The Smart Estate Plan, Part 2: What to do with the Money

In Part 1, we covered the basics of your will, including guardianship and execution of the will. Now let’s get into how to handle the money.

Here’s the reality. Premature death by a spouse is usually a devastating event for people. First, they’re overwhelmed, then disoriented, depressed, confused, lonely. Children are acting strangely, impacted by the event in ways that neither they, nor anyone around them can understand. On top of this, there’s only one person caring for the kids now, and maybe they have a job that’s asking “when will you be back?”

Does this seem like a time when you’d want your spouse having to deal with the complexities of the finances and investments? No.

Now picture this, your spouse suddenly, within weeks of your death, has $2M, $3M or $10M sitting in their checking account.

Maybe they never handled the bills.

Maybe they never handled the investments.

You expect them to handle this well? I’m sure you think your spouse is smart, level-headed and can learn quickly right? But remember, they just lost the love of their life, partner, father or mother to their children.

What’s going to happen when they go to the bank and talk to the teller? “Mrs. Smith, I see you’ve got quite a large account with us suddenly. Would you like to meet with Matt, our investment professional?” Compelled by the itch to ‘get the money working’, might they invest with this person?

What about that old friend who has always had that great idea to open a combo taco stand-nail parlor and now finally has friend who has the money to fund it? Think there might be a financial mistake made here?

What about when your spouse eventually is ready to date, and meets someone. Is it good for that person and your spouse to both know in the back of their minds that millions of dollars are in the bank? Couldn’t that make things weird? Won’t that cause icky conversations like a pre-nup to be discussed at some point?

Not to mention if they got deeply involved, married this person, realized it was a mistake and divorced; guess who could get a good piece of your money?

What about if the circumstances of your death, say a bad car accident, was your fault, and your estate is facing a lawsuit.

OK, enough already…what am I getting at?

Getting the money outright vs getting it in trust.

Now imagine this scenario. You died. Your spouse called the lawyer, financial advisor and insurance agent, as mentioned in Part 1. They help process beneficiary claims, transfer accounts and process life insurance payouts.

But the assets DO NOT go into the checking account, they are automatically invested, and all the bills get paid, starting immediately.

There is no pressure to start handling the finances.

There is no pressure to “get it invested”.

The money is shielded against any lawsuits or creditors.

Since it’s not in your spouse’s hands, it’s not available for any creep to get a hold of, even if there’s an emotion-driven relationship mistake made.

What am I talking about? The smart way to handle the assets after death. Having as much as possible paid directly into trust for the benefit of you spouse (and kids).

How does this work?

Step 1: You get your wills done (see Part 1.) and include a “testamentary trust” provision.

Step 2: You agree on who will be the co-trustee, along with your spouse, of the trust.

Step 3: You inform that co-trustee and ask them to accept the responsibility.

Step 4: In the event of your death, the co-trustee carries out the process of investing the money, paying the bills and supporting the beneficiaries.

Pro tip: Caution against naming your brother, financial advisor, accountant or pastor as the co-trustee. There are all kinds of problems with this. They get old. They may not be qualified to do a good job. They may be prone to conflicts of interest. 

What should you do? Pick a professional trustee. I prefer a trust company.

Trust companies have the highest level of responsibility to manage the investments appropriately, distribute the funds according to the trust document, prevailing customs and law precedents, and are impartial. And it won’t cost you more to employ them in this role. They charge a similar fee, based on assets in the trust, as advisor would. Trust companies don’t get old, they’re qualified to do a good job, and they don’t have personal, potentially uncomfortable relationships with the beneficiaries.

What about control?

Ah yes, that comes up all the time, and here’s what I tell people: Anything GOOD your beneficiary could do with the money in their possession, they can do with it in trust.

All their costs of living will be paid for. Housing, education, clothing, travel, health care, and “others”, in line with the lifestyle they are used to. They could start a business (after a real business plan process has been completed). And beneficiaries are ALWAYS entitled to 5% of the principle regardless.

But if there’s ever a problem, your spouse or children can have the right to fire the co-trustee at any time.

All the potential problems are avoided. It doesn’t cost more. It’s the right thing to do.

I always tell clients your will is not about you, it’s about how you leave the situation behind for the people you love. Do you want to add stress to an already awful situation or make it as stress-less as possible? Do you want the process to be difficult or easy? Expensive or inexpensive?

Consider having your assets paid into trust, and your family will thank you.

Let’s do it!


Wells Fargo Wealth Management, what the hell?

Ugh, read this…



The Smart Estate Plan, Part 1: The Basics

As a financial planner, I help people figure out a plan for the entirety of their financial needs. I help them figure out how much money to save for their typical goals, like retirement, education, weddings, bar mitzvahs, etc. I help them put together insurance plans to cover the financial boogeymen that can ruin everything, death or disability. Finally, we handle their estate planning, and things often get weird. You’ve got a 401k, maybe some non-qualified investments, a home and a big chunk of life insurance, adding up to millions of dollars. This is not unusual.

The first problem: They’re not sure they need a will. Many people confuse the need for a will with extreme wealth, as in an estate big enough to be exposed to estate tax. But the primary needs for a will (and the related ancillary documents) have nothing to do with wealth.

First and foremost: Guardianship

Picture this: You finally take that weekend away from the kids. Toes in the sand in the Bahamas, fruity cocktail in hand. But on the way back, your plane doesn’t make it. Who’s taking care of your kids? Some people think about their own parents,  or more often, a sibling and their spouse, but there are common problems with these solutions. Your parents may be pretty old already, or will be by the time your kids are grown. Your sibling may get divorced. So here’s some guidance:

  • Pick the person, not the couple: when you choose your brother John and his wife Mary, chances are you’re actually choosing your brother John. If you name them both, and they divorce, or he dies, you could have a custody mess, with all best intentions (your sister-in-law and your other siblings ALL love your kids right?). This is a mess we want to avoid.
  • Pick the person who best represents your values about raising kids. Don’t worry so much about location. Your kids will get over changing schools, states, even countries! And don’t worry about financial circumstances. You should have taken care of the financial needs of your kids through your financial plan, life insurance and proper trust planning (more on this later), so this shouldn’t be an issue.

Pro tip: If you and your spouse are struggling with agreeing on whom to pick. Sit down in different rooms and make a top 3 list. There is usually at least one person on both your top 3 lists, and the first one “wins”.

Second: Executor

This person’s job is to get the will and do what it says. No special skills are necessary to do this, but a familiarity with the family certainly helps. Simple solution: Spouses name each other, and a close sibling as a contingent.

Pro tip: Have a contact sheet with the names and phone numbers of your attorney, financial advisor and insurance agent handy. Also keep some kind of semi-organized inventory of the policies, accounts and group benefits info in one place for easy processing.

Third: Trustee

Here’s where it gets complicated; handling the money. In most cases, I find my client prefer to go with a testamentary trust plan that I help them develop, explained in Part 2.

Some things to scare you into action!

The state you live in already has a will written for you. Typical provisions will include provisions like:

  • Equal distribution to your kids, or to your siblings if you don’t have kids (or they took that ill-fated trip to the Bahamas with you).
  • Because the state follows a pretty set protocol, the one guardian you WOULDN’T want could be the one the state chooses.
  • Dying without a will (intestate, as the court calls it), could mean maximum time in courts over the next year or so, and maximum costs (easily thousands) of court and possibly lawyer fees.
  • While your kids are minors, their will be a trustee named to handle the money you leave behind (God knows who that could be!), and the money will be flushed out to them after they reach adulthood, like age 18! Millions of dollars handed to an 18 year old. What could go wrong?

Finally, the ancillary documents: 

Health Care Proxy: Someone to make health care decision for you if you are incapacitated. Name your spouse, then a sibling who lives nearby.

Living Will: Directions for if you want to be kept alive by artificial means. Remember Terri Shiavo? Don’t do that to your family.

Durable Power of Attorney: Similar to the Health Care Proxy, but authorizes someone to make your financial decision if you can’t.

Happy Planning!

Is your advisor pushing IUL?

I’ve dealt with the “hottest” (I know, it’s life insurance) product booms and busts for all my career. I’ve always been leery of products that promise amazing results (Variable Life for example), and always found they don’t live up to the hype.

Anyway, these days Indexed Universal Life is the hot one, and I’m once again reviewing the merits on behalf of a client. In short, there are MANY issues and concerns, and you should go in wide-eyed and well-informed if you ever buy one of these.

Here’s an excellent article from The Bishop Company explaining:

Buyer beware!


An Underrated Perk of Being a Financial Planner

One thing no one talks about in my business is the enjoyment clients bring THEM. Yes, we’re paid to help our clients. Maybe I’ve been lucky, but one of the things I find most valuable about my work is the clients themselves.

Here are some examples of clients of mine:

  • The former CFO of a major Healthcare/Hospital Network
  • A Hollywood producer
  • A TV writer
  • A cardiac surgeon
  • The CEO of a charter airplane and flight training company (with his own book)
  • A franchise broker (has a book)
  • An auto dealer consultant (also, a book)
  • The president of the leading provider of Emotional Intelligence (multiple books)
  • A contractor who built Marc Anthony’s house
  • A currency trader
  • An immigration lawyer
  • Multiple bank and Wall Street executives
  • The owner of one of NY’s most famous restaurants (and children’s book author)
  • A leading occupational therapist in NYC

The list goes on and on. They are diverse, which makes it interesting for me. I love getting to know a little about each of their worlds. They also provide valuable resources for me. Believe me I tap into the car guy, and plane guy, the cardiac guy whenever I need them! I hope they sense the enthusiasm I have for not only helping them with money, but in learning about their little (or not so little) slice of the world. I think they do.