,

00:49:12.600 | what happens if I die without a will?

00:49:14.600 | So each state is going to have different laws of--intestacy laws, which says,

00:49:18.600 | if you die intestate, meaning without a will, what happens to your assets?

00:49:22.600 | So in Florida, where I live, here's what happens.

00:49:26.600 | If I were to die, let's assume that I don't have a will.

00:49:29.600 | If I die without a will, all of the assets of my estate would be disposed of in this way.

00:49:38.600 | If I have children but no spouse, my children would inherit everything equally.

00:49:44.600 | If I have a spouse but no descendants, my spouse would inherit everything.

00:49:50.600 | If I have a spouse and descendants from me and that specific spouse,

00:49:57.600 | and if the spouse has no other descendants, then my spouse would inherit everything.

00:50:04.600 | If I have a spouse and descendants from me and that spouse,

00:50:09.600 | and the spouse has descendants from another relationship,

00:50:14.600 | then the spouse would inherit one half of my intestate property,

00:50:19.600 | and my descendants would inherit one half of my intestate property.

00:50:23.600 | If I have a spouse and descendants from me and someone other than my spouse,

00:50:29.600 | then my spouse would inherit one half of my intestate property,

00:50:33.600 | and my descendants would inherit one half of my intestate property.

00:50:37.600 | If I have parents but no spouse and no descendants, my parents would inherit everything.

00:50:43.600 | If I have siblings but no spouse, no descendants, and no parents,

00:50:47.600 | then my siblings would inherit everything.

00:50:49.600 | So basically, in Florida where I live, Florida law basically codifies what most people would want

00:50:57.600 | and what most people would assume would happen to their stuff if they died intestate.

00:51:01.600 | I probably still wouldn't want to trust the intestacy laws,

00:51:04.600 | but my point is that dying intestate from the disposition of property perspective

00:51:08.600 | is probably not that big of a deal.

00:51:10.600 | I bet you the majority of wills probably line up with those intestacy laws.

00:51:17.600 | You know, "Hey, if I die, I want everything to go to my spouse.

00:51:19.600 | If my spouse and I have kids, you know, five kids from another marriage,

00:51:23.600 | then I would want half to go to my kids and half to my spouse," that type of thing.

00:51:28.600 | So what if you die--what if you don't have a will and you don't have any family

00:51:33.600 | or don't have any descendants?

00:51:34.600 | Well, in this case, this would be where you would probably not want this to happen.

00:51:40.600 | What happens in that situation is that all of your property will go to the estate.

00:51:45.600 | There's a formal legal word for this.

00:51:48.600 | It's called "escheat," E-S-C-H-E-A-T.

00:51:51.600 | I don't know if it's pronounced "escheat" or "escheat."

00:51:55.600 | I would say "escheat," but I've never heard a law professor say it,

00:51:58.600 | so I've just always read it, and I'm not sure how to pronounce it.

00:52:00.600 | But all of your property would "escheat" to the estate.

00:52:05.600 | It's pretty rare, though, because if you have any of these people in your life,

00:52:10.600 | then your property is not going to go to the estate--in my state, in Florida.

00:52:15.600 | So if I have a spouse or children or siblings or parents or grandparents

00:52:21.600 | or aunts or uncles or great-uncles or aunts or nieces or nephews,

00:52:25.600 | if I have cousins of any degree or the children, parents, or siblings of a spouse

00:52:29.600 | who dies before I do, then my property would go to them and not to the estate.

00:52:35.600 | So under that situation, it's pretty rare that property is going to wind up going to the estate.

00:52:43.600 | So the whole idea, does everybody need a will?

00:52:46.600 | I would say no, not everybody does need a will, but the vast majority of people probably do,

00:52:51.600 | because the situation that I described to you could change quickly.

00:52:56.600 | If a 20-year-old person with the majority of their assets held in a life insurance policy

00:53:00.600 | and a 401(k) plan, if they die, whatever, who cares much about their car?

00:53:04.600 | But the instant they buy a house, well, now we have a valuable asset.

00:53:08.600 | So what happens to the house? Where can it go?

00:53:11.600 | And it's just better to do planning.

00:53:13.600 | So I would say the majority of people need a will, but if you understand the laws,

00:53:16.600 | you could understand, well, those who do and who do not need a will.

00:53:23.600 | Understand that there is a difference.

00:53:26.600 | What happens in a will is your property will pass through the probate court

00:53:29.600 | and it will be supervised by the probate court.

00:53:32.600 | And if you have arranged your affairs in another way,

00:53:37.600 | then it's possible to arrange your affairs so that your property does not go through the probate court.

00:53:43.600 | There are advantages and disadvantages of probate.

00:53:47.600 | Generally, often people say, "Well, I don't want my stuff to go through probate."

00:53:50.600 | There are actually advantages to having your estate go through probate court.

00:53:54.600 | I'm not going to get into those advantages today or the show will be three hours long,

00:53:58.600 | but I'll do a show on that, probate versus non-probate,

00:54:01.600 | and how to make sure that your assets don't go through probate and the various ways to do that.

00:54:07.600 | The major point would just simply be that probate court is 100% optional with good planning.

00:54:12.600 | There are a lot of things that are optional with financial planning if you have good planning.

00:54:16.600 | I covered briefly why people don't plan, but basically people don't like to think about their own mortality.

00:54:23.600 | And I don't know how to get over this.

00:54:29.600 | I'm a Christian, so I usually try to get people to think about their mortality,

00:54:32.600 | although I think the Christian life has much more to do with now versus later.

00:54:36.600 | But I won't get into theology today.

00:54:39.600 | But I think we should think about our mortality.

00:54:41.600 | I think it's valuable to think about our mortality,

00:54:43.600 | but I'm in a minority percentage in our society.

00:54:47.600 | A lot of people, it's just a form of denial.

00:54:50.600 | If I don't think about it, then it won't happen,

00:54:53.600 | this idea that if I don't think about my death, then maybe it won't happen.

00:54:56.600 | But I think that greater than those topics which are usually cited,

00:55:01.600 | I think most people are just overwhelmed by the idea of estate planning.

00:55:05.600 | And because it's something that we're not generally familiar with,

00:55:08.600 | unless we've been the administrator or the executive of a family member's estate

00:55:12.600 | or settled in the state already, it's something that is intimidating to most of us.

00:55:16.600 | A, you're dealing with laws, courts, judges, attorneys.

00:55:19.600 | It sounds expensive. It is expensive.

00:55:21.600 | And it's not something that we're ever taught about.

00:55:24.600 | So people are just really overwhelmed with it.

00:55:27.600 | And I'm hoping that my content here will help you to not be overwhelmed with it

00:55:32.600 | so you can break it down into a simple process.

00:55:37.600 | How do I do estate planning for myself?

00:55:39.600 | So two last questions.

00:55:40.600 | How do I do estate planning for myself? And should I do it for myself?

00:55:43.600 | And then we're done for today.

00:55:45.600 | I'm going to keep this very, very simple in answering how do I do it myself.

00:55:51.600 | Primarily you think through it.

00:55:53.600 | And think through everything that you can think of that would happen if you died

00:55:58.600 | or whoever's situation that you're planning for.

00:56:02.600 | There are a lot of laws and a lot of rules,

00:56:05.600 | but they are inapplicable to the majority of our population, many of them.

00:56:11.600 | When you do financial planning, you start to get this idea that everyone needs this and that

00:56:15.600 | and this and that and this other kind of trust.

00:56:17.600 | What happens sometimes if you're working with an estate planning attorney

00:56:19.600 | who specializes in high net worth, things are sometimes unnecessarily complicated.

00:56:24.600 | Most people, their estate planning is fairly simple,

00:56:27.600 | and it can be accomplished in a fairly simple, straightforward way.

00:56:30.600 | Now, if you have assets--and I'm going to go through some situations

00:56:33.600 | that are not fairly simple and fairly straightforward--

00:56:36.600 | then in a moment you should consider something else.

00:56:41.600 | But for you yourself, just think through, "What would happen if I died?"

00:56:47.600 | It's a useful exercise.

00:56:48.600 | "What would happen to my stuff, to my assets?"

00:56:52.600 | And try to answer all those questions that are going to pop up,

00:56:55.600 | because the answer is probably going to be, "I don't know."

00:56:58.600 | So that's going to be something you're going to want to research.

00:57:01.600 | What would actually happen?

00:57:03.600 | And then think through, "What would I want to happen?"

00:57:06.600 | If you have money, "What would I want to happen with that money?"

00:57:08.600 | If you have stuff, "What would I want to happen with that stuff?"

00:57:11.600 | Who would I want to get it?

00:57:13.600 | Who would I want to give it to?

00:57:15.600 | What would be an ideal scenario?

00:57:18.600 | In essence, that's all estate planning is, is thinking through that question

00:57:22.600 | and those questions and then putting in place the things that are going to make sure

00:57:28.600 | that your wishes are carried out.

00:57:30.600 | It's as simple as that.

00:57:32.600 | I would reference your statement of financial condition, your balance sheet.

00:57:37.600 | So one of the reasons why I stress that so heavily in the past is because

00:57:42.600 | you're going to use that at every stage of planning.

00:57:45.600 | So if you go back and you look at your assets and your liabilities,

00:57:49.600 | then you're going to start to look and say, "Well, what would happen?

00:57:52.600 | How is this asset titled?"

00:57:54.600 | So when I do a balance sheet, I put together, I put the asset titling on there.

00:57:57.600 | That may be overwhelming to you, and that's fine, but you should put on there,

00:58:01.600 | "Is this joint? Is this jointly held or is this individually held?

00:58:04.600 | Does my wife have a bank account and I have a bank account,

00:58:07.600 | or do we have a joint bank account?"

00:58:09.600 | So you would want to have that listed there,

00:58:13.600 | and you would want to have that information.

00:58:16.600 | I would go back, if you haven't listened to it, listen to that show.

00:58:19.600 | It's episode 22.

00:58:20.600 | It's called "An Introduction to the Statement of Financial Condition or Balance Sheet,"

00:58:23.600 | a powerful tool in financial planning if you understand how it works.

00:58:27.600 | So that's at radicalpersonalfinance.com/22.

00:58:30.600 | So look at your assets and look at your liabilities

00:58:33.600 | and figure out what assets and liabilities would--

00:58:36.600 | what would happen to those assets and those liabilities.

00:58:39.600 | Quick general rule, nobody inherits your debts unless they signed for them.

00:58:44.600 | So if I have a million dollars of credit card debt and I die,

00:58:48.600 | my children do not inherit my debt.

00:58:51.600 | Nobody inherits your debt unless they signed for it as a co-borrower

00:58:55.600 | or as a guarantor of the debt.

00:58:58.600 | So if I sign--if I co-sign a loan for somebody,

00:59:01.600 | now I am obligated and liable for that loan no matter what happens.

00:59:06.600 | There could be exceptions written into that--into a legal contract,

00:59:10.600 | so you would want to read the loan document.

00:59:12.600 | But in general, nobody inherits your debts.

00:59:15.600 | But if that is--if your debts are secured by property,

00:59:18.600 | then your creditors could make a claim on your estate.

00:59:22.600 | So let's say, as for an example, I own a home.

00:59:24.600 | My house is worth $100,000.

00:59:26.600 | I have a $50,000 mortgage on that.

00:59:29.600 | Well, if I die and I bequeath the house--I give the house to my brother,

00:59:36.600 | he inherits the $100,000 house, but he still has to satisfy the $50,000 debt.

00:59:42.600 | And so that has--that bank still has a claim on the house.

00:59:46.600 | So unless I've made provision for the payment of that debt,

00:59:49.600 | he's going to have to ensure that that debt is paid,

00:59:52.600 | and let's keep it at the surface level with that.

00:59:55.600 | So you're going to want to look at who's liable for any debts.

00:59:57.600 | You're going to want to think through the titling of all of your accounts.

01:00:00.600 | You're going to want to think through the people that you're caring for.

01:00:04.600 | And you're going to want to carefully consider

01:00:06.600 | both tax planning and non-tax characteristics.

01:00:11.600 | So do you have a bunch of accumulated deferred income taxes

01:00:14.600 | on an investment that you're trying to avoid?

01:00:17.600 | Do you have a large amount of debt, a small amount of debt?

01:00:20.600 | Do you have assets? Do you have not?

01:00:22.600 | And every situation is going to be unique.

01:00:24.600 | If you will listen to this show and future shows,

01:00:27.600 | you'll be able to have the knowledge when I get through

01:00:29.600 | what are probate assets versus non-probate assets,

01:00:32.600 | what's part of your gross estate versus your probate estate.

01:00:34.600 | Most of that is not--a lot of that is not necessary.

01:00:37.600 | I'll try to do the simple ones at the beginning,

01:00:40.600 | talk through the income taxation,

01:00:42.600 | and talk through some of those things in this series as it goes on.

01:00:46.600 | And I expect it to take years to work through this series.

01:00:48.600 | But if you'll listen to those shows, you can probably do it yourself.

01:00:53.600 | I don't want to get any deeper into it right now.

01:00:55.600 | Let's talk about should I do it myself.

01:00:58.600 | And this is one of the questions that I hear most frequently

01:01:02.600 | as a financial planner,

01:01:04.600 | because the majority of people that I've worked with over time

01:01:06.600 | as a financial planner, I ask them, "Do you have a will?"

01:01:08.600 | "No."

01:01:10.600 | And it's clear just due to the fact that they have children,

01:01:13.600 | that they need a will.

01:01:15.600 | And I say, "Well, you don't have a will.

01:01:17.600 | Have you ever thought about it?"

01:01:18.600 | "Yeah, I've thought about it."

01:01:20.600 | "Have you talked to anybody?" "No."

01:01:21.600 | "Why not?" "I'm overwhelmed by it. I don't have the money."

01:01:25.600 | So should you do it yourself?

01:01:28.600 | I've asked every estate planning attorney that I've ever worked with

01:01:31.600 | this question.

01:01:33.600 | I've said, "Should I do it myself?"

01:01:35.600 | And I'll share the answers.

01:01:38.600 | And usually the number one answer I've always gotten is,

01:01:41.600 | "Well, there may be a small number of people who could do it themselves,

01:01:44.600 | but in general, no."

01:01:47.600 | And so that's become my answer,

01:01:49.600 | just simply assuming that they know more what they're talking about.

01:01:51.600 | But I'll explain why,

01:01:52.600 | because I understand why they would give that answer.

01:01:54.600 | The question would be,

01:01:55.600 | "How competent are you with all of these terms?"

01:02:00.600 | Are you an expert or are you not?

01:02:03.600 | And the problem here is that ignorance is bliss.

01:02:07.600 | In my experience with financial planning,

01:02:08.600 | I used to think I was great and very knowledgeable when it came to finances.

01:02:13.600 | And then I became a financial planner,

01:02:14.600 | and I was stunned by how much I didn't know

01:02:16.600 | and how much stupid advice I'd given to people in my ignorance.

01:02:20.600 | Now, I was a well-meaning ignoramus.

01:02:22.600 | I had the best of intentions.

01:02:24.600 | I really wanted to help people.

01:02:25.600 | But I was just flat-out ignorant.

01:02:28.600 | And ignorance, meaning well and having good intentions

01:02:34.600 | is not ultimately what matters.

01:02:36.600 | And so a lot of times, many of the times,

01:02:38.600 | when people say, "Well, I do it myself,"

01:02:40.600 | a lot of times they're just simply ignorant of what can happen.

01:02:43.600 | Ignorance really is bliss.

01:02:45.600 | And so there are many aspects of estate planning.

01:02:49.600 | Just like with every aspect of planning,

01:02:52.600 | there are many aspects of planning that you just simply may not know about.

01:02:56.600 | And if you don't know about them,

01:02:58.600 | then you're not aware of what could happen.

01:03:04.600 | This is why, I mean, Scripture says,

01:03:06.600 | "In the multitude of counsel there's wisdom."

01:03:09.600 | A lot of times the problem is you just simply don't know what you don't know

01:03:12.600 | until someone tells you what you don't know.

01:03:13.600 | But you don't find out what you don't know

01:03:15.600 | until you talk to somebody about it,

01:03:16.600 | and they inform you about what you don't know.

01:03:19.600 | How is that for a sentence?

01:03:23.600 | I'll try to give you everything that I know,

01:03:25.600 | but at the end of the day, you've got to look at your situation.

01:03:27.600 | How competent are you actually?

01:03:29.600 | Are you just someone who reads personal finance books?

01:03:31.600 | That's not enough.

01:03:33.600 | If you are actually really competent,

01:03:34.600 | maybe you've settled a couple of estates,

01:03:36.600 | you've consulted a family friend who is an attorney,

01:03:38.600 | you've discussed your situation,

01:03:39.600 | they've pointed out here would be what you would need to do,

01:03:42.600 | you would need to be aware of that may work.

01:03:44.600 | And if you're competent in doing things,

01:03:45.600 | you might be able to do it yourself.

01:03:47.600 | And that's certainly no problem.

01:03:49.600 | But you won't know the problems until they present themselves.

01:03:53.600 | Just because an attorney does something for you, by the way,

01:03:56.600 | just because you have professional help

01:03:57.600 | doesn't mean that it's competently done.

01:03:59.600 | So there are plenty of cases that could be pointed to,

01:04:03.600 | you know, all those celebrity cases that I played at the beginning,

01:04:05.600 | there are plenty of cases that could be pointed to

01:04:07.600 | to illustrate how even a professionally prepared estate plan did not work.

01:04:13.600 | It makes a big difference as far as how complicated is your situation.

01:04:16.600 | Here are some examples.

01:04:17.600 | Do you have money?

01:04:20.600 | If you have money, there's a much higher probability

01:04:24.600 | that your situation is going to be somewhat complicated.

01:04:26.600 | Or do you not have money?

01:04:27.600 | If you're broke, you probably don't need to worry too much

01:04:30.600 | about establishing a very exotic trust

01:04:34.600 | to avoid the disposition of your $300 checking account,

01:04:38.600 | you know, to avoid that going to your children prematurely.

01:04:41.600 | So just, frankly, do you have money, do you not?

01:04:43.600 | If you don't have a lot of money, your situation is probably simple.

01:04:47.600 | Now, let's money.

01:04:48.600 | What about assets?

01:04:49.600 | Do you have assets or do you not have assets?

01:04:51.600 | Think about, go and study, for example, and here's what I mean.

01:04:54.600 | My understanding, and I'm going off the top of my head,

01:04:56.600 | I didn't research this, but my understanding is that when--

01:05:00.600 | who was the guy, the pop singer guy that was in the introductory mashup,

01:05:05.600 | the guy with the funny hair, Michael Jackson.

01:05:08.600 | Michael Jackson, my understanding is that he was close to broke when he died.

01:05:14.600 | He didn't have a lot of money,

01:05:16.600 | but yet the assets of his portfolio of music were tremendous.

01:05:21.600 | And so it's very possible, if you have some kind of intellectual property,

01:05:25.600 | it's very possible you may have no money, but you may have a huge asset base.

01:05:29.600 | Do you have assets or do you not have any assets?

01:05:32.600 | Are you expecting inheritances or future money?

01:05:34.600 | Inheriting money can make a major difference.

01:05:37.600 | So you may--your parents may be wealthy, but you may not be,

01:05:40.600 | and let's assume that they've not done excellent planning,

01:05:43.600 | and now you wind up inheriting money,

01:05:44.600 | and now that's going to be governed by your non-existent estate plan.

01:05:48.600 | It's really not a good idea.

01:05:50.600 | Are you married?

01:05:51.600 | If you're married, that brings with it certain legal rights and privileges,

01:05:56.600 | but it also brings with it certain complications.

01:05:58.600 | So if you're married, it's going to be a much bigger deal for you

01:06:02.600 | to make sure that you've done a good job with your planning

01:06:04.600 | than if you are not married.

01:06:06.600 | Let's say that you're married and you have a large creditor.

01:06:09.600 | How is that going to affect your spouse if you die?

01:06:12.600 | What if you are in a relationship with somebody

01:06:14.600 | and you live your life with them, but you're not legally married?

01:06:18.600 | If you're not legally married, that person has no spousal protection in place,

01:06:23.600 | and so therefore your estate planning is extremely important

01:06:26.600 | if you care about that person and want to make sure that they are--

01:06:30.600 | you want to make sure that they are cared for.

01:06:33.600 | What if you have a non-citizen spouse?

01:06:35.600 | A non-citizen spouse is a very--in some ways, it's simple,

01:06:39.600 | and in some ways, challenging thing to plan for

01:06:42.600 | because especially if you're doing estate tax planning,

01:06:45.600 | you have to do some extra steps of planning for a non-citizen spouse

01:06:49.600 | because they're not entitled to the same privileges

01:06:51.600 | under the U.S. estate tax code.

01:06:54.600 | What if you're in a same-sex relationship?

01:06:56.600 | Same-sex relationships--simple tip--don't have a will.

01:07:03.600 | Wills can be contested in court,

01:07:05.600 | and you just simply don't want to have a will, period.

01:07:07.600 | I mean, I guess maybe you can have one,

01:07:09.600 | but you want to have all your assets titled under a trust,

01:07:11.600 | and you want to establish alternative arrangements

01:07:13.600 | that cannot be contested in court.

01:07:15.600 | What about blended families?

01:07:17.600 | This is the most common thing in our relationship--

01:07:20.600 | excuse me, in our society, and I hear this a lot.

01:07:24.600 | You know, this is my second marriage.

01:07:28.600 | This is my spouse's second marriage.

01:07:29.600 | I've got two kids from my first marriage.

01:07:31.600 | She's got two kids from her first marriage,

01:07:33.600 | and we've got two kids together.

01:07:35.600 | So I'm thinking about doing a will in a box.

01:07:37.600 | What do you think?

01:07:39.600 | That's a disaster.

01:07:40.600 | It's an absolute disaster.

01:07:42.600 | If you have a blended family, do not pass go.

01:07:45.600 | Do not collect $200.

01:07:46.600 | Go straight to an attorney,

01:07:47.600 | because there are a lot of issues

01:07:49.600 | that you're going to want to talk through,

01:07:50.600 | and it's not necessarily legal issues.

01:07:52.600 | It's a matter of communication between you and your spouse.

01:07:55.600 | Do you have children?

01:07:56.600 | I should have said that first, but if you have children,

01:07:58.600 | you need to make sure that you've done some good planning.

01:08:01.600 | Do you have a business?

01:08:03.600 | So if my example--sample case--22-year-old male,

01:08:07.600 | no kids, no spouse, works as an employee,

01:08:11.600 | has some group term life insurance, maybe a 401(k),

01:08:15.600 | yeah, don't worry.

01:08:16.600 | Do it yourself.

01:08:17.600 | If you want a will, just go online and Google the--

01:08:19.600 | what is it--the five wishes, set up a living will,

01:08:22.600 | get it notarized, buy a will in a box,

01:08:24.600 | and just do it, and you're done.

01:08:26.600 | If you have a business now, please talk to an attorney.

01:08:29.600 | Many family businesses--I won't say the majority--

01:08:32.600 | many family businesses are destroyed

01:08:34.600 | by the death of a principal,

01:08:36.600 | and good planning with business continuation planning,

01:08:39.600 | a preplanned sale of the business, a buy-sell agreement,

01:08:42.600 | good planning can avoid the destruction of family wealth.

01:08:46.600 | Do you have assets that you own with other people?

01:08:49.600 | So for example, do you have a piece of--

01:08:52.600 | do you have a hunting lease that you own with your brother-in-law

01:08:54.600 | that you guys went in together,

01:08:56.600 | or do you have a piece of investment property

01:08:58.600 | that you went in on with a partnership?

01:09:00.600 | Do you own real property or personal property?

01:09:03.600 | If you own real property, there may be complications with it.

01:09:07.600 | You can make your estate simple.

01:09:10.600 | So I can design a very simple estate,

01:09:14.600 | and you can design an estate to where you can simply do it yourself

01:09:17.600 | and have it very reasonably taken care of.

01:09:21.600 | Here would be just a simple example that occurs to me.

01:09:23.600 | I'm 55 years old. I've retired from my job.

01:09:26.600 | I sell my house. I rent--now I'm renting a house,

01:09:29.600 | so I no longer have any major real property.

01:09:32.600 | All of my assets are in a 401(k),

01:09:35.600 | and I purchase an immediate annuity for a life income,

01:09:40.600 | so I've got income coming in for the rest of my life.

01:09:42.600 | My assets are in my 401(k),

01:09:44.600 | and so those have a beneficiary designation.

01:09:47.600 | I don't have assets that are so substantial

01:09:49.600 | that I'm going to have to worry about estate taxes,

01:09:51.600 | and I don't have a complicated family situation.

01:09:54.600 | Let's say that my spouse and I, we just want to make sure

01:09:56.600 | that we're taking care of each other,

01:09:58.600 | and then we don't have any kids or grandkids

01:10:00.600 | that we're trying to take care of,

01:10:02.600 | and then if--when both of us die,

01:10:06.600 | we want to make sure that the assets go to charity.

01:10:08.600 | That's simple. You can do that yourself.

01:10:10.600 | You can write that document yourself,

01:10:12.600 | but if you change any of those complicating factors,

01:10:15.600 | you're probably not going--

01:10:17.600 | you're probably going to want to get good advice.

01:10:19.600 | So last one--oh, I forgot to mention this one.

01:10:22.600 | Do you have any marital agreements?

01:10:24.600 | Do you have any antinuptial or postnuptial agreements?

01:10:27.600 | Antinuptial is prenup.

01:10:29.600 | So which do you--do you have any of those?

01:10:33.600 | Frankly, doing it yourself,

01:10:35.600 | something is probably better than nothing, probably,

01:10:38.600 | but I tell you, most people just simply don't have a clue

01:10:42.600 | about what the words mean,

01:10:44.600 | and so usually you--you know,

01:10:48.600 | you're not going to know that it's wrong until it's wrong,

01:10:51.600 | and every attorney that I've spoken with,

01:10:53.600 | this has been their experience.

01:10:55.600 | They all have at least one or two horror cases

01:10:57.600 | where the client thought they did everything well,

01:10:59.600 | and then it was challenged,

01:11:01.600 | and the problem is once it's challenged, it's too late.

01:11:04.600 | There really are a lot of moving parts in an estate plan.

01:11:07.600 | There are a lot of non-tax issues, you know,

01:11:09.600 | everything from minor children, distributing property,

01:11:11.600 | "What do I do if one of my kids is a druggie?"

01:11:14.600 | "How do we handle our blended family?"

01:11:16.600 | There's a lot of moving parts in the tax planning,

01:11:18.600 | planning for income taxes, gift taxes, GST taxes.

01:11:22.600 | There are a lot of parts to all of this, so I'm here.

01:11:25.600 | This show exists to give you confidence in your knowledge

01:11:28.600 | so that you can trust yourself

01:11:29.600 | when it comes to meeting with professionals

01:11:31.600 | and allow the professional to point out

01:11:33.600 | in your individual situation, in your individual state,

01:11:35.600 | where I'm right or I'm wrong about something

01:11:38.600 | because this is a highly individualized scenario.

01:11:42.600 | You got to really think how complicated is your situation.

01:11:45.600 | Now, frankly, I think the primary benefit of an advisor

01:11:49.600 | is often not in their technical work

01:11:52.600 | or in their technical competence.

01:11:56.600 | Creating a standard will is not that tough.

01:12:01.600 | You can go on to one of these will-in-a-box sites

01:12:04.600 | and you can buy one for $20,

01:12:06.600 | and any law student, you know, third-year law student,

01:12:08.600 | could create one for you.

01:12:10.600 | It's not that tough.

01:12:11.600 | Most of the attorneys are going to have a boilerplate document

01:12:14.600 | they're going to start from anyway.

01:12:15.600 | The primary benefit of a good advisor, though,

01:12:18.600 | is in their advice and in their counseling.

01:12:22.600 | If you're sitting with an effective financial planner

01:12:24.600 | and an effective attorney, a state attorney,

01:12:28.600 | that attorney is going to be able to walk you through the issues

01:12:31.600 | and guide you and counsel you through the challenging ones.

01:12:36.600 | How do you take care of kids from another marriage

01:12:40.600 | in a blended family?

01:12:42.600 | How do you divide that equally and equitably

01:12:44.600 | in such a way that you and your spouse are happy?

01:12:48.600 | Conflicts among heirs are common,

01:12:50.600 | especially if there's any money involved,

01:12:52.600 | any major money at all.

01:12:54.600 | So I think the primary benefit of an advisor

01:12:58.600 | is not necessarily in the area of technical competence

01:13:00.600 | but in general advice,

01:13:02.600 | and a good advisor is going to have a lot of ideas

01:13:05.600 | that you probably wouldn't have thought of.

01:13:07.600 | Hopefully I've shared enough interesting ideas with you

01:13:10.600 | that if you're a layperson that you've had some,

01:13:12.600 | "Ah, that's an interesting idea.

01:13:14.600 | I might not have thought of that."

01:13:16.600 | Well, that comes from the experience of working

01:13:18.600 | and studying this stuff,

01:13:20.600 | and they're just ideas that you might not see,

01:13:22.600 | and it's hard for an attorney to relate to you

01:13:24.600 | or a financial planner, "Here are the things that I would do,"

01:13:27.600 | until they know the situation,

01:13:29.600 | because everything is so individualized.

01:13:32.600 | What about the question of, "Should I do it myself

01:13:34.600 | and then have an attorney review my documents?"

01:13:36.600 | Every attorney I've ever asked about this hates that,

01:13:39.600 | and they probably won't do it.

01:13:41.600 | They hate that.

01:13:43.600 | It is far worse for you to go to Office Depot

01:13:45.600 | and buy the Will Kit and then take that to an attorney

01:13:47.600 | and say, "Review it,"

01:13:49.600 | because the attorney didn't write that boilerplate language.

01:13:51.600 | So it's going to be cheaper for you

01:13:53.600 | to go to the attorney in the first place and say,

01:13:55.600 | "Here, I want to get this set up. Here's what I want,"

01:13:58.600 | and for them to just use their boilerplate document

01:14:00.600 | that they're familiar with,

01:14:02.600 | customize the two paragraphs that need customized for you,

01:14:05.600 | and have you sign it than it is for you to go to Office Depot

01:14:07.600 | and do that.

01:14:09.600 | In my opinion, a do-it-yourself is not smart.

01:14:14.600 | What about all the online legal document stuff?

01:14:17.600 | You hear these guys advertised everywhere.

01:14:21.600 | I'm not so sure about these.

01:14:23.600 | I am unconvinced of the value.

01:14:25.600 | I really am, and here's why I'm unconvinced of the value.

01:14:29.600 | Everything I hear advertised by a lot of the online services,

01:14:33.600 | you can do yourself.

01:14:35.600 | Articles of incorporation.

01:14:37.600 | If you're going to use a boilerplate articles of incorporation,

01:14:39.600 | your state will do it for you for free in most states.

01:14:42.600 | In the state of Florida where I live, I can go to sunbiz.org,

01:14:46.600 | and I can file articles of incorporation for an S corporation.

01:14:49.600 | I can file an LLC agreement.

01:14:51.600 | I can file all of this stuff without needing to go

01:14:53.600 | and spend an extra $50 for some other stupid boilerplate document.

01:14:57.600 | The point of financial documents is not to have a document.

01:15:01.600 | The point of financial documents is that the documents actually say

01:15:05.600 | and dictate certain things that you want to have established.

01:15:09.600 | If you just want a corporate entity, just go to your state's corporate entity--

01:15:13.600 | and I would assume that most states have this, although I could be mistaken--

01:15:16.600 | and just simply file their standard boilerplate corporate entity

01:15:19.600 | that has no rules governing it.

01:15:21.600 | But if you're establishing a real estate corporation

01:15:24.600 | that's going to invest in nursing homes,

01:15:26.600 | and there's a team of six primary investors,

01:15:28.600 | you're going to sit down with a corporate attorney,

01:15:30.600 | and those articles of incorporation are going to be much more detailed.

01:15:34.600 | The point is, I feel like a lot of times people are just simply bamboozled

01:15:39.600 | by their lack of knowledge and confidence regarding legal matters,

01:15:43.600 | because nobody studies law.

01:15:45.600 | You would think that would be an important part of an education.

01:15:47.600 | "Hey, let's study law."

01:15:49.600 | But maybe if you're a business student, you have one semester of business law

01:15:52.600 | as part of your business degree.

01:15:54.600 | Nobody else has any background or basis in law.

01:15:57.600 | And so I feel like people are generally taken advantage of,

01:16:01.600 | and they just simply go and buy a bunch of useless crap

01:16:04.600 | because it makes them feel good, that they bought these legal documents,

01:16:07.600 | and they don't know how to read them, they don't know what they say,

01:16:09.600 | and they've got a bunch of stuff that is useless.

01:16:11.600 | So again, I could be wrong,

01:16:14.600 | but boilerplate documents are easy to find online.

01:16:18.600 | You don't need to pay for that. You can get them for free.

01:16:20.600 | But the value is not in the boilerplate document.

01:16:22.600 | The value is in the advice, and in the advisor,

01:16:27.600 | and the advisor being able to speak into your situation.

01:16:31.600 | If I were going to do a will in a box, I wouldn't do a will in a box.

01:16:34.600 | I would at least use a software program of some kind.

01:16:36.600 | I think Nolo has one that I've read good things about.

01:16:39.600 | I've never used it. Nolo is N-O-L-O.

01:16:41.600 | They publish a lot of good books.

01:16:43.600 | I've read several of their books, good guides,

01:16:45.600 | and they have one that they've sponsored.

01:16:47.600 | I've heard of other ones that would do it, so maybe that would be useful.

01:16:49.600 | But in that situation, why not just simply sit down and write it out,

01:16:52.600 | type it out in a Word document?

01:16:54.600 | Here's the other thing about documents.

01:16:58.600 | The majority of people are trying to solve a problem.

01:17:02.600 | "Hey, I need to get a will."

01:17:04.600 | So they go online and they buy some stupid document from a document factory.

01:17:10.600 | Again, if I'm wrong about this, let me know that I'm wrong.

01:17:13.600 | In fact, I'd have you on the show to tell me.

01:17:15.600 | I just have never been able to figure out what the value of these services is.

01:17:21.600 | So if I'm wrong, tell me. I would be happy to have you on the show and correct me.

01:17:26.600 | But from my experience, the majority of people buy a stupid document,

01:17:30.600 | and they think, "Okay, I'm going to get my will done."

01:17:32.600 | And the document sits there.

01:17:34.600 | I did this years ago. I bought a will kit.

01:17:37.600 | They send me a Word document.

01:17:39.600 | Now I've got to sit there and I've got to fill it in.

01:17:41.600 | The problem is I never did it.

01:17:43.600 | Never did it.

01:17:45.600 | And so then I've got to--in the state of Florida, I've got to get two witnesses,

01:17:48.600 | and I've got to get it notarized, and I've got to fill it out,

01:17:50.600 | and I'm overwhelmed by the language, and I'm overwhelmed by what I do,

01:17:52.600 | because I have no one to walk me through it, and I don't understand it.

01:17:55.600 | I just had a conversation with a friend of mine,

01:17:57.600 | and he's sitting here trying to figure out what he needs to do with--

01:18:00.600 | this book is going here, and he's going through all of his personal assets.

01:18:03.600 | This clock is going to the third place.

01:18:05.600 | This gun is going to this thing.

01:18:08.600 | This motorcycle--and I'm saying,

01:18:11.600 | "Don't you realize that you can just simply put a memorandum of personal property inside,

01:18:14.600 | and then, boom, you're done. You don't need to put that in your will."

01:18:17.600 | And he was agonizing over paragraphs and paragraphs and paragraphs

01:18:22.600 | of who's going to get this one thing,

01:18:24.600 | when with 30 seconds of good advice, I could have solved all the problems.

01:18:27.600 | Just make a simple spreadsheet, toss it in, and Florida law,

01:18:29.600 | you can make a memorandum of personal property.

01:18:31.600 | You can update it any time. It doesn't have to be signed.

01:18:33.600 | It doesn't have to be--I mean, it doesn't have to be notarized or witnessed.

01:18:35.600 | You can change it at any time.

01:18:37.600 | So you don't need to worry about that little stuff

01:18:39.600 | and getting all of that stuff right in your will.

01:18:43.600 | So I guess the point that I was trying to make

01:18:46.600 | is that most people will get this software

01:18:48.600 | and think that they're doing something.

01:18:51.600 | In reality, they never get anything put in force.

01:18:54.600 | But the worst thing is--the problem with that is that it's worse

01:18:57.600 | than if they were still uncomfortable about it.

01:18:59.600 | They're feeling comfortable because they're making progress towards it.

01:19:02.600 | Better to go to the attorney and buy the $5,000 of stuff

01:19:06.600 | that gets put into place

01:19:08.600 | than to buy the $50 of stuff online

01:19:11.600 | that never gets put into place

01:19:14.600 | because you've got to have it when you need it.

01:19:16.600 | Now, again, those things are not mutually exclusive.

01:19:18.600 | Somebody who is expert and detailed and competent--

01:19:22.600 | and if you listen to my--I don't know,

01:19:24.600 | it would probably be 60 shows on estate planning.

01:19:27.600 | And then after listening to those 60 shows,

01:19:29.600 | six years from now, you feel good,

01:19:31.600 | and you go down and get your--

01:19:34.600 | you go down and you write your own documents.

01:19:36.600 | You probably could do that, and that would be fine.

01:19:38.600 | Again, that's why it's fairly nuanced.

01:19:41.600 | So those are my answers to the "Should I do it myself?"

01:19:44.600 | Probably not. It's probably better just to--

01:19:46.600 | even just a simple, cheap something from an attorney

01:19:49.600 | is probably better because you get the advice.

01:19:51.600 | Or talk to your financial planner.

01:19:53.600 | There's a lot of aspects to a financial planning team.

01:19:56.600 | You know, if you were--if we're talking in the wealthy space,

01:19:59.600 | you may have a financial planner,

01:20:01.600 | you may have an investment advisor,

01:20:03.600 | you may have an accountant, there may be an insurance advisor,

01:20:06.600 | there may be an attorney, there may be a trust officer

01:20:08.600 | from a bank or trust company.

01:20:10.600 | So there'd be a lot of aspects of it.

01:20:13.600 | So those are my answers for the "Should I do it myself?"

01:20:18.600 | Hopefully that is--hopefully that's helpful for you.

01:20:21.600 | [upbeat music]

01:20:23.600 | I feel like that's a good place to stop for today,

01:20:25.600 | so I'm gonna be done.

01:20:26.600 | An hour and a half here on this show,

01:20:28.600 | and an hour and 20 minutes on this show.

01:20:31.600 | I don't want to go any deeper on that.

01:20:33.600 | There are some ways that if you pay attention

01:20:35.600 | to these knowledge--I know this is the radical personal finance--

01:20:37.600 | there would be some ways to game the system.

01:20:39.600 | Most of these are pretty unethical,

01:20:41.600 | but if you understand the rules,

01:20:43.600 | you could set up an estate plan

01:20:45.600 | that could game the system to your own benefit.

01:20:47.600 | But most people who are smart enough to do that

01:20:49.600 | are smart enough just to play by--I mean, you can play by the rules,

01:20:51.600 | but I would consider a lot of the things that--

01:20:53.600 | the ideas I could come up with to be unethical.

01:20:56.600 | This series will have many, many shows in it,

01:20:58.600 | but hopefully today is a good starter point.

01:21:01.600 | It's pretty daunting of a project to sit down and say,

01:21:05.600 | "How can I teach people about estate planning?"

01:21:08.600 | because there's all different levels of it.

01:21:12.600 | But this was my best attempt.

01:21:14.600 | Would love to hear what you think of the show.

01:21:16.600 | Thank you for those of you who have been emailing.

01:21:18.600 | Thank you for those of you who have been leaving reviews.

01:21:20.600 | Please keep doing that. iTunes, Stitcher, wherever you listen,

01:21:22.600 | please leave a review.

01:21:24.600 | Thank you for all the communication.

01:21:26.600 | By the way, I figured out that I guess my commenting system

01:21:28.600 | on the blog is not working very well.

01:21:30.600 | I'm using a commenting system called Live Fire,

01:21:32.600 | and it's showing some of the comments,

01:21:34.600 | but some of the comments it's not showing.

01:21:36.600 | I know several of you have commented on the blog,

01:21:38.600 | and I've replied, but it's not showing up.

01:21:40.600 | So if that was you, and you're not seeing a reply from me,

01:21:43.600 | then that's why it's my commenting system.

01:21:45.600 | I've got to figure out how to trash it and go back to something else.

01:21:48.600 | I'm not a techno guy, so that's intimidating to me.

01:21:52.600 | Estate planning is not intimidating to me, but that stuff is.

01:21:56.600 | That's it for Wednesday's show. I hope you survived.

01:21:58.600 | See you back here tomorrow.

01:22:00.600 | Tomorrow we're going to have an interview with Pat Schulte of Bumpuzzle.com.

01:22:04.600 | Here's a guy who he and his wife retired in their early 30s

01:22:07.600 | and have spent the last 10 years traveling around the world,

01:22:10.600 | sailing around the world, driving around the world,

01:22:13.600 | sailing around the world, RVing around the world.

01:22:15.600 | Come back for that show. I hope you enjoy it.

01:22:17.600 | Have a great day, everybody.

01:22:19.600 | [Music]

01:22:36.600 | Non-painful estate planning done.

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RPF-0049-An_Introduction_to_Estate_Planning