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’re talking about wills, power-of-attorney, and estate documents, what you should be doing with family in town with your estate planning. The comments on Decker Talk Radio are the opinion of Brian Decker and Mike Decker.
MIKE: Good day, everyone. This is Mike Decker and Brian Decker on another edition of Decker Talk Radio’s Protect Your Retirement. Brian Decker, a licensed fiduciary from Decker Retirement Planning, this is Decker Talk Radio on KVI 570, the Greater Seattle area and KRNS 105.9 in the Greater Salt Lake area. We got a packed show lined up, 57 minutes of pure content, no commercials, so sit back and get ready. Brian, should we start the show with some market news?
BRIAN: Yeah, let’s talk about the market. There’s a couple of things that are very interesting that I want to mention, one is the valuation.
BRIAN: So, if we for example look at the University of Michigan survey of consumers, whenever the market, by the way, the market definition of a market top is when things are so good they can’t get any better. That’s the definition of a market top. The University of Michigan survey of consumers usually vacillates between a low of 30 and a high of 62. However, it’s interesting in the last 17 years, whenever the University of Michigan consumer sentiment hit 62, that’s the peak of the market.
BRIAN: July of 2007 it hit 62. June of 2015 it hit 62 and the markets dropped about not much, about 10 percent. Well, guess what? This week, the University of Michigan consumer, or the survey of consumers hit 62 again. So, just a heads up that that’s typically where we hit a point where the markets will take a pause in the past. The next thing I want to talk about is our tax structure.
BRIAN: Mike, guess what percent of US taxpayers pay zero federal tax.
MIKE: Isn’t it around 40 percent or so?
BRIAN: 40 percent is right. The bottom 40 percent of earners in the United States pays zero federal tax. So, when we talk about tax cuts going to the rich, that’s exactly right because the bottom 40 percent don’t pay any. So, I want to talk about an interesting discussion, gosh, I’ve used for a long time.
BRIAN: This is called bars… if you want to pull this up, it’s called barstool economics. Suppose that every day 10 men go out for a beer and the bill for all 10 comes to 100 dollars. If they paid their bill the way we pay our taxes, it would go something like this. The first four men, the poorest would pay nothing. We just talked about that, bottom 40 percent. The fifth would pay a dollar. The sixth would pay three dollars. The seventh would pay seven dollars. The eighth would pay 12 dollars. The ninth would pay 18 dollars and the richest man or woman would pay 59 dollars.
BRIAN: So, that’s what they decided to do. All 10 were good friends. They decided to meet every night and have their beer and adjust accordingly. So, the 10 men drink beer at the bar every day and they were happy with the arrangement until one day the owner of the bar threw them a curve. Quote, since you’re all such good customers, I’m going to reduce the cost of your daily beer by 20 dollars. Drinks for the 10 men would no longer cost 100 dollars. They would cost just 80 dollars. The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected.
BRIAN: They would still drink their beer for free. But what about the other six, how could they decide how to divide the 20 dollar windfall so everyone would get the fair share? The bar owner suggested it’d be fair to reduce each man’s bill by a higher percentage the poorer he was, to follow the principle of the tax system that they’ve been using. And he proceeded to work out the amounts he suggested that each would pay.
BRIAN: So, the fifth man like the first four would now pay nothing, 100 percent savings for the fifth man that used to be paying a dollar, now he pays nothing. The sixth man was paying three dollars. Now he’s paying two, a 33 percent savings. The seventh now pays five instead of seven, 28 percent savings. The eighth pays 9 dollars instead of 12, 25 percent savings. The ninth now pays 14 dollars instead of 18, a 22 percent savings.
BRIAN: The tenth now pays 49 instead of 59 which is a 16 percent savings. Each of the six was better off than before. The first four continue to drink their beer for free. They were unaffected. But once outside the bar, this is so interesting, once outside the bar, the men began to talk and said quote, I only got a dollar savings out of the 20 dollars that all of us were able to save, declared the sixth man. He pointed to the tenth man, but he got a 10 dollar savings. Yeah, that’s right, explain the fifth man.
BRIAN: I only got a dollar savings, too. It’s unfair he got 10 times more benefit than I did. That’s true, shouted the seventh man. Why should he get 10 dollars back when I only got 2? The wealthy get all the breaks. Wait a minute, yelled the first four men in unison. We didn’t get anything back. This new tax system exploits the poor. The nine men surrounded the tenth and beat him up. The next night, the tenth man didn’t show up for drinks. So the nine sat down and had beers without him.
BRIAN: And when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half the bill. And that boys and girls, journalists, and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat more friendly. Have you heard this before?
MIKE: Yeah, I mean it’s a good analogy for sure.
BRIAN: All right, so now we’re going to transition into something that’s very important in our planning. We’re not attorneys but we are going to start talking about estate tax planning and your estate documents. This is your will, power-of-attorney, your living will. So, here’s where we’re going to talk about the will, power-of-attorney, living will, and your trust documents.
BRIAN: I want to talk to you and make sure again that I say this again very, very important, we are not attorneys but we get the fallout from the transitioning estates to where documents that were supposed to make things run smoothly didn’t. And these are the same train wrecks that come up so we want to bring up these points so that you can review your documents. And by the way, Mike, if they find out that listeners want to back to this and pull this up and re-listen to this with their estate docs, how would they do that?
MIKE: You mean like just the radio show?
BRIAN: Yes, recorded, right? It’s in a podcast.
MIKE: Yeah, the best way to do it is to go to DeckerRetirementPlanning.com as we do post these shows on that website. And just click on the top right shelf for the radio show. And then on there we’ll have a link to all postings, all the shows. This show or any show, you can always do that in the past. That work?
BRIAN: Yeah, I just want to make sure that Decker Talk Radio listeners know where they can just pull this up. I think you’ll be surprised at how common sense these changes are in these edits.
BRIAN: So, let’s talk about the will first. In a typical person’s estate, there’s three parts of instructions to transition your estate. One is your will. The second is your trust if you have one and the third is your retirement accounts. Your retirement accounts have beneficiaries that are primary and contingent that with presentation of a death certificate, the funds move lump sum to your beneficiaries, so, three parts to the distribution of your estate.
BRIAN: We’re going to talk about your will first. So, on your will, jot a note on this, Decker Talk Radio listeners. This is very, very important. Your will needs to have common sense succession. So, with a husband and wife, the spouses to each other are their executors. So, one spouse names the other spouse as the executor of their will. So, when they pass away, if the other spouse is still alive and surviving, then they receive all the assets of the estate as their beneficiary.
BRIAN: If their spouse has pre-deceased them, then the assets go like a single person would to their children or their named beneficiaries. That’s how the assets flow and also who do you put in charge of transferring these assets? That is the succession of the executor. So, if one spouse is deceased, the other spouses named as the executor of the estate to transition the estate over to them, to themselves.
BRIAN: So spouses name each other as primary executors. Usually the children are secondary. We want to make sure that whoever your secondary executor is that if you have one, two, three, one or more children, that you ideally name one single secondary executor in succession. The reason is because if you name all three children to handle the estate transfer, it can be very emotional and you have a combination of different personalities.
BRIAN: Picture this. Let’s say that you have a left brain detailed sequential thinker child working with a right brain big picture creative artistic child. The detailed person is wanting to get things done and goes through things very quickly and logically in their mind. And the big picture person is still emotionally recovering from the loss of one or both parents.
BRIAN: So, it creates a problem and what we’re trying to avoid in bringing things up here is to make sure that your children still love each other when the estate is processed. So, it’s very important to make sure that you logically think this through of how ideally it would be to have one of your children instead of all two, three, or four of your children try to process that estate. It’s fine to process the estate with more than one secondary executors, your children, as long as they get along, think alike, and can work together.
BRIAN: So, we just want to bring that up as an option. The next thing we’re going to talk about here in your will is typically what destroys relationships more than any other part of all of your estate documents, your will, power-of-attorney, living will, trust documents. What we’re going to talk about right now is typically what destroys the children’s relationships where many of them will never talk to each other again because of the language that is boiler plate in most everyone’s will. So, I hope you turn the volume up and think carefully, Decker Talk Radio listeners, about what I’m going to tell you right now.
BRIAN: We and our planners at Decker Retirement Planning in Seattle and in Kirkland, Washington, and in Salt Lake City, we are not attorneys but we point this out as something that is on a consistent basis a major problem and it’s typically two-thirds of the way down page one of your will, and it has to do with tangible assets. Tangible assets are your stuff. It’s not your investment account.
BRIAN: It is your car, your house, your bling, your jewelry, your paintings, your furniture, your clothing, all your stuff, tangible assets. And the problem in the documents that is boiler plate says this, tangible assets, and I’m quoting here, tangible assets are to be equally divided. Well, you can’t do that. Let’s say that you have three children, three piano players and one Steinway, how are you going to do that?
BRIAN: And by the way, when we at Decker Retirement Planning talk about this in this part of the planning, a lot of the countenance of our clients turns dark at this point and they say yeah, it wasn’t fair how my siblings separated the estate. There are ridiculous things that are out there like if you have three kids, the oldest gets to choose first then we all choose. Well, guess what?
BRIAN: If you’ve got the typical tangible assets, the oldest is going to choose the car or the house. And then what? It’s not fair in the distribution of assets. So what we recommend and a lot of clients have received well, and again we’re not attorneys, we’re just throwing this out, to discuss with your legal counsel are three sentences to be added right here in the tangible assets portion of your will.
BRIAN: Number one, there is a sell provision that the house and the cars be sold and with proceeds equally divided. Why? Because in the case of children, let’s say for example that you have three children. Typically they’ll be on different levels economically, financially.
BRIAN: So, the one that has plenty of money wants to keep mom and dad’s house. They don’t need the money. The other two needs the money and they want the house sold. So, that creates a problem. Same thing with the cars, some might say that they want the cars. Some might say that they don’t. So, what you have is a sell provision where if any of the children want to buy the cars, they can. But you really dial down and dilute the potential problems by having a sell provision for the house or any real estate and the cars with proceeds equally divided.
BRIAN: That typically is received well by families and saying that that’s fair. The second sentence references appendix A for specific request. A lot of you Decker Talk Radio listeners know that when it comes to mom and dad’s things, you should, and you dilute the potential problem a huge way by saying to your kids on Thanksgiving or Christmas, whenever you gather, you say kids, we’re not going to be around forever. If there’s anything you’ve got your eye on, let mom or dad know.
BRIAN: And we will put your name on it to make sure that whatever that is, it comes to you. Don’t put your name on the house. Don’t put your name on the cars. But walk around the house, put your yellow, blue, pink, green stickie on whatever you want and we’ll put your name on it. This is huge, Decker Talk Radio listeners, because now your kids can’t claim that they’re a victim that it wasn’t fair. They had a chance to speak up. And also there’s a benefit of doing this because if as what we typically see, both daughters want mom’s wedding dress or wedding ring.
BRIAN: Now, you’ve got years while you’re still alive to work it out. You ideally have the kids work it out. If they can’t work it out, then that falls to you. And you look and assess who’s economically better off and you can decide yourself. So, this appendix A is where you would reference specific gifts. Typically the guys, the sons, they want dad’s fishing stuff and his hunting stuff, maybe coin collection.
BRIAN: Some of the daughters will go after the wedding rings, they’re very sentimental, or wedding dress. There’ll be artwork that’s requested. Surprisingly there will be casserole dishes that they’ve grown up with that are very sentimental. But whatever it is, you have the children put their name on it and you reference that in appendix A. That’s the second sentence of your will under tangible assets. The third and final sentence here under tangible assets says any tangible assets other than real estate and cars and what’s referenced on appendix A are to be sold slash donated with proceeds equally divided.
BRIAN: Why is this important? It’s important because let’s say that Johnny is one of the sons. He’s chosen to be of the three kids the executor once the last parent passes away. Once the last parent passes away, it’s very awkward to look at the house and see that mom or dad’s stuff is all in there. It’s eerie. It’s very emotional. And when Johnny, the son, says all right, let’s sell everything and clear out the house and we’ll bring in the Salvation Army or whoever for all donations, Johnny is now heartless and is viewed as a bad guy among the siblings.
BRIAN: Because Johnny’s just trying to do the right thing and do the job. So, let’s take the pressure off of Johnny, your son, by telling all the kids that that’s your wishes is to have everything sold slash donated with proceeds equally divided. Now, Johnny is not the problem. Johnny is just following your wishes that are stated for your tangible assets. By having those three sentences there, your children will still love each other after your will is processed because it’s very important to make sure that you have in your will a fair way to divide tangible assets.
BRIAN: The next thing that’s very important is if you need a trust to have a pour over provision to where all assets are to be poured into the will, all assets that are not titled in the will are to be poured into the will. And then you’ve got by the way, that’s going to be very important and then the distribution language that we just talked about with those three sentences are now part of the trust to distribute assets from the trust so that you can avoid probate time and cost.
BRIAN: So, we talked about tangible assets. We talked about the pour over provision. We talked about the three sentences that are critically important so that your children still love each other when they’re processing your estate and handling the will. Now let’s talk about the AB clause if for estate tax reason, it’s very important with the 5.45 million dollar exclusion per couple per spouse.
BRIAN: You can shelter about 11 million dollars of assets as long as your will has that language to cut the estate in half so that there is a marital trust and there’s a decedents trust with the surviving spouse having access to both sides. But for tax reasons, it’s very important to make sure that you have the exclusion language in your estate to minimize or zero out the amount of estate tax whether it’s federal or state.
BRIAN: That’s very, very important to make sure that that exclusion language is in your will. And that’s it. When it comes to the will, we want to make sure that the distribution language is fair, that the kids still love each other, that the succession in executors, how you line that up, that that’s logical, that that makes sense for your family, that you have a pour over provision to sweep everything into the trust. And that you have the AB language so that you can preserve the exclusion on your trust.
BRIAN: At Decker Retirement Planning in Seattle, Kirkland, and in Salt Lake City, we work with your attorney to make sure this stuff gets done.
BRIAN: All right, so we talked about the will. Now let’s talk about the trust. There’s typically three reasons, well, probably four reasons why people need a trust. Number one is that there’s different marriages and kids from different marriages. That’s important to have a trust because a family living trust is revocable until the first spouse dies and then it becomes irrevocable. Why is that important?
BRIAN: Well, in the case of having children from different marriages which by the way my wife and I have, I have three children. My wife, Diane, has three children and we had two together. So that means that my wife, Diane, could say to me, Brian, I love your kids. I’ll make sure that when you pass away, if you pre-decease me, I’ll give you my word that we’ll divide things equally. And I say honey, I love you. I love your kids. I’ll do the same. I give you my word that when you pass, if you pre-decease me, I give you my word that we will divide things equally.
BRIAN: Most of the time that does not happen. Most of the time, here’s how this plays out. After the one spouse passes away at the funeral, the surviving spouse gets ticked off by the other children and they’re cut out of the will. Now the other spouse is gone. There’s nothing that he or she can do. And running the ship is the surviving spouse and the distribution is totally changed against the will of the other.
BRIAN: So, the family living trust is revocable. They put the distribution instructions in there as they agree and it becomes irrevocable when the one spouse passes. So, this is very, very important. If you have children through separate marriages, we highly recommend this. Most any attorney would. We’re not attorneys. We recommend that you talk to an attorney and get a revocable family living trust drafted for your assets. The second reason that we would highly recommend a trust is just flat out to avoid probate.
BRIAN: If you live in a probate friendly or unfriendly state, it makes it very convenient to sweep all your assets into the trust, not your retirement account, but to have all of your assets go into a trust and then you can have distribution instructions going very simply and easily after you pass away. You avoid probate. Probate is kind of a pain. It ties up assets for time like four to six months and there’s a cost of a few thousand to several thousand dollars depending on what state you live in.
BRIAN: California, New York, New Jersey are the most unfriendly estate states when it comes to probate. So, the third reason, third and final reason that we would recommend generally speaking to have a trust is if you want to control distribution. Let’s say that you have one child and you have five million dollars. There’s something called the lottery effect that applies here in distributing lump sum, five million dollars, on any human being, whether they’re in their 20s, 30s, 40s, 50s, 60s.
BRIAN: We’ve seen it way too often. The lottery effect goes like this. When you distribute a huge lump sum, the child, now the child is an adult, but that person, three things typically will happen. Number one, the spouse of your child that just received five million dollars will say thank you, very much, I’m divorcing you and taking half. Second, they’ll quit their job. Third, they’ll spend the money over five years and they’re worse off financially, spiritually.
BRIAN: That’s called the lottery effect. To minimize that risk, we recommend that you distribute assets over a period of time instead of lump sum. Think about how much better it is to distribute 25 percent at date of death, 25 percent five years later, 25 percent 10 years after date of death, 15 years after date of death and the final distribution is 20 years after date of death.
BRIAN: Now your son or daughter, singular or plural, can go through and blow the first distribution and wise up and sober up so that they know that these distributions are spaced out so that they can be more responsibly handled. So, this is something that we recommend a trust for. There’s other reasons to have trusts. For example if you have a disabled child, it is a special needs trust so that you have someone become trustee to your children or your child that doesn’t handle money well or is disabled or whatever.
BRIAN: You can have trust where assets are distributed under the guidance and oversight of one of your other siblings or a dear friend that’s a generation younger. Anyhow, those are some of the general reasons. There’s many more reasons. But those are some of the general reasons to have a trust. If you do have a trust, we look through the trust and again we’re not attorneys. We just see the train wrecks in transitioning estates and want to point out some of the problems that we’ve seen in people’s trust.
BRIAN: One is again like the will, succession. If there’s a logical succession in your trust, we want to point out that just like the will, that spouses are trustees on the trust, when both grantors pass away, you have successor trustees, typically your children, to distribute the estate or to continue the estate if for example there’s assets in the trust like rental real estate which typically we recommend either be in the trust or an LLC.
BRIAN: But anyhow, those, the successor trustee is usually your children or your child. We want to make sure that your choice there for secondary trustee or alternate trustee makes sense to you. We also want to look at the distribution instructions to make sure that they also make sense and that they’re fair, just like the will. We recommend that there’s three sentences. If all assets are to be distributed and not staggered, we recommend these three sentences.
BRIAN: That the house and the car are to be sold with proceeds equally divided. We recommend that there’s a reference of appendix A so that you have specific assignments of tangible assets to your children and then a final sentence that says all proceeds, all assets, all tangible assets that are not house, automobile, or on appendix A that the remaining are to be sold and donated with proceeds equally divided.
BRIAN: Also in the trust, we then go to another problem that we typically see is the compensation clause. The reimbursement clause is fine. If any of your trustees are working with the distribution of the trust and they have expenses that they pay, the trust should reimburse them. We have no problem with the reimbursement side. We do have a problem with the compensation clause because the compensation clause says this.
BRIAN: Quote, it says that reasonable compensation is due the trustee. Well, guess what reasonable… Mike, let me ask you this. If you’re between jobs, what’s reasonable compensation?
MIKE: As much as I can get?
BRIAN: Yeah, that’s right. And there’s no oversight. So, you can write a blank check and it comes out of the trust and your siblings will never know.
BRIAN: We feel that it’s an honor to be elected by your parents as the trustee of the trust. It’s an honor to process the estate. If you need help, you can reference an attorney or friend who’s an attorney but it’s an honor to process your parents’ estate and we would not recommend that compensation clause because it’s so often abused. And that’s it. Those are the points that typically we see as problems with the trust. So, we’ve talked on Decker Talk Radio. We’ve talked about how our planners are not attorneys but we work with your attorneys.
BRIAN: And we want to help and provide helpful insight into your will and your trust. Now let’s talk about your two power-of-attorney documents. Usually power-of-attorney is split into finance, power-of-attorney finance and power-of-attorney healthcare. Sometimes they’re combined into one with a durable power-of-attorney. Power-of-attorneys are executed when you’re not dead but you’re incapacitated. And your spouse, your surviving spouse or someone that’s near and dear to you, you elect as your agent to operate as your with all things finance or all things healthcare so that life can go on in your estate while you’re incapacitated.
BRIAN: So, when it comes to your power-of-attorney documents, again, we look for common sense succession. We want to make sure that spouses to each other elect each other as agent. Once a spouse pre-deceases the other, then you bring the kids on or the next generation or someone near and dear to you, that needs to make sense. We review that to make sure that that does make sense. Then we also highly recommend once again that the compensation clause be removed because it’s so often abused and it’s so vague in the dollar amount.
BRIAN: If you insist that you want that your agent should get paid, if you insist that, we highly recommend that you put a dollar amount in there. All right, so those are the two things when it comes to your power-of-attorney. Oh, wait, there’s one more very important one and that’s the trigger clause. Is that what you were going to say?
MIKE: Yeah, that’s I think the last one then we’ve covered it all.
BRIAN: Well, we need to go to the healthcare directive.
MIKE: That’s right.
BRIAN: But the trigger clause is very important. The trigger clause is what activates you power-of-attorney. How do you know when someone is quote end quote officially incapacitated? Now some of these documents, let’s assume that you’ve got them split between power-of-attorney finance and power-of-attorney healthcare? We recommend that quote, two doctors testify that you are no longer capable of handling your finance or your healthcare affairs.
BRIAN: That’s the language that we recommend. Sometimes we see clients where it’s activated on signature. Well, for convenience sake, that’s wonderful because you have an active power-of-attorney document. Let me tell you a story I had a couple years ago where I had in Seattle some clients that were fighting during the planning process and she would tell me in between meetings through a call that she might divorce this guy. Well, at the very end, we looked at their power-of-attorney documents and they had the trigger clause said that they were activated on signature.
BRIAN: Well, here’s what can happen now. One spouse can use that power-of-attorney document to clean out everything that the other spouse has, bank accounts, IRAs, sell the house, use the proceeds, and make a phone call from Cabo San Lucas and say hey, honey, I’ve decided to clean you out. I legally can. You signed and dated this. And I am out of here. Good luck. So, that can happen legally and we want to warn people that you don’t need a loaded gun in your relationship.
BRIAN: So, we don’t recommend that they be activated on signature. It’s not a stress that you need. We recommend that two doctors testify. You can find two doctors anywhere. A lot of times we see on trigger clauses for power-of-attorney documents that your primary care physician is the one that’s going to testify that you’re incapacitated. Well, what if you’re on a trip and you’re incapacitated or what if it happens during the weekend? It’s very hard to get your primary care physician.
BRIAN: So, that’s why we recommend two doctors because you can find two doctors in any emergency room. So now let’s talk about exceptions to this. Again, this is Decker Talk Radio with Decker Retirement Planning, Brian Decker and Mike Decker, with offices in Salt Lake City, Seattle, and Kirkland, Washington.
BRIAN: All right, so on these trigger clauses, it’s a pain in the rear when it comes to a diagnosis where one spouse is diagnosed with Alzheimer’s or dementia. That spouse is fighting for their independence and does not appreciate having their authority taken away. So, many times if you have two doctors listed with a dementia or Alzheimer’s case, you have…
BRIAN: Let’s say that your husband has it. The wife brings the husband in to get two doctors to testify that he’s not capable of handling the financial affairs anymore. Well, the husband’s going to put on his best face and the doctors many times in the early stages will say gosh, he is capable, when you know that he’s not. Because you’re the wife, you’re living with him. So, in those cases of dementia, we’ll change the trigger clause to be a family counsel. The people who know you the most are your family.
BRIAN: This is spouse and sibling. And when you can’t remember more and more names, faces, places, memories, things like that, then the family doesn’t need two doctors. They can activate the trigger clause and the power-of-attorney without, and still maintain any semblance of… it’s very emasculating, humiliating to go in front of two doctors and have them tell you that you’re no longer capable of handling your financial or healthcare affairs.
BRIAN: So, that’s another option is to have a family counsel act as the trigger clause and you name spouse, and you name spouse and children as part of that family counsel. All right, so we talked about the power-of-attorney documents. We talked about the trust documents. We’ve talked about your will. Let’s talk about your healthcare directive. Healthcare directive is the document that’s created to pull the plug. It also typically has DNR, do not resuscitate provisions, organ donation provisions and things like that.
BRIAN: What we care about, the problems that we have seen with healthcare directive is two things. One is having a trigger clause that makes sense and the second is to make sure that pain meds are part of the document that you’re not going to suffer, that you have comfort measures as part your document. Many times, people will check an initialed box that says that if the healthcare directive has been activated, that you want them to pull the plug and you get no artificial hydration and nutrition, and that’s it.
BRIAN: Well, you’re going to suffer in your transition from pulling the plug to death. And so we want to make sure that you have written in there that pain meds are allowed and that you want them even if they can prolong life. You want to make sure that you don’t suffer. Now when it comes to the activation clause on your healthcare directive, we recommend, and again we’re not attorneys, tell me if this makes sense…
MIKE: We’ve seen enough.
BRIAN: Yeah.
BRIAN: That your healthcare directives say that when two doctors testify that you are kept alive artificially, that’s what we’d like to see. Why two doctors? Because we don’t want one doctor that might be the emergency room doc that’s been awake for 36 hours and he’s hallucinating himself. So, we want to make sure that two doctors testify that you’re kept alive artificially. And that would activate your healthcare directive.
BRIAN: Also, here’s what we have seen far too often is a trigger clause that says when one doctor know we want to, when you’re quote end quote diagnosed with a terminal illness, the other spouse can pull the plug. Well, that’s not good because you might live 18 months after diagnosis. Another one that I see frequently is when you can no longer recognize your spouse. This other spouse can pull the plug.
BRIAN: Those are uncomfortably vague. We would recommend that you add the language that’s much more specific that says that you’ve got two doctors testifying that you’re no longer capable or able to handle your financial or healthcare affairs. All right, one last story, we talked about your will, we talked about your power-of-attorney healthcare, power-of-attorney finance. We’ve talked about your healthcare directive. We’ve talked about trust.
BRIAN: We hope you never put your trust as beneficiary of your retirement accounts. You typically won’t see it because it’s a major tax issue. Trusts are allowed by the IRS to pass a generation without probate but it’s very inefficient to have a trust receive an IRA because then all your money pulling out and paying unnecessarily high taxes by doing it.
BRIAN: Attorneys will not recommend that you put a retirement account and a trust unless, and this is very important, it’s a special type of trust called a conduit trust. Now this is very important because the majority of your financial assets are typically in retirement accounts and if you die young in your 60’s and tragedy strikes, you and your spouse pass, your children are going to get lump sum from your retirement accounts.
BRIAN: That’s how it works. Fidelity, Vanguard, Scottrade, whoever the custodian is, they’re given instructions that you are primary beneficiaries to each other, spouse to spouse, but your children are listed as contingent beneficiary. And when you pass away, husband and wife, in a tragic car accident, plane accident, whatever, now your children have lump sum access to your IRAs, Roth 401(k), whatever is in there, usually there’s very large amounts in there.
BRIAN: How do you control distribution without putting it into a trust? If you use a conduit trust, it’s a specific type of trust, then you can control distribution and have a third, at date of death, a third, 5 years later a third, 10 years later after date of death. And now Johnny, Sally, and Susie aren’t going to blow it and have the same experience that most people have with the lottery effect that we talked about.
BRIAN: All right, I’ve been… gosh, we’ve taken the whole time. We’ve almost taken the whole hour. Mike, what if people want to have planners in Seattle, Salt Lake or Kirkland take a look at their documents, how can we help them with Decker Retirement Planning?
MIKE: Yeah, so you can go to our website, DeckerRetirementPlanning.com. And on the locations, you’ll see all the direct lines to each of the offices to schedule a time to visit with one of our planners about this
BRIAN: Alright, I want to tell a quick story to finish up our discussion of estate documents. We had a client probably three four years ago, husband went into a coma. She called 911. She went to the local hospital. The hospital asked for a healthcare directive. She went home, got it, came back, gave it to the hospital and that’s the last time she was consulted for any strategy or discussion regarding her husband’s healthcare.
BRIAN: The reason is because the hospital now has written signed and dated instructions on how the person, the man in a coma, wanted his healthcare to be received. Two doctors showed up just like per instruction, said that he’s kept alive artificially. She should gather the family. She gathered the family. They pulled the plug, 80 plus percent of the time it ends there. It didn’t. He lingered. She asked for ice chips. The hospital said nope, it says right here no artificial hydration.
BRIAN: Next day went fetal, and started to moan with pain, and she asked for morphine and they said no, it doesn’t allow us to give him pain meds. So, what we recommend and again we’re not attorneys, we’re just real life observers, is that when it comes to spouses, instead of giving the hospital your healthcare directive, give them your power-of-attorney healthcare. That places you as agent to your spouse to where the doctors in the hospital have all decisions made through you with your input instead of a healthcare directive.
BRIAN: However, when one spouse passes away, we recommend that you keep on file your healthcare directive with the hospital because you don’t want to put it on your kids to have them pull the plug on mom or dad. There’s some religion that are very uncomfortable pulling the plug. So, you might want to have a healthcare directive so that you don’t put it on a spouse that is of that religion where they just will not pull the plug. These are all important aspects and parts of your documents and how you put your healthcare directives together.
BRIAN: Now, we recommend that once these edits are made, we get your attorney on the phone and we talk through with him or her because they know you legally better than we do. We recommend these changes. The attorney agrees or disagrees. And we have a conversation on these points to make sure that your documents are edited the way that you want them. Your final product is the way that you want them and you’re happy with them. Don’t treat your documents as something that you cannot edit ever.
BRIAN: We recommend that we work with your attorney and get these documents, your will, your power-of-attorney, your living will, your trust documents to be saying what you want them to say, very, very important. Mike, I think we got a few more minutes. We cover a ton of information on this segment. How are they able to pull this up? You mentioned it once before.
MIKE: Yeah, so you can go to DeckerRetirementPlanning.com. On there we have not only, and this is actually, a call that came in had mentioned this, not only do we have the radio show publicized on there so you can listen to it, you can also on iTunes or Google Play, you can also subscribe that way. But we also transcribe every radio show. So, if it’s better for you to just print it out and read it, you can do that. You can go to our article pages and catch the same topics but just written differently on the article page. There’s a ton of content.
BRIAN: Mike, there’s two more minutes. I just thought of a couple more things on this topic when it comes to estate documents. You should update your estate documents if you’ve gone from single to married, if you’ve had children, if you’ve had children deceased, pre-decease you, if you have lost a spouse and have remarried, those are all life events that you should go back and review your documents to make sure that they say what you want them to say. Read them often. Let me give you another scenario with one minute. We have one minute left.
MIKE: Two minutes.
BRIAN: Two minutes, okay. What do you want done, let’s say that you have a son married to a daughter-in-law, the daughter-in-law doesn’t handle money very well. The son pre-deceases you. For many families, you’ve got your two grandchildren with your son and daughter-in-law, you want the money to go to your grandchildren because you’re not confident that the money will ever see your grandchildren because she will spend your son’s portion of the inheritance.
BRIAN: So, what you can do, and by the way, don’t feel bad, her inheritance should come from her family. You are not responsible for your in-law’s inheritance. Those families are responsible for their own children’s inheritance. So, many times you’ll create a minor’s trust and have assets flow down to fund your minor’s trust for your grandkids so that when they become of age, funds can be used to fund their college education and for later in life.
BRIAN: So, that way the amount of assets that was going to that son or daughter, if they pre-decease you, you can preserve those assets and have them go right to your grandchildren.
MIKE: All right, so tune in next week, KVI 570, Sunday mornings in the Greater Seattle area or KRNS 105.9 6:00 PM in the Greater Salt Lake area. Thanks for tuning in, everyone. Have a great week. And most of all, have a happy Thanksgiving, everyone.
