Chapter 13 – “Estate Planning"

In this episode, podcast host and author of “Control Your Retirement Destiny”, Dana Anspach, covers Chapter 13 of the 2nd edition of the book titled, “Estate Planning.”

If you want to learn even more than what there is time to cover in the podcast series, you can find the book “Control Your Retirement Destiny” on Amazon.

Or, if you are looking for a customized plan for your retirement, visit us at sensiblemoney.com to see how we can help.

 

Chapter 13 – Podcast Script

Hi, this is Dana Anspach. I’m the founder and CEO of Sensible Money, a fee-only financial planning firm. I’m also the author of Control Your Retirement Destiny, a book that shows you how to align your finances for a smooth transition into retirement.

In this podcast episode I cover the material in Chapter 13, on “Estate Planning.”

If you like what you hear today, go to Amazon and search for Control Your Retirement Destiny. And, if you are looking for a customized plan, visit sensiblemoney.com to see how we can help.

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Even if you have never been to an attorney or drawn up a will or a trust, you have probably still done some type of estate planning- and not even known that’s what you were doing. How could that be?

If you have ever opened a bank account or named a beneficiary on a retirement account or life insurance policy, that’s estate planning. It’s a legal document that specifies where your assets go when you pass.

For example, if you open an account titled jointly with a spouse, friend or child, when you pass, that account belongs to them. It doesn’t matter what your will says – the titling of that account overrides any other documentation.

The same thing occurs with beneficiary designations on retirement accounts. The financial institution must disburse the funds to the beneficiaries you have listed – it doesn’t matter if you have a trust or will that says something else.

Many people don’t know this. And it can get you in trouble. I saw this first-hand with George and Faye.

George was referred to me shortly after Faye passed away from pancreatic cancer. This was a second marriage and Faye had two children from a previous marriage. When Faye was diagnosed, they had wisely visited an attorney and had a trust drawn up. Faye wanted 1/3 of her assets to go to each of her two children and 1/3 to George, so that is what the trust said.

However, nearly all of Faye’s assets were in her company retirement plan. And Faye never changed the beneficiary designation on this plan to the trust. George was named as the beneficiary.

Unfortunately, George and Faye thought the trust document would take care of this. They did not realize the trust has no legal authority over her retirement plan unless she took the next step of filing updated beneficiary paperwork.

Now, George was in the awkward position of inheriting the entire account. Luckily, George is a good guy, and continues to honor Faye’s wishes by taking withdrawals and then sending the appropriate after-tax amounts to Faye’s children. However, this has unfortunate tax consequences for George, forcing some of his other income into higher tax rates.

Overall though, this case has a happy ending because George is doing the right thing. But not everyone would.

The type of estate planning error that happened to George and Faye could have been avoided if the estate planning had been coordinated with the financial planning. Many attorneys don’t ask clients for a detailed net worth statement. I’m not sure why. They should and they should look at the types of accounts that someone has so they can make recommendations that will work.

An attorney can draft the best documents in the world, but if they don’t make sure the client follows thr