Estate Planning With Estate Lawyer Mark Moss
Episode 126
Episode Guide
Episode Summary:
Episode Timestamps
ChooseFI Podcast Episode: Estate Planning Essentials with Mark Moss
Episode Summary
Estate planning is crucial for everyone over 18, not just the wealthy. It helps ensure that wishes are known, saves time, and prevents conflicts and legal expenses after one's passing. Mark Moss joins the discussion to share his expertise, emphasizing that everyone should consider their estate planning needs regardless of financial status. The conversation covers key components such as wills, trusts, power of attorney, healthcare surrogates, and living wills, along with the importance of reviewing plans periodically.
Key Topics & Takeaways
-
** Podcast Intro
-
Introduction to Estate Planning
- Exploring essential elements of estate planning.
-
Why Estate Planning is Important
- Estate planning is essential for adults starting at 18.
- It saves time, prevents conflicts, and reduces litigation costs.
-
What is Probate?
- Probate is a public, expensive process that can take months.
- Avoiding probate saves time, money, and protects privacy.
-
Components of Estate Planning
- Essential documents include wills, trusts, power of attorney, healthcare surrogates, and living wills.
-
Types of Trusts
- Differences between wills and trusts, including their functions and privacy benefits.
-
The Role of Guardianship
- Differentiate child guardianship and financial guardianship.
-
Maintaining and Reviewing Estate Plans
- It's advisable to review your estate plan every 3-5 years or after significant life events.
-
Conclusion and Call to Action
- Encouragement to establish and review estate plans.
Key Quotes
- "Estate planning is essential for adults starting at 18."
- "Avoiding probate saves time, money, and privacy."
- "Differentiate child guardianship and financial guardianship."
- "Is your estate plan current? Schedule reviews every few years."
Actionable Takeaways
- Everyone over the age of 18 should consider an estate plan.
- Schedule a review of your estate plan within the next few years.
- Discuss and decide on guardianship and financial responsibilities for your children.
Related Resources
- Mark Moss Law: markmoslaw.com
Discussion Questions
- Why might people avoid discussing estate planning despite its importance?
- What factors influence whether someone needs a will or trust?
- How does probate impact family dynamics during asset distribution?
Speaker Highlights
- Brad Barrett: Co-host discussing the importance of estate planning.
- Mark Moss: Attorney specializing in estate planning, emphasizing the necessity of solid estate plans.
- Jonathan Mendonsa: Co-host engaging with Mark to discuss personal experiences related to estate planning.
Podcast Description
Explore the essentials of estate planning with expert Mark Moss. Learn why every adult needs an estate plan, the differences between wills and trusts, and how to safeguard your family's future. This episode dives deep into the components of a sound estate plan, addressing common misconceptions and action steps that every listener can take. Don't leave your family's future up to chance; listen to gain the insights you need to create a solid estate plan.
Email Campaign Segments
- "Discover the critical steps for establishing your estate plan today! Tune in to our latest episode with expert Mark Moss."
- "Is your estate plan up-to-date? Learn the importance of reviewing your plans regularly with our newest episode!"
Podcast Extro:
"You've been listening to ChooseFI Podcast, where we help middle-class America build wealth one life hack at a time."
The Essentials of Estate Planning for Everyone
Estate planning is not solely the domain of the wealthy; it is essential for every adult, starting at age 18. Having an estate plan ensures that your wishes are honored and that your loved ones are not left to navigate legal complexities during their hardest times. Here’s how you can establish a solid estate plan and protect your financial legacy.
Why is Estate Planning Important?
-
Saves Time and Money: Establishing a good estate plan can drastically reduce the time and money your family needs to spend navigating legal processes after your death. Avoiding probate can save significant stress by helping streamline the asset distribution process.
-
Protects Your Wishes: An effective estate plan includes documents that clearly outline your preferences and ensures that your decisions regarding asset distribution, guardianship for minors, and healthcare surrogates are honored.
-
Prevents Family Conflicts: By providing clear instructions, you can significantly reduce the likelihood of disputes among family members. This is particularly important regarding the distribution of assets and the care of children.
Key Components of an Estate Plan
Creating an estate plan typically involves several key documents. Here’s what you need to consider:
Wills and Trusts
-
Will: A will outlines how you want your assets distributed after your death. It is essential for appointing guardians for your children and specifying your wishes for your remains.
-
Trust: A trust is used to manage assets for your beneficiaries during your lifetime and after your passing. Unlike a will, a trust can help avoid the probate process and keep your affairs private.
Power of Attorney and Healthcare Surrogates
-
Power of Attorney: This document allows someone to make financial decisions on your behalf if you become incapacitated. It is critical for ensuring that your financial matters are handled according to your wishes.
-
Healthcare Surrogate: This document designates someone to make medical decisions for you if you cannot do so. This is often combined with a living will, which specifies your medical preferences.
Living Will
A living will provides instructions regarding your preferences for medical treatment in case of a terminal condition or incapacity, allowing you to communicate your wishes regarding life-sustaining treatment options.
Avoiding Probate
Probate can be a lengthy and expensive public process. Here are steps to avoid it:
-
Joint Accounts: Assets held in joint accounts typically pass directly to the surviving owner without going through probate.
-
Beneficiary Designations: Certain assets, like life insurance policies and retirement accounts, allow you to name beneficiaries, ensuring they pass directly to them upon your passing.
-
Living Trusts: Establishing a living trust allows you to transfer ownership of your assets into the trust while you're alive. Upon your death, the assets in the trust avoid the probate process entirely.
Guardianship for Minors
One of the most critical aspects of estate planning for parents is deciding who will care for minor children in the event of their death or incapacity. Here’s how to handle it:
- Separate Guardianship Roles: Consider naming different individuals for the role of guardian for your children and for managing their financial assets. This can ensure your children are cared for by someone nurturing while also having someone financially savvy to manage their inheritance.
Performing Regular Reviews of Your Estate Plan
Your estate plan should not be a one-time task. It’s crucial to review and update your estate plan every three to five years or in the event of major life changes, such as:
- Changes in family dynamics (births, deaths, divorce)
- Significant changes in your financial status
- Changes in tax laws
Taking Action: Building Your Estate Plan
-
Start Early: Age 18 is not too young to begin planning. Consider what your wishes are and how you would like your affairs managed.
-
Consult with an Attorney: While DIY estate planning is possible, consulting with an attorney can provide clarity and ensure all necessary documents are included and legally binding.
-
Communicate with Family: Discuss your estate plan with family members. Open family discussions about your wishes can ease tensions later on.
-
Document Storage: Keep your documents in a safe yet accessible location. Avoid safety deposit boxes as they may complicate access after your passing.
Conclusion
Estate planning is a crucial step for every adult, providing peace of mind that your wishes will be respected while also offering financial security for your loved ones. By taking the time to create a well-structured estate plan, you can ensure your legacy and protect your family's future. Don’t delay—start planning today for a secure tomorrow.
Brad and Jonathan are continuing the conversation about estate planning and planning for your family's future with estate lawyer, Mark Moss.
[elementor-template id="143609"]Why Estate Planning?
If the worst happens to your family, it is vitally important to have an estate plan for your survivors. Estate planning is not just for the extremely wealthy. It is for any adult that has any assets. The goal of an estate plan is to really allow your wishes to be known. It can also save your family from potentially fighting over your assets and additional court costs down the line.
It is an uncomfortable subject to think about your death, but it is so crucial to plan. It's important to not leave them holding the bag with no idea what to do.
Mark Moss, a lawyer, will talk us through why anyone over the age of 18 should have an estate plan in place. In his private practice, Mark works with folks in the Jacksonville Florida area to create estate plans.
Mark's Story
At an early age, Mark benefited from an estate plan set up by his grandparents. His parents wisely invested his windfall for him wisely. With that money, he was able to partially pay for his law school loans and buy the best possible house that they could get approved for in their pre-FI life.
Law School
In total, it took around $100,000 of student loan debt in order to graduate from law school. When he graduated, his monthly payments were between $700 to $800 a month. However, after refinancing he was able to bring that down.
Before you choose to attend law school, ensure that you know the reality of many lawyers today. The reality is that you no longer come out of law school with a six-figure salary and a signing bonus. Instead, it will be a grind to success.
You need to really want to do this, otherwise, there might be an easier path for you.
Podcast Episode: Student Loan Debt Repayments with Travis Hornsby
Life As An Entry-Level Attorney
Many of us think that lawyers are automatically wealthy. At least from appearances, that's what it seems like. However, that is usually not the case. A starting salary for a first-year attorney is around $40,000 to $45,000, which is far from instant millionaire status that some assume with the law school route.
Mark's lifestyle cost was starting to get out of control shortly after graduation.
I really reigned it in just looking at the inflow and outflow of assets and what sort of position am I putting myself in...What's the legacy I'm going to leave for myself, for my family, for future generations? And things needed to change if I wanted to leave a positive one.
Eventually, he started to think about what he wanted out of life. He realized that things need to change if he wanted a different life for his family.
Going Into Private Practice As An Estate Attorney
After a few years of working for someone else, he transitioned out into his own firm. It was not an easy decision, but he knew it could make him happier. He enjoyed helping people and educating them about their plan to leave a legacy for their family.
It was a risky proposition, but he had some savings to fall back on. Plus, his wife is still working so they could survive on her salary if necessary.
Related: When A Life-Sucking Job Forces You To Rethink Everything
Estate Planning
When you start thinking about estate planning, it is important to think about your goals. If you choose to talk to an attorney, then realize that the conversation should be mostly about you and your goals. Of course, you will discuss your assets, but that shouldn't be the driver of the conversation.
Estate planning is not a one size fits all approach. Everyone has a different situation to plan for. The purpose of your estate plan is to cover all of the possible bases.
It's things you might not ever think of. But I do. "Wow! I didn't even think of that!" "Could this really happen?" Yes, lots of things could happen and we want to prepare for this. While this might not actually happen, it could. We want to make sure we're prepared. Because why are we planning if we don't cover all bases?
It is more than just deciding who gets your stuff, especially if you have children. You can use your Will to pass along life lessons if you aren't going to be around to do that.
Lessons For Your Children
If you want to leave a legacy of knowledge behind, then you can leave notes, letters, and audio as a part of your Will. The knowledge would be referenced in the legal document, similar to a set of instructions.
The notes wouldn't necessarily be binding, but they are included to be read to your children.
Timed Releases Of Money
Instead of a lump sum payment upon your death, you might prefer to divide the payments into three parts. You would be able to include this as a part of your estate plan in a Trust.
Think of a Will as things go outright. It's you get my shoe collection, you get "Golden Boy." If you wanted to start putting restrictions or using the carrot and stick approach to accessing the assets, then you are looking at a Trust.
It is possible to release money at certain times in your beneficiaries' life through a Trust.
Will Vs. Trust
You might be wondering what the difference is between these two. If you want a complete estate plan, then you probably need both.
Probate is the judicial process in which a Will is proved in the court. It allows an opportunity for creditors to come and claim any debts you might owe. Anything that's left is given out based on the terms of your Will.
[You want to avoid probate because] it's a public process, it's expensive, and it takes a long time. It could take six to nine months on the short side, on average.
It's possible that your assets could be tied up completely during the probate process.
If you have a joint checking or savings account, then those assets shouldn't be a part of the probate process. Also, any accounts with a designated beneficiary should be kept out of probate but it depends.
The best thing to do with your accounts is to have a POD (Pay on Death) designation set up. With this, the account would not change titles but if you died, then your designated POD could come to claim the money with your certificate of death. Through this, you would likely be able to avoid probate. For a non-spouse beneficiary, this is the preferred method.
A Trust allows you the ability to execute your wishes over a period of time. It is a private entity that is not subject to public records. However, if the Trust is created as a part of the Will, then the assets transferred Will be public record.
Components Of An Estate Plan: Wills And Trusts
Mark calls this a Life Plan because it helps to re-frame the conversation.
The Importance Of Having AWill
Your Will is the execution of your wishes--one time--on the public record. First and foremost, it identifies who your family is without any questions. You can also specify your treatment of bodily remains, specify tangible gifts of property, appoint a guardian for your children, and appoint a personal representative.
Usually, if you want to give specific property gifts then you would create a separate list and reference it in your Will. That way you'll be able to update the secondary list without formally amending your Will.
Most Wills drafted by a professional attorney will include survival provisions that dictate how you want your expenses and taxes to be paid. If you go the DIY route, then this may not be the case.
Designation Of A Preneed Guardian
Importantly, you should consider creating a separate "Designation of a Preneed Guardian" document and reference it in your Will. This document outlines a first choice guardian, a successor, and an alternative successor. Plus, you can have both a physical and financial caretaker designated for your children.
It is critical to draft this document to protect your children.
Unfortunately, in many cases, when there is a lack of a Will, your children will end up with whichever entity is the loudest.
Also, if you aren't appointing a local guardian, then you should appoint a temporary local guardian. This document should ensure that your children never become wards of the state for a single second. A ward of the state is an obligation of the state. The state would act as their legal guardian until someone else was appointed.
Even if you were incapacitated temporarily, a legally appointed guardian would need to be appointed through this document. If you are still alive, then your Will won't be activated and a guardian couldn't be appointed without this documentation of your wishes.
Healthcare Surrogate
Also called a Medical Power of Attorney, a Healthcare Surrogate is an often overlooked but necessary piece of your estate plan. If you can't make healthcare decisions for yourself, then you appoint someone to do it for you. You would include HIPAA release documentation in this paperwork.
Living Will
If you had a terminal condition or persistent vegetative state, then you would outline what level of medical care you would and would not want in this document.
Power Of Attorney
You assign the power of attorney in various ways for various situations through these documents. Durable Power of Attorney, Limited Power of Attorney, General Power of Attorney, etc.
Different Types Of Trusts
Trusts allow you to execute your wishes over a longer period of time. If you do not want people to know what you are passing along, then transfer assets into a Living Trust while you are alive. Also, set up POD and beneficiary designations.
You might want a Trust for a variety of reasons. For example, if you have a property and pass it to your children. They may have trouble taking out a HELOC because they are not on the title. In order to transfer ownership, the house would have to go through probate. However, if your property is in a Living Trust then the successor of the Trust will be able to take ownership without the courts getting involved.
The entire goal of the Trust is to keep things private and avoid probate. You can even create a pour-over Will that will transfer anything not specifically designated in your Will to the Trust automatically.
A pour-over Will, think of a cup of water and a pitcher of water. Your Last Will and Testament is the pitcher. The Trust is the cup. Anything not specifically devised in the Will, we are transferring over into the Trust.
The executor you name for the estate will be in charge of making sure your wishes are respected. They are held to a fiduciary standard and can have an attorney assist them in the process.
Testamentary Trust
With this type of Trust, your Will effectively sets up a Trust upon your death. The assets would still go through the probate process to an extent. The assets in this Trust are public knowledge because the terms of the Trust are set out in the Will.
It is more cost effective to go this route, but things will become public record.
You might not think it is a big deal now, but your beneficiary's future creditors would be able to see what money the beneficiary would receive at a particular age or date and the creditor could lay claim to the money at that time.
Living Revocable Trust
You can transfer assets into this Trust while you are living. However, it is revocable so you can move these assets out at any time. At your passing, the assets in the Trust are the property of the Trustee and they can continue to use the assets as needed without being a part of the public record.
You may want to consider putting your home into the Trust because that allows the Title to the home to be in the Trust, allowing the next generation to maintain the property as theirs.
While you are living, you are the Trustee. Upon your passing, you'll name a successor Trustee.
Related: Disability Insurance: The Most Important Insurance People Don't Buy
The Cost Of An Estate Plan
Depending on your area, the cost of an estate plan may be around $1,000 to $2,000. However, this cost will vary widely based on your needs.
You can go the DIY route. However, if you have dependents then it is important to get these documents right. It is better to be safe than sorry.
You take advantage of a free consultation from a local estate attorney to see what your needs really are.
When To Revisit Your Estate Plan
You should check these documents every three to five years because things change throughout life. Big changes could include getting married, having kids, changes in assets such as buying or selling a home.
Where To Store Your Estate Plan
Whatever you do, do not store your Will in a safety deposit box! It can be extremely difficult to retrieve for your survivors. You can keep it at home or in a safe, just make sure someone has a combination. But wherever you keep it make sure someone knows about it!
Check out Brad and Jonathan's Friday round-up of this episode.
The Hot Seat
Favorite blog: ChooseFI and Millennial Mom Confessions
Favorite article: Andy Hill's "How Fatherhood Sparked My Desire For Financial Independence"
Favorite life hack: Not procrastinating. Plus, utilizing credit card points and miles as best as I can.
Biggest financial mistake: Has yet to occur. Trying to take the viewpoint that it is just money and we can always make more.
The advice you would give your younger self: Pay attention to opportunities earlier. Specifically, opportunities to invest and take advantage of compound interest.
Bonus! What is the purchase you've made over the last 12 months that has brought the most value to your life? A set of erasable pens for my "pen and paper calendar".
Connect With Mark Moss
You can connect with Mark on his website Mark Moss Law, on Facebook at Mark Moss Law, or on Twitter @estateplanjax.
Related Episodes And Articles:
- Podcast Episode: The Family Emergency Binder
- 5 Estate Planning Document Every Family Needs to Protect their Finances
- Estate Planning: Wills vs Trusts
New to FI? Be sure to check out Episode 100: Welcome To The FI Community!
[elementor-template id="137737"]