We have another amazing episode of Decker Talk Radio’s Protect Your Retirement for you today. Mike and Brian Decker will be discussing Holiday activities you can do with your family in regards to estate planning. Believe it or not, you can still have fun and plan for your future. Grab a notepad, sit by the fire and enjoy this episode of Decker Talk Radio.
MIKE: Good morning, and thank you for listening to Decker Talk Radio’s Protect Your Retirement, a radio program brought to you by Decker Retirement Planning. This week, we will be discussing financial news, as well as things to do in the holidays with family in regards to your estate planning. The comments on Decker Talk Radio are of the opinion of Brian Decker and Mike Decker.
MIKE: Good morning, everyone. This is Mike Decker and Brian Decker from Decker Talk Radio’s Protect Your Retirement. We’re excited to have a show with projections of what the market might be next year, winners and losers for the sector, and we’ll be ending the show today with wills and power of attorney. Bur first, I do want to have a brief introduction from Brian Decker, who is from Decker Retirement Planning out of Kirkland, Washington. We’re lucky to have him. He is a financial planner specializing in retirement planning, and he’s a fiduciary, which is very important to know.
MIKE: That means that he is bound to do what’s in the best interest of you, the client. So, we’re gonna jump right into this, Brian, today. Let’s talk about projections. The analysts, the projections, they’re all starting to come in for what the markets would look like next year. What do you have for us?
BRIAN: All right, let’s start with bonds. HSBC, who correctly called the recent slide in the US bonds to historic lows, say that bond yields on the 10-year treasury may hit two-and-a-half percent next year.
BRIAN: But then, strategist Stephen Major says that it’s gonna fall sharply back to one point three-five percent. So, an initial rise to two-and-a-half percent would be unsustainable, tightening financial conditions dragging on the economy and constraining the fed. And then with a slowing economy, having that rate fall all the way back to one point three-five percent.
BRIAN: I don’t know anyone else who is saying this, so I don’t know that it’s right. But if he is right, that means that the economy will be strong out of the gate in the first quarter, and then slowing. A slowing economy will cause the treasury bond yield to go down. Now let’s be clear. When it comes to bonds and bond funds, when interest rates are this low, and when interest rates go up, you lose money in bond funds.
BRIAN: I just want to be crystal clear that anyone who is a fiduciary will tell you that your safe money should not be in bond funds. Decker Talk Radio listeners, I want to make sure that this is crystal clear, that you have interest rate risk with your bonds. And just the last couple months, 60 days, bond funds have lost three to five percent in the intermediate term, five to ten percent in the long end, and also double-digits in the high-yield sector, too.
BRIAN: So we want to make sure that you listeners know that if your banker and broker tell you that your safe money is in bonds, you need to know that that’s not true, and to come in and see us at Decker Retirement Planning in Carillon Point in Kirkland, we can tell you where your safe money should be, and it should not be in bond funds.
MIKE: Brian, can I interject here as well? Because we’re talking about low interest rates, we actually had a caller yesterday that I spoke with who was frustrated about trying to do retirement planning and live off of interest rates with CDs and money markets.
MIKE: Very conservative lady, very wonderful lady, but just was so frustrated with these low interest rates. Now I don’t want to sidebar too much here, but there are solutions. There are other ways that you can have safe money and not have to suffer with one point five or two percent interest rates, because you can’t live off of that. That’s too low to live off of in retirement, right?
BRIAN: Exactly right, Mike. It used to be you could get five percent on a five-year CD, seven percent on a 10-year CD, and you could live off your interest.
BRIAN: Retain your principal and live off your interest. You can’t do that right now. Let’s say that you won 100,000 dollars. In return, just on interest, if you have a 10-year CD at two and a quarter, you got to invest a lot of money.
BRIAN: I think it’s five million dollars, Mike. I think you have to have 5 million dollars at 2 percent to generate 100,000 dollars net and live off your interest. So not many people can do that. Some can, but not many. All right, I’m gonna keep going.
MIKE: Let’s go.
BRIAN: A bold call by HSBC Hong Kong Shanghai bank is calling for a one point three-five percent reversal on the ten-year treasury after hitting two-and-a-half percent in the first quarter.
BRIAN: Okay, here’s number two. Bank of America Merrill Lynch in 2016, they called it. They said that peak liquidity and peak inequality, peak globalization and peak deflation, and the end of the biggest bull market in bonds in 40 years, that all starts to reverse next year. For the first time since 2006, there’ll be no big easing of monetary policy in the G7 nations and interest rates and inflation will surprise to the upside.
BRIAN: They even pin a date on when the bull market will likely peak, and they say July 11th of 2016 is when the 30-year US treasury bond yield bottomed out at two point zero eight-eight percent. By the way, right now it’s at three percent. So, if you have a fund that is a long treasury bond fund that just went from two percent and you bought it in July 11th, 2016 and it’s now at three percent, you have double-digit losses in that fund.
BRIAN: Bond funds are not safe. We’ve emphasized that on the show already. But this is an interesting call. They’re saying that the 36-year run in bonds from 1980 when the 30-year bond was over 18 percent, that now that it hit two percent July 11th this year, that now the trend is gonna start to go back up.
BRIAN: And by the way, from 1965 to 1980, that was a 15-year run up in yield, down in price. If you owned a bond fund from 1965 and you held it for 15 years, you lost money every year for 15 years. So, that is what Bank of America Merrill Lynch is saying, is that there will be now a rise in yield, a decline in price, in bonds are going forward.
BRIAN: MIKE: Brian, real quick. You mentioned G7. We have clients that do have investments overseas or in other countries. Just to clarify G7 for those who don’t know, it’s the seven countries. Correct me if I’m wrong, the United States, Canada, France, Germany, Italy, Japan and the UK. Is that correct?
BRIAN: That’s right.
MIKE: Okay.
BRIAN: Brazil is not in the G7. Okay.
MIKE: What one’s not in the G7?
BRIAN: Nope. Okay, so now let’s talk about black swans.
BRIAN: Black swans are statistical anomalies that interfere with the ebb and flow of the traditional market cycles, economic cycles, interest rate cycles, real estate cycles. A black swan would be like two airplanes flying into the twin towers in 2001, 9/11. So, those statistical anomalies, economists at Societe Generale illustrate a graphic with four black swans that could blight the global economic and market landscape next year for good or bad.
BRIAN: This is mostly bad news. The tail risk, which by the way, tail risk is standard deviation talk about statistics. The tail risk they see most likely to alter next year’s outlook stem from political uncertainty, which is a 30 percent risk factor, the steep increase in bond yields, which is a 25 percent risk factor, a hard landing in China, which is a 25 percent risk factor, and trade wars because of Trump’s protectionist rhetoric.
BRIAN: They rank at 15 percent risk. So, economists at Societe Generale are saying that those four black swans are lurking out there and existing. Any of those could change the stock market and your investment returns. Okay, number four. The euro also rises. The dollar right now is overvalued.
BRIAN: Everyone knows that, versus the G10 currencies. It’s not something you hear too often, but in the view of Swiss Wealth Management, there’s a call out of UBS, Union Bank of Switzerland. They predict that the euro will end the year at a dollar 20, going against the growing calls for parity where the euro will be one point zero-zero. That’s parity.
BRIAN: By the way, it hit a one-year low of one point zero-six, a dollar six last week, and even lower the week before. The euro will also draw support from the ECB, the European Central Bank, tapering of its quantitative easing, while undervalued sterling will pick itself up from the Brexit disaster on that currency to rally against the US dollar.
BRIAN: That’s an interesting call, because if you’re traveling, Decker Talk Radio listeners, you can go anywhere world right now and the prices of what you pay for anything outside the US will be less because the strength of the US dollar. That’s a benefit for vacationers and travelers. It’s not a benefit if you’re an exporter.
BRIAN: So Boeing, for example, with the strong dollar, their planes are more expensive compared to their competitor, all other things being equal. Strong currency makes your products more expensive, which is why Japan tries very hard as an export nation to have their currency weakened. Same with China. Okay, number five.
BRIAN: The good carry in the emerging markets. Few disputes that a higher dollar and higher US yields next year will hurt the emerging market investment sector. Goldman Sachs has long championed a strong dollar and higher yields. Two of the top 2017 trade tips, however, involve buying emerging market assets. That’s interesting, when they’re saying that the high dollar and the higher US yields next year will hurt emerging market returns.
BRIAN: They’re saying that you should go long, and equally weighted basket of foreign exchange of Brazilian rial, Russian ruble, Indonesian rupiah and South African rand versus short of an equally weighted basket of Korean wan and Singapore dollars to earn the good carry. Mike, I don’t know anyone the trades foreign currencies like that, so I’m not gonna spend time talking about that on the carry trade for emerging markets.
BRIAN: I’m just gonna move on from that. More quantitative easing from the European Central Bank. European Central Bank has been printing money just like our Federal Reserve Bank has been pretty money. They call it quantitative easing. Now that inflation has bottomed out, the Fed is raising rates, and other central banks are beginning to reduce their stimulus. The European Central Bank is expected taper, that means cutback, its 80 billion euros a month quantitative easing program.
BRIAN: You would expect that, right? Maybe not. RBC capital expects the European Central Bank to not only extend the quantitative easing in December, but even consider extending it again next year as inflation and growth fall short. So, they’re expecting that the printing of money will continue with the ECB. That, by the way, is inflationary.
BRIAN: Next one, and this is the last one we want to talk about. I just tried to find interesting calls for next year. The last one here is how much offshore earnings can US companies bring back if President Elect Trump follows through with his pledge to cut the corporate tax? Some people are saying it’s about a trillion dollars, according to Deutsche Bank. This could give US stocks, already at record highs, another shot in the arm.
BRIAN: Citibank reckons that global equities will rise 10 percent next year, led by developed market indexes. A 10 percent rise in the dollar and a cut in the US corporate tax rate to 20 percent could add six percent to global earnings per share. If other countries also cut taxes, than earnings per share could rise further, even against an uninspiring economic backdrop.
BRIAN: So that’s interesting expectations for 2017, as we are now officially in the month of December, the last month of the year. Mike, at this point, I just want to say nobody knows what’s actually gonna happen next year. There could be anything from a continued trend higher, which in the last three years, the market stock market has trended higher, but just by a little bit.
BRIAN: The one percent % 2015 S&P returns were up about seven percent so far this year. In 2014, the S&P was up single digits then. We’ve had a lot of single-digit, kind of flat growth. If that continues next year, the expectation is that the market cycle, which usually cycles every seven or eight years, will turn lower.
BRIAN: Every seven or eight years, the stock market has taken a beating. This goes back many decades. So 2008 was definitely a tough year. that was a 50-plus percent loss from October of ’07 to March of ’09, followed by seven years before that, twin towers went down in 2001, middle of a three-year, 50 percent drop.
BRIAN: Seven years before that was 1994. Iraq had invaded Kuwait, oil went up. We had a recession. Higher interest rates. Stock market struggled. Seven years before that, we had Black Monday, October 19th, 1987. Thirty percent drop in one day. Seven years before that was 1980, the beginning of a two-year, 40-plus percent bear market.
BRIAN: Seven years before that was a ’73-’74 40-plus percent drop in the stock market. Seven years before that was ’66-’67, bear market, and it keeps going. So now Decker Talk Radio listeners, we have an expansion that is the second-longest expansion.
BRIAN: So anyone that’s over 50 years old with most of your money at risk, we would ask you why you’re taking such unnecessary risk, ’cause markets usually turn lower every seven or eight years. We are due.
MIKE: Before we move onto the next point, Brian, I want to ask you a quick question, because we set aside time every week for Decker Talk Radio listeners to come into your office in Kirkland at Decker Retirement Planning and chat with you.
MIKE: Have a quick visit about their retirement plan. And we’ve said this before, and we consistently are seeing it again, that a lot of retirees are taking too much risk, and you just were talking about that. Now, the strategies we use, the Decker approach that Decker Retirement Planning uses, is a wonderful solution, if I can say that. But an investment strategy that when you have these black swans, these anomalies, or these bubbles that burst and markets tank, that retirees can sail through it.
MIKE: And you see this over and over again when these people come in. No one knows what’s gonna happen in the future. No one knows if the markets are gonna continue go up, or if they will, like history says, repeat itself and tank again.
MIKE: But I guess to make the question more specifically, when people are coming in, whether they come in through the radio, or just normal people that come in just calling our office here, what are you typically seeing with people that are taking too much risk, and is there a solution for these people that are coming in?
BRIAN: Yeah, the people that have come in are taking too much risk because they always have taken too much risk, because they believe their banker or broker who tell them to keep all their money in the asset allocation pie chart, which is fine in your 20s, 30s and 40s when you have a paycheck coming in.
BRIAN: But they get it. They feel uncomfortable having all their money at risk. The reason that they don’t make any changes, is because they don’t know what the alternative is. For people that come in and we’ll show them three things that they need when they come in. Number one, they need to see what a distribution plan looks like, where we use mathematic calculations to calculate how much money you can spend each year given your age, given your Social Security, pension, given your assets that you have.
BRIAN: We’ll calculate for you how much you can draw per month with COLAs, cost-of-living adjustments for each year for the rest of your life. We’ll show you how much money you can draw from your existing assets. So that’s number one. Number two, we’ll show you stock market models. These are trend-following models. This strategy, trend following, has been around for 30 years.
BRIAN: We’ll show you the models that we’re using, that since January 1 of 2000, have made money every year for 16 years, collectively. So with the six models that we have, who else do you know that made money in 2000, ’01, ’02, and that’s when the markets lost 50 percent. And then when the stock market doubled from ’03 to ’07, these models doubled also.
BRIAN: Then when the markets tanked in ’08, collectively, these six models made money. And then when the markets more than doubled from ’09 to present, these models more than doubled also. I don’t know anyone out there that can offer retirees visuals on returns like that. So Mike, let’s have ’em come in and see those two things, and let’s throw in a third.
BRIAN: The third is, what do you use for bonds when bond funds are not safe and you need returns that are principal guaranteed and have averaged over six percent in the last eight years? Those of the tools that are missing from the average Decker Talk Radio listener out there. Come on in, we’ll show you all three.
MIKE: The next thing we want to talk about here, is the winners and the losers. So, the sectors that have done well, the sectors that have not done well since President-Elect Trump won the election. So, I’ll just hand it over to you, but who are the winners, who are the losers so far?
BRIAN: Sounds good. I’m just gonna take a few minutes on this, because we want to spend the rest of the radio show talking about wills, power of attorney, living wills, trust documents, community property agreements, things like that.
BRIAN: Okay, so the winners so far since November 8th through yesterday’s close, bank stocks have rallied more than 15 percent. Biotech is up over 9 percent. S&P industrial companies like GE and Boeing are up 8 percent. Russian stocks are up almost five percent. That’s pretty funny. Copper and industrial metal is up 32 percent on Trump’s infrastructure spending plans.
BRIAN: Natural gas is up 18 percent. I was curious. I’d like to see what coal is up here. This is funny. By the way, I think this is the funniest thing that we’ll say in the whole hour. Core Civic, ticker symbol CXW, formerly known as Corrections Corp. of America. It’s a publicly traded prison stock.
BRIAN: It’s up 55 percent on the Trump rally. 55 percent.
BRIAN: That’s a prison stock. I wonder why. Okay, on the flip side, market losers. Gold miners are down 14 percent. That’s with a strong dollar. Emerging markets are down 6 percent. That’s with a strong dollar, along with Trump’s protectionist policies.
BRIAN: The Mexican peso is down 11 percent. Yields on the 10-year treasury just since November 8th are up 50 basis points. That is a huge move when interest rates are this low. So, that Core Civic, that’s really interesting. Jail stocks are up 55 percent on the Trump rally.
BRIAN: All right, so now let’s talk about will, power of attorney, living will, and whether or not you have or should have a trust. And by the way, this is something that we have to tell Decker Talk Radio listeners, we are not attorneys. We work with your attorney. We just see things over the decades that we’ve been doing this. I’ve been doing this for 30 years. We see problems in your documents, and we want to talk to you about those problems.
BRIAN: I can’t tell you how many times people have smiled and handed me their will and power of attorney documents. Big stacks of binders, and they’ll say, “Won’t see any problems with this, Brian. Best attorneys in Seattle put this together.” And without opening it, I tell ’em, let’s cut to the chase. The number one most divisive, destructive sentence in your will, in all of your documents, is in your will, page one, two-thirds of the way down.
BRIAN: It’s in the tangible assets section, and that one sentence will cause your children, many of them, to not talk to each other again. And for estates that are over 10 million, that one sentence will cause your children to show up at the reading of the will with their own, individual attorney. It is divisive. It is destructive. And when we bring it up, the countenance of our clients clouds over and becomes dark and they say, yes.
BRIAN: In the way that assets were distributed, it really wasn’t fair for us either. So we’re gonna cut right to the chase, Decker Talk Radio listeners, and talk about this one sentence. In the tangible assets section of your will, it says, quote, “all tangible assets are to be divided equally.” Well, let’s say that you have one Steinway and three piano players.
BRIAN: How in the world are you gonna do that? How can you do that? And by the way, tangible assets include your house, your cars, your artwork, any collections that you have, art collections, gun collections, coin collections. All of those things. How in the world can you divide those equally? And if you don’t handle this while you’re still alive, it will divide your children after you die.
BRIAN: So here’s some of the things, these are some ideas that we like to throw out there on how you can make sure this sentence doesn’t divide your family. Unless there is unusual circumstances, we recommend that you add a cell provision clause for the house and the cars so that the house and the cars are sold, and then proceeds are divided equally. That’s fine.
BRIAN: Now with your house, let’s talk about what your children want. You can’t know what they want, unless you invite them over Thanksgiving, or Christmas, gather them around and say, “Children, we’re not gonna be around forever. Whatever you want, speak now, or forever hold your peace.” Go around the house. Johnny gets a blue sticky. Sally gets a pink sticky, and the other kids get different colors, and you record what they want.
BRIAN: Now two things have happened. You’ve created an appendix A in your tangible assets section, which typically is there, just normally, it’s left blank. You’ve got an appendix A and you record what goes to Johnny, what goes to Sally, and what goes to other kids, number one. Number two, is the children can’t say that they were ripped or burned, or it was unfair, because they had their chance to speak up.
BRIAN: Decker Talk Radio listeners, I hope that you’re listening. I hope that you do this. We see tragically many, many adult 60-plus year-olds that when they think of how their assets were distributed, they say that yeah, it wasn’t fair. I wish our families would’ve done it this way. Please take control and do this, and make sure that your assets are divided equally.
BRIAN: If distance separates you, send an email. Say, “have you had your eye on anything?” If Johnny wants the house and Susie wants the cars, you know, maybe that’s fine. Or if you have a single child, then it’s not a problem at all. But I hope that you address tangible assets. Let’s stay on tangible assets for a few more minutes, because many parents think, oh, the vacation home.
BRIAN: We have three kids and they can all three vacation, and continue to go to the XYZ vacation home in beautiful fill in the blank. Well, here’s what typically happens. Of your three children, one of them is doing well. One of them is getting by, and one of them is struggling. So, equally dividing your vacation home expenses is not appreciated, and one of your three children will have the money to use it quite often, and it will create resentment.
BRIAN: It will create resentment. We hope that unless there are special circumstances, that you think of what it will do with your kids, and that you sell the home, because two of your three children typically could use the money, and the one child that’s doing very well can afford to buy their own place. So, when it comes to tangible assets, we hope that you use common sense.
BRIAN: That’s the most divisive part of all the documents. We just hit that. In your will, we want to make sure that you have a clear designation of your executor, and your contingent choices for executor-executrix. If you’ve got more than one child, many times it’s not prudent, not wise to have both children be co-executors, because depending on their personalities, in times of stress, do they work well together, or will it be divisive, and will it create resentment, lifelong resentment?
BRIAN: There’s pros and cons on having co-executor, both your children in there. The good part is it creates transparency so that one child can trust what the other child’s seeing in handling of your estate. That’s the good part. The bad part is the decision-making process. There will be a lot of very important decisions that will need to be made. If your children are tight like twins, where they work together and they’re of one mind, definitely put them both in there.
BRIAN: But when you think of who the other children would fully expect to handle it, know that that’s probably the right choice for someone to be the single executor and to offer full transparency in the process. All right, those of the two things that we look for in the passing of assets, and we want to make sure that the will also has clear designation of how assets are to flow.
BRIAN: This is your blank slate to write in what child gets what percent. And there’s some very interesting clauses that should be added. Like for example, if any of the children challenge the will, they get one dollar. It’s called the challenge clause. So you want to make sure that your will is able to go through and disperse your funds.
MIKE: So if your guy isn’t cutting it, or looking for one, we can look at what you have, and then at least point you in the right direction. Decker Talk Radio listeners, we are fiduciaries. At the end of the day, we just want to do what’s best for you. And at the very least, point you in the right direction.
BRIAN: Okay, so now let’s talk about trust documents. Do you need a trust? I’ve been in the presence of attorneys. They typically ask you three questions to see if you need a trust. Number one, is it your second marriage and do you have children by other spouses?
BRIAN: If you do, you should have a revocable family living trust, because you can have a situation where one spouse says to another spouse, do love my children? Oh, yes, I love your children. And when you die, I’ll make sure that your children get half of the investments. I’ll make sure they’re all taken care of. And then one spouse dies.
BRIAN: The other spouse’s children somehow in the funeral make him upset, make him angry, and they’re cut out of the will and there’s nothing that the other now-deceased spouse can do about it. In a revocable family living trust, you can put in writing the wishes of how assets are to be divided, and those instructions become irrevocable, non-changeable at the death of the first spouse.
BRIAN: So you can’t have that uncertainty. You’ve put it in writing. You’ve both signed your names to it. So that’s number one reason to have a trust. The second reason, is if you have real estate outside of Washington State. Washington is in the top five in the nation of probate-friendly states. It’s very short in time to probate an estate, probate a will, and it’s also relatively inexpensive to probate an estate.
BRIAN: So if you have real estate or assets outside of Washington State, that asset most of the time should probably be held in a trust, to make sure that the probate disasters that happen in California where there, attorneys get a commission. They get a commission. they get a percentage of the estate as their fee. It’s just ridiculous.
BRIAN: But anyhow, that’s how the State of California has decided to probate their people’s estates. The third reason to have a trust, one is if you have children through separate marriages, second is if you have assets outside of the State of Washington. The third reason is if your estate is going to leave seven figures or more to a child or per child.
BRIAN: When you lump sum assets onto a child, your children, even adult, grown children in their 30s, 40s, 50s, 60s, it changes their life for the worst. It’s called the lottery effect. It’s predictable. This is where you receive three million dollars in assets, four things are going to happen according to lottery effect.
BRIAN: Number one, your spouse is gonna take half, divorce you and say, see you. Second, is your friends will find out that you just got this lump sum, and they’ll come to you with all kinds of business ideas which you’ll turn them away and say no, I’m not interested, and you’ll lose a lot of your friends. Number three, you’ll quit your job and spend through the money in five years. And at the end of five years, you’ll be worse off body, mind and spirit, then before you received those funds.
BRIAN: It’s called the lottery effect. Look it up. Google it. See that if your plans are to lump sum assets onto your children, it’s not a good thing. It’s a bad thing. So, we hope that you use a revocable living trust to make sure that when you die, a third of your assets are distributed on date of death, and five years later, another third, and five years later, the final third.
BRIAN: So that when your child blows through the first disbursement, thank goodness that they can learn from the mistakes they made on that first distribution, and five years later they will get their next distribution and be more frugal and more responsible. This is human nature. We hope at Decker Retirement Planning in Kirkland that your documents reflect what you want.
BRIAN: You can incent responsible behavior. One other thing on a trust which cracks me up. There’s a provision in a trust that I saw, which I thought was spectacular. It’s called the beach bum provision, because many trust recipients become what are called trust babies, where they quit their job and they live off trust proceeds for the rest of their lives. They become irresponsible. They drive Ferraris into the lake. They have wild parties.
BRIAN: They become subhuman. And so, what happens in a beach bum provision, is that trust assets are distributed based on matching W-2 income. So, if you don’t have a job, you don’t get anything. If you do have a job, then you’re matched four-to-one, or whatever you want in distributing assets. You incent responsible behavior in the distribution such that you pay of 25 percent of a down payment on a house.
BRIAN: You help for college education. You help X percent of a wedding. You help for a first car. And then other assets are continuing to incent the responsible behavior that you want. Those are called beach bum provisions. Trusts are very important, but those are the three most popular reasons that you have one.
BRIAN: If you have a child who is an adult child who can’t take care of himself, you have a special needs trust. Those are very important to provide income and livelihood for your adult children as they continue to live out their lives, and have as much independence as possible. But still in the special needs trust, to prevent the net worth clause from cutting off government assistance, there is a very special way that that has to be done.
BRIAN: All right, we’ve talked about wills, we’ve talked about trusts. Now let’s talk about your power of attorney documents. This is where you’re not dead, but you’re incapacitated. You’re in a coma. You’re not able to take care of your own financial affairs, power of attorney finance, or power of attorney health care document.
BRIAN: There’s three parts of your power of attorney documents that we want to make sure are crystal clear. One is your agent. Your agent if you’re married is your spouse. Your contingent choice is usually your children. So, who has power of attorney finance, who has the ability to be financially responsible of your children, whoever that is, that will be your choice as your contingent agent.
BRIAN: We want to make sure that that choice is singular and not co-agents. Again, because of the getting along and in pressure situations, and making decisions, most of the time it makes sense to choose the most financially astute of your children to be your contingent choice as agent for your power of attorney documents.
BRIAN: So that’s number one. The second is the trigger clause. When do you want your power of attorney finance to be triggered? We hope that it’s not on signature. I had one situation where there was a couple that was meeting, and they were arguing and fighting and meeting with me separately, saying I don’t know how long this marriage is gonna be.
BRIAN: And at the very end of the planning, we went over their documents and found out that their power of attorney finance documents, the trigger clause, they were activated on signature. That means that either of them could act as each other, and clear the other bank accounts out, and say sayonara. In any marriage, you don’t need that bazooka aiming at the other spouse.
BRIAN: We recommend a couple other ideas are out there that seems to be much wiser, and that is when two doctors sign off that you’re not competent to handle your financial affairs, two doctors can easily be rounded up in an emergency room if you brought the spouse in for a competency check. Or you can have a family council.
BRIAN: So when a spouse or their children are living close to them, and they see and interact with mom or dad on a regular basis, they can testify of the competency and can activate power of attorney documents that way. Those are the two that we would recommend. Sadly, the trigger clause has either one doctor or your primary care physician being your doctor that assesses competency.
BRIAN: What happens if you’re climbing the mountains in Peru and you go into a coma? You’re rendered incompetent. Your primary care physician isn’t really available. Not very smart. So we recommend two doctors or a family council as a trigger clause. Third and final, and then Mike, I’m talking too much here, we’ll make another offer.
BRIAN: The third and final part is when your power of attorney documents were okay with the reimbursement clause, but the compensation clause is abused almost 100 percent of the time. When you have three children and one is your power of attorney agent, and your spouse is predeceased you, so now you’re incompetent, and your child goes in there and sees this line.
BRIAN: It’s very general. It says that reasonable compensation is due my agent. Well, guess what reasonable is? Most of the time when there’s no oversight at all, checks are cut of 15, 20,000 dollars, because no one is gonna know, and that agent cuts himself or herself a very large check. We hope that you X out and delete the compensation clause completely.
BRIAN: Keep the reimbursement clause, but X out the compensation clause, or we recommend that you write in the amount of compensation with a set dollar amount so that it’s not abused. All right, so we talked about the power of attorney finance. The power of attorney healthcare has all the same concerns. We want to make sure that the trigger clause is two doctors or a family council for power of attorney healthcare.
BRIAN: We want to make sure that sometimes your choice of agent if you have more than one child, maybe the child that is adept and skilled in finance, you’ve got another child that’s more adept and skilled in healthcare issues. Many times, it’s a different child that you’ll choose as contingent agent for your power of attorney healthcare document.
BRIAN: But we recommend that the trigger clause be two doctors or family council, and that your compensation clause be deleted, or that you write in the specific amount. All right, Mike. The last thing that we’ll talk about here, is the living will where this is the pull-the-plug document. But Mike, we should probably make an offer again
BRIAN: I think a lot of people realize at this point that their documents that they have written, that they haven’t dusted them off in a long time, we should offer 10 callers to come in and I’d be happy to go through and help them on their documents.
MIKE: Yeah, even though we’re not attorneys, Brian, you’ve been doing this for a long time. And so, you can give an extra opinion, some insight, and get them pointed in the right direction. It’s a very important document.
MIKE: I hate to be dreary, but everyone does die at one point. And so for the next 10 callers that call in, we will set you up with a visit with Brian to go over with your will, power of attorney and trust documents. For those that are 55 years or older and have at least 300,000 of investable assets, this will be at no cost to you. That number is 1-800-261-9446. Again, that’s 1-800-261-9446. And when you call in, they’ll get your information.
MIKE: I’ll personally call and get to know you, and then we can schedule a visit for you to come into the offices at Decker Retirement Planning in Kirkland, Washington and visit with Brian. So Brian, let’s wrap this up. We’ve got six more minutes left for the last, little segment of wills, power of attorney and trust documents.
BRIAN: Okay. So community property agreement, I’ll just say very quickly. If you’re living in State of Washington in your community property, which is a community property state, the assumption is what one spouse has, the other spouse receives upon death.
BRIAN: That community property agreement, it becomes very important if you want to keep separate property from an inheritance. Let’s say that one spouse has inherited funds. He or she wants to keep that separate property, the community property agreement will be very important to designate that separate property and also make sure that he or she that receives that inheritance never comingles those funds in a joint account of any kind.
BRIAN: Okay, now the living will or the healthcare directive, those are two of the same words here at Decker Retirement Planning. I want to tell you a story that happened a while ago. A client went into a coma. The spouse called 911. Ambulance came. They brought the client to the hospital. The request was made for the patient to show his living will, the pull-the-plug document.
BRIAN: The spouse had to go back home, get it, brought it back. And when she presented it to the hospital, that’s the last time she was approached for any decisions, because hospitals practice medicine so that they don’t get sued. They have to do it that way. And they have a legal document on how this patient, although he’s comatose, how he wants his healthcare received.
BRIAN: Two doctors came up and said, gather the family. In our opinions, the patient is kept alive artificially. She gathered the family. They pulled the plug. 85-plus percent of the time, it ends there. In this case, he lingered. And when he lingered, his lips started to crack. She asked for ice chips. The hospital had to say, no.
BRIAN: It says right here, no artificial hydration. A day later, he went fetal and started to moan with pain. She asked for morphine. The hospital had to say, nope. It says right here, no pain medication. So sadly, there was a horror in the end-of-life experience for that family, which, if in hindsight, they would’ve presented power of attorney documents, the spouse would’ve been consulted at every turn and would’ve been able to make those last two comfort measures for her spouse.
BRIAN: And so we want to make sure that you know that you can present either document. You can how power of attorney healthcare documents that can be presented when the hospital ask you for healthcare directive or a living will. You don’t have to give a living will or a healthcare directive.
BRIAN: You can give power of attorney healthcare, so that one spouse is designated as the decision-maker in even end-of-life situations. Some people have shredded their healthcare directive and just want to keep power of attorney healthcare documents so that they are going to be responsible for making those decisions.
BRIAN: Again, we’re not attorneys, but we’ve heard attorneys say that’s wise as long as it’s the spouse’s. My spouse could pull the plug on me, because she knows what my wishes are. But to put that on your children might not be what you really want. You might want to have your healthcare directive kept in case a spouse predeceases you.
BRIAN: There’s cultural reasons, religious reasons, and children reasons are the big three that you might want to retain your healthcare directive and your power of attorney. I’m sorry. Mike, we’re out of time.
MIKE: You’re good. Just wrap it up.
BRIAN: Okay. There are reasons to keep both documents and to use both, and know which document to bring to the hospital. I didn’t see the time just clicking away here.
MIKE: That’s okay. Any last quick suggestions?
BRIAN: Do we still have a couple minutes?
MIKE: We have 30 seconds.
BRIAN: Mike, you can close this up.
MIKE: All right. Well, tune in for more. For more information about wills, power of attorney and what we’ve talked about today, you can go to our website, www.Deckerretirementplanning.com. We have a numerous amount of articles that have been written on this topic, as well as subscribe to this via podcast to catch it at a more convenient time on iTunes or Google Play, or continue to listen to us, KVI 570, 9 AM Sunday mornings on AM radio.
MIKE: This is Mike Decker and Brian Decker from Decker Talk Radio, Brian Decker from Decker Retirement Planning out of Kirkland. We wish you all a great week and a happy December. Take care.
