Hey, parents join the LA Kings on Saturday, November 25th for an unforgettable kids day presented by Pear Deck. Family fun, giveaways and exciting Kings hockey awaits. Get your tickets now at lakings.com/promotions and create lasting memories with your little ones. So you wander up to me at a cocktail party and we start talking, you find out I'm a financial planner and the question out of your mouth is this, hey, Joshua, I think I need to get a will.

Can you like tell me what I need to do? After all, I'm supposed to have a will, right? And do some estate planning. So today I'm going to give you my cocktail party answer. We're going to talk about the surface, interesting kind of introductory approach to estate planning. No grantor of attained annuity trust here today.

No crummy powers, just very, very simple discussion of wills and living wills and powers of attorney. Hopefully you find this useful. Welcome to the radical personal finance podcast. My name is Joshua sheets and I'm your host. Thank you for being with me to the all four of you who actually clicked on today's show and said, I'm excited about estate planning.

Welcome. Now, hopefully it's more than four of you, but I want to share with you some ideas and demystify the world of estate planning and try to give you some straight answers and some broad, generalized advice that can help you know what to do. Estate planning is a mystical world.

It's a very seductive world to some people, to financial planners. It's one of the things we love to talk about and try to make everything complicated and obfuscate everything. But the reality is it's really not that complicated. Certainly it can get very complicated. And if you get into the fancier aspects of estate planning, especially tax planning, you can build some really, really complicated stuff.

But for the majority of people, things are simple. And here's my proof for that. The majority of people do no estate planning and people die all the time and their estates are disposed of. So there's a system in place. And if you don't have any documents and you don't have a will, you don't have any trusts and you don't have any of that stuff, guess what?

For many, many people, things are probably going to be okay. There's a pretty standardized process. If you die without, for example, a will, you get to be one of those fancy people who dies in test state. And no, that doesn't have anything to do with any part of your anatomy.

It just simply means you've died without a will. And every state has some sort of provision in place for people who die in test state. There's an order of succession that happens to your property. It goes to your next of kin in a premeditated, carefully planned out way according to the laws in your state.

If you've got kids and you die and you don't have a will to establish the guardian, then a judge will take over and they will handle that. After all, kids are transferred all the time in a legal capacity where they go to the proper people. So it's really in some ways not that big of a deal.

And I say that because oftentimes estate planning is blown way out of proportion. Now, let me give you the flip side. This is a big deal. And since it's fairly simple to start and do some basic estate planning, there's no reason in the world why you shouldn't. And since horror stories do happen and bad things do happen, you should take care of this.

But you don't need to be intimidated by it. Just step up and start taking some actions. Now, if you've got some money or if you've got any kind of complicated situation in your life, as in own a business, as in have assets, have money, as in have a blended family, which accounts for a vast majority – a large percentage of the US and – US American and world population, if you have any kind of antagonistic family relationships, you better pay attention and you better get things squared away.

So in some ways, I know that probably seems like a paradox, but that's really how I see it. And in the grand scheme of things, it's pretty simple, but – and many people are going to be OK, but you also should pay attention to this. And the more advanced you go down your path of wealth, the more attention you need to pay to it.

But today, I want to keep things simple and I promise we'll probably go way too complex, which that seems to be the character of Radical Personal Finance, right? But today, I want to create a resource that you can share with people. Just a quick overview to the major estate planning documents and major estate planning approaches.

Just to give you a quick cursory introduction so you can kind of figure out how deep you need to go. And let's start with just a simple discussion of what is estate planning. Well, all it means is you die. What happens to everything that you owned at the date of your death?

That's it. And there's a legal process involved for knowing what happens to it and designating what's going to happen to it. Now, in the United States of America and most countries, most modern western countries – I don't know much about any other places in the world. But there is a systematic legal process where you can put documents in place that are going to clarify your wishes and the courts will follow that and your heirs will follow those documents.

There's a long established process that goes back a very long time into history. So this is very, very standardized. And the simple documents are, number one, a will. And here we usually talk about wills and trusts. I'm pretty much going to ignore the discussion of trusts today and do a standalone show on that.

Next one is a living will. And there are a bunch of different names for living wills. You'll hear them referred to usually colloquially as a living will. But they're also called an advanced healthcare directive, maybe a personal directive, maybe an advanced directive, an advanced decision, something like that. There will be a medical power of attorney.

You'll hear this one referred to as a medical power of attorney, a healthcare power of attorney, a designation of healthcare surrogate, a healthcare proxy. Basically, all of those names are for the same thing. And then a financial power of attorney of some sort. You'll hear different words, which I'll explain in a minute, a durable power of attorney or a general power of attorney or a special power of attorney.

So we'll talk about those things. But these are the basic documents. And let's begin with a discussion of what these documents are and why they are useful. So let's start with a will. Everyone knows about a will and everyone knows the basic language of a will. I, Joshua Sheets, being of sound mind, do hereby declare blah, blah, blah, blah, blah.

But essentially the biggest function of a will is to arrange for the disposition of everything that you own when you die. If you die without a will, you die in testate. And the laws of your state then go into distributing how your property is distributed. And I should interject here that estate planning laws are primarily state-specific.

So I will be mostly general here. I will refrain from mentioning any specific resources because everything is state-specific and you need to be aware of the things that are in your state. So for example, if your state is a community property state or a non-community property state, that makes a big difference in your estate planning.

So you'll need to be aware of that. We may talk about that in a future show. I'm going to ignore it for today. But I'm going to be general and nonspecific today. So if you die in testate, usually your property goes to your spouse or some portion of it goes to your spouse and to your children in many states.

And then if you don't have a spouse or children, then it goes to your next of kin in an orderly way. Oftentimes father and mother next or brothers and sisters. If in absence of father and mother or brothers and sisters, then it goes to uncle, aunt or whatever, and it goes out to the last living relative.

And if ultimately you don't have any relatives that the state can find, then the property reverts back to the state and the government gets to spend your money after a period of time after they look for anybody that's connected to you. So the only way that you can affect that property transfer is if you have a will.

So if you actually want all of your property to go to your best friend Joe instead of to your dad and mom, then you need to designate that in a will. And then if you designate that, then you'll be able to outline that and that transfer will happen. Another important function of a will is that it appoints somebody to serve as the executor and/or trustee.

And it talks about the actual powers that that person has, and these powers would vary depending on how specific your will is. If you don't designate the executor of your estate, the executor or executrix of your estate is the person who is responsible for basically settling all your debts and distributing all of your assets and your stuff according to your will – according to the details of your will.

And the court will appoint one, and they'll find an executor who does that. And then a trustee is somebody who is a steward of your assets. This could be specific to a trustee of a business. It could be specific to trustee of financial assets for your children, things like that.

So you want to designate those people in your will, and that will help you and help you to have a good peace of mind to make sure that the appropriate person is going to take care of your stuff. So that's an important function of a will. Another important function of a will and frankly for most of you who are listening, the most important function in my opinion is that a will will allow you to appoint a guardian for your children.

So my wife and I are out on date night. We die in a car accident. We leave two kids without parents. Well, if we don't designate a guardian, the court will go through a process and ultimately establish a legal guardian for our children. But that legal guardian may or may not be the person that we would have chosen.

They might choose somebody that they believe is best, but that person might not share my wife and my parenting philosophy. So this is the most important function of a will for parents is to be able to designate a guardian for their minor children. There are some other important functions.

You can specify any funeral wishes if you want in a will. You can – it will make things a little bit simpler sometimes with the legal – to settle the legal process and for you to settle your estate. So these are all valuable. And the clearer you can be on your instructions, the fewer decisions your heirs have to make.

It can certainly be – for example, for me as a leader in my household, it's important to me to make sure that as much as possible, my instructions for what should happen to our household and to our family in the case of my death are clear and they're thought out in advance.

So that if I were to die, then my wife is not left with the burden of grieving for me and the burden of making important, difficult decisions all the time. A lot of money is spent unnecessarily on funerals by grieving family members who want to honor, rightly so, the memory of their family.

But yet, that may or may not be what the wishes of the person who died had to do. So that's the basic function of a will. In many ways, it's fairly simple. Now, a will can also be extremely complex. So if you were entering into more advanced stages of estate planning as we were – as we'll talk about in the future, then you could – within the context of your will, you could establish extremely intricate instructions for your executor and for your trustees.

You could, in the context of your will, establish some very intricate and carefully designed and very involved trusts. You could designate all kinds of very, very specific instructions, and that's where you get into advanced estate planning. So a will can be very simple or it can be very advanced, and we'll talk more about wills and can I do one myself, etc., in a couple of minutes.

Next document, however, is the living will or, like I said, also called an advanced healthcare directive, personal directive, advanced decision, etc. And the living will, basically its major function is to tell your doctors what you want if you can't make your own medical decisions. So Joshua falls down, hits his head, and I'm in a coma.

What do I want? Do I want to be kept on life support or do I not? If I don't have a living will expressing my wishes and desires for that, then the medical care providers have to go based upon their standard outline. And so this can lead to really troublesome situations, and so this is why there's such a big focus on clarifying it.

And it should be fairly simple to clarify it. You just, again, express your intentions so that your family and your doctors can follow those intentions. And that's really the only way that, for example, if you didn't want to be kept on life support, that's really in many ways the best way for you to express it is through the context of a living will.

Now, the other document that's usually referred to in connection with the living will would be the medical power of attorney. Again, with multiple names, healthcare power of attorney, designation of healthcare surrogate, healthcare proxy, depending on the language in your state. Let's just call it the medical power of attorney.

The medical power of attorney allows somebody else to make medical decisions for you. And there is a method in the laws of your state by which somebody else can influence those decisions. As an example, I as a parent don't need a medical power of attorney to make decisions regarding my children's healthcare decisions.

I am in charge of that, but I can't make any decisions about my brother's healthcare decisions unless I were appointed as a medical power of attorney. And so the medical power of attorney allows somebody else to be involved in that, and that's good to designate who that person is and that the power of attorney gives them the legal ability to act on your behalf.

If they don't have the power of attorney, the legal document specifying them to have that authority, then that person is forced to – that person – the medical doctors and hospital staff are not going to be able to follow their instructions. The concept of the power of attorney is relatively simple, and the next one where we get to the financial power of attorney, it's basically just simply authorizing somebody else to act on your behalf.

And powers of attorney can be very, very specific and limited in scope, or they can be very, very broad with very few restrictions. And that's why you want to be careful when you establish powers of attorney, what they are and how they work. They need to be given in writing.

They need to be done while you are of full capacity. They need to be done while you're not incapacitated, and we'll talk about that in just a moment. But the powers of attorney are important, and you can designate somebody to have your medical power of attorney. The financial power of attorney is the final document, and this essentially allows somebody to make certain decisions for you and take certain actions for your finances and for your general normal goings on of your life.

But they're not you. So, again, I'm in a coma. Well, my dad isn't going to be able to go down to my bank and withdraw money out. They can't access my checking account. They can't arrange for my house to be sold or things like that unless I've given a power of attorney.

But if I have a power of attorney, then my dad could take that document and he could trot down to my bank or trot over and list the house, and he would sign as my attorney, as my representative. And the power of attorney is what gives him the opportunity and the authority to do that.

That can be a big deal because it can be important for somebody to be able to have power over those things, to be able to sign the checks in the business to keep my employees paid, those types of things. So these documents are all part of the estate planning process, and you'll notice that some of these are relevant when you are alive and some of them are relevant when you're dead.

If you're dead, the living will doesn't matter. You're dead. But the will matters. If you're alive, the will doesn't matter. But the healthcare power of attorney, the financial power of attorney, and the living will, those all matter. And the will comes in after the fact. So that's the simple overview of the documents, and they are and can be indeed very, very simple.

If your desires are simple, if you just want some basic protection, you can create these documents very simply. You can create them yourself, and those will work perfectly well. On the other hand, they can also be used and made to be very complex and very intricate if your desires and the things that you're trying to accomplish are not simple.

If the desires and the things you're trying to accomplish are a little bit more involved. Now, let's talk about doing your documents yourself and saving money versus getting advice and paying other people to help you with your documents. I am not an attorney. I'm not qualified to give legal advice.

I'm not going to give you legal advice. The things I have to share are simply my opinions. But I ask a lot of my attorney friends this question, and one of the nice things about being a financial planner is you wind up knowing a lot of really competent attorneys.

And the cool thing about being friends with attorneys is I pump them for free advice, and I'm always asking them their opinions. You can do a lot of stuff yourself, and I'll give you and tell you how you can do a lot of stuff yourself in a couple of minutes.

But unless your situation is extremely simple, you probably should at least seek some basic advice from somebody with some knowledge. Talk to a financial planner. Talk to an accountant. Talk to an attorney. Accountants generally are not going to have much knowledge of estates unless they deal with that world and they specialize in estate taxation or something like that.

But at least talk to a financial planner or talk to an attorney and get some overview information. Let's talk about can you do your own will. You can do your own will, but if you do your own will and you're not an attorney, you should probably make it as simple as possible.

Simple example. I do not have a lot of probate assets, and we'll talk more about that in the future. But what I mean is the majority of my property are what is called non-probate assets. And non-probate assets are assets that would not go through the court in the case of my death.

If I have a life insurance policy, I do. That's the majority of my assets. If I died right now, the vast majority of assets that my beneficiaries would receive are insurance. It would be the insurance payouts. I've got $2.5 million of life insurance, and that by far dwarfs any of my other assets and accounts.

Well, life insurance policies are not subject to the court process. If when I die, then the life insurance company will simply pay the money directly to my beneficiary, and my will does not influence that at all. I can change the beneficiary to be anybody that I want, and it does not matter what my will says.

The court has – and my will has nothing to do with my life insurance. That's a private contract between me, the insured, the owner of the policy, which can be me or it can be my wife depending on how the policy is structured or it could be really anybody else, the insurance company, and the beneficiary.

Those are the four parties to the contract, the insured, the owner, the insurance company, and the beneficiary. It's a private contract. It has nothing to do with the will process. So I don't need a will to designate where my life insurance policy goes. Other assets that I own are also nonprobate assets, things like a 401(k) account.

A 401(k) account has a beneficiary designation. So that beneficiary designation is what determines where that money flows. If I have bank accounts, those bank accounts can be titled in such a way that the titling determines where they go. If it's a joint account, then the assets in that bank account flow to the joint account holder based upon the type of joint account.

Or if I have a transfer on death provision with my checking account, then at my death, that policy will transfer based upon the instructions that my bank has. So does everybody need a will? No. Not everybody needs a will. And this is one of the things that annoys me when people give that advice.

If you are a young man or a young woman and you are unmarried and have no children and if you don't really own any real property that you are – and all of your property is assets that have beneficiary titles, then you don't need a will. It's not going to do much for you because most of your assets will simply transfer.

And even if you do own real property, so let's say that I were single and I don't – I own a house. But if I were single, I just leave it all to my parents. Well, I can just check the intestacy laws in the state of Florida and I can see, "Oh, looks like my parents would be the beneficiary to that property," and I'd go ahead and just leave it as is and they can transfer there.

Now, that may or may not be smart, but it is the fact that those laws would govern how things go. The biggest reason why most people need to have a will is for the guardianship. And if you are a parent, this is the number one reason why you should have a will is to establish the guardian for your children.

That is the most important thing. You can do that with a very simple document. And if you're going to do your own documents, I would recommend to you that you keep it very, very simple. Now, you'll hear – if you pay any attention to financial advertisers on financial radio shows or on financial blogs, you'll see and hear of all kinds of companies that create legal documents.

And so I grill all my attorney friends on what's the good thing. Basically, the consensus among all the estate planning attorneys that I've worked with is you can do your own will. But if you do your own will, keep it super, super simple. Because what often happens is people try to use legal language they don't understand and they try to fill out a form and make a kit and they try to make it more complex.

And they wind up contradicting themselves. And then if they're trying to do something that's more complex, they really cause more problems. So if all you want to do is say all of my assets are left to this person or these people and here's the person who's the trustee and here's the person who's the guardian of my estate and here's the executor.

That can be done in about a page or two with a simple fill in the blank document. It could be done even without a fill in the blank document. You just write it down and then have it properly implemented in your estate. If you're going to do anything more complex, get good advice and get somebody else to write the documents who's not going to contradict themselves.

You also often want to get advice because you may not know what you don't know. And this is the biggest risk that you face with estate planning. You may not know what you don't know. And somebody who's an expert can look and can quickly look through your assets and suggest a couple of things that might be a big deal for you and can save you quite a bit of money or make things much, much simpler for you.

So it is a good thing to seek advice, but you can do it yourself. And how to know where you fall? Well, listen to a few episodes of the show as we get into more detailed things and you'll start to see. If you have any kind of blended family or any kind of unusual circumstances of any kind, that's where you definitely probably want to make sure you get some advice.

And this can be a real area of heartbreak. If you've got a blended family, you've got children, divorced and remarried parents, and you've got children from multiple marriages and you're trying to figure out how to equalize the estate and how do we make sure that things are covered and whose property goes where, you want to get some good advice and get those things squared away so that that's taken care of.

Now, is a will the best financial instrument for you to use or the best legal instrument for you to use? It might not be. And this is where we get into the area of trust planning, which I'll talk about in future shows. But wills in many ways are very clunky and they're not great.

A couple of major downsides of wills, why often you'll see people using trusts and many attorneys will usually revert to using some sort of trust structure instead of a will. Number one, a will is fully public. So, at the date of your death, all of your assets are disclosed to the court.

All of the information is made public. That will becomes a matter of public record. You might not like that very much. If you are leaving behind half a million dollars to your mistress and nobody was supposed to know about the mistress, well, now the world knows about your mistress.

It might not be very good. Or if you're going to disclose now that you're a net worth and everybody's going to know the companies that you own because you own those assets personally and they were distributed according to the terms of your will, you lose all privacy. Major downside of the will.

Another major downside of the will is that a will can be contested and this can lead to long and expensive legal battles. And if there's any kind of situation where there can be a dispute, the will can be contested and the will can be overthrown. The court can change if sufficient evidence is shown.

The court can change that. And so what will happen is most people will revert to using a trust structure because a trust structure – and a trust is in many ways just simply a company that basically exists on paper that has assets and has somebody in charge of it.

A trust structure, nothing changes when you die except the trustee changes. So what can happen is all of the items in it remain private. Nothing is disclosed. Nothing is made public. So you can establish a trust and in that trust, you can funnel the money to your mistress without anybody knowing about it.

And also, the trust is set where it's not able to be contested. It can be kept secret in many ways from some people. And so this is where you get into the world and how to know what's right for you depends. It's not really a dollar figure. It's kind of a mixture of dollar figure and complexity and goals and wishes and etc.

The other area where you want to stay away from writing your own will is if you desire to exercise any kind of more significant control over your assets. If you just simply want to leave all your assets to your kids and at their age of – under the stewardship of a trustee and at their age of majority, they can go ahead and do whatever they want with them.

Well, you can do that very simply yourself with a simple document. But if you want to disperse a certain amount of assets to your kids at 18 and a certain amount at 25 and under certain conditions at 32 and you want to protect those assets in case they're doing drugs and then the money would ruin their lives, you're going to need a little bit of help to write those things into it.

So answer to can I do my will myself? Do I need one? Depends, as is frustratingly the same answer with almost every financial situation. At least start with something simple. If you don't have a will, you can get a will and a couple of recommendations for you. Start with some simple books at the library.

Start with the resources of your local state bar association. There are probably some standard boilerplate template documents that your local bar association has created or that you can get in the library. And you can do this for free. The thing that is required to properly put a will in place is not the language in the will but rather the process of implementing it.

And your state should be pretty clear if you look that up. It will need to be notarized. It will need to be witnessed. And it will need to be available to somebody at the time of your death so that it can be submitted to the court. So you can create a very simple document.

You can find a document for free. There's no reason to pay for one. And you can find a document for free and you can put it into place. And I think that's a really good starting point if you don't have a complicated situation. And at least there, if you're a parent, you can designate the guardianship of your children.

Next, the other documents, especially the living will and the healthcare proxy or the healthcare power of attorney, those can also be put into place very simply. For example, in many states, there's a document that's available called the five wishes. You can find this available free online. You fill it in.

You get it witnessed. You get it signed. And that can be – that can serve as an appropriate document. You can – from your local bar association, your state bar association, you can find a document to put those things in force. And you can fill that in, get it properly witnessed, notarized if necessary under the laws of your state, and you can get that put in for yourself.

Finally, with the power of attorney, the financial power of attorney, that can also – you can find a simple document and you want to pay careful attention to the terms of it and you can do it all yourself. So you can do it yourself. You can do it for free.

Maybe you have to pay a notary to notarize things for you. And you can do it very simply. Should you? Well, pay attention in future shows as we dig into, again, the discussion of what assets are included, what assets are you disposing of, what kind of control do you want to exercise over your estate.

And if you have any question about it, then you should probably seek some advice and in general seek some good advice. People are often scared of attorneys and I think there are some really crummy state attorneys out there that just oversell a lot of things. But there's also a lot of things that most estate attorneys know and have been through that can affect their decision.

Now, the challenge that I found is most of my friends who are attorneys, because they're attorneys, they're so used to dealing with extremely combative situations. They're so used to dealing with litigious situations. They're so used to dealing with people who are fighting that they sometimes go above and beyond.

And so I always try to filter the advice through the actual context of my family's situation. And I recognize why they do it, but my situation isn't the same as theirs. And so seek the advice and then filter it through your own scenario. But you can probably do some things yourself.

So if cost is going to keep you back from setting up your own document, recognize that you can do it yourself and it is OK to do that. But if you have any questions about it, then you probably should seek some better advice. That's where I want to cut it off today.

I want to keep this show short, focused, casual, cursory overview. And in future shows, I'll try to dig into some more of the details. If you have questions on estate planning during the month of – as I record and release this show, it's November 2015. During the month of November, I'll be doing a number of discussions here on estate planning.

And so as I do these shows, I'd be happy to answer your questions. I put out some information on the Patreon page. So go to RadicalPersonalFinance.com/patron, and I will give priority to the patrons of the show who ask questions. And I will answer every one of those questions for you guys.

And then I've also put out the information and the questions on my Facebook page. So go to Facebook.com/JoshuaSheets, and you can see that information there. And go ahead and post your question there on my Facebook page. And I'll do my best to answer as many of these as I can fit into the content.

And I'll try to give you some more in-depth details. There's a lot we haven't covered, a lot we could cover. And I'll try to give you a good rounded discussion of the pros and cons and merits and demerits of different approaches and define some of these terms in a little bit more depth.

So that will be coming up in future episodes. Hopefully, this is a good overview. Hopefully, you can share this with somebody. By the way, thank you to all of you who share the show with other people. That is the number one way that the show has been marketed and will be marketed and even going forward in the future.

And I have realized just that that's what's grown the show. And I'm going to be continuing to focus on trying to create really useful content that can help you. And the best way to tell someone else about the show is just tell them to search their app store on their phone and download the Radical Personal Finance app.

Thank you to those of you who support the show directly on Patreon. There are 232 individual patrons of the show, and that is a major, major influence and a huge, huge help to me. If you are not supporting the show directly on Patreon, please consider going to radicalpersonalfinance.com/patron. Look to see all of the bribes and everything that I have there for you to incentivize you to participate.

You can contribute as little as a buck a month or as much as a couple hundred bucks a month. And I would love, if possible, at the moment, the current support level for the show is $2,435.35 a month. And at the $4,000 level, I would like to create a course for the patrons of the show.

And that specific course, I know what it is at this point. I know what I want to do. And I would love to do that and launch it in about January. If we could get to the $4,000 a month level by January, that would make a huge, huge difference.

So consider going to radicalpersonalfinance.com/patron and sign up to support the show. Peace out, y'all. Be back soon. Don't just dream about paradise. Live it with Fiji Airways. Escape the ordinary with Fiji Airways Global Beat the Rush Sale. Immerse yourself in white sandy beaches or dive deep into coral reefs.

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