SHOW NOTES: 2019-06-06 MiM

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Last Week’s Question of the Week: At what age can you begin Medicare coverage — age 62, 65 or 70?

ANSWER: You can begin Medicare at age 65.

HOST: While you are helping your clients figure out investing for their future retirement, I assume you are also helping to direct them toward what should be done with estate planning?

KLAAS FINANCIAL: Yes, this is often a neglected area in planning. While we are not attorneys and you should consult with your attorney, let’s clarify what estate planning is:

  • Everyone has an estate: it is comprised of everything you own— your car, home, other real estate, checking and savings accounts, investments, life insurance, furniture, personal possessions. No matter how large or how modest, everyone has an estate and something in common—you can’t take it with you when you die.
  • When you die — that is a “when” and not an “if”— you probably want to control how those things are given to the people or organizations you care most about. To ensure your wishes are carried out, you need to provide instructions (using a will or trust document) stating whom you want to receive something of yours, what you want them to receive, and when they are to receive it. You will, of course, want this to happen with the least amount paid in taxes, legal fees, and court costs. This is estate planning—making a plan in advance and naming whom you want to receive the things you own after you die. Hence, the importance of having a good estate plan and attorney to make sure your estate plans are funded/carried out as you wish.
  • About Trusts and Wills: Both are useful estate planning devices that serve different purposes, and both can work together to create a complete estate plan. One main difference between a will and a trust is that a will goes into effect only after you die, while a trust takes effect as soon as you create it. A will is a document that directs who will receive your property at your death and it appoints a legal representative to carry out your wishes. By contrast, a trust can be used to begin distributing property before death, at death or afterwards. A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a “trustee,” holds legal title to property for another person, called a “beneficiary.” Trusts can help you avoid probate.

It is important to integrate your beneficiary designations INTO your overall estate plan and how beneficiary designations TRUMP whatever your Will or Trust says.

HOST: Can our listeners do this on their own, or should they seek an attorney?

KLAAS FINANCIAL: We prefer an attorney is involved to make sure things are done properly. Lawyers and financial advisors both recommend people write wills to ensure their wishes for transferring their property and assets are followed and to avoid protracted legal proceedings over the distribution of those assets.

According to the American Bar Association, according to statistical studies, more than 55 % of Americans die without a will or estate plan. This means only 45% do in fact have this covered. Many times people will seek out an attorney and design a plan, and never sign the documents which makes them invalid. Follow-through on estate plan documents is vital! The top reasons cited why Americans have not done estate planning documents:

  1. “Haven’t gotten around to it yet.”
  2. Fear it will be “difficult and expensive.”
  3. “I don’t want to think about death.”

HOST: What about the need for Power of Attorney Documents? What kind do we need?

KLAAS FINANCIAL: YES, YES, YES. Power of Attorney documents for both health and property are very important. Remember, the difference between being a beneficiary and POA — a beneficiary only comes into effect at the death of someone, versus being a POA, as the POA document comes into effect while the person is still living, typically incapacitated.

More people are proactive about their health care power of attorney because often a doctor or hospital will force this document on them, as it grants someone legal authority to make medical decisions for you if you’re incapacitated.

However, a little over half of adults have a power of attorney for property in place.

HOST: Can you define the differences between who an executor/trustee/administrator is for an estate and discuss how life insurance fits into the picture?

KLAAS FINANCIAL: Carefully consider WHO will be the executor or trustee of your estate after death. Too often people think of their money as a BLESSING to the next generation instead of a RESPONSIBILITY and potentially a BURDEN. Give examples of lottery winners and NFS football players and the potential problems with inheriting large sums of money. Discuss the potential benefits of paying out PORTIONS over time OR leaving money “IN-TRUST” even after your death.

Remember that existing life insurance may be part of the entire estate plan for potential taxes or for beneficiaries. You should also review how assets are titled on your investments, amongst your bank accounts etc.

Finally, review beneficiaries regularly. Again, these are important items that all of our listeners should make sure they have in place. Once you have your ducks in a row for retirement planning, making sure you have the proper estate planning documents in hand as well!

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Catch C.J. Klaas and Maleeah Cuevas on Money in Motion every Thursday on Madison's 1310 WIBA from 8:05-8:35am.