October 5


Michael Jackson is still getting sued. And he died ten years ago.

Let’s talk about the importance of wills and other important financial documents. 


Note:  I am not an attorney.  I know just enough to give you the basics. 


When it comes to legal documents there are four basic items.


Your Last Will and Testament.

Your Health Care Advance Directive   

Your Durable Power of Attorney

Your Trust documents


Is this stuff fun to think about?  No.  Is it something you’ve been putting off for years?  Probably.  Do you know it is important?  Yes.  


Your Last Will and Testament.  All of you know what this means.  It basically tells everyone who gets your stuff.  For example, your may wish that all of your assets are split between your three kids.  


Now, whatever passes through the will has to go through a process called “probate.”  Probate seems to be a scary word to people, but the concept is very simple.  Before the money can be passed on to the beneficiaries, creditors get a chance to collect any unpaid bills.  


The “Executor” or “Executrix” handles this process.  If you have gone through this process, it’s not a lot of fun.  You should be very proud of yourself for putting up with the hassle.  For large estates, this process can last for a year or more.  Smaller estates can expect about six months before the assets are distributed.  Remember, IRA’s, 401k’s, life insurance, and annuities do not go through probate.  They go instantly to the heirs.   


Quick Dave Note:  Homes, farms, and other real estate properties are notoriously a mess to leave to heirs.  Probate is complicated.  Kids fight.  You need to have specific instructions as to what you want to be done with the house.    


Health Care Advance Directive.  Here’s something that is super fun to think about.  Who gets to make medical decisions for you if you are unable to do so for yourself?  This document better allows your loved ones to advocate on your behalf.  It gives them access to all your medical records and allows them to authorize medical procedures.  And of course, this document outlines when it is time to pull the plug.  (like I said, not real fun document)


Durable Power of Attorney. A durable power of attorney simply shows who can handle your financial affairs if you are unable to do it for yourself.  Often a spouse is put into this position. You would be surprised at how many things a spouse cannot access without a power of attorney in place.  Does Mom need money sent from her IRA to her checking account for important expenses if she is not capable?  Without this document, you cannot make that transfer. 


A common example is selling Mom’s primary residence upon her entering into an assisted living facility contract on her behalf.  You need to have the ability to act as her representative. 


This doesn’t only apply to elderly parents. It can also apply to a spouse with a sudden injury where he/she is unable to communicate their wishes.  


Trusts.  I’m sure you’ve heard the term “Trust Fund Baby.”  What does that actually mean?  Trust documents give you control of your money from beyond the grave.  Instead of dumping your money into the laps of kids all at once, a trust gives you control over how and when they receive the money.  




“Upon my death, my son gets 25% of the money when he turns 25, 25% when he turns 30, and the rest when he turns 35.”


“Upon my death, my children may receive 5% of my trust value per year.”  (This is a common strategy for charitable trusts.  If the money is invested, the portfolio should make an average of 5%, so that the trust fund will last forever).


Not only do trusts allow you to control your assets beyond the grave, but they can also protect your money from getting in the hands of people you don’t like.


“Upon my death, these trust funds may be paid out to my daughter and her children.  In the event of a divorce, my son-in-law has no rights to this money in the trust.”  


Why is this important?  If you dump a lot of money into your child’s lap when you die, and your child then gets divorced, her ex could go after half of the assets, including the inheritance.  If the money stays in the trust he has no claim against those assets. 


And how about…


If one child gives all the care to elderly parents. Do they get more of the inheritance?  These documents would spell this out. These clear directions could stop any fighting between the kids. 


What if your kids face a lawsuit?  Trusts can help protect those assets.


What happens if your child dies, and their spouse gets all the money?  Are you ok with that?


I hope this at least gets you thinking about your own death.  I’m just kidding.  Don’t think about that. 


It is so easy to ignore these issues.  Just do it!.  Get it out of the way.  Do you know who didn’t have any of these documents upon his death?  Michael Jackson.  Can you imagine the mess?  Can you imagine people coming out of the woodwork trying to get their “share” of the loot?   He died ten years ago and court battles continue and will continue to go on for years and years. 

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