Estate Planning

Kim Scott and Derek Kravitz discuss the importance of estate planning and the various documents that are part of that process.

Estate Planning Transcript

Derek:

Hi, everybody. This is Derek and Kim with FSA again for another Technical Tuesday’s video. Kim, how are you? What have you been up to since we last spoke?

Kim:

Hey, Derek. Yeah, this weekend I got to go to a winery with a couple of friends and do a socially distanced wine tasting. So, it was kind of fun to do something that felt a little bit normal, almost pre-COVID, so that was great. How about you?

Derek:

Yeah, I bet that was fun, especially given the unusually mild week weather-wise we’ve had in this region for August. So, that was probably a great thing to do in this weather. I’ve been good. I actually mustered the strength to wake up at 5:00 a.m. today and go up to the Air Force Memorial, which is really close to where I live, and see the sunrise. So, it was definitely worth it, as you can see by my photo there. So, I’m really happy I got to do that. Anyway, today we’re going to talk about estate planning. I’m going to be asking Kim some questions about that and why it’s so important. So, without further ado, Kim, can you fill us in? What is estate planning? Why is it so important?

Kim:

Yeah, sure. So, an estate plan, or the estate planning documents, essentially give instruction for what you want to happen after you pass away. So, it’s what do I want to happen to my assets? Where do I want things to go? That type of thing. And there are a couple of documents that also speak to during lifetime. What if I were to become incapacitated in some way, who do I want to step in? So, it may be helpful if I kind of name off the four main estate planning documents.

The first one is your will. So, that’s the one that speaks to your assets and what you want, where you want those assets to go after you pass away. Also, if you have children, you can name a guardian who you want to step in and take care of your kids if something happened to you.

Next, we have your power of attorney. So, for the power of attorney there are actually two separate, and both needed, documents. There’s the power of attorney on the healthcare side, so that’s if you were to become incapacitated, you can’t make decisions on your own, someone steps in, or can step in, and make healthcare decisions for you. Then, similarly, but on the other side, is a health care, sorry, a financial power of attorney. So, that’s someone that, again, if you were to be incapacitated, they step in and kind of help on your financial world and are your bills paid and financially are you in a good spot?

And then, the third document would be your living will or advanced medical directive. That speaks to your end of life care. So, do you want to be sustained on medical machines or do you not? Do you want to be fed, and those types of questions that are really tricky to answer, but it’s helpful for you to have those answers in place so that your loved ones aren’t having to make those decisions for you.

Then, the fourth is a little bit more of a tricky one, and so we’ll probably have another episode on that one alone, but a trust is another estate planning document that can be used for you to kind of explain how you want assets to be handled after you pass away.

Derek:

Okay, yeah, that’s very informative and very interesting. I think that this speaks to why it’s so important to have a good financial advisor in your corner. I will willfully admit my ignorance here. This is not something I really ever gave a whole lot of thought to until we started talking about this as a topic for Technical Tuesdays. Could you speak a little bit to maybe where a financial planner fits into this aspect where … I know that there’s obviously an attorney present, but where does the financial planner fit in specifically?

Kim:

Sure. Yeah, good point, Derek. So, you’re right, given the estate planning documents are legal documents, we cannot draft those. So, an estate planning an attorney would obviously be needed to draft and execute those. Our role is really everything leading up to those documents being drafted. So, we often help clients think through who they want to name in any of those events, whether it’s who they want to name to take care of their kids or who they want to name to step in on a healthcare and a financial standpoint if they were to become incapacitated. Similarly, on your will, you have to name someone as what they call an executor. So, they’re the person that kind of oversees your assets being passed to whoever they should go to. So, we help kind of facilitate those conversations. A lot of times they’re not just a cut and dry, “Oh, I already know the answer to every single one of those.” So, it’s helpful to kind of talk through some of that before going to the estate planning attorney, and then you have your answers in place.

And the other way in which we help is that as your financial planner, we have a good understanding of your kind of total picture, and so a lot of times we can help kind of explain how your assets are set up now and how they would pass, to then decide does something need to be changed, do you need to bring in an estate planning attorney, and kind of make sure that we adjust things so that they do pass the way you want them to.

Derek:

Okay. That makes a lot of sense. Like I said, I mean, I’m 29 as of last week, and I guess now I’m starting to think is there a certain age at which somebody should start thinking about this and preparing for it? What do you think?

Kim:

Sure. Well, first off, happy birthday.

Derek:

Thanks.

Kim:

Second off, I would say that I get that question all the time. And generally, I think people come from it from the standpoint of, that’s something I need way down the road. I don’t need that now. I’m young, and I won’t have those issues for a long time. I would like to say it’s very important. Once you reach the age of 18, you are now no longer under your parent’s umbrella. So what does that mean? That means you really do need to make sure you have those power of attorneys in place, both healthcare and financial, because if something did happen to you your parents don’t have the right to step in or know what’s going on with you from a healthcare standpoint and make decisions, and they can’t access your bank and make sure that your bills are paid. So, it’s important to have those documents in place. I would also say, if you didn’t have them in place and they needed to step in, it’s quite a process for them to be able to. They have to petition the court and get a guardianship, and that can take time, and a lot of times you don’t necessarily have that time. Decisions need to be made, actions need to be taken. So, it’s really important early on, like right at 18, to make sure you at least have those documents, and then once you start having some assets, whether it’s a car, or a house, or you have kids, it’s important, again, those are big triggers, to make sure that you have your estate planning documents in place and that the right things are addressed to make sure that things are taken care of if you were to pass away.

Derek:

Absolutely. That makes a lot of sense. What would you suggest in terms of how someone should get started on all of this?

Kim:

Sure. So, that’s a great question. I will say there are a lot of online tools, and since I’m not an attorney, I can’t necessarily speak to the validity or how strong those tools are. I generally recommend seeing a Board Certified estate planning attorney and one that is certified in your state because, really, the estate planning laws as far as how things are passed and what needs to be included in documents vary from state to state. So, I would strongly recommend seeing an estate planning attorney that you feel comfortable with.

Derek:

That makes sense, and that’s a great point about how laws can vary state to state. It really does seem to be a good idea to have a estate planning attorney well versed in the laws of that particular state. I guess the elephant in the room for me question-wise just given what’s going on with the COVID-19 pandemic is, does anything change given the COVID-19 situation, and if so, what?

Kim:

That’s probably a question a lot of people are asking right now. I would say the only thing that it does change is just the urgency of needing to make sure that you have these documents in place because we do have a global pandemic and so we don’t know … I mean, our risk is higher. We don’t know if we’re going to contract something or need someone to step in or even we pass away. So, it’s important to have all of those documents that I mentioned in place to make sure that your affairs are in order because, Derek, as you mentioned earlier, you want to make sure that you have these in place before you actually need them. So, I think that now is a time to make sure that you have everything in good order.

Derek:

That makes a lot of sense. Well, I think, I learned a lot today, especially the fact that I need to start thinking about getting this started for myself. Kim, thank you so much for entertaining my questions about this. If our viewers have any questions, they can reach out to us at questions@FSAinvest.com. As Kim mentioned, we will probably have some videos in the future about trusts and maybe some other stuff that Kim had mentioned. So, until next time, Kim, thanks so much for speaking.

Kim:

Thank you, Derek.

Derek:

All right, bye-bye.

Kim:

Bye.

 

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