Talking FACS
Host: Dr. Jennifer Hunter, Assistant Director for Family and Consumer Sciences Extension, University of Kentucky
Guest: Kelly May, Senior Extension Associate for Family Finance and Resource Management
Episode 29, Season 2
0:02 Welcome to Talking FACS; what you need to know about family, food, finance and fitness. Hosted by the University of Kentucky Family and Consumer Sciences Extension Program, our educators share research knowledge with individuals, families and communities to improve quality of life.
0:21 Dr. Jennifer Hunter: Hello and welcome back to Talking FACS. This is your host, Dr. Jennifer Hunter, Assistant Director for Family Consumer Sciences Extension at the University of Kentucky.
Today, I'm pleased to have joining me, Kelly May, our Senior Extension Associate for Family Finance and Resource Management. Welcome, Kelly.
0:35 Kelly May: Thank you.
0:36 Dr. Hunter: Today's topic is one that I'm excited about and I'm passionate about; getting started with estate planning.
So, prior to stepping into my current position, I had the opportunity to travel the state and teach the basics of estate planning. So, I definitely know that there is the need for folks to understand and learn more about estate planning. And I also know that it can be very scary and intimidating to people, just because it's something that they don't know much about.
So, I'm pleased today that we're going to have a conversation about just the basics of estate planning and kind of knocking down some of those barriers that might prevent someone from planning.
So, the most basic question that we can start with is what is an estate plan?
1:20 Kelly: So, estate planning involves arranging for the use and disposal of your resources and property after your death. I'm reading a definition when I say that.
So, it's what's going to happen to your things; your property, your guardianship, if you have children. A lot of times people think estate planning is for the elderly, but that's absolutely not the case. If you have property, if you have things that you want to share with other people in a very specific sort of way, or if you have guardianship over others, it's important to set up a plan so that there is a direct line of what happens to those things and not just what the state will determine automatically. Because if you don't have a plan, the state is going to settle it for you.
2:02 Dr. Hunter: Right. The state has a plan for you. I always tell folks that either you can do your plan or the state will do their plan. But everyone does have a plan; it's just who decides it.
And I love the point that you just made that often people will say, “Well, estate planning is just for really wealthy people” or “Estate planning is just for older people.” Really and truly, estate planning is for anyone. I always encourage people, especially if they have, as you mentioned, minor children to really think about developing an estate plan.
I think often when people think about estate planning, their mind immediately goes to wills. But as we're going to talk about today, an estate planning is so much more than just a will document.
How does an individual begin to create an estate plan?
2:49 Kelly: Just by starting. So, the biggest hurdle is not wanting to think about it. It's not a very positive topic; we’re talking about death, really, and nobody wants to think about their death, but it is important to do,
So, getting started is not as hard as it seems. The hardest part is actually taking that first step and saying, “Okay, let's do this and let's start gathering up some information.” And honestly, that's how you start, is you gather up your information.
So, you want to figure out your net worth before you meet with somebody. And that just means all of your assets or the things that you own that are worth something, minus all of your liabilities, which are your debts and obligations and things you have to pay or that you owe on. And that is your net worth.
And as you figure that out, you gather up those papers and those documents into one place that you can formulate the basis of your estate plan and to take that to somebody else to get started.
3:44 Dr. Hunter: This is not an easy topic. It's not anything that people like to think about. And one thing that I would always encourage folks is that I know this is easy to put off, but to look at it as a gift to your family. That this is really and truly making it easier on them if something does happen to you.
And, you know, no one wants to leave their loved ones with more to deal with than what they have to deal with after someone's passing. So, by taking the time now, again, regardless of age, regardless of wealth, because there's quite a few of estate planning documents that have nothing to do with how much money you have, of taking the time to sit down, you know, pick a rainy afternoon or take a day off work to really and truly kind of gather this information up, because that can seem rather daunting.
4:36 Kelly: And there's a lot of documents. I mean, just in figuring out your assets and liabilities and your net worth, but also your records like marriage certificates and birth certificates and all of those vital records, sorts of things and -
4:50 Dr. Hunter: Military service.
4:51 Kelly: Yeah, it's great to keep those documents in one place because eventually you'll need it for something or other anyway. And you'll say, “Hey, it's in my estate plan. I already have it where I know I need to find it.” And otherwise, it may be hard to find these things. And it's especially hard for your family to find these things, if they don't know where you kept them. And they're grieving your loss and trying to work through many emotional things. Like you mentioned, this is one thing that can ease their burden and make it easier on them.
5:21 Dr. Hunter: Right. I will say that because of my role and the fact that I would travel around the state, that my parents have come to hear me do the estate planning program, I don't know how many times. But they did listen and they did get all their documents together and they put them all in one place and I knew exactly where that was.
And then they moved; they just recently moved houses. And so, that was right on the top of my list, after they kind of got in and got settled up, “Okay. So, now where are these documents and where is this paperwork?” Because it is important that you do know where it is.
5:50 Kelly: Right.
5:51 Dr. Hunter: So, let's talk about that. This probably isn't a process that someone wants to walk through on their own. Who can help with the estate planning process?
5:59 Kelly: Right. So, you probably want an attorney. You can do this on your own; a lot of the documents, you can do on your own through websites. But with some things, it's just better to have an attorney. With a will, it might be better to have an attorney, even though you can do it on your own.
They know the laws better than probably you or I and can help you through the questions that you have. And certainly if you're thinking about having a trust, you want an attorney to do that because there are tax implications and the laws changed sometimes and you want to make sure that you have somebody on top of all of that and how to explain it. Because the trust is a legal entity.
6:34 Dr. Hunter: Right. I would often just recommend to folks that this really is not a do-it-yourself type project. That if your estate is fairly small; so, if you do not have a tremendous number of assets and you're not trying to do anything elaborate in the passing on of assets, that it'll be a fairly reasonable fee, that it's not -- As you mentioned, a lot of these are standard forms. So, it's not as if an attorney is creating something new; they're just inputting your specific information. So, it's normally a very reasonable cost.
However, if you are someone that does have a lot of assets and a lot of wealth and does have a fairly elaborate plan for how they would like things transitioned after death, that could be more expensive. But definitely you want to seek professional advice to walk you through that process. There is some costs associated with it, but it's always a good idea to seek professionals in this case.
7:26 Kelly: Right. And if you do have -- You mentioned some of the more elaborate plans that could happen. If necessary, you might also want to work with an accountant or a financial planner; you certainly don't have to, but it's an option and there are professionals, different kinds that you can hire.
So, when choosing a professional, make sure that you interview them. You can interview more than one and that you're comfortable working with them. And please check their credentials and make sure they're licensed to do what they're supposed to be doing and that they have some record of doing it for others, too.
But it is good to find somebody who fits you and who you feel comfortable talking to, because this is certainly very personal information that they're going to help you work through.
8:08 Dr. Hunter: Right. And I will share this, too. In finding those professionals, is make certain it's people that do this on a regular basis. So, I often tell the story about that my brother is an attorney. So, when my husband and I were working on our will and estate planning, I went to him and I said, “Can you just do this for me as a freebie because I'm your sister?” He kind of looked at me and laughed and he said, “No, I took one class on estates in law school.” That's not the type of law that he does on a regular basis.
And I feel so often, when I go out and talk to people that, “Oh, well, my friend's a lawyer and he wrote this up for us.” or “Our next door neighbor wrote this up for us” trying again to save on costs.
Get someone that does this on a regular basis because they're current on the law. They know what can happen. They do this regularly, so they know how to best protect you.
8:53 Kelly: Right.
8:54 Dr. Hunter: When meeting with that attorney or that group of professionals that could help walk you through this process, what kind of documents might they help you prepare?
9:03 Kelly: So, there are several things they could help you with. Well, I think you mentioned a will earlier; that’s one of the first things people think of when they think of an estate plan. It's not the only document you might have.
But your will gives the instructions to be carried out after you die. So, it indicates your wishes for transferring or disposing of your property. And we mentioned it names guardianship, if you have children or somebody else that you're a guardian for.
It designates your executor, which is the person who has to execute the will; that's where the title comes from.
9:36 Dr. Hunter: Right.
9:37 Kelly: So, you need to pick somebody you trust. I've heard you present before, actually. I had the honor of listening to you give this presentation. And there was a very interesting side conversation about, “Can you have more than one person execute your will?
9:50 Dr. Hunter: And you can in the State of Kentucky. You can have more than one.
9:52 Kelly: And you can, but it can lead to some conflict, sometimes. If those two people don't agree or if they don't live close together, it can make it more challenging and actually make it harder on them.
So, don't feel like you have to name all of your children, to be fair. Maybe pick the one who's most willing to take on the responsibility or who lives near enough to go with you to the attorney's office, if needed, to sign papers. Just talk to everybody.
I know that communication is key, and that's one of the things that you often shared in your presentation, and I would absolutely agree that with all estate planning, communication is key and let people know who's the person you've designated in charge, who are you working with and where do you find this stuff?
10:33 Dr. Hunter: Right. There's no doubt about that, that the more you communicate through this process -- And I always tell folks that you don't have to tell everybody every last detail, but give them enough information so that they're prepared.
And that also that there are not kind of shocking surprises. Because we can all think about stories of folks that we know of families that no longer maybe celebrate holidays together because they've had a falling out over the settling of an estate.
And that's what we want to try and prevent by having these conversations early, by developing a plan early; it helps prevent some of that heartache later on.
11:09 Kelly: Exactly. Another document that you might have a professional work with you on is a trust. So, that is, like I said, a legal entity where you're transferring property to the trustee who has to take care of that property for the beneficiary, whoever that is.
And so, you have to very carefully select your trustee because you're giving that person basically the keys to the kingdom.
11:31 Dr. Hunter: That's true.
11:32 Kelly: To handle your choices on your behalf according to the trust documents. So, that should definitely be a document written by a professional who understands the tax law and the tax consequences.
11:43 Dr. Hunter: And I know trusts are -- that term in general is scary to people and often kind of, in my presentations would say, “If you meet with an attorney and they recommend that you need a trust, ask why. And if the answer makes sense to you, then you probably do need to trust. If the answer does not make sense to you, you can ask why again and ask for a little bit better description.”
But that's a decision to think through. Understand the why a trust is being recommended. Think through your particular situation and determine if it applies or does not apply.
12:15 Kelly: Right.
12:16 Dr. Hunter: Never be afraid to ask the professionals that you're working with, questions.
12:20 Kelly: You should understand what you're signing, anytime you sign you anything.
12:23 Dr. Hunter: 100 percent.
12:25 Kelly: Another document that you might have help with is a power of attorney. And there are lots of different kinds of power of attorney. But it's a legal document that authorizes someone to act on your behalf.
So, there are standard powers of attorney where if the purpose is fulfilled (So, it's written for a specific reason) if that ends, then it ends; if you are incapacitated, it ends or if you pass on, it ends.
So, a standard power of attorney is only good for certain situations up and until, usually death or incapacitation.
And there are other kinds of powers of attorney for somebody to act in your behalf, if suddenly you can't make those choices anymore. And so, that might be the type of power of attorney you might want to consider for someday.
Someday, I may not be able to make these decisions. Who would I actually trust, so that when I'm at that point, I'm not picking somebody then who may or may not have my best interests at heart? Let's choose that person now before that issue comes to life.
13:25 Dr. Hunter: And if an individual has become incapacitated, they probably do not have the ability to pick. And if they are unable to pick, then the court will pick for them.
3:35 Kelly: Will assign for them. Exactly. So, a durable power of attorney allows someone to act on your behalf, if you become disabled and a springing power of attorney goes into effect after you are mentally incapacitated.
So, there are different types. And again, it's a legal document that gives specific powers. All right.
So, once you've gathered these documents, you've had your professional help, you've got whatever documents you want in place, you need a place to store it that is secure. You don't want somebody stealing this information. You don't want it just sitting around. You don't want to put all the time and effort into putting this together and then have something happen to it like a natural disaster. So, it's a good idea to invest in a small, fireproof, safe or lockbox; something so that it can be in your home.
It's great to organize this in a binder. I think when I first thought about this, I thought, “Oh, an envelope will be sufficient.” But it ends up being a whole lot of paperwork and it's stuff you might need to access.
14:31 Dr. Hunter: True, it's a lot of information.
14:33 Kelly: You might need to access it for this and that along the way. So, it's nice to have it in a binder where you can just find what you need, take it out, make copies, put it back in.
And it also encourages you to easily go back and look at it every few years. So, we advise that you update it maybe every three to five years or whenever something changes.
So, some of the things that can change would be -- You could have a change in your marriage or your kids; there could be a change with your children. If you move to another state, the laws will be different. So, you might need to see an attorney in that state or if you -- Well, we talked to some people who lived in two states at once; they had a summer house and winter house. So, how does that apply?
So, it is something that you need to look at and update every now and then. If the tax laws change, you might need it for that.
And also, you want to review your account beneficiaries. Because you can name things in your will, but some accounts, the beneficiaries you list on the account will take precedence over the will or legal documents. So, your retirement accounts and your life insurance policy.
It's very important to have the right beneficiaries listed. And if they give you a spot to put a contingent beneficiary, that's the person who gets it, if the first person in line doesn't for some reason. If they're if they pass away before you do, then you have a backup plan for your backup plan.
15:53 Dr. Hunter: True. And there's so often that we see where someone has not updated a beneficiary.
Kelly, thanks so much for being here today and sharing about this topic. And I know we have a wealth of resources that will be linked in the show notes for individuals that want to learn more.
16:09 Kelly: Thank you.
16:11 Thank you for listening to Talking FACS. We deliver programs focusing on nutrition, health, resource management, family development and civic engagement.
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