72 – Top 10 Estate Planning Mistakes to Avoid

Christian Financial Perspectives

English - March 27, 2020 05:15 - 43 minutes - 59.4 MB - ★★★★★ - 11 ratings
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Previous Episode: 71 – For Richer Or Poorer

Next Episode: 73 – Finding God’s Purpose During Retirement

Bob and special guest Shawn McCammon discuss the top 10 mistakes surrounding Inheritance and Estate Planning. Shawn is an estate planning attorney and CFP® who works with individuals and families to find effective solutions to meet their goals in the areas of estate planning, trust administration, business planning, and asset protection.

Click below to listen to Episode 72 – Top 10 Estate Planning Mistakes To Avoid

Top 10 Estate Planning Mistakes To Avoid

Learn about the top 10 estate planning mistakes to avoid.

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This week, Bob and special guest Shawn McCammon discuss something that is both extremely important – but also can be heavily ignored – Inheritance and Estate Planning. Shawn is an estate planning attorney and CERTIFIED FINANCIAL PLANNERTM. Now, that’s a great combination!

He works with individuals and families to find effective solutions to meet their goals in the areas of estate planning, trust administration, business planning, and asset protection. Needless to say, he is full of great information when it comes to making a plan for your wishes after death.

In this episode, Shawn covers the “Top 10 Estate Planning Mistakes” that he commonly sees people make. This includes anything from not updating an estate plan to having former spouses still on a will. So, tune in to learn the details of an estate plan and to see if you might be making any of these top mistakes.

To learn more about Shawn and estate planning, visit texas-estateplanning.com or click on the button below!

LEARN MORE ABOUT ESTATE PLANNING >>

GUESTS: Shawn McCammon, JD, CFP®, CKA®

HOSTED BY: Bob Barber, CWS®, CKA®

Mentioned In This Episode

Christian Financial Advisors

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Bob Barber, CWS®, CKA®

Shawn McCammon, JD, CFP®, CKA®

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EPISODE TRANSCRIPT

[INTRODUCTION]

Welcome to “Christian Financial Perspectives”, where you’re invited to gain insight, wisdom and knowledge about how Christians integrate their faith, life and finances with a Biblical Worldview. Here’s your host Christian Investment Advisor, Financial Planner, and Coach Bob Barber.

[EPISODE]

Bob:

Proverbs 20:21, “An inheritance gained hurriedly at the beginning will not be blessed in the end.” So that scripture has to do with inheritance. You know, I don’t know if you know it or not, but inheritance appears over 200 times in the Bible and when you take any word and it appears that many times in the Bible, I think it’s important. It’s not always in the context either of material assets being passed down, but that we leave a spiritual inheritance and values from one generation to the other. So guess what we’re going to talk about today? If you guessed it’s inheritance, yes it is. We’re going to talk about estate planning. We’ve got a special guest, Shawn McCammon, an estate planning attorney and a certified financial planner and he’s actually with CIS wealth management now. Now, I think that’s a really great combination when you take an estate planning attorney and add the CFP designation on top of that because he looks at really everything from a holistic point of view. Shawn works with individuals and families to find effective solutions to meet their goals in the areas of estate planning, trust administration, business planning, and asset protection. If you thought I was reading that, you’re right. I got that right off his website, but you know what, it really sums it up. So Shawn, welcome to the podcast.

Shawn:

Well, thank you so much for having me, Bob. I appreciate the opportunity to be here and go over some of the estate planning issues that I’ve seen unfold in clients’ lives over the years. And happy to be a part of the talk.

Bob:

This must be something that was on your heart from a long time ago to specialize in estate planning and to go in that special field. Out of all the legal areas you’ve could’ve gone into, you went into estate planning. So what made you do that?

Shawn:

You know, in the beginning I did a little mix of everything when I first got my bar card. And as with most young associates, a lot of the trouble and problem cases kind of rolled downhill. So you ended up doing a little bit of everything. And a lot of that consisted of some litigation as well. But I kinda found out early on that I didn’t really care for the litigation side of things. Plus, as my family grew, I have five kids now. What I found was that by being on the estate planning side and more of the transactional side, you know, I wasn’t hopping from discovery deadlines and court hearings and worrying about other attorney’s calendars and things like that. So the estate planning was both a way to help people avoid problems before they blew up and ended up in litigation. And then it also kind of helped me from sort of a quality of life standpoint if I decided to, you know, instead of drafting this today, I’ll draft it tomorrow so that I can go to a kid’s swim meet or whatever the case might be. It was not a big deal. So it addressed both sort of what I like to do from a practice perspective, but it was also good from sort of a family life perspective. So that was kind of how I ended up getting into the estate planning side of things. And I’ve been doing that for a decade or so now. Just pretty exclusively focused on wills, trusts, probate, trust administration, some of the business planning, corporate formation, LLC formation, things of that nature.

Bob:

You know, you’re a relationship guy. I’ve gotten to know you well over the years. I remember we met at Kingdom Advisors and you’re also a Certified Kingdom Advisor like myself. You know, I would think that being involved in estate planning like you are, you really get to know people well.

Shawn:

Yeah. You get a chance to ask questions that maybe you know, aren’t things that are typical to just general conversation. You know, you’re asking about things about their family, about their past in their family, their family history, you know, kids or the issues or struggles that maybe kids are having so that we get a kind of a holistic picture on, you know, the issues that we might need to address when it comes to estate planning. So you get to kind of delve deep on some of those issues with clients and you know, most are very willing to share because they want to make sure they get the planning that suits their needs. Even still, though, some people you know, they tend to start off pretty private when even they’re talking to their attorney. So sometimes we have to kind of break the ice a little bit and let the conversation develop and eventually we get into the things that are going to matter for them down the road.

Bob:

Shawn, I know that you do a lot of workshops on estate planning and one of the things that we’re going to do today is I wanted you to take that information that you normally present in a workshop and actually bring it to the podcast. So I want to go over some of the estate planning mistakes. That’s what you talk about in your workshop, and then you give solutions, that you see people make. And you know, but before we get started, it’s interesting when we mention this term estate planning and the you and I, you know, my wife really accuses me, she says, Bob, sometimes you talk in lingo that people don’t understand. I don’t know if you’ve ever, if your wife’s ever said that to you or not.

Shawn:

Yeah, yeah, no, I’ve heard that. I’ve been accused of the same thing. It just becomes second nature to the people who are kind of dealing with this stuff on a daily basis. And so sometimes you’ve got to take a step back and kind of pull back a little bit and give some context and broaden things out a little bit.

Bob:

I know it, you know it. But for our listeners, what is estate planning? What does that mean? Can you define that for us? If anybody can define it, you can cause this is what you do everyday as a specialty.

Shawn:

Well, you know, it’s one of the first things I start with too when I’m doing the seminars that I put on or when I’m talking to people about estate planning is just doing that exactly, that kind of pulling back and saying, you know, what do we mean when we talk about an estate plan? But I really try and make it just as simple as possible. And I didn’t really coin this definition, but it’s one that I found and have stuck with it cause I think it addresses all of the issues. And so basically the way that I try and kind of describe it is that, you know, I want to control my property while I’m alive, take care of me and my loved ones if I become disabled, give what I have to whom I want the way I want and when I want, and furthermore, if I can, I want to try and save every last tax dollar, professional fee, and court costs legally possible. So, it doesn’t have to be anything much more complicated than that. But I think that that definition kind of helps give us a sense that estate planning isn’t just, you know, for the Rockefellers, it’s not just for those who consider themselves to be well off from a financial perspective. You know, in this definition we can really see that it’s about disability planning and it’s about estate planning in terms of, you know, who’s going to end up with what and how do we keep the state from getting involved in all of that? And how can we maintain privacy? How can we save court costs and on taxes and attorney’s fees, and those kinds of things impact everybody. Those really aren’t just for the ultra wealthy or for people who think they have an “estate”. I mean, we all have stuff, right? And that makes up our estate and I think we get into that. But that’s kind of one of my favorite definitions just because it helps kind of encompass both distributing property but also planning for disability and avoiding some of the costs and hassle that can happen with a probate and court involvement or the state making decisions for you

Bob:

Or a hospital making decisions for you. I was thinking about that while you were saying all these different things because you do the medical power of attorney and, or I don’t know all the legal jargon for what you call those documents, but that’s very important too, isn’t it?

Shawn:

Absolutely. Yep. In fact, I’ve got a whole slide at my seminar where we talk about not just having a will or trust, but the other ancillary documents that go along with the foundational planning that a will or trust provides. And so maybe we’ll get into some of that down the road here.

Bob:

There is no doubt that when you hear that word estate, you know, we think of this the big estate, but yeah, estate planning, just for our listening audience, let me tell you that means everything that you have. You know, you take your house, you take your cars, you take your 401ks, your IRAs, your bank accounts, all your personal possessions, your insurance policies, your life insurance policies, any land that you may have. I mean, it’s a lot of things. It’s everything, basically, that’s under your control or possession. Am I saying that correctly, Mr. Lawyer?

Shawn:

That’s exactly right. Yeah. I think a lot of us don’t realize just how easy it is to have, you know, if you’ve got a house that’s a few hundred thousand or a couple hundred thousand dollar life insurance policy or some money in the bank, I mean, it’s easy to accumulate an “estate” that’s going to need to be administered. We’ll get into this, I think later on in some of these other mistakes I see people make, but sometimes it’s not even just about assets or an estate, but you know, who’s going to take care of the kids or who’s going to take care of me if I can’t make a decision for myself. And so there’s more that goes into it than just simply thinking about, you know, stuff and assets.

Bob:

You’ve come up with basically 10 overall mistakes that you see. So what is the first one?

Shawn:

Well, the first one that I usually try and point out when I’m talking to people is the importance of making sure that you get your plan in place. So not dying intestate or not dying without a will or a trust in place. If you don’t have your wishes down on paper, then the state’s gonna make those decisions for you. And a lot of people just don’t realize that they already have an estate plan in place. So, when we’re talking about doing your estate plan or taking care of estate planning, I think it’s important to remind everybody that they already actually do have a default estate plan in place through the Texas estate and probate code or whichever jurisdiction they’re living in. And you know, that becomes a public affair. Your assets and your personal information gets filed with the court. It can be costly. You’ve got court filing fees and appraiser fees, sometimes you’ve got probate bonds and publication fees and notice fees, you know. There’s attorney’s fees. And so all of this can kind of go into creating an expensive process for people to have to deal with when they have to go through the probate process. And like I said, the court’s going to decide who’s in charge of it all, who gets what. Oftentimes, it can last, you know, several months. And so I’ve had one client call it, it’s like a lawsuit against your family. And unfortunately it can turn into something like that. And especially if you have like creditors or contentious family members, it can really get drug out over time. So some of that can be avoided, obviously, if we just take time to make sure we get our wishes down on paper so that it’s clear. So if the court’s looking at it down the road, let’s say if a will gets probated, the court knows exactly what it is you want to see happen and who’s to be involved with managing it and who’s to get what, those kinds of things. So I think it’s best to at least make sure you have your wishes down on paper so the court knows what should happen in case something were to happen to you. So that’s generally kind of what I call mistake number one is when somebody doesn’t take the time to get their wishes put down on paper.

Bob:

Well, you know, it’s amazing to me how many people don’t take the time. As long as I’ve been in the financial advisory business, which is over, gosh, it’s like 26 years. I’ve been doing this a long time. Started off, I was young and now I’m a lot older. But I am amazed at the high percentage of people that don’t have anything at all, just like what you said, just dying with no will or trust, estate plan whatsoever. And they have an estate plan, it’s not the one that is good for them or their family. But I think that the stats, and maybe you’ve heard them, are as high as 80% of people don’t have an estate plan. Is that right?

Shawn:

Yeah. Recently, I read an article and it was, I think it was right around 74-75% don’t have any planning in place. So, there’s plenty of people out there who could benefit from getting some planning in place.

Bob:

Well, we better get to some of these other mistakes or we’ll never get through today’s podcast. Okay. So what’s the second one that you see people make?

Shawn:

Well, this is what I call sort of having an “I love you” will. I’m not sure if you’ve heard that term before.

Bob:

I’ve never heard that before.

Shawn:

Well, and it’s just something that I use to kind of describe some of those simple, maybe off the shelf, wills or handwritten wills you might see somebody do that just basically says, you know, whenever I have to my spouse and the spouse has one that says, you know, whatever I have to my spouse. And while it’s better than having nothing in place because at least you’ve got something in writing so the court could look to that as what you would want to happen to your estate. It guarantees probate, you know, so you’re going to have that probate process to go through when you have a will. But a lot of times it just doesn’t address a lot of the concerns that people have in terms of planning for incapacity or sometimes I’ve seen it where they actually have minor children, but the will doesn’t address who’s going to be the guardian for the minor children. And so some of these little short form, you know, off the shelf, kind of like I say, I love you wills as I call them. They just fail to address a lot of the issues that are out there that can really smooth things for the family down the road. And a lot of times too, they just set up outright gifts to whoever the beneficiaries are. And I think you’ve probably seen in your practice like I’ve seen in mine a lot of times, you know, just dumping a lot of money on someone’s lap isn’t necessarily what’s best for them.

Bob:

No. It’s the old 80/20 rule, about 20% are going to save the inheritance, 80% are going to spend it. And most of the times I’ve seen it spent in an average of two to three years what has taken the parents 30 or 40 years to save up.

Shawn:

Well, yeah, and that kind of leads into what I talk about as mistake number three. That’s kind of giving property outright or not putting things in a trust because, you know, maybe the maturity of the beneficiary or the decisions that they’re making. But you know, there’s also other people out there looking to take advantage of people who receive an inheritance. And so it might not be the best thing to just dump a bunch of money in someone’s lap and give the property outright, or you might have some beneficiaries where it sounded good at one point in time, but then you know, they end up on social security, disability, Medicaid, or something like that. And if they get an inheritance, it doesn’t even have to be very big. It can knock them off that program and that can create an issue for them as well. So there can be a lot of reasons why we might not want to just have a simple all out distribution all at once to our beneficiaries. And so those are the things that I try and kind of cover, you know, when I’m talking with clients and make sure that I know if the kids have some kind of means based program that they’re on, that we might want to plan around or whether they have maybe addiction issues or things like that that they’ve struggled with and we need to make sure we kind of plan around that. Or do we have kids that might be getting married soon? Are we concerned about what those future relationships are going to be like and whether future spouse of a child is going to end up with the inheritance? Those are the conversations that I like to try and have and make sure to get people thinking about because we can do some planning to address those and so I try and take time to work through clients those so that we can make sure we’re addressing some of those concerns. Sometimes, maybe keeping things in trusts or distributing things over time might make a lot more sense.

Bob:

I think it does make a lot of sense, Shawn, because I always say this to people when they’re looking at doing an estate plan. I’ll always think, do your kids have wisdom yet? Because if they don’t have wisdom, are they really ready to receive that money? And another real funny thing I’ll say sometimes, I think when they’re ready to receive that big lump sum, when they already have showed that they have a big lump sum.

Shawn:

Yeah, no, I understand what you’re saying.

Bob:

They’ve proven that they know how to handle money. And it’s amazing too, when we speak about our children, you know, I have three of them and they’re all three very different. Sure. The way I want to give to them is in a different way. I want to give what’s best for the child because as a father and a mother, we love our children and now a grandchild has come along and we want to give that in a wise way, a way that it’s not going to create more harm than it does good. Because if money is harming your children now and they don’t know how to handle it now, what makes you think that more money is going to make it better?

Shawn:

Yeah, and in fact, it usually exacerbates the problem. You’re exactly right. You know, if somebody has a spending issue or an addiction issue or something like that, I mean, the money is only gonna make it worse in all actuality. I can’t remember if it was Ron Blue or who I heard say, you know, when you’re thinking about how you’re going to give money to your children, is it going to help draw them closer to Jesus or is it gonna pull them away from Jesus? And when you start thinking about that and you think about it in context of how each child is an individual and each child is different, you know, sometimes that will impact the manner and the amount in which you give to each child, and that it’s not that you’re playing favorites or that you’re not treating one fairly, you’re actually trying to be as fair as possible and have sort of a kingdom minded perspective, and look at what’s going to be best for this person for the long run. And I like that.

Bob:

I’ve talked about over the years a pre inheritance experience and I take that from the scriptural guidelines given to us in Matthew, Mark, Luke, and John. They all talk about the parable of the talents or the parable of the gold where the master gives five, three, and one talent, and then he comes back and sees how they did with it. And I think a pre inheritance experience is really good to give your children or grandchildren that you have in your estate. Give them a couple thousand dollars and then come back in three to six months and see what they did with it. See if some of them gave and some of them saved it or did some have just went to the mall the next day and spin it all. We went through mistake number three, and I didn’t even ask about it. It just kind of took us into that. So now, we’re going to that fourth mistake that you see with estate planning. What is that?

Shawn:

Yeah. I usually at least take a little bit of time to bring this up when I’m talking to people because maybe I have an elderly client come in and you know, they think, well, I think in order to kind of short circuit this whole estate planning process, I’m just going to add my son on the title. And so the fourth mistake that I talk about is owning property jointly, not in a trust. And I’m talking about not necessarily for spouses who might own property as joint tenants, but maybe also, too, just when you add somebody on title like a child or something like that because it is an outright gift. So, there could be some potential gift tax consequences there to think about. But what I think a lot of people don’t realize is that, you know, let’s say this person did add their son onto the title, but then the son gets in an auto accident or hits a kid in a crosswalk or whatever. Well, that lawsuit against the son, they’re now going to be looking to see what assets he owns. Well that may include now the property that he’s been added to because we thought it would be a good idea for an estate planning purpose and to short circuit the need for any kind of will or trust planning to just add him to title. And so now that person has exposed their home to the potential liabilities of the son. I at least like to kind of illuminate that and point that out to them because a lot of times they just don’t realize how far reaching the consequences can be when you just add somebody to title. And that could be a real estate or piece of property that you’re adding them to title. It could be a bank account, you know, but by doing that you’re going to possibly subject your assets to the liabilities of the child. And so I like to highlight that and bring that up as something that we might want to try to avoid.

Bob:

I think that’s one of the biggest mistakes I see. I hear this all the time that as you’re getting older you add that child onto your bank account. So you take the mom and dad that’s maybe 80, 75 or 80, or 85, and now they add one of their children that’s trustworthy onto the bank account and they could have three or four children too, and now that can mess things up for the estate as well, can’t it?

Shawn:

Well, yeah. And you know, you just think about it from sort of a plaintiff’s lawyer perspective. If somebody gets in an accident or something, you know, you’re looking to see what could potentially be used to satisfy your client’s claims. And so if you see bank accounts or property that that person has their name on, you’re going to try and go after those regardless of the fact that it was really just done for convenience sake, on behest of maybe the mother or the father or something like that.

Bob:

So you’re taking on each other’s liabilities, and you don’t even realize it.

Shawn:

Yup. That’s one of the ones I like to bring up just because a lot of times people just don’t realize how far reaching the consequences can be. And there can also be some other tax consequences and things like that. But for purposes of our talk, I wanted to at least just kind of highlight that as kind of the main one.

Bob:

Oh, well, you think about it, the banker or the credit union never tell you that either when you go in to do that. You’re dealing with somebody opening an account. They don’t know the legal side of it.

Shawn:

Right.

Bob:

Well there’s the first four, so we’re getting through it. What’s the fifth one that you see?

Shawn:

The fifth one for me that I like to mention is having a trust or I should say the mistake would be not having a trust. I mean, in my estimation, a living trust is kind of the Swiss army knife of estate planning tools. It really just addresses so many different issues in one foundational document. So the trust typically would take the place of having a will by itself. If you think of a will and a trust, I mean they both basically do the same thing. They both say who’s going to be in charge, who’s going to get what and what does it look like? But a will has to be probated, like we talked about earlier. A lot of people just don’t realize that a will has to be probated and it’s got to have a court order saying that this is a valid will, that it was executed properly, and go through those formalities. With a living trust, you can avoid the probate process if you handle the trust properly. And so not only does it avoid probate at death, but there’s also this thing that I’ve heard some people refer to as like the living probate. So that might just be during a period of incapacity where you just might be down and out. You know, the trust describes how the property is supposed to be used for your benefit and who’s going to be in charge of that, and people don’t have to run to court for any kind of conservatorship or guardianship proceedings. And so you can avoid that as well by having a trust in place. And so that’s one of the benefits that I see from having a trust over just a will. Also, you know, while things are in the trust and stretched out over time, perhaps like we were talking about, let’s say we don’t dump assets right into the lap of our children and let’s say we do stretch it out over time. Well, while those assets are in the trust being distributed over time, there’s this asset protection that they get as well and they can’t be reached by the creditors of the children or future spouses that maybe they have trouble with. So, you can get this asset protection from the trust as well. So there’s just a lot of benefits I think to doing the trust planning or at least considering it, you know. When I’m talking to clients I say, okay, you know, this is what things are going to look like if you do nothing. And this is what things will look like if you have a will. And this is what things might look like if you have a trust in place. And I let them choose. But I think if we kind of educate them on sort of the pros and cons of each option, many times they do see the benefit of doing the living trust planning, and that is something that we offer to, I would say, the bulk of our clients end up going with a living trust over just the will.

Bob:

And also, you know, having a trust really does save you cost in the long run. It might be a little bit more upfront, but it’s going to save you the cost in the long run of legal fees, isn’t it?

Shawn:

Yeah, exactly. You know, usually by the time you talk about having a will drafted for wife, a will drafted for husband, and then you have a probate perhaps with, the first spouse passing a probate with a second spouse passing. By the time you add all that up, you’re way in excess of what could have been spent to just have a living trust put together that would have avoided the cost of the probate and the planning fees. Not that much more upfront. It’s just a matter, I think for me, what I’ve seen, is just a matter of educating, just explaining the differences and talking about how much more we can address and how many more concerns we can deal with when we’re talking about a trust. Like I’ll just give you one other quick example. Let’s say you did have a child that ended up being on Medicaid or social security disability down the road. You didn’t know that when you drafted this, but when you have a special needs already in your living trust, then if a child happens to be on some kind of program like that, their share can be held in your trust and assets can be distributed a little bit at a time without knocking them off that program. So it can address just a myriad of concerns within the living trust instrument itself. And so to me it’s kind of a mistake not to at least think about doing a trust as opposed to a will. And certainly either one of those more than nothing.

Bob:

I know as long as I’ve been doing this, I have lot of clients that wish that their parents had done a trust because they’ve had to go to the probate with the way people have moved around. A lot of clients live here in Texas where we are, but their parents live in another state and they have to go do that probate in the other state and Oh my goodness, it just becomes such a hassle.

Shawn:

Yup. And especially when clients have property in multiple states, you’re exactly right. You’re going to have a probate in each state perhaps. And so you want to try to avoid that if possible. So a trust is perfect for holding title to the various properties in different states.

Bob:

All right. So I know a little bit about the notes cause I’m looking at him. So we’re going to come up with this, you know, not come up with it. It’s the mistake number six that you share. This is one that I see so much as a financial advisor that happens, this mistake number six. So go for it.

Shawn:

Yeah. So mistake number six is not funding your trust. So if you’re somebody that has taken the time to set up a trust. The best analogy I use when I’m talking to people is if you just think of the trust is kind of like a bucket. We’ve got to get assets in the bucket. Whatever’s in there is what the trust controls. If we own a home we’ve got to make sure that we draft a new deed, transferring that to you as trustees of the trust. So, it’s still yours to do with whatever you want. You can still sell it, you can still refinance it or whatever. But by getting it in your name as trustee of the trust, it’ll pass according to whatever you’ve laid out in the trust. Same with bank accounts, you know, updating those in the name of the trust. Now there’s certain qualified retirement accounts you have to be careful with on whether those would go on the trust or whether the trust would be named beneficiary. I like at least give that caveat when we’re talking about it. But you know, typically your checking account, your savings account, your home, any other real estate and personal property, all those things would typically be put in your name as trustee of the trust so that they go in that bucket. And then whenever you’re incapacitated or you’re gone, the trust will control how all of that property in that bucket is managed or distributed. And so it’s really important to make sure you take time to get that stuff update. When we’re meeting with clients, we usually help by drafting the deeds to put the property in the trust, give them certificates of trust to take to the bank so they can get those updated as being in the name of the trust as well. So, we try and make it a pretty simple process, not overly cumbersome. We want to help them keep the momentum moving to getting everything done and getting everything completed in a timely fashion. So we try and help them with some of that as well.

Bob:

I’ll tell you, as experienced financial advisors, over the years, we’ve helped a lot of people make sure that everything that they have as far as their investments go, are in the name of the trust. Now an IRA, I’m always having people, come to me and think this, you cannot put an IRA in the name of trust, but you can make the trust the beneficiary of the IRAs. Is that correct or how do you do that?

Shawn:

Yeah, you can put a trust as the beneficiary of the IRA. But like I said, you’ve got to be careful because of the potential tax consequences. And then there was some recent changes in January with the secure act. And so you’ve kinda got to sit down and kind of go over how much is in the retirement account and what are we trying to accomplish with those funds. What are the tax consequences going to be if we have the trust as the beneficiary or whether we have a spouse that we can just roll it over to and the spouse will be able to take those distributions and stretch them out over their lifetime. Whereas to the trust, it might require more of an accelerated payout, might not be as favorable from a tax perspective. So those are the kinds of things you have to sit down and kind of work through. So, when I have my seminars or I’m talking to people about getting things in the trust, I like to make sure I highlight the fact that don’t just run out and put the trust as a beneficiary on your IRA or your qualified accounts because the trust has to be drafted a certain way in order to deal with those assets to make the IRS happy. And we need to make sure that we have a conversation about whether that’s the best thing to do in your situation.

Bob:

Okay. So this next mistake that I see, this is another one I see a lot of. I love that you give this workshop. These are very common sense mistakes that people make when it comes to their estate plan. Go into mistake number seven, and I definitely want to make some comments about this.

Shawn:

Well, yeah. It sounds simple but it’s something sometimes we forget to do and it’s just basically not getting things updated. There can be changes to estate tax laws or change in family circumstances. Someone can move away, someone can pass away. Like we talked about earlier, somebody might not have been on some kind of a government program and now they are. Family happens. Life happens, and laws change. And so it’s good to take a look at your documents every couple of years and make sure that you don’t need to update them. I even joke sometimes with clients, I tell them, I think it’s good to get it out every couple of years to make sure you can find it. Cause I’ve had some people after a couple of years they can’t even find their documents. So it’s good to just make sure you can locate them, you know where they are, you know what they say, and make sure that it’s still fairly represents what you want to see happen. A lot of times, after time’s gone by, things change and things need to be updated. So yeah, that’s one of the things I see in my practice.

Bob:

You definitely wants your your co-trustee to know where those documents are, don’t you?

Shawn:

Right, exactly.

Bob:

Yeah. And I’ve noticed, with myself, that I need to update my estate plan. I mean, I need to do to update it now. We just built a new home out in the country, out on 17 acres, and I need to update it because I want to do some things with this home with some of the children that are here. And then I’ve got others in another state and I want to divide up this state where they get their share of the estate and just things change. Like now, we have a new grandchild. I have not updated my estate planning since we’ve had that new grandchild. So, I want to update it for that. So, if anything changes – I mean the loss of a spouse – you need to update it. You need to update your estate plan, for what I’ve seen, about every three to five years, or at least like you said, get it out and take a look at it and make sure all that still applies. And I think you’ll be surprised. When your children or minors, you had guardians in there, but now let’s say your children are no longer minors. Well, you need to update the estate plan.

Shawn:

Yeah. That’s a good point.

Bob:

Alright, we’re on the downhill slide. We just got three to go. Eight, nine and 10. So what is a mistake number eight that you see?

Shawn:

Yeah, we’ll try and make these a little bit quicker. But mistake number eight, I try and explain that having a will or a trust, whichever foundational document you have, having that in and of itself isn’t enough. You need to also think about, a power of attorney for financial affairs and you need to have a medical power of attorney. Some people also like the physician’s directive or living will where it says, I don’t want to be hooked up to a machine forever. It’s okay to pull the plug kind of thing. When we do trust planning, we also do a pour over will, which is just kind of like a backup will that basically says if I acquired something that I forgot to get in my trust, I want it poured over into my trust to be administered according to what my trust says. And so that’s kind of a backup will that we use when we have the trust planning in place or assignments of personal property, or that we make sure we nominate guardians for any minor children. So it’s kind of a whole package that you want to make sure you’re addressing when you do your estate planning. I don’t want people to get just too focused on the will or trust by itself because there’s a lot of other documents that go into making sure that during any period of incapacity, or something like that, things can be managed without having to get the court involved.

Bob:

This is where a specialist in estate planning, like an estate planning attorney, is so important because you shouldn’t put a whole lot of trust in doing your will over the internet.

Shawn:

Right? Yeah. A lot of times I’ve kind of joked clients who you know, said, well they had a friend that did their will on legal zoom or what have you. Many times we still ended up dealing with those in the probate process. So they ended up actually costing quite a bit more because somebody checked the wrong box or didn’t make a note that the will should be handled independent of the court or whatever. And so everything has to be overseen by the court, and the process becomes a lot worse. You’re exactly right on that front as well.

Bob:

All right, we just got two left. Mistake number nine.

Shawn:

Yeah, I like to remind people that it’s a good time when we’re doing this to make sure that your beneficiary designations are updated. Cause I have seen people not update those beneficiary designations on bank accounts and investment accounts, retirement accounts, to the extreme where it even, you know, I’ve seen ex spouses still left as beneficiary and they get a sizeable amount of money because beneficiary designations were not updated. A lot of times too, people just don’t realize that, let’s say for example, several years ago I set up an account. It’s got $100,000 in it, and I put one of my children on there as pay on death beneficiary just when I was setting up the account. I didn’t really give it a lot of thought. I just had to put somebody down. So I put one of my children on there. Well, 10 years later, I decided it’s time for me to do a will so I do a will and I say everything’s going to go to my kids equally. Well, the only problem is is that you’ve actually set up that one specific account with $100,000 to go to the one child, and the one child only, outside of probate and outside of your will because you have that beneficiary designation on there, and so sometimes the left hand doesn’t know what the right hand is doing. So, you got to make sure that your will and your beneficiary designations are all working together. Alternatively, I try to explain to clients how a trust can deal with that. If you had everything in the trust, you just update the beneficiaries on the trust. You don’t have to go to each account to update beneficiaries because it’s just already in the trust. So anytime you make an update to the beneficiaries of the trust, you’ve got it all covered. But it’s usually just kind of a reminder, as we’re going through this estate planning process, to revisit who the beneficiaries are that you had listed on the accounts and make sure that they represent what you want to have happen today.

Bob:

Shawn, as I’ve listened to all this, I think about how many of our listeners are listening to this and they’re going, this sounds very complicated and this is going to take us to our last mistake that people make when it comes to estate planning. Again, the way that you’ve put these mistakes together, it really makes so much sense. So, go into the last one.

Shawn:

Well yeah I think the last mistake is kind of thinking that estate planning “documents” are all you need. It’s not really just about a set of documents cause I’ve seen people get a stack of documents, you know, maybe they had a living trust salesman come through the area, sell them a trust, hand them a binder, and say good luck. They’ve got the documents, but the trust wasn’t funded and they’re still going to have a probate issue hanging out there or they haven’t taken time to really have more of a comprehensive discussion about who gets what and why and what does that look like? Or, you know, taking time to meet with a financial planner like yourself. Sitting down and really kind of focusing on what are the values we want to pass on or what’s the legacy we want to pass on and how are we going to do that? Maybe we could have a family meeting ahead of time to kind of go over some of that. So. It should be more than just thinking you’re covered with a set of documents. I think you should take a little bit more of a comprehensive approach where you sit down and talk about not just the estate planning, but financial planning and retirement planning, or insurance and risk management. All of those kinds of things that go into making sure that, you know, you’ve got asset protection you might need or you’ve got the estate planning distribution set up. You’ve considered some of the family issues that are going to inevitably be a part of all this and taking time to kind of consider what that looks like. And so bringing in some wisdom from some outside resources can be helpful. I think we try and make it as simple as possible, but as comprehensive as possible. We don’t want to overwhelm it. We want to keep the ball rolling so that someone who starts down that road continues to move forward and get it done because what good is it to overwhelm them and then not get anything done. So we try and strike a balance between being comprehensive but also being simple and straightforward so that we get something accomplished. It can always be revised and updated down the road, but let’s get some foundational planning in place so that you can feel good about that footing, and then you can always improve it down the road if you need.

Bob:

You know, over the years we have many times had a family meeting where we’re doing the parents’ estate plan, but we’ve got all the children there and even some of the grandchildren. I’ve had as many as 12 to 15 inside of my office. You know, my office is like a little living room set up with a fireplace. It looks like you’re sitting at home. And we did that on purpos because this can be very stressful, but we’ve had meetings where we’ve gone all day long and we’ve had the team there. When I say the team, you’re one of them. You’re the estate planning attorney. And then we had the financial advisor, and then we have the CPA in the room, the accounting company. We put all this together where it all flows nicely together. And I tell you, I say this really from my heart, that there is a wrong way to do an estate plan. This is my opinion, but there’s a wrong way. And there’s a right way, and I think the wrong way to do the estate plan is that the first time your children hear all of your wishes is after you’re gone. I mean, that’s sad. That’s sad. You know, let the children know what your wishes are before you’re gone, while you’re still healthy. A great book that I read couple of years ago put out by the National Christian Foundation, NCF, it’s called “Family.Money.”. It’s actually called “Family.Money. The Five Questions Every Family Should Ask About Wealth”. And I would recommend, highly recommend, this book. In chapter eight of the book – and the book’s not real thick by the way, it’s less than half inch thick – I would recommend that you go to chapter eight in this book, and it’s got a complete family conversation guide. We’ve had several of our clients with Christian Financial Advisors take this book, highlight it, including myself, and go over these questions with the family and let the family know, so that is not a surprise because you know, you could break your kids’ hearts. The last thing you do, you don’t want to leave the children heartbroken over why you did what you did. It’s because you love them is the way that you did the estate plan.

Shawn:

Yeah. And those kinds of family meetings can go a long way towards heading off the hurt feelings or the issues that come up that generate the desire to litigate. And so if you take a little bit of time, you know, early on to kind of go over all that, you can address those concerns, explain those things, and really help head off what could be potential litigation over the estate down the road too.

Bob:

So that’s going to do it today for our podcast on estate planning. And I think Shawn did a great job of educating us today about those mistakes that we make. Most of you that are listening to this, just because I know the numbers, you know about 70-80% of you don’t have an estate plan. Of those of you that do, if it’s been more than 5 or 10 years since you’ve looked at it, you need to get it updated. I want to let you know that we’re here for you. Shawn’s here for you. I’m here for you to help you through this. And if you want to talk about this, feel free to give us a call during business hours. By the way, this podcast – Shawn, you might not know this – but when we finish the podcast, we have this typing service they go through and they type it all up and they put it on our website.

Bob:

So, these mistakes, they’ll all be on our website for Christian Financial Perspectives, which the website address is christianfinancialpodcast.com. I really invite you to share this podcast with those that you love, and don’t procrastinate about this any longer because when you do procrastinate, that causes financial failure. One of the number one reasons for financial failure is procrastination. So I want to encourage you. Our main phone number at our main switchboard is in New Braunfels, but we can get you connected with Shawn. He’s in Boerne, Texas, north of San Antonio. I know many of our podcast listeners, you listen nationwide, but we can still help you. Our number is (830) 609-6986 and our website address is CISwealth.com, and you can go to that website and hit contact us and you can email us right from there. Hey Shawn, before we’re done with the podcast today, is there any last thing you’d like to share?

Shawn:

Oh, I just appreciate the opportunity to come on and talk about it. I know we talked about a lot and we covered a lot in a short amount of time. So, feel free to reach out if there’s other questions. Like you said, happy to help. I just think – like you were kind of touching on – the important thing is to try and come up with an action step after you’ve heard this, and think about if you don’t have something in place, what’s the next step you can take to try and help get that in place.

Bob:

We’ll make the number one goal of this year for everyone. One of your number one goals should be to get your estate plan done.

Shawn:

Absolutely.

Bob:

All right. Well, that’s all for today, Shawn. Thank you for being a guest on Christian Financial Perspectives.

Shawn:

Thank you, Bob.

[CONCLUSION]

That’s all for now. We invite you to listen to all of our past episodes covering many financial topics from a Christian Perspective. To make sure you don’t miss any of Bob’s upcoming episodes you can subscribe to Christian Financial Perspectives on iTunes, Google Play Music, Spotify, or Stitcher. To learn more about integrating your faith with your finances, visit ciswealth.com or call 830-609-6986.

[DISCLOSURES]

Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the host, Bob Barber. Bob does not provide tax advice and encourages you to seek guidance from a tax professional. Investment advisory services offered through Christian Investment Advisors Inc. DBA Christian Financial Advisors, a registered investment advisor.

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