Ep # 47: Estate Planning 101: What Documents, Who To Appoint, and Why It's Crucial

Benjamin Haas | Aug 27, 2021

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Benjamin Haas 00:03

Hi everyone and welcome to A/B Conversations where we will help you CFP your way out of it. A podcast where you get into the minds of a Certified Financial Planners on how we think and feel about everyday financial planning questions and what should really matter most to you. A healthier financial life starts...now!

Adam Werner 00:33

How are you?

Benjamin Haas 00:33

Here we are. Welcome back, Adam. Good, dare I say excited about the topic today.

Adam Werner 00:39

Wow. All right.

Benjamin Haas 00:42

Which is it feels really awkward talking about death should not be exciting at all in any way, shape, or form. But excited because I think you and I feel really good about the myth busting. Like when there seems to be something that holds people back that totally shouldn't hold them back. So, people are probably chomping at the bit. What's the topic? Just tell me the topic? Well, here it is. In the spirit of estate planning, trying to get your affairs in order. I don't, do you remember what the statistic is? Like, only 15% of people have a will? (NOTE - it is 30%) It's something really low. Right?

Adam Werner 01:21

Yeah, that sounds about right.

Benjamin Haas 01:25

Why is that? I think there are a lot of misconceptions I'll call them and maybe there's a lot of stress that goes with the topic for today. Picking the people to honor your wishes. Who are the people? What are the positions that you need to appoint people to, to make sure that when you pass away, your affairs are taken care of? And importantly, taken care of in the manner in which you would have wished.

Adam Werner 01:54

Yeah, I think that last sentence is the key, I think to most of this conversation. We'll talk about different aspects but when it comes to a will, that document is you essentially documenting your wishes. When I am gone here's what I would like to see happen. Not only just property, assets, investments, all of these things, but then you name somebody to essentially carry out those wishes. That's the number one: you need to have a will. Everybody should have a will but then in choosing that person to execute your wishes that’s often we've seen with clients with children, more often than not, it's, well, the oldest one. That's what we put on there by default and that's not necessarily always the best solution. So maybe I'll stop talking there and let you fill in.

Benjamin Haas 02:53

So that's a perfect setup. By definition, you're naming an executor/executrix.

Adam Werner 03:01

A fun word. Executrix just means if it's a female.

Benjamin Haas 03:04

Yes, so you are naming the person that is supposed to carry out what's in that document. So number one misconception I think I hear is that you're giving that person power to make decisions. That's not necessarily true. It is literally the person and let's also be like brutally honest about this, this isn't a fun job. This can be a very cumbersome job, it is the person that is supposed to pick up every financial account in your life, close the utility bill, close this account, this credit card, this financial account, and whatever the instructions are beneficiary designations or through the will, start to have that money flow through based on what is documented. That person is not there to make decisions, that's the point of the will that you have documented what you want to see happen. So I don't know if that's your experience, too but I see that as a big misconception. The executor is not somebody that's making decisions.

Adam Werner 04:05

So even in that sense, wanting to name someone that can have good judgment, make decisions, that's really not the role of the executor. You really want someone who is organized, can follow through, keep track of many different moving pieces. There's going to be a whole heck of a lot of paperwork involved so it may not necessarily be - if you have children, multiple children and you're trying to pick somebody, it really is a job of execution, hence the name executor. You're really just executing on all of these wishes and actually just, it's somewhat, I don't want to say it's a boring process because we've certainly seen it can be a very complex thing, but it should be relatively straightforward in that you really are just going down the list checking boxes and just moving through that.

Benjamin Haas 05:02

So I have two thoughts. I'll quickly move to the first one. It may not need to be the legal document of the will but you certainly make that person's job a whole lot easier by supplementing that will even if it's just a cheat sheet on where things can be found.

Adam Werner 05:19

Absolutely.

Benjamin Haas 05:20

Your usernames and passwords to online accounts, getting those things organized and letting the executor know this is where those are, it makes that job way less painful, it may eliminate some hurdles. So that was my first thought. My second, let's compare that then to some of the other positions or maybe some of the other documents that go along with the will where you may need to be a little bit more thoughtful on who you're going to give certain powers to. So I don't know, I'll turn it back to you, I'm thinking like, powers of attorney.

Adam Werner 05:53

Yep. Power of attorney, essentially, you can name someone who can legally act on your behalf while you're living. So strictly while you are still living, you're giving somebody the power to make decisions whether that's with investment accounts, bank accounts, it's financial power of attorney but then even there's a subset underneath that. There's what's called a springing power of attorney that only becomes active in whatever circumstance, if you're disabled or you're just incapacitated, whatever the case may be, it only comes into play then. Or the other option is what's called a durable power of attorney and that is essentially live from day one. So if I named you as my power, my durable power of attorney, I'm giving you essentially access and control over my investments and assets and everything while we are both here and living.

Benjamin Haas 06:59

Yeah, so on the opposite end of naming that executor in a will where you're not necessarily giving powers, you're just asking them to execute when you pass away but this is like completely open ended. You can buy, sell, liquidate stocks, like the whole gamut of transactions can occur simply by a signature of this person. So you better would trust that person and know that they will continue to honor your best wishes. I guess we could just flip that real quickly into it's pretty common then in the suite of estate documents (will, power of attorney) to also have a health care directive that kind of acts in a similar way.

Adam Werner 07:40

So the way that we have seen those documents, they're essentially almost like a combination of a healthcare power of attorney and a living will that essentially says, here are all my wishes on how I would want treatment. And, if the Do Not Resuscitate, like that kind of life saving measures, you can document all that while you're able to. But then you can also name somebody to help make those decisions on your behalf so that's the healthcare power of attorney. So you are, you can potentially give somebody those powers but you don't have to. You can just have your kind of checklist of here's what I want, here's what I don't want, and then that can go on file and you have that set if you ever end up in the hospital, your wishes are documented, if you can't make those decisions in real time.

Benjamin Haas 08:35

Okay. So before I go through, like my next thought is to give a scenario or two here where I think we would want to coach some people through how do you think about these things? Are there any other appointments that you think we should talk about within kind of that suite of stated documents?

Adam Werner 08:54

Yes, but before I get to that, there was one other thing I wanted to note on the executor of a will. We've often heard clients say they have named two people.

Benjamin Haas 09:08

Oh, right.

Adam Werner 09:09

Because I figure I'm going to offset some of this risk by just naming one person and all mean two people. They can work together to do this.

Benjamin Haas 09:18

Yeah. My son and my daughter will take care of this for me.

Adam Werner 09:22

And being the key word and that now everything, all of the tedious process that we kind of listed now has to be done and signed off by two people who may or may not be in the same area. May or may not get along, may or may not have similar personalities and ways about going through paperwork. So yeah, we would highly suggest about naming co-executors but you should definitely have a successor name. So if the first person either can't or won't act, then you have a backup that can step in to fill that gap without the court eventually appointing someone to act on your behalf.

Benjamin Haas 10:03

Okay, so thank you. I don't think that you knew the segue I was looking for but that was it. In the absence of all of this, if you are one of those people that feels like avoidance or just again, God forbid, something happens to you in your life and you didn't have any things in place. The court's going to decide. This state, the Commonwealth of Pennsylvania, here in PA, there is a process, a very clear, stated, here's what happens if someone passes away without this documentation. So there are defaults and I will share through experience that these typically are not the way that you want things to go. They not only are cumbersome but they are costly. We highly, highly suggest that everyone goes through this process of making sure that things are documented for their wishes.

Adam Werner 10:57

Yeah, and so on that note, not only just document it the first time around but life changes, relationships change, staying on top of these things over, even if it's just you check in on it every year, every other year, a couple of years. We've had clients come in and we ask the question, you know, when was your will last updated? It's when we had children back in 1968 and the same will is still written and that's what, God forbid, they pass away now we're working off of a 50-year-old document which may or may not have all the provisions that we would want to see in them. So staying on top of them, making sure they still reflect your wishes, and any changes in relationship is equally important.

Benjamin Haas 11:48

So I'll give one other misconception. I think there is certainly a segment of clients that we work with that have a little bit of a misconception on what really goes into drafting that will and feeling like it's a really expensive process that's not necessary. These legal documents should not be costly just flat out. A simple will that for most people is going to work might cost you a couple 100 bucks. Might. I think and we're not going to go there today, there are certainly situations where we suggest based on the complexity of a situation or a certain degree of assets that we're going to talk about trust and naming trustees, more in line with the power of attorney conversation than the executor. Those are the types of documents that are a little bit more intricate. They'll probably take a little more customization but I think if the hurdle for somebody is that I don't want to pay an attorney 1000’s of dollars to get my estate plan in order, you really shouldn't have to. These documents are not based on the professionals we work with, they're not that expensive. Just get it done, you're going to cost your family more.

Adam Werner 13:09

That's exactly what I was going to say. Even if it did cost you a few $1,000 to get these things set up, which in our experience with the relationships that we have in the estate planning attorney world, that's not the case. But even if it was, to your point, what that would cost your family or your estate on the back end to now have to go through this process without that documentation. It far outweighs the nominal cost to get it right on the front end and by the way, you then can at least dictate those specific parameters where you want to leave money, who gets what rather than the defaults of the state.

Benjamin Haas 13:56

Last thing I want to mention because this comes on the heels, I mean, our last podcast was about breaking the ice and talking about these types of things with family. I think it's really important that somebody be in the know again on where you have certain things. These documents are going to be included in that. It may not be common knowledge that really when you pass away and you are opening estate at the county level, that you really are to furnish all original documentation. Original, not copies so knowing where those can be found so that you don't need to file some appeal to use a copy document, which by the way, time and money. It's just I think it's really important to include that person, whoever you are naming, let them know that this is a job that you would like them to do where they can find these documents. And again, if that's supplemented by something, we have a process called the final financial plan. Let's just document where everything can be found and how you get access to things. It just makes the estate settlement process so much smoother and hopefully does not become a process that somebody curses you over because things just felt completely disorganized.

Adam Werner 15:11

Well said.

Benjamin Haas 15:12

So hopefully, we've shed some light on this process doesn't need to be daunting. Hopefully the titles and the roles are kind of a little bit clear. Last disclosure, we're not a state attorneys here. We're not drafting these documents but we certainly have taken many people up in to this process where we need to talk about how things efficiently pass to the next generation. We need to make sure the documents are in order. We need to be thoughtful about taxes and beneficiaries and this is all part of that process.

Adam Werner 15:41

Yep. Okay, we did it.

Benjamin Haas 15:46

Two thumbs up today, pal. Way to go.

Adam Werner 15:49

Hey, you weren't so bad yourself.

Benjamin Haas 15:52

I appreciate the vote of confidence. All right. Have a great, great rest of the day and we'll see for podcast time next week.

Adam Werner 16:03

All right. Sounds great. Bye everyone.

Benjamin Haas 16:06

All right. Bye. Hey everyone. Adam and I really appreciate you tuning in. Please note that the opinions we voiced in the show are for general information and are not intended to provide specific recommendations for any individuals. To determine which strategies or investments may be most appropriate for you consult with your attorney, your accountant and financial advisor or a tax advisor prior to making any decisions or investing. Thanks for listening!

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Ep # 47: Estate Planning 101: What Documents, Who To Appoint, and Why It's Crucial