ABOUT HOSTS

Joe Anderson
ABOUT Joseph

As CEO and President, Joe Anderson has created a unique, ambitious business model utilizing advanced service, training, sales, and marketing strategies to grow Pure Financial Advisors into the trustworthy, client-focused company it is today. Pure Financial, a Registered Investment Advisor (RIA), was ranked 15 out of 100 top ETF Power Users by RIA channel (2023), was [...]

Allison Alley
ABOUT Allison

Since 2003 Allison Alley has been committed to working with clients to help them achieve their retirement, estate, investment, and tax planning needs. Prior to joining Pure Financial Advisors, Allison served as Senior Vice President of a small private wealth management and investment banking firm where she specialized in comprehensive wealth planning to address the [...]

You’ve spent your entire life saving for the future. Don’t pay to let the courts decide what happens to your money when you’re gone! Learn from Joe Anderson, CFP® and special guest Allison Alley, CFP® how to avoid common will and trust mistakes that can lead to an expensive and overly complicated estate plan.

Download the Estate Plan Organizer

Estate Plan Mistakes:

  • Estate Planning Basics
  • Will & Trust Mistakes
  • Important Documents

Important Points:

  • 00:00 – Intro
  • 01:35 – Estate Planning Basics
  • 02:43 – Estate Plan Mistake 1: Dying intestate
  • 03:40 – Estate Plan Mistake 2: Dying with only a will
  • 04:34 – Estate Plan Mistake 3: Owning real property jointly
  • 07:03 – Estate Planning Organizer & Survivor’s Guide – free download
  • 08:19 – True/False: It’s better to give property outright to your heirs before you die to avoid probate.
  • 08:42 – Estate Plan Mistake 4: Giving property outright
  • 09:08 – Estate Plan Mistake 5: Improperly funding your trust
  • 11:03 – Estate Plan Mistake 6: Not considering children’s future
  • 12:11 – Estate Plan Mistake 7: Not updating your plan regularly
  • 13:58 – Estate Planning Organizer & Survivor’s Guide – free download
  • 15:19 – True/False: A will or a trust are the only estate planning documents you need
  • 17:08 – Estate Plan Mistake 8: Forgetting to name a power of attorney
  • 18:13 – Estate Plan Mistake 9: Overlooking your digital assets.
  • 18:40 – Estate Plan Mistake 10: Not discussing your wishes with your loved ones
  • 19:20 – Viewer Questions: How do I specify how my dog is cared for after my death?
  • 20:00 – What happens to a pension or annuity when someone dies?
  • 21:28 – Pure Takeaway
  • 22:11 – Estate Planning Organizer & Survivor’s Guide – free download

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Transcript: 

Joe: 70% or close to 70% of people have the wrong estate plan. Are you one of those 70%? Stick around and find out.

Welcome to the show folks. Show’s called Your Money, Your Wealth®. Joe Anderson here, CERTIFIED FINANCIAL PLANNER, President of Pure Financial Advisors, and I’m with the wonderful Allison Alley today. How are you?

Allison: I’m great. Excited to be here to dive into some estate planning today.

Joe: Yes. We’re talking about estate planning. What happens to your stuff when you pass away? And like I said, almost 70% of people have the government write their overall estate plan. 34% have taken the time to do what’s right for them and their family. Don’t be part of the 64%! That’s today’s financial focus. Will the government write your overall estate plan? It’s called probate. 3,000,000 people a year go through the probate process. It costs them $2,000,000,000. Half of their overall estate goes to taxes. It goes to fees. It goes to attorneys. Save that 50% and give it to your heirs. Let’s bring in Alli to break things down.

Estate Planning Basics

Allison: Thanks Joe. Today we’re going to dive into the top 10 estate mistakes. And your estate plan is a crucial part of your overall financial plan. So this is a really important topic. First, we’re going to go over estate planning basics. We’re going to talk about will and trust mistakes that people make all too often. And we’re going to go through all the important documents that you need as part of your estate plan.

Joe: Yeah, I think some people get confused on what is an estate plan, right? It’s like they hear about a will. Is a will good? Is a will bad? Will is the first step of all of this, right? It’s like jotting things down, writing things down in a legal document to say, hey, I want the house to go to Jimmy. I want my cars and jewelry to go to Susan. Whatever. The will is the starting point. However, a will does not avoid probate. This is what avoids probate.

Allison: That’s exactly it. You have to have a trust to avoid the probate process. The trust is there to designate where you want your assets to go, how you want things divided up, and it assures that you’re not going to have to go through a lengthy court process to make all of that happen.

Joe: Yeah, and then that’s not the last step, right? There’s other documents that you need, like powers of attorney, health care directives, things like that. So God forbid if you get injured or if you get hurt or if you get sick, you still might have bills to pay, right? So these people then take over and help you distribute assets so you can continue to pay your bills and everything else. So everything, your household will run smoothly. However, there’s a ton of mistakes that people make.

Will & Trust Mistakes

Allison: This is mistake number one that people make, it’s dying without any type of estate plan whatsoever, and it’s called dying intestate. The issue with that is that the process for your assets to go where you want them to end up can be very lengthy from anywhere from a few months to frankly, I’ve seen it take a couple of years.

Joe: Yeah, I mean, there’s a few different things here. So you probably heard you want to avoid probate. You know, the biggest reason here is that it takes forever. There’s only a few courts that will go through the probate process, and then you have to get in line and everything else, like Allison said. But also, it’s very expensive. Also, it’s public record, right? So if you’re a private person, you probably don’t want all your stuff out there as private record. So Dying Intestate has no estate plan. There’s no will, there’s no trust. The courts are going to decide, and it’s going to take forever. Second.

Allison: Second is dying with only a will. Now, while a will is important because it says where you want your assets to go, like Joe just mentioned, it doesn’t avoid probate. Sometimes called an I Love You Will, where you might be leaving everything to your spouse, that might be fine if you have a very simple situation. But it doesn’t take into consideration more complex scenarios. What if you own a business, or there’s significant amounts of debt, or there’s blended families, right? The will, leaving everything to your spouse, isn’t going to factor in those additional situations.

Joe: Yeah, right, if you just give everything to the spouse. And then the spouse like remarries, and then all of your stuff goes to the other spouse. We probably don’t want that to happen. So a will is a really good start, but for a lot of us, we probably want to take it a little bit further and get a little bit more complex. Number 3.

Allison: Number 3 is owning real property jointly. If you own something jointly with your spouse like your house, if you pass away, your spouse is only going to get a step-up in basis on half of the value of that property. So you want to pay attention to how you’ve titled that. In addition, you might own real property with somebody else like your brother. Let’s say you own a house with your brother and let’s say you have it titled in joint ownership with rights of survivorship. The issue with that is that if you pass away, your brother is going to inherit that other half of the property, which could be okay. But what if you wanted that to go to your child? Instead, it’s going to go to your brother. In addition, if your brother has debt or creditors, they could come after your half of the house.

Joe: Yeah. You know, what we see also is just avoiding probate is I’m going to put my son on title. So the, my, my house is gonna go to my kid anyway, so if I pass away, right? He’s the joint owner. He has full control over the house. But what happens if Junior gets in a little trouble? Right? So if there’s lawsuits and now my house that I’m living in, even now, it’s going to be Junior’s, but I’m still alive. So you want to be careful with creditor situations and, you know, things can go awry there. So, yes, that will avoid the probate process, but it’s probably not the most efficient. Number 4.

Allison: Next mistake that people tend to make is giving real property outright before they pass away and that might seem like reasonable if you’re gonna gift property to somebody regardless. But in reality, you could miss out on significant tax savings. If you gift property during your lifetime to let’s say your child and they go to sell the property, they’re gonna deal with the capital gains from the point of the value that you bought it to when they sell it. If they were to inherit it on your death, they’d save the capital gains tax because they would get a step-up in basis. In addition, you lose control of the property if you give it during your lifetime. What happens to it then? You gave it away. So if the situation were to change or you were to change your mind, it’s too late. That situation, that opportunity has then passed.

Joe: Yeah, there’s all sorts of different ways that people try to avoid the overall probate process. And this is just another prime example, you know, I think the biggest one is that step-up in cost basis. So if I give an asset that is highly appreciated, right, and that they sell it, they have to pay the tax, right? If they wait till I inherit it. Right? Then they get a step-up in basis or I’m going to give this to you, but I’m really not giving it to you, right? I’m still going to live in the house. Or I’m still going to utilize these assets. But if I were to pass away, you’re going to be on title. We’re all good. Yeah. A lot more things to discuss, but let’s get organized first. We got this Estate Plan Organizer. Get organized with your overall estate plan. No one likes to think about this. right? I don’t want to think about what happens when I die. But if you just spend a couple of minutes and get organized, trust me, you will feel better. Your family will feel better. Go to our website, YourMoneyYourWealth.com. Click on that special offer this week. It’s our Estate Planning Organizer. Get organized with your overall estate plan. We got to take a break. We’ll be right back.

Andi: Do you know right now how likely you are to run out of money in retirement? There’s an easy way to find out. It’s also free. Go to easiretirement.com.

Joe: Hey folks, welcome back. Show’s called Your Money, Your Wealth®. Joe Anderson and Allison Alley hanging out here today. We’re talking about estate planning. What happens when you pass away? What happens to your stuff? Where does it go? Does it go through the courts or does it go directly to your heirs? Get organized, folks.

We got that Estate Plan Organizer. Go to YourMoneyYourWealth.com. Click on that special offer, download it for free right there. Get organized. YourMoneyYourWealth.com. Click on that special offer. Now let’s see how you did on that true/false question.

Allison: It’s better to give property outright to your heirs before you die to avoid probate.

If you were paying attention to the last mistake, hopefully you knew that was false, right? Gifting outright before you die does avoid probate. There wouldn’t be anything to go through probate. However, you lose out on the control of the assets, those tax implications, etc. So not necessarily the best way to handle things.

Joe: I think gifting is a good thing.

Allison: For sure.

Joe: Right. But you don’t want to necessarily gift assets that you are utilizing today that will help provide what retirement income or if you’re living in the home or things like that. So, gifting is a great strategy. You just have to understand hey, yes, it might avoid probate, but you might get stuck with the gift tax or could be capital gains and so on and so forth. All right, let’s go to mistake number 5.

Allison: Mistake number 5 that we see pretty commonly is not properly funding your trust. So you have your trust drawn up, that’s great, but now you actually have to fund it. What does that mean? It means titling the appropriate assets in the name of your trust. And people often forget to do that, or they just forget to do it with some of their assets. In addition, as things change, as your life changes, you might sell a house, buy a different house, etc. You want to make sure that you are paying attention and making sure that you’ve actually titled those properties and your non-retirement assets in the name of that trust.

Joe: Yeah, really good point. And a good way to double check this is check your property tax statement, right? If it says Joseph Anderson, then I know it’s not in the name of the trust. If it says Joseph D. Anderson, trustee of the Anderson Family Trust on the- then I know, okay, it’s properly funded. So real things that you can check real quickly is just that property tax statement. Brokerage account statements, also look at the title of that. If it just has your name or if it says joint. You want to make sure that you put that in the name of the trust if you of course drafted a trust. Another mistake in regards to funding trusts is that sometimes or some of you might name the beneficiaries of your retirement account the name of the trust. That’s fine, but you have to understand that there’s more complexity if you name the trust as the beneficiary of your retirement account. I think in our opinion, a better way to do it is just to list out the beneficiaries. I want to name Allison Alley 25% beneficiary of my retirement account. I want to name Benjamin Anderson another 25%. So think of it like that versus naming the trust. It’s an easy out, but it can create a lot more complexity. Let’s go to mistake number 6.

Allison: Next mistake that we see people make is not factoring in the wishes and future needs of their children. So if you are naming a guardian to take care of your children, should something happen to you prematurely, you want to really pay attention and think about who you’re naming in addition to laying out how they can spend funds for your children’s support. Also, it would be, it’s important to look at, what are your children’s future wishes? You might lay out in your documents that your daughter is going to inherit your house once she gets married. But what if she never wants to get married or never wants to be a homeowner, right? Those are important considerations when laying out those estate documents.

Joe: Yeah. You also want to look at, you know, what’s their financial acumen as well, right? So, hey, I want to name my brother, the guardian, or I want to name my brother, the successor trustee of my trust. My brother lives in Minnesota, right? So is that going to be right? And my kids probably want to stay in Southern California. All right, or does he have any financial acumen to understand to look at the overall statements and distribute it? So it’s just laying things out, getting things organized to make sure that you know when you pass that everything is going to go according to plan. Let’s go to number 7.

Allison: Next mistake is not updating your plan regularly. If you move, buy a different house, get married, get divorced, have a child, have a grandchild, right? Anytime there’s life changes, it makes sense to re-look at what you’ve got going on, right? You might need to update your beneficiaries, take, add, remove accounts, etc. We typically recommend every 3 to 5 years you have those documents reviewed or anytime there’s a life change.

Joe: There’s also changes in tax law. There’s also changes in like HIPPAA and privacy and all sorts of different things. So yeah, updating this, taking a look at things on an ongoing basis is very key. It’s not set and forget it. Allison, a question for you. Who needs an estate plan? Do you think everyone out there needs an estate plan?

Allison: Everyone has an estate plan. It depends on whether you want to be in control of it or not. So I would say, yes, everybody needs an estate plan because at a minimum, you want to have control over where your assets are going, who’s in charge of things, who’s making decisions on your behalf, etc.

Joe: So, yeah, I think sometimes people think of an estate plan is like, oh, I need to be wealthy to have this estate plan. The fact is if you have $5 or $50,000,000, you know, everyone potentially might get sick or hurt. So you need health care directives or a financial power of attorney. So there’s different things and different documents. Maybe all of you don’t need a full blown trust, but at least there’s certain documents that you need to have regardless of your wealth status. Alright, if you want to get organized, you know where to go, YourMoneyYourWealth.com. Click on that special offer this week. It’s our Estate Plan Organizer, right? It’s a document. You can have everything listed here, so you are going to be secure and organized when that time comes. Hey, we’ve got to take another break. When we get back, we’re going to wrap this show up. We’ll see you in a minute.

Andi: Do you know right now how likely you are to run out of money in retirement? There’s an easy way to find out. It’s also free. Go to easiretirement.com.

Joe: Hey, welcome back to the show. Show’s called Your Money, Your Wealth®. I’m Joe Anderson with Allison Alley. Today, we’re talking about estate planning. What happens when you pass? You know, another big thing is the heirs, the beneficiaries, right? You get your trust established and God forbid you pass away. And then now the heirs have it. The kids are like, oh, mom has gone. Or dad has gone. Now what do I do? But we have the answer for that as well. We have a Survivor’s Guide. It walks the survivors through step-by-step funeral arrangements, to how to contact custodians, beneficiaries, looking at, trustees documents. Everything that a survivor needs as they inherit wealth is right here. So go to our website, again YourMoneyYourWealth.com, click on the special offer, it’s our Survivor’s Guide. Let’s see how you did on the true/false.

Important Documents

Allison: A will or a trust are the only estate documents you need. That’s false. As we’ve been discussing, there’s multiple documents out there and they all serve a different purpose. A will is there to make specific bequests and make sure your assets are going where you want, but it doesn’t avoid probate. Trust is there so that you can avoid probate and control the distribution of your assets. In addition, things like powers of attorney for medical decisions and financial decisions allow you to control who’s going to be making decisions on your behalf.

Joe: You know, a lot of this can be intimidating too, because you have to hire an attorney to draft some of this. Right, but to get organized, it’s just drafting. You know where your stuff is and where you want it to go. I think that’s kind of the first step. Work. Have a family meeting. Talk to your spouse, talk to your kids. Let them know what you’re thinking. You don’t have to give dollar values. Let’s say if you’re worth $20,000,000 and your family thinks you’re worth $20,000, you could, you don’t have to tell the values. You could say, hey, I have a retirement account. We want this to go to X, Y, and Z. This is the person that you would want to talk to. Here’s your advisor, or your broker, or your brokerage house. You know, just so they’re not in the dark, right? So just getting organized, I think, is the first step. And then this just comes naturally. Like the trust, it’s a big document. But basically, it just avoids the probate process. All of your assets are titled here. So when you pass, the successor trustee just takes over and distributes the wealth. It avoids the courts altogether. So just putting together a comprehensive plan might seem intimidating. Might seem expensive, but it will save you a lot of time and a lot of heartache in the future. Because when you pass, the heirs are- right, the last thing they want to do is start learning finance. So just putting this together, I think is really key. Let’s go to number 8.

Allison: Next mistake is not having a power of attorney. You can have powers of attorney for healthcare decisions, financial decisions, or a healthcare proxy so that what happens in the event of your incapacity is factored in. If you don’t have these documents, then you’re leaving it up to the court to decide what’s going to happen. Not only does that take away the control from you, it also can be a lengthy process that then slows the decision making.

Joe: Yeah, you got to be careful with these documents too because there’s all sorts of ways that you can draft them. There’s like a springing power of attorney that springs right in or you have two powers of attorney. And they both have to act on your behalf, but one person might be out of the- You know, so you just want to be thoughtful as you’re thinking about this. As you’re getting organized with your overall estate plan., there’s going to be, you know, pros and cons on how you draft this. So just sitting down, being thoughtful of what you want to have happen, God forbid, if something bad were to happen to you, you know, at least everything will run smoothly. Let’s go to 9, digital assets.

Allison: As you can imagine, this is a newer issue. But what happens to your cryptocurrency or NFTs after you die, your social media accounts, your Facebook, your email, etc.? You can lay out in your estate planning documents, what happens to those assets. You can also use the settings in your social media accounts to determine who would be able to have control over those.

Joe: I mean, who think- like your Facebook account, right? Oh, I want to keep those pictures. Whatever. Number 10.

Allison: Mistake number 10. Not discussing your wishes with your loved ones, right? You want to make sure your family, your children, your parents, etc., know what you want to happen, that you’ve had discussions on not only what your wishes are, but where your documents are, who they would contact in the event of your death. And it’s nobody likes talking about this, right? But it’s really important to make sure what you want to happen is what actually happens.

Joe: All right. Those are the top 10 mistakes. Let’s flip this around. Let’s answer some of your questions.

Allison: All right, we’ve got a question from Ginny in San Diego. “How do I specify how my dog is cared for after my death? He’s my fur baby.” Like anything else, you would designate that in your will, right? You can appoint a guardian to handle the care after your death going forward.

Joe: Fur baby.

Allison: Yeah, fur baby.

Joe: I think there’s like estate plans for pets, right?

Allison: I believe there is. I think there’s stories of wealthy people living their entire estate to their cat or something like that.

Joe: Yeah, I think isn’t there like pet psychiatrists?

Allison: There are, there’s psychics. I’m sure there’s pet chiropractors. All kinds of things.

Joe: All right. Yeah, we’ll just put it in the document. And you could probably have a separate document. Yeah. But your fur baby, you know, you wanna make sure that the fur baby’s taken care of.  This question actually comes from our producer. He asked us at the break, he’s like, “what happens with pensions or annuities if someone were to pass away? Does that income stream continue to carry on or not?” And I guess the answer to that is-

Allison: I think it, it depends, right? It’s gonna depend on the documents for those specific things. Like pensions are all different depending on their issuer. Some might continue on after your death. Some might not. You want to know that ahead of time when you’re electing the choices available to you and the same would apply to annuities. It’s going to depend on how that contract is written up and your elections when you took the income stream to begin with.

Joe: There’s period certain, there’s life only, there’s life with survivor. So I’m married, if I have a pension, it might just go through my life and my spouse’s life. Or maybe I just want life only, so if I die, nothing goes to the heirs. But I could pick like a 20-year period certain. And so if I were to pass away near 10, there’s still 10 more years where that payment will continue to go to whatever beneficiary that I named. Same with annuities. If it’s not annuitized yet, if there’s still a lump sum, it could have a beneficiary designation. So, again, understanding what you have in regards to your wealth and assets and making sure that your heirs understand, hey, I have this pension, it could come to you, or yes, I have this pension or annuity, and it’s probably going to die with me. Alright, what have we learned today, folks? Top 10 Estate planning mistakes. First of all, most of you don’t have one. So, I would consider getting one or at least get organized. Find out what documents that you need. We looked at wills, we looked at trust, powers of attorney. Just getting organized, right? And then the important documents that you need for your specific situation. I think the starting point, you know where I’m going. Right here, it’s your Estate Planning Guide. Go to YourMoneyYourWealth.com, click on that special offer. That’s our Estate Planning Guide. You’re also going to get a Survivor’s Guide. So, this is for you. This is for your heirs, right? So you’re going to be organized. You know where your stuff is, and here’s a step-by-step guide for the survivors to do what happens when you pass. That’s it for us today. Hopefully you learned some valuable information. I know it’s kind of a gloomy topic, but it’s something that needs to be done. Again, go to the website, YourMoneyYourWealth.com. Get that special offer. For Allison Alley, I’m Joe Anderson. We’ll see you guys next time.

 

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

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• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

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• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

CFP® – The CERTIFIED FINANCIAL PLANNER™ certification is by the Certified Financial Planner Board of Standards, Inc. To attain the right to use the CFP® designation, an individual must satisfactorily fulfill education, experience, and ethics requirements as well as pass a comprehensive exam. Thirty hours of continuing education is required every two years to maintain the designation.

AIF® – Accredited Investment Fiduciary designation is administered by the Center for Fiduciary Studies fi360. To receive the AIF Designation, an individual must meet prerequisite criteria, complete a training program, and pass a comprehensive examination. Six hours of continuing education is required annually to maintain the designation.

CPA – Certified Public Accountant is a license set by the American Institute of Certified Public Accountants and administered by the National Association of State Boards of Accountancy. Eligibility to sit for the Uniform CPA Exam is determined by individual State Boards of Accountancy. Typically, the requirement is a U.S. bachelor’s degree which includes a minimum number of qualifying credit hours in accounting and business administration with an additional one-year study. All CPA candidates must pass the Uniform CPA Examination to qualify for a CPA certificate and license (i.e., permit to practice) to practice public accounting. CPAs are required to take continuing education courses to renew their license, and most states require CPAs to complete an ethics course during every renewal period.