June 14

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Are You a Gold Digger?

Great news! My wife's migraines are improving. Thanks to the accurate diagnosis, the medical protocols are working more effectively. She spent a few nights in a hotel this week so she could be in the dark without any noise around her. We still have a ways to go, but she was able to take a walk on the beach last night.

I was diagnosed with severe sleep apnea. For years, I was so tired that I could nap at a moment's notice- morning, afternoon, or evening. The CPAP machine is a revelation. I feel more rested than...well, ever. I don't know how long I've been suffering from this. It's almost like I have a new lease on life. It was so bad that I could sleep ten hours or more and still be exhausted. If any of you suffer from the same condition, you know precisely how it can take over your life.

Instead of having a graduation party, my daughter decided to go to an escape room with her friends. Escapology on Clark Road is a really fun place.


J. Howard Marshall II was a billionaire. He passed away in 1995. If you don't remember him, you probably remember his wife at the time of his death, Playboy playmate Anna Nicole Smith.

When Marshall died, he completely excluded her from his will, leaving his son the majority of his inheritance. Anna Nicole Smith sued, claiming that Marshall had promised her half the estate.

The case went to the US Supreme Court. Twice. It took twenty years to resolve the issue. Finally, a probate judge in Texas denied the request to sanction Marshall's estate. Anna Nicole Smith did not get $44 million. The will and testament were preserved.

Let's discuss your will and a few other critical financial 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.

There are four essential legal documents you need to prepare for retirement.

Your Last Will and Testament.
Your Health Care Advance Directive
Your Durable Power of Attorney
Your Trust documents

Your Last Will and Testament

You all know what this means. It tells everyone who gets your stuff. For example, you may wish that all your assets be 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 straightforward. Before the money can be passed on to the beneficiaries, creditors get a chance to collect any unpaid bills.

There are somewhat significant fees associated with the probate process in Florida:

Court Fees: $400 - $500
Personal Representative Fees: 3%
Attorney Fees: 3%
Appraisal Fees: $500 - $2,000

The executor (personal representative) handles this process. If you have gone through this process, you know that 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, IRAs, 401(k)s, life insurance, and annuities do not go through probate. They go instantly to the heirs.

Homes, farms, and other real estate are notoriously messy to leave to heirs. Probate is complicated. Kids fight. You need specific instructions on what you want done with the house.

Health Care Advance Directive

Here’s something that is super fun to think about. Who gets to make medical decisions if you cannot 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.

Of course, this document outlines if and when it is time to pull the plug. (Like I said, it's not a really fun document.) If you remember Terri Schiavo's controversial case, you know how important this document can be.

Schiavo sustained a cardiac arrest in 1990, leaving her in a permanent vegetative state. Her husband and her parents battled in court on whether or not Terri should continue to be kept alive by machines. The battle lasted for fifteen years, until 2005.

Durable Power of Attorney

A durable power of attorney shows who can handle your financial affairs if you cannot do so 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. Does Mom need money sent from her IRA to her checking account for important expenses if she is incapable? Without this document, you cannot make that transfer.

A typical example is selling a parent's primary residence upon entering an assisted living facility. You need to be able to act as their representative.

This doesn’t only apply to elderly parents. It can also apply to a spouse with a sudden injury who cannot communicate his/her 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 a pile of money into your kids' (or grandkids') laps all at once, a trust gives you control over how and when they receive the money.

Examples:

"Upon my death, my son gets 25 percent of the money when he turns 25, 25 percent when he turns 30, and the rest when he turns 35."

"Upon my death, my children may receive 5 percent 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 percent so the trust fund will last forever).

Trusts allow you to control your assets beyond the grave and protect your money from being in the hands of people you don’t like.

"Upon my death, these trust funds may be paid 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, their ex could go after half of the assets, including the inheritance. If the money stays in the trust, they have no claim against those assets.

What if one child gives all the care to elderly parents? Should they get more of the inheritance? These documents would spell this out and hopefully stop 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? Would you prefer it go to your grandchild? Or a charity?

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 over ten years ago, and court battles still rage.

Be Blessed,

Dave

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