You know you should have a will–but WHY?

Originally published CNBCYou’ve surely heard the sad news that music legend Prince has died, and you likely caught the fact that he did so without leaving a will. This high-profile case of apparent negligence has rekindled the collective finger wagging over having the correct estate planning documents. But the question remains—WHY?

I had the opportunity to answer this question recently on the Today show, but I wanted to further explore the topic in the hope of providing some additional, actionable clarity:

WHY NOT?

Statistics suggest that a majority of Americans don’t have a will. And, after reading hundreds of these documents, I’ve found that even most people who do have a will have one with sub-optimal language they don’t understand.

Why don’t we do a great job planning for our death?

Save Social Security For When You Need It Most–Later

Originally published CNBCI think we’ve been looking at Social Security retirement benefits all wrong. In the long-running debate about when to take Social Security — as early as age 62 or as late as age 70 — the focus has been on timing your claim to get the most money, in total, out of the social safety net.

This is a circular argument that will never be fully decided until the Social Security recipient in question dies. So let’s shift the focus from the question “How do we get the most out of Social Security?” to “How do we get Social Security when we need it most?”

Simply put, you’re more likely to run out of money at the end of retirement than at the beginning.

You’ll love this–a discussion with a prolific, syndicated Canadian talk show host about the lesson that EVERYONE can learn from the U.S. debt ceiling debacle.  This article spurred our discussion.

Listen to the show snippet here: Finances and Fault

Date: October 28, 2013
Appearance: Finances and Fault
Outlet: AM 680 CJOB
Location: Winnipeg, MB (Canada)
Format: Radio

Start With Your Obituary

This is a guest post from my friend, mentor and co-author, Jim Stovall, who has overcome blindness to become a best-selling author and source of inspiration for literally millions.  Please enjoy.

Most people would assume that an obituary is the final word in a person’s life; however, there was a gentleman who lived in the 19th Century for whom an obituary was a new beginning.  You and I can join him.

Alfred Nobel was a Swedish gentleman who lived from 1833 to 1896.  He amassed a fortune as the inventor and mass producer of explosives including dynamite.  His story might have ended there except for a premature obituary.  When Alfred Nobel’s brother passed away, the press mistakenly ran an obituary on Alfred Nobel.  Among other things, this obituary stated Alfred Nobel was “a man who had made it possible to kill more people more quickly than anyone else who had ever lived.”

Alfred Nobel had the advantage of previewing his own obituary, and he knew he didn’t like it, and he didn’t want to be remembered that way.  So, he took action.

Relatively few people know of Alfred Nobel as the inventor of dynamite, but he will forever be known as the creator of the Nobel Peace Prize and Nobel prizes for literature, economics, medicine, and the sciences.

He changed his lasting legacy 180 degrees by simply becoming aware of his own obituary and rewriting it.  You and I can join Alfred Nobel today as we become aware of the fact that we are daily writing our own obituaries, and if we don’t like the first draft that we have today, we can edit it before it goes to the final press.

We have a tendency to look at the world through a short-term lens.  We consider today’s schedule, this week’s calendar, or this month’s expenses.  If we want to be a high-impact, self-actualized, successful person through the long-term lens, we’ve got to begin writing our own obituary and creating our lasting legacy today.

There are some people like Alfred Nobel whose legacy extends worldwide through the way they have impacted society.  There are some individuals who impact only a handful of people, but their impact is felt at a core level.  You can change the world and leave a powerful legacy either way.  Some people change the world while other people change the world changers.

There are teachers, pastors, coaches, and mentors whose names history will never record but whose legacies will endure as long as thoughts or discussions of greatness exist.  Stake your territory, make your claim, and begin writing your own obituary now while you can still make a difference.

Estate/Legacy App

This is the 14th exercise in a series designed to walk you through an entire financial plan.  The exercise is embedded in an Excel spreadsheet you can download and save for personal use.  You can read the backdrop for the exercise HERE, or just jump right in with the instructions given below:

You’re creating a legacy whether you want to or not, and purposing yourself to make that a story filled with meaning isn’t a box to be checked off, but a different way of living.  And while your estate and your estate plan is merely a part of the legacy you’ll leave, it’s certainly an important part, and we’ve developed an app to help you do that.

Begin or revisit your personal estate plan by completing the Legacy Plan exercise.  Included is an estate checklist to ensure you have the necessary documents updated with the appropriate provisions inside of them.  As you work through the process of getting your documents in line with your Personal Principles, develop your survivor guide which should accompany your estate-planning documents to provide additional details of your wishes to those you leave behind.  You’ll find this downloadable booklet app by clicking HERE.

Incidentally, my coauthor, Jim Stovall, has changed the way millions of readers, and Lord knows how many moviegoers, understand the word legacy through his book, and subsequent movie, The Ultimate Gift.  If you haven’t read it yet, I encourage you to do so.  It is a fast, refreshing read that acts as a great launching point for a legacy plan going well beyond the numbers.

For those who are encouraged to take additional steps to ensure they leave a legacy, not just an estate, the themes exhibited in The Ultimate Gift are now available as tools you can find at www.theultimategift.com.

And of course, you can also read more on the topic in the book Jim and I co-authored, The Ultimate Financial Plan.

The Most Important Love Letters You’ll Ever Write

Originally in ForbesYou don’t want to write estate planning documents because you don’t love meditating on the prospect of your own death.  Sure, you might think you’re mature enough to face that eventuality and plan responsibly to care for anyone or anything you might leave behind.  But even if you’re perfectly cognizant of your own mortality and confident of a secured eternity north of the border, you may not rank a discussion on splitting up your worldly assets and responsibilities with an attorney particularly high.

But your estate planning documents aren’t for you.  Think of them as the most important love letters you’ll ever write.  Find inspiration in knowing that you’re caring for the people and causes you love, even if you’re not here anymore.

The most important recommendation in every financial plan is successful completion of thoughtfully prepared estate planning documents.  So, no matter your age (unless you’re still a minor), marital status or net worth, you need to be considering how to write your WILL, DURABLE POWER OF ATTORNEY and ADVANCE DIRECTIVES.

Here is an estate planning crash course in the form of three videos addressing each primary document in under 90 seconds.  Enjoy!  (Then, act.)

 How to Create a Will in 90 Seconds or Less

 

How to Create a Durable Power of Attorney in 90 Seconds or Less

 

How to Create Advance Directives in 90 Seconds or Less

The Most Important Financial Planning Recommendation for Young Parents

Young-family-portraits If you queried a score of financial planners and hit them with the question, “What is the most important financial planning recommendation for young parents?” I bet 19 of them would mention something about investing, retirement planning, insurance, education planning or tax planning.  But the most important financial planning recommendation for young parents isn’t even completed by a financial planner, but instead, an attorney.

If you’re a parent with minor children, the most important planning strategy you can employ is to have a will written and a guardian established for your children in the will.  The guardian is the person charged with the day-to-day care of your children, effectively becoming their new parent.  If you fail to designate who should hold that penultimate office, your state of residence will decide for you.  Do you trust them to make the right decision?

There are at least two other officers you should appoint in your will—the personal representative (AKA executor) and the trustee.  The personal representative (PR) has the relatively short-term job of walking your estate through the probate process.  You want to choose an anal retentive (for lack of a better term) person who will follow the steps necessary to complete the detailed checklist to close your estate.

The trustee is the designee second in importance only to the guardian.  While the guardian is responsible to raise your children, the trustee is responsible to fund their upbringing.  Before you mistake the need for a trustee in your will as an optional estate planning feature reserved solely for the silver spoon crowd, let me assure you the vast majority of youngish households should be seriously considering the creation of a trust in their will and a trustee to manage it.  I’m not talking about a “trust fund” here but a testamentary trust, a vehicle not birthed until you and your spouse are no more.

The testamentary trust may not exist until you don’t, but you write the rules for it in your will.  It is likely to receive the bulk of your estate—your home and life insurance proceeds—and since most families with a proper level of life insurance will have a testamentary trust with over a million dollars in it, it is important to deliberate over the instructions you give for the trust’s use.  Many wisely give the trustee broad “HEMS” provisions, allowing for distributions supporting health, education, maintenance and support. Additionally, consider scheduling principal distributions over several years—for example, you may distribute one third of the principal at age 25, half at age 30 and the remainder at age 35.  You’re protecting the money both for and from the child.  After all, what would you have done with a million bucks at the age of 21?

A logical question many pose is, “Shouldn’t I just name one person for the personal representative, guardian and trustee?”  After I disclaim that I’m not an attorney and don’t wish to be misconstrued as one offering “legal advice” (an offense punishable by law) I may respond that I prefer to see the person best suited for each office named.  For most of us, it is not one person alone who is an optimal fit for each of the important designations in your will.  Is the person you trust most to actually raise your children also the most financial savvy and detail oriented?  Even if the answer is yes, you may still consider the benefit of having a healthy wall of separation between the guardian and the giant bucket of money in the testamentary trust created under your will. 

It’s not that investing, insuring, education planning, retirement planning and tax planning aren’t important—in fact, they have the highest probability of impacting your life and the lives of your family members, while the guardianship and trustee provisions in your will are unlikely ever to be exercised.  But in the unlikely case that you and your parental partner are both taken from this earth in an untimely fashion, you’ll make that transition much more peacefully knowing someone you trust is designated to care for your offspring and their financial wellbeing.  More succinctly, you can’t write a will after you’re dead.

90 Second Finance…The Bucket Plan

The "technical" term I use most in educating about personal finance is… BUCKET.  It’s useful in so many areas of financial planning.  You put your money into checking account buckets and set-up various budget buckets.  You contribute money to a 401(k) bucket during your working years and then take money out of that bucket in retirement.

This video is 90 seconds of instruction on the primary decisions you face in creating the optimal Will…the document you should have properly written before you KICK the bucket!

The Most Important Financial Planning Recommendation

Estate_planningWhen I say, “Financial Planning,” it’s altogether likely that the first thing that comes to your mind is either INVESTMENTS or INSURANCE.  And while each of those disciplines are fundamental and foundational to every good financial plan, it is easy for me to say that the most important recommendation that I see in most financial plans does not fall under either of those categories, but instead, in the realm of estate planning.

And, of course, the first thing that comes to mind when I mention stuff like wills, powers of attorney and advance directives is, “Oh, yeah, I know I need to do that.”  You’re in good company if you haven’t; over 80% of people don’t have these documents, and most of those who do, have insufficient or outdated documents.  Why is it, then, that I could suggest that the MOST IMPORTANT recommendations in your financial plan fall under the heading of estate planning?

First, if you have minor children and haven’t yet created wills (or you have children who’ve blessed you with grandchildren), you should stop whatever you’re doing and purpose yourself to contacting an estate planning attorney to get these documents drafted immediately.  Ordinarily, I try to avoid using such dramatic words as best, most and immediately, but I’m not exaggerating here!  The reason this is so important if you have minor children is because you stipulate in your will who the GUARDIAN would be for your children in the case that you and your spouse are both… gone.  Sure, the probability of that happening is very low, but if you don’t determine who should raise your children in your absence through a will, your state of residence will decide for you!

Second, whether you just became a legal adult or have recently gained access into the centenarian club, the time is likely to come when you’ll need someone else to help you with a financial or health decision because you’re unable (through a disability) or unavailable (you’re settling on a house and are out-of-town for business).  You can clear up exactly how these things would be handled with a well written power of attorney document and advance directives.  The former allows someone else to act on your behalf in financial matters; the latter, in decisions surrounding healthcare or end-of-life decisions (like the tragic Terri Schiavo case).

Third, of the very few things you can count on as certainty in this life is that your stay here on Earth will eventually come to an end.  So even if you’ve made definitive plans to join the prophet Elijah, who reportedly left the planet on a chariot of fire sometime around 800 B.C., you’ll likely be leaving someone (and something) behind when you go.  Deliberating over what you intend to leave behind—both monetarily and otherwise—may be seen as not only an opportunity, but an obligation for a life-well-lived.

So why do you think people have a tendency NOT to check-off this big to-do item of having solid estate planning documents created?  People have a tendency to avoid conversations about their own demise, as though they might attract it sooner.  Instead, I encourage you to see this as an incredible opportunity!  Whether your 20 or 120, I encourage you not just to leave an estate, but a legacy.

For more information on HOW to put together a proper estate plan, you’ll find a more detailed explanation in Chapter Sixteen of THE FINANCIAL CROSSROADS.

For more information on WHY, enjoy my CROSSROADS co-author, Jim Stovall’s, best-selling novel, THE ULTIMATE GIFT.

Cycling, Peace Signs & the Middle Finger

A friend and I were recently riding our bicycles in the Greenspring Valley area north of Baltimore on a beautiful afternoon.  We were in single file, and I, in the rear, called out “Car back!” to signal to my companion that a car was approaching from behind.  As we hugged the white line, a newish yellow Volkswagen Beetle, adorned with multiple large peace stickers, passed us Cyclingslowly—slowly enough that we were quite capable of seeing the passenger in the vehicle extend the unambiguous international hand gesture intended to exclaim, “F@#% YOU!”

At the moment, I enjoyed the irony, but as I’ve continued to reflect upon it, I’ve reached a trio of conclusions I’m impelled to share:

1)   There are two types of people in this world—cyclists and those who despise them.  I only became a road biker less than a year ago, so I can’t be dismissed as a life-long zealot, but I must say that I simply don’t see validation for any of the reasons given by anti-cyclists to rail against the cycling community.  Sure, there are instances of renegade cyclists ignoring traffic signs and rules, but has that ever actually caused anyone such undue harm that the entire cycling population deserves unbridled hatred?  And yes, it is true that a cyclist may hold a driver up for a moment while waiting for the right moment to pass, but do school buses, farm vehicles and horse-drawn Amish travelers engender the same virulence?  

 

2)   It can’t really just be about anger towards cyclists.  It must be something deeper.  After an errant driver killed Larry Bensky—Baltimore area resident, cyclist, husband and father—some used that as an opportunity to yet again spew derisions on the cycling community.  Is it really possible for someone to have so much angst that they would use that tragic event as an opportunity to make their point?  It can’t be.  This causes me to wonder, in my moments of anger and rage, are the objects of my aggression the cause of my anger or merely the unfortunate recipient?  Oh, the sinking feeling of realizing that I used a customer service person or my co-worker or my brother, my wife or my children as the whipping post for consternation that was mine and mine alone.

 

3)   We must encourage our actions to rise to our ideals.  As I’ve already confessed, I am chief among those who all too often justify assailing an innocent party with the aggregate of days worth of personal irritants.  So I’m not judging anyone here.  But I am asking that you consider—with me—allowing lucidity to enter those moments in which we begin to bristle with frustration and reflect on our ideals… and those symbols that reflect them.  If peace and the peace sign is one of them, maybe we should put one of the peace stickers inside the car to remind us to act… peacefully.