99. The Importance of an Estate Plan, Part 2

Apr 8, 2022

Do You Have a Power of Attorney?

Anywhere from 50% to 60% of Americans don’t have a will. Does this surprise you? However, more and more people are becoming more aware of the 6th pillar of the Redefining Wealth Process, estate planning. On today’s episode, we are continuing our conversation on estate planning and why it’s so important for you and your family. We will explore the key documents you need to consider when building out your estate plan and the types of trusts that may be applicable to your situation. 

Your Power of Attorney is really the starting point for a sound estate plan. This document is essential for everyone, whether you have a trust or will. You’ll need a Power of Attorney for both your finances and healthcare. You need someone that can step in if incapacitation has occurred. Even with legal documents, sometimes custodians request an order from probate or their own documents. If you’re doing estate planning yourself rather than with a financial professional and attorney, these are the nuances you’ll probably be missing. 

State laws seem to change rapidly, so you must review your estate plan on an annual basis. Courts can challenge and scrutinize these documents if they aren’t up to date. Furthermore, giving an agent broad legal authority over principles of property with very little detail instructions may lead to an abuse of power. The Power of Attorney is used for specific circumstances, but is of great value in conjunction with a revocable living trust which can protect you, your family, and your property against these dangers. Join us as we further discuss the documents, trusts, and, professionals you need to be working with to stay protected and safe, financially and beyond. 

Further reading mentioned in today’s show >> 

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https://podcasts.apple.com/us/podcast/retirement-talk-podcast-with-laura-stover/id571347188

 

Links

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lswealthmanagement.com

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Timestamps (show notes):

0:13 – Quick recap on estate planning 

5:25 – The Power of Attorney for finance and property 

8:15 – Even with legal documents there may be problems 

10:38 – Keeping your documents updated 

16:55 – Client story of revoking Power of Attorney 

19:50 – Springing Power of Attorney 

21:45 – The Power of Attorney and revocable living trust

26:46 – Irrevocable life insurance trust 

32:11 – A dynasty trust if you have significant wealth

36:19 – Things to think about when making your plan 

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Review the Transcript:

Ron S.:

Welcome to Retirement Talk, the Redefining Wealth show, your source for financial information specifically for pre-retirees and retirees. We’re here each and every week to help you better navigate during these economic times. We’re here to discuss thoughts and ideas in the field of finance and retirement, as well as discuss trending topics that could impact your bottom line. We’ll break it all down. These discussions can help you make better informed decisions so you can make better financial choices and live the lifestyle you imagine for retirement.

Laura Stover is a registered financial consultant and CEO of LS Wealth Management, as well as founder and owner of LS Tax, a consulting firm. She’s been featured in Forbes, CNBC, and The Wall Street Journal. I’m Ron [Stutz 00:01:00], our topic for today is the importance of an estate plan, part two. Now, here’s your host, Laura Stover, along with co-host for this week, certified financial planner, Michael Wallin.

Laura Stover:

Hello, hello, hello, and welcome to Retirement Talk, the Redefining Wealth show. We are here this week, again, episode 99. We’re almost to our 100th episode. It’s like a big birthday milestone. We’ll start celebrating a little bit early, we think. Each and every listener, some of you have chosen to reach out these past few weeks after becoming new listeners or listening for quite a few months. And I want to extend my gratitude to each and every one of you that have reached out and have spoken with me personally. I have my right hand co-host back in the chair, looking across the screen, the dazzling certified financial planner. Oh, look at him grin. I wish this was on TV. Michael, how are you?

Michael Wallin:

I’m doing great. And Laura, it’s good that we’re on radio, because I do have a face for radio. So I’m glad to be back this week. I know it’s going to be a great show and a great topic, very timely for those that are listening in today.

Laura Stover:

Well, we’re talking about estate planning. Go back and check out episode 98 if you happened to miss the show last week, that laid the foundation on basic estate planning. We talked a little about wills. I also talked about some procrastination that people tend to do. They think they have plenty of time and that they’ll get to writing their will or maybe they think, “Oh, I just don’t have that much money, so maybe there’s a certain threshold I really need to be at before I even have a will.” Or, “I don’t want to pay an attorney.”

Or they go to websites that… Nowadays you can Google almost anything. And that’s great to be self-sufficient and to do self-education, but I think that can potentially lead to some landmines. And we did talk all of about that because if it’s very generic and you’re pulling documents off online, most estate attorneys are going to say there’s issues that can come up because you’re not the attorney and you don’t know what you don’t know. Maybe you don’t want your kids to fight, but there can be other issues that you have no way to know about because you didn’t go to law school. And if you’re on the fence about that, it can become very, very stressful.

So I covered a lot of those areas in last week’s show. And going on now to a state planning part two, and we’ll probably revisit this on a frequent basis because I believe there’s a lot of regulatory changes around the corner. I believe that more and more people are becoming aware of the need to use this six pillar of our Redefining Wealth process, which is the estate planning, the income, the investment, the healthcare, the tax planning, the liquidity that you have in your portfolio, but the need for a sound estate planning. So by most estimates, anywhere from 50 to 60%, 50 to 60%, of Americans do not even have a will.

The COVID-19 pandemic has increased the number of people who have created a will or estate plan, but there’s a good percentage of Americans that are without one. So today, we’re going to cover key documents. Michael’s going to help me walk through the key documents that we need to understand what they are and why they’re important, and just try to get a little deeper depth of knowledge on some of these areas. And I think it’s good to talk about some different types of trust. And I’ve selected three that I think are very relevant that maybe the majority of people have not heard of, but I consider them pretty important to know about.

So without further ado, let’s hop right in and start with documents. First and foremost, Mike, the power of attorney for finance and property. Now, this goes hand in hand with revocable trust, and that empowers the trustee to manage property owned by a trust. And that’s really the start not the end of a sound estate plan. So power of attorney for finance and property and some of the documents that we want to jump into, durable power of attorney and all of these great things. So let’s tell them all about it.

Michael Wallin:

Well, the power of attorney is essential, and that’s whether a person has a trust or they have a will. I tell everyone, you should have a power of attorney for your finance, for your healthcare because you need somebody who can step in in that time period where disability or incapacitation has occurred, an individual needs to step in on your behalf and pay bills, utilize your finances to be able to execute daily living activity. For instance, as an example, so listeners understand what we’re referring to here, COVID, we’re all familiar with the cases of COVID, individuals were going into the hospital, and many cases individuals were in the hospital for 30 days, 45 days, 60 days.

Individuals that did not have a hour of attorney over their finances while they were incapacitated were really exposed to not paying their bills, not having other finances taken care of. Now, for us, as we manage individuals, investment accounts, we have a limited power of attorney. They execute those with us so that we can do their investing on their behalf early on. That’s not always the case. So I recommend that individuals have an individual that they set up that is their chosen agent that can work on their behalf when they are incapacitated or unable to be able to execute decision making on their own.

And that goes whether it’s on the finance side or somebody that’s making the decisions for you through a power of attorney for medicals, because if you’re not there, you need to have a chosen agent, a trusted individual that can step in on your or behalf.

Laura Stover:

Yeah. Or even with a revocable trust, the family could lose control over some of its legal affairs without the power of attorney for finances in particular. There’s two kinds, we’ll get to the healthcare type here momentarily. But when it comes to the finances, this is also an interesting fact, if people have their documents or they have their wills in order; oftentimes, clients will bring those in for us to update with the custodians that we’re working with. But those custodians, to your point, require a limited power of attorney of that person in addition to the will that the client has had drawn up, and that’s just a standard policy.

And if they don’t sign the custodian paperwork in addition to that, then you can run into snags where they’re not going to recognize maybe the family attorneys will that was designed in some cases, and I’m sure you’ve seen that too.

Michael Wallin:

Well. Just recently, we had a family member that passed away. We did have will, had a trust, had power of attorney documents. And unfortunately, we had to actually go get a testamentary letter from the probate court before we were able to work with these custodians. And that’s an important thing to understand, is even though you have legal documents drawn up, sometimes these custodians are going to request their own documents or they’re going to want to have an order from the probate court stating that is the last and factual document that was created, that is the one on file with the probate court, before they’re going to release information or any type of financial funding that you may have with that custodian.

Laura Stover:

Yes. So it’s important to understand that because the same as if you’re doing these things yourself online, you’re not really going to probably understand some of these not so common components, and the authority granted can be whatever rights you desire the agent to exercise over your legal affairs and your property. And then obviously, the whole point is so that that authority can be given to that individual to make deposits, withdrawals from your bank accounts, help manage your investments, sell your home, or anything else that you could do yourself, but you might be in a position where you’re not able to execute those things, that’s the whole point of having the POA.

Another important aspect of it, and I know our attorney, I remember him saying, “You want these reviewed every so many years to make sure they’re updated.” State laws seem to change on a rapid basis, and they’re picky in the courts from some reading I was doing. Every three years almost, they suggest that you make sure that these documents are updated. And I’m sure in the state of Tennessee, that this is standard. Although state to state varies with some of their nuances when it comes to estate planning. But keeping those updated every few years is very important because the court really scrutinizes. If you have something 10 years old, that in some cases can create issues if it’s not updated,

Michael Wallin:

Well, it could be challenged. There’s been officials out there, Laura, that could step up and say, “I’m challenging this.” And you could tie up legal documents in the courts to validate those. And mostly in a time when it’s timely to either get funding to be released or to be able to move an estate forward, the last thing that you want to do is have an arguing or bickering between multiple beneficiaries. Some that may be included in a legal document, and then maybe somebody that has been excluded purposely by the donor. And so when you’re the grantor….

And so when we are looking at that, it’s very important that you’re constantly reviewing. It says three years, I would say I would review those documents annual. I would review an annual document, just like you’re reviewing your financial strategy and plans, you look at your tax strategy, you look at your healthcare plans that you put in place. These are not items on a to-do list that you check off one time and you put them in a shoebox and put them in the top of your closet and you just forget about it. These are things that are executable documents to properly, effectively, and efficiently transfer your estate to whom you desire it to go to.

Now, many people may say, “Well, we’re listening to your show here, and I’ve got this person that I would want to represent me, but I really want to give them a power of attorney over me now.” Now, there’s two different kind, there is a limited power of attorney and a general power of attorney. What Laura and I are discussing here today is a limited power, limited to the focus of either finance or medical services. So when you’re looking at that, if you don’t want to execute a person today, you can always have your documents written up with what’s called springing powers.

And springing powers means that individual you’ve selected will not spring into action until an event happens to you, whether it’s disability, death, something that has incapacitated you from being able to work or act on your own behalf. So don’t be fearful of those documents, but that’s why you need to work with a competent attorney that can draw up the legal documents to execute your wishes in the most effective way possible and carry out your desires, whether you’re still living or you’ve already passed.

Laura Stover:

Yeah. Just to recap that Michael, I knew that springing powers was going to come in, and we talked to clients about that a lot. So with the traditional power of attorney, it may not be acceptable to some people because most powers of attorney give the agent immediate legal power to act on your behalf, even though you neither presently need or want any help. So that’s where there is a shortcoming in the traditional power of attorney. So that can be avoided by using the springing power of attorney, to your point. And unlike my those powers of attorney, then that gives the agent a right to act for you immediately.

But the springing power of attorney loves the agent to act for you only after an event. So Bruce Willis has just made it known he has aphasia. It’s a disability, that’s fairly significant, and he’s going to lose communication ability. So I don’t know what his estate plan is, but in this instance, now he has the onset of a disability. It’s definitely impacting him. So that would work in this instance now, the springing power document and that type of power of attorney would it allow his wife or whoever he has chosen to act on his behalf with contracts, money, disposition of assets and so on and so forth.

So rather than risk a lawsuit by honoring a stale power of attorney, and to our point about having it updated. And I am going to throw out the disclaimer, Michael nor our attorneys, we work with the estate planning attorneys. And we believe that is very important to have certified financial planners, investment, a team, along with the attorney to best coordinate the usage, and that will probably be a little more reflective as we get into the trust and why you need a team.

But rather than risking the lawsuit, having that power of attorney become what they call stale, so to your point, also reviewing them on a very regular basis because the financial institution may require a court to establish the validity of the power of attorney. So in most circumstances, your agent’s going to win in court, your family will have lost because the whole point of having a power of attorney was to avoid a trip to the courthouse in the first place. So you have that one problem relative of, or one problem sibling, they weren’t made the power of attorney, the other one was, and it hasn’t been reviewed recently. That could be an instance where something could potentially go wrong.

It just really depends on a number of things, but always wise, as my grandma always said, be safe rather than sorry. Do you want to interject there?

Michael Wallin:

Laura, I want to share a story that happened yesterday because I think the listeners could very well relate to this that may have some legal documents. Now, I don’t think that others may have this exact circumstance, but I met with a client yesterday, her husband had passed, but he had been a very, very controlling individual, even to the point that where… And he passed away a year ago after COVID had come through, they had legal documents that were drawn up. She was not even aware that the legal documents had been drawn up, but as I was reviewing her annuity contracts, I identified that somebody else had signed all of her applications.

And I asked her, I said, “Well, who is this?” And she happened to say, “Well, that was a friend of my husband’s because my husband wanted to make sure that all the money was set up so that I did not have direct access to it.” Which I had my own review or opinions, and maybe there are circumstances I’m not aware of, but this gentleman had signed on her behalf and entered her into four annuity contracts. She had never signed for it. And I asked her, I said, “I see that he lists here his name as power of attorney.” And she said, “Yes, that’s how he established all of those contracts on my behalf.”

And I asked her, I said, “Did you sign?” She said, “I’m not aware of signing any power of attorney.” Now, one of the insurance companies actually sent me a copy of that power of attorney, so she and fact did sign it. And I said, “Is it your desire that this individual still have power of attorney over you?” She said, “Absolutely not.” And I said, “Have you ever revoked the power of attorney?” She said, “I have not.” So we are now meeting with the attorney next week to have a legal document drawn up to revoke that power of attorney.

Laura Stover:

That’s a good story. It’s a bad situation, but a good story so that people understand. Now, the person that was the power of attorney, was that an advisor or just a person?

Michael Wallin:

He was not an advisor. They were a member of a church organization. This individual happened to be a member of the church that was good friends with her husband. And there was legal documents drawn up before, and unaware to her, she was signing documents that executed this individual as her power of attorney. And I shared with her that in the event of not revoking that power of attorney and he still has that document, even though it would be stale and it would not be what she would wish, he could actually execute any financial, he could sell her home, he could sell her car, he could enter her into credit cards, he could take out loans in her name.

Laura Stover:

It’s dangerous if you grant an agent, broad, legal authority over the principles of property with very little on the way of detailed instructions or restrictions to prevent what could be an abuse of power.

Michael Wallin:

Absolutely. And that’s where springing powers come in. If I’m making advice to people, I am telling them, you want this event to occur for you to be able to then move forward. If you have a trust, or if you do have a spendthrift individual, which the client in that scenario is not, but if you had a spendthrift child, if you had an individual that may have a drug or alcohol problem, there are reasons to use legal documents and go ahead and execute an agent to service on the front end for an individual. But for a grown adult making competent decisions, executing a person, and again, that was over 10 years ago. And for 10 years, that power of attorney has not been eliminated, and that person has actually had that executable document that he could have done harm to her for the last decade.

Laura Stover:

Yeah. And these are decisions between conversation with a qualified attorney and a team that you trust to help you to understand the difference in these documents and make the best decisions based on your circumstances, your health, your mental capacity, and what your wishes are. But to wrap this up as far as the document side, instead of just using powers of attorney to grant an agent legal authority to do everything imaginable, a much better approach could be to use a power of attorney that grants only limited authority in conjunction with a comprehensive estate plan that has added, maybe now you add the other power of this, the center piece being the revocable living trust, because the power of attorneys created for limited and specific purposes, and then that can be of great value in estate planning when used with a revocable living trust.

So an example, the estate planning center piece being the revocable living trust, that’s going to accomplish what is expressively designed to do to help the estate guardianship proceedings while also providing the trustee with detailed and structures that authorize only appropriate use of trust funds to help you and your loved ones and no one else. And the power of attorney supplements that authority then by authorizing the agent to handle any property, any illegal issues not controlled by the trust. And such legal issues could include representing you if you become injured in an accident or advocating for you before government agencies, dealing with insurance or retirement account issues and those types of things.

And other limited powers could include the authority to transfer assets to your trust, but not give them away. So there’s some value there, you might go using a revocable living trust in conjunction with the power of attorney, you’ll just have a little more security and the knowledge that the instructions you leave will actually work as you intend without the court intervention or the risk of being a victim by an unscrupulous agent.

Michael Wallin:

The number one thing that I have seen for 30 years of doing life insurance is a life insurance agent goes out, sits with a client that maybe a young family that’s just starting out and they set up beneficiaries and they’ll set up the insured, they’ll make sure the beneficiary, which oftentimes might be a spouse, but if not, they’ll use children. And if that child is a minor, then that is really not effective. And I hope that everybody that’s listening to the show, if you have a life insurance policy and you’ve got minor children listed on it, that you will heavily consider having a trust set up so that life insurance can pay into the trust, and then you can identify the distribution because if you leave assets in many states, if that beneficiary is a minor, then the probate court is going to hold those assets or the distribution of those assets until that minor child turns age 18 or age of authority for that state.

Laura Stover:

So remember, these are decisions of the heart and don’t necessarily always require the same financial skills you might need to see in a trustee and making sure that you annually look at your documents, making sure you understand the different choices, some in which we’ve presented. That is all part of maybe having those family meetings and making sure everyone is on the same page, and whomever you choose to act as your agent, making sure that you have a thorough discussion with that person so that your desires concerning whether you should receive or refuse healthcare service, there’s also the healthcare powers of attorney, and that’s more or less a discussion.

If you have a terminal illness or if you become incapacitated, making sure people know your wishes. And also that’s a separate document, making certain that that is in place, very, very important to have in place. You don’t want to be in a position where you are in intensive care and then you have things thrown at you to sign when you’re in that kind of situation. So all of those things need to be discussed and the legal documents need to be in place. And these are very important conversations. We’ll be right back. And the second part of the show, we are going to go into more detail about two or three different types of trust that I think will help you with your estate plan. You’re listening to Retirement Talk, the Redefining Wealth Show.

Ron S.:

We hope you’re enjoying the show. If you’re uncertain about your estate plan, let the LS team assist you. Begin with a 15-minute strategy session, go to redefiningwealth.info to review your unique situation. Walk through the Redefining Wealth review, go to redefiningwealth.info, click Review. Learn the steps to the process to help determine that you are on the right path. Schedule a phone or a virtual meeting, go to redefiningwealth.info. Everyone’s situation is unique, make sure you have certainty by a walk through the Redefining Wealth Process. This framework covers six key areas, including estate planning. Now, back to Retirement Talk with your host, Laura Stover.

Laura Stover:

We’re talking all about estate planning on part two. If you happen to miss episode 98, go back and listen to part one. And Michael will probably have to do a part three and a part four because we are really only covering just the high level of this to get people’s minds wrapped around some of the areas that you need to have focus and knowledge about. You hit on the living trust, if someone has a physical and financial, if they’re in a position where they need an estate plan, this is something when you’re both living in a living trust, that’s going to help people to avoid probate or protect minor children, reduce taxes to some degree and ensure some privacy with your estate and some protections while you’re alive.

Now, let’s talk a little bit more about a few types of trust, and I’m going to go down to the ILIT first, the irrevocable life insurance trust, and then we’ll hit a couple of other types of trust. And these are obviously discussions that are important because knowing which type to use, it all comes down to what you’re trying to accomplish, number one, people buy life insurance for many reasons. And I’ve also read if you have existing policies, that sometimes can create issues trying to put them into an ILIT. So there’s a lot of nuances, this is why a good certified financial planner and investment advisor is helpful with the estate attorney.

They may know how to execute and write everything up at the trust, but there can be some issues with policies, maybe not impossible, but it can create some issues. So people buy the insurance and it’s to leverage. In the early years of the policy, you pay a small premium to lock in a large death benefit or the ability to liquefy if a person passes away. The ILIT or irrevocable life insurance trust is really created to own and control term or permanent life insurance policies while the insured is alive and then distribute those proceeds that are paid out upon the insured desk.

It can be owned by an individual like in a second-to-die policy oftentimes that’s the framework in which they’re set up and insure two lives. So one person could essentially be unhealthy, but you could still qualify maybe on some of those, if at least one is a healthy individual. And the reason you may want to do this, well, we know the administration has been side stepped, we have a war going on in Ukraine, we had a lot of COVID issues. There’s a lot of stuff going on, but I don’t think the discussion about taxes going up, we are now starting to hear some things, taxes are increasing. So from a tax perspective, structuring these trust to reduce taxes, that’s really the premise with the irrevocable life insurance trust.

Michael Wallin:

Yeah. We want to move the death benefit out of the estate calculation. And that’s the basis of what the ILIT was designed for. So let’s say you have a large life insurance policy, you don’t want the death benefit to be calculated in against the estate for tax purposes for those calculations. And one of the ways that you do that is you gift living benefit under the gifting rules, you gift it to the beneficiaries and they fill out what’s called a Crummey Letter, which means that they, instead of taking the benefit today, they’re saying, “No, you can put that money into the trust, and then I will take the benefit fit from the trust in the future, which is the life insurance policy.”

So there is a two-step process, and for some, as you mentioned earlier, if they have existing life insurance policies and they want to move it into an irrevocable life insurance trust, it’s a two-year-time period that you’ve got to wait before you could move it in into that third year. And so that in the event of a person died prematurely before that time period was up, then the death benefit of that life insurance would be counted into their estate planning for tax purposes. So again, a lot of times for high-net-worth individuals, an ILIT is heavily designed so that you can maybe gift away your qualified accounts and have some of those dollars that goes in as the gift that you would give to your children.

And that would then go into the ILIT, but you’re leaving your children or your beneficiaries a much larger tax free death benefit. And so again, it helps an individual for their charitable planning, as well as leaving a proper estate for their children or their heirs.

Laura Stover:

I love that Crummey Letter. That’s not the Crummey Letter I sent you, right? No. Oh, you’re talking about… I think it’s named after someone’s last name was Crummey, wasn’t it? That’s where it got the name.

Michael Wallin:

It was.

Laura Stover:

There’s always a story behind some of the vocabulary that you hear on the show here. Now, so the life insurance is used in a multitude of ways, and that can also maybe help a little bit with the passage of the SECURE Act, the elimination of the stretch from a lifetime benefit down now to condensing to 10 years, if it’s important for someone to have those assets pass in the most tax efficient manner, again, it depends on what’s important to the individual, but life insurance could be used for a multitude of things. And you just really have to evaluate what your goal is. Now, the other item on a trust that some people may or may not have heard about, and they were popular some years ago, but it’s called a dynasty trust.

If you have sign wealth and want to spread it over multiple generations while maintaining some asset and tax protection, now can be used in conjunction with irrevocable living trust. Sometimes more than one of these types of trust can be complimentary to one another, but it basically can provide some funds to your descendants need, or if you want to try to mitigate the estate tax across future generations. And we’ve seen some instances of insulating inherited assets from descendants’ creditors, that’s typically the scope in which a dynasty trust is utilized.

Michael Wallin:

One of the things that I like again, it’s the asset protection, but also you’ve got individuals in there that may be a beneficiary today and let’s say this trust was established in 2010 and now it’s 12 years later, an individual may have just graduated from college. Now, they’ve done really well. Let’s say they from their garage, they created computers. And now they’re multi-billionaires, which we know that there’s some very successful individuals in America that were like that. Well, let’s say that that successful person now says, “I don’t need those assets. I was a beneficiary, but can I disclaim and take myself out of that situation?”

Well, what if that individual had not set up a contingent or a tertiary beneficiary, if it’s through the dynasty trust, then that individual disclaiming would be able to step out of the distribution and let the next generation. And unfortunately, a lot of times financial advisors or insurance agents do not do a great job of looking at multiple layers of decedents. However, if you’re working with a competent attorney, they are going to look at that dynasty trust and you are going to have that designed out for multi-generations, and that’s going to be more effective. You have a higher probability that your estate is going to go to the individual that you want in the most efficient manner. when you’re working with an attorney that looks comprehensively at multiple generations in one legal document.

And I think that’s a really good executable plan and good solid advice for anybody that’s looking to have asset protection around that personal property that they have saved or accumulated over their lifetime.

Laura Stover:

That’s a good point. So just to summarize the dynasty trust, it can be used in conjunction with the irrevocable trust, it’s just one of the estate planning tools available to take advantage in fact of a dynasty trust. And then to what we were talking about earlier, Michael, the irrevocable life insurance trust provides another vehicle by which parents can use dynasty trust planning to benefit their children, their grandchildren, or both. And if done correctly, the generation skipping tax exemption can be applied to any money gifted to that ILIT that we were speaking about a short while ago, the irrevocable life insurance trust, and used to pay the insurance premiums.

So some things to think about when you’re looking at how to execute your estate plan, there is a lot to know. That’s why I caution anyone just to try to pull forms offline. I think you can use them for guidance and to become knowledgeable and do some research, but even better, reach out to a team that knows how to execute this, use estate planning attorneys, bankruptcy attorneys do bankruptcy, divorce attorneys do divorce, criminal attorneys, they’re going to defend bad people or people that’s been accused of bad things. Not everybody is a specialist on the attorney front, make sure you have assembled the right team for your unique and specific situation, because the most important part of all is trust executor mistakes.

And I’m going to share this story and then Michael, I want to of course get your take on this because you know what a fan I am, but let’s talk about some big name people that have made mistakes. Now, there’s a lot of them, but I just happen to pick out somebody that I relate to and have followed their life. Elvis Presley earned more than a billion dollars during his career, a billion. Now, we all know he bought a lot of Cadillacs and boy, if we were around during his time, we might have been awarded a pink Cadillac or some guess, he was generous. And that’s to be admired, but why was his estate only worth $10 million when he died?

Well, after that fateful August 9, 1977, Colonel Parker, who was his manager, he no longer had the key to manage or make money from him, but that did not stop him. Instead, he approached the executor of Elvis Presley’s estate who happened to be Vernon Presley, Elvis’s father. Now, at that time, when Elvis passed, his father he became very ill after Elvis died and he was in very fragile health. Parker warned him that he’d be the target of scam artists and pirates. And given Vernon’s heart condition, Parker convinced him to sign a new agreement to let Parker be the one to manage the estate of Elvis Presley and receive 50% of all income received in order to protect Vernon.

Well, this amounted to quite a windfall for Colonel Parker, the income expected to come in through Elvis Presley’s estate in terms of royalties from his music, movies, merchandising commercial uses, his image, likeness so on and so forth would have been astronomical, even if nothing was done to promote it. He after all was the king of rock and roll. And eventually due to a probate court proceeding, an independent attorney was appointed to investigate Parker’s agreement with the estate. The attorney’s 300-page report concluded that Parker’s commissions were unreasonable and exorbitant compared to industry averages.

The attorney challenged the validity of the holding company for Elvis’s merchandising rights, which caused the estate to receive only 22% of related profits. So accordingly, all agreements with Parker were terminated. Yay for that court. In the end, Elvis Presley was too successful and too beloved for his estate not to turn a profit, at least once the influence of the Colonel was removed. So it makes you wonder, how much better off Elvis’s estate would’ve been if his last will and testament had been better. Elvis named his father, Vernon, as the executor and did not name an alternate or a backup choice. Vernon had poor health and an advanced age, not to mention his lack of sophistication to manage assets as valuable as Elvis’ royalties’ income properties.

Elvis’s will left Vernon in a vulnerable position to Parker or others who could have preyed on his naivety. And instead, by leaving it all in Vernon’s hands, he became an easy mark or Parker which ultimately almost bankrupt the estate. So if not for that probate court’s investigation and intervention, Lisa Marie might have been left with nothing but debt. While very few people have a assets that approach even a fraction of the value of the Elvis Presley’s estate, this still provides an important lesson. Too many people make the mistake of automatically choosing an executor or trustee based on who is the oldest child, or perhaps who lives closest.

The key competent in choosing a trustee or executor is trust. Well, Elvis clearly, clearly trusted his father. He should have been more careful to think through who would be in the best position to protect his estate and legacy, it’s especially unwise to name only one executor with no alternate choice, especially when the nominated person’s older. Everyone would be wise to learn from the King’s mistakes. It’s very important for your loved ones left behind to name the most capable and trustworthy executor and trustee to manage your financial legacy. So you don’t have to have the wealth or fame of an Elvis Presley, but there are some very good lessons to be learned from this. It could have been a catastrophic situation.

Michael Wallin:

Sometimes it’s better to look outside of the family. If you do not have an individual that you feel would be able to execute your wishes and desires, there’s organizations, you can look at a bank. A lot of banks have trust departments where they have trustees that you can hire their services to be able to carry out your wishes, desires, and they are mandated to follow whatever the legal document lays out. They are fiduciarily bound to do so. And individuals that are trustees are oversaw by the courts to make sure that they are properly executing the trust based upon the wishes that are outlined there.

Laura Stover:

I hope you’ve enjoyed this week’s show. Thank you for joining us. As you’ve been listening to Retirement Talk, the Redefining Wealth Show, go to redefiningwealth.info, schedule a 15-minute strategy session with Michael or myself. Again, redefiningwealth.info, schedule review.

Ron S.:

Redefining Wealth is a registered trademark of LS Wealth Management. Take advantage of a complimentary plan. Know where you stand regardless of the market, walk through the Redefining Wealth Process and have a clear picture of the key risks you likely will face. Achieve a deeper understanding of how to properly plan for these risks with the Redefining Wealth Framework. Schedule a strategy session today. Go to redefiningwealth.info. Redefining Wealth is a registered trademark of LS Wealth Management. Investing involves risk, including the potential loss of principal.

Any references to protection, safety, or lifetime income generally refer to fixed insurance products, never securities or investments. Insurance guaranteed are backed by the financial strength and claim paying abilities of the issuing carrier. This show is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual situation. LS Wealth Management, LLC is not permitted to offer and no statement made during this show shall constitute tax or legal advice.

Our firm is not affiliated with or endorsed by the US government or any governmental agency. The information and opinions contained herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by LS Wealth Management, LLC. Investment advisory service is offered through Optimize Advisory Services and SEC-registered investment advisor. LS Wealth Management is a separate entity.

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