Estate Planning - You Need to Do This ASAP

Hey, what's up everyone and welcome to the School of Personal Finance. So the day I'm recording this, it is September 9th, 2021. In two days, it is gonna be the 20 year anniversary of September 11th. And I'm four episodes in on the new docuseries on Hulu. If you haven't watched it, I highly recommend you checking it out. And it's bringing me back such vivid memories of everything that went on during that time and how many heroes and it's just, you sit there watching it with goosebumps and disbelief that we lived through that. But it got me thinking that I should do a video about estate planning. And with estate planning, some people, they hear that term and they automatically think of wealthy people and something that you don't really have to worry about. But I'm talking about the estate planning for everyday people. You really do have to prepare for your death, for your unexpected death. If something were to happen to you, you wanna make sure that you're not leaving everybody in shambles when it comes to your finances and just the overall organization of everything and where everything's at. So there's definitely certain steps that you need to take to make sure that everything is buttoned up and in place if you were to pass away unexpectedly and that your wishes would be carried out the way that you want them to. So in this video, I'm gonna go through a few different things, some steps you could take that are really important. Make sure you stick around for the last one, which is one that you might not hear other people talk about which I've done personally in my life. So we'll get to that as well. But I hope that you find this one helpful. It's not the greatest topic to talk about or to think about, but it is very important to plan for these things because you just don't know what could happen in life. All right, let's get to it. All right, so just a quick reminder, I'm still in the process of creating the School of Personal Finance. So I'm creating a bunch of different courses. I'm gonna have office hours, I'm gonna have webinars, I'm gonna have quizzes and downloadable PDF worksheets that you could use. I'm also gonna be hosting live Q&A sessions and I'm gonna have monthly accountability calls as well along with a bunch of other stuff. Go over to schoolofpersonalfinance.com, sign up for my email list, keep checking back, but I'll let you know, I'll send out an email when I'm ready to launch that. I'm gonna try to do all of this for a low monthly membership fee and really try to help everybody out there become great with money. So go over and check it out. All right, so now the first thing that I wanna talk about when it comes to estate planning is making sure that you have what we call the three-legged stool of estate planning. And those are the three main documents, the will, the power of attorney, and the healthcare proxy. Now, I recommend that you have an attorney who specializes in this draw them up. It should not be that expensive. A lot of employers offer group benefits where you get discounts with local attorneys creating these documents. All right, so starting with a will. Now, everybody needs a will. All a will is, it is your last wishes written down in a legal document so that the courts could follow this and execute what you would want to happen if something were to happen to you. If you do not have a will, then what happens is the courts are going to decide how to disperse your assets or who's gonna take care of your kids. So let's say a worst case scenario. Let's say that you're married and you and your spouse do not have a will and something happens to both of you at the same time and your kids are left behind. The court is gonna go ahead and they're gonna decide who is going to be the guardian of your children. And who knows who that might be? It might be the closest relative that lives near you but that might not be at all who you actually want taking care of your children. So you have to make sure that you have a legal document in place that is going to tell the courts exactly what you want to happen. And also, say you have a boatload of life insurance and you and your spouse pass away and now there's all this money that is going to be left to take care of the children. You wanna make sure that you have a custodian that you trust, that you would want to be handling that money to make sure that they always have your children's best interest at heart. So it's very important to have a will. And then you might have other assets and other things that you wanna leave to specific people. So you want all of that laid out in the will. Now a few things to remember with a will is that it goes to probate court. It is a public document, the will. So people could come and contest the will. People could go and see who you're leaving money to. It's all public information. So if you don't want that to be public, then another option would be some kind of trust document. And then the second document that everybody should have is a power of attorney. So now by having a power of attorney, you are giving somebody else legal authority to act on your behalf. So obviously you have to choose somebody that you trust to be able to do that. So like your significant other is the perfect person to have as your agent on your power of attorney. And you can have what's called a general power of attorney where they're able to act on your behalf for any matter, or you could have it very specific. Like for example, if you have a real estate closing that you're not able to go to, you could do a power of attorney just to execute those closing documents on your behalf. So there are different types of power of attorneys. But I recommend having a general power of attorney with your spouse if you're married so that they could act on your behalf. God forbid something were to happen to you and you're still alive, but say you're in the hospital and you're in a coma and they need to be able to sign on your behalf, a power of attorney, a general power of attorney will allow them to be able to do that. And another thing to remember is if you do pass away, then the power of attorney, it ceases to exist at that point. So it goes away at death. It is no longer a legal enforceable document once you pass away. And then the third one, the healthcare proxy. This is a legal document where you are naming somebody to be able to make medical decisions on your behalf, to be able to carry out your wishes. And this is a very important one because we always think of pulling the plug of that final decision and having a healthcare proxy to be able to make that decision. But there's always a lot of very small decisions that lead up to that big decision. And you want somebody that you can trust. You want somebody that's obviously always going to carry out your wishes and have your best interest at heart, but you also want somebody that's comfortable with that situation, talking to doctors and having these discussions, because it is obviously a very stressful thing. So you don't wanna put somebody in that situation who is not gonna be able to handle the pressure or really that wants to be in that situation. So a healthcare proxy, it's definitely a good idea to have a very serious discussion with whoever you're naming on that document to make sure that they really understand your wishes and how you feel about all of it. All right, so those are the three main documents that seriously, everybody should have. If you don't have those, you should put a plan in place to get them executed. Now, if you do have those, it is always a good idea to update them every few years or when you have a life event, like if you have additional children or if something changes in your life, you wanna make sure that you are keeping those documents up to date. You don't wanna let 20, 25 years go by and everything looks different in your life and you haven't updated these documents. All right, and now the next thing with estate planning that you need to do is make sure that all of your beneficiary information is correct. You would be amazed at how many people screw this up. So beneficiary designations, those trump whatever is in your will. So say for example, you have a very big life insurance policy and years go by and your spouse is the beneficiary on your policy and let's say you get divorced and you get remarried years later. All right, so let's say that all of this has gone over the course of 20 years and you never updated the beneficiary on your life insurance policy and you unexpectedly pass away and you still have your ex-spouse as the beneficiary on your life insurance policy. Even if you updated your will to say that you're leaving everything to your new spouse, that does not matter. Whatever the beneficiary designation is on that life insurance policy, that is where the money is going to get left to. And that also applies to 401ks or IRAs. On any of these accounts, they're going to look at who you have listed as the beneficiary on those documents and that is going to trump whatever you have in the will. But it's like you hear so many horror stories about people passing away, they didn't update their beneficiary, they're leaving the money to somebody that they don't want to have the money and then the person who they actually want to leave the money to, they don't get it and they're in a terrible situation and there's nothing that they can do about it. So just make sure that you have all your beneficiary information exactly how you want it to be. All right, and then the last thing, which is what I referenced earlier that you just don't really hear people talking about, and that's creating a what if something happens to me file or a video or both. I like the idea of doing both. But like I have a PDF document that will walk my wife through exactly where everything is, who she should contact, where my life insurance policies are, how much they're worth, where my 401ks, my IRAs, all my investment accounts are. We own real estate properties, so numbers of the property managers, the addresses of all the homes, like I deal with all of this stuff. So in many households out there, there's one person who handles all of the finances, all the paying of the bills, and the other one doesn't really want to know about it. They just want to know that there's enough money in there when they swipe the credit card or the debit card through. And that's kind of how my household is also. Like I feel an obligation to keep her in the loop and to always be telling her, but I don't know, I feel like it goes in one ear and out the other. So leaving a roadmap of exactly what you have, where everything is, make it easy on them if something were to happen to you. And if you could do a video as well, that would be perfect because then they could at least get your expressions and you could come across and say, listen, it's very important that you call our accountant or that you call our attorney or that you call our financial advisor and all of these people. And listen, the life insurance policy, here's the rep, here's their phone number, call them up because you should get a big fat tax-free check for this amount if something were to happen to me. So you just want to make it very easy on them and take the stress off because obviously they're going to be emotionally devastated so make this stuff easy so they're not scrambling around looking for documents and wondering, am I missing something? Do we have something over here and something over there? You just want to make it as easy as possible. So creating a nice PDF or a nice file, an Excel spreadsheet of where everything is, keeping it up to date, having the file on there. Like I joke, I have it on my computer as if I get hit by a bus so that she could find it very easily and it stands out, something were to happen to me. Open this file up and just follow the instructions. The video, I'm going to create a video. I haven't done that yet. I figure I have so many videos on things that hopefully she'll watch and learn about this stuff if something does happen to me but I should make a personalized one to kind of walk her through all of this. All right everyone, that is it for this one. Hopefully you found that helpful. I know it's never enjoyable to think about this stuff, to plan around this stuff. It costs money, it's a pain in the neck but it is super important. You just hear too many horror stories out there and you want to make it as simple as possible for your loved ones if the worst were to happen. All right, I will see you all again in the next video. Go over, check out schoolofpersonalfinance.com. Get on my email list. I'll see you again next week. Thanks.