Financial Focus – July 24th, 2019

Announcer:
It’s time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indexes mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker dealer, member of FINRA, SIPC. Investment advisor representative Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now, here’s today’s Financial Focus program.Nate Kreinbrink:
Good morning, and welcome to this week’s Financial Focus brought to you each and every Wednesday morning right here on KROS. This is Nate. James is joining me again today on another beautiful late July Wednesday morning. Hard to believe that we’re at that point of the year already. The summer is just flying right on by.

James Nelson:
Yeah, exactly. Nice temperatures for this time of year. School is going to be getting back in session before too long. I know the kids are getting school supplies already and that seems crazy, but that time of year.

Nate Kreinbrink:
It is, and we’re currently running our annual school supply drive up at the office there.

James Nelson:
Yup.

Nate Kreinbrink:
The lobby is starting to fill up. It seems like it just keeps multiplying every day, which is a great thing as far as being able to take some of those supplies and distribute them to the areal schools as far as for those that may need a little extra help in that area.

James Nelson:
Yup. It’s always a need each and every year, and it’s great that our clients are able to participate and help us out with that.

Nate Kreinbrink:
It’s always great to see the lobby filled up with that type of stuff this time of year.

James Nelson:
Yeah, yeah.

Nate Kreinbrink:
Getting into today’s show, I know, again, we always talk as far as what direction we want to go. We’ve talked tax planning quite often, retirement planning, having a big plan in place. One of the steps or one of the parts of that plan is estate planning, and I think it’s a part that people are aware of, but oftentimes gets overlooked and maybe kind of kicked to the side a little bit until it’s oftentimes too late, which we’ve seen in some instances when we sat down and met with people.

Nate Kreinbrink:
But a lot of times, people think that they’re not necessarily qualified for estate planning because they don’t have enough assets or they don’t have their… their accounts aren’t as big enough, which is actually farther from the truth than what it really is, and that’s when it becomes even more important to understand what your options are and to make sure that your accounts are titled Correctly to make sure that they’re going to go where you want them to go after your passing. A lot of times, it just has to focus on wills, trusts, powers of attorneys, beneficiary designations, and we could spend a whole show on each one of those, but again, I’m trying to touch briefly on some of those. I think just talk about the differences today.

James Nelson:
Yeah, and that’s a big thing. It’s understanding what actually goes through that estate plan.

Nate Kreinbrink:
Mm-hmm (affirmative).

James Nelson:
Most people think in terms of wills, “Oh, I updated my will so I’m taken care of.” Well, no. Your 401(k) is beneficiary-driven, so you’ve got a beneficiary form on file. Your IRA, same thing, beneficiary form. Those are generally some of the biggest assets that people have in their names, and the will or the trust isn’t going to control those whatsoever, unless we want it to. Those people usually have individuals named on those beneficiary forms so those have to be current. Those have to be correct. How many times have we seen an ex-spouse or a parent in some situations where someone is not married and doesn’t have kids, and they named a parent, the parent passes away, and the beneficiary forms aren’t updated? This is all part of estate planning in general, and the easiest thing to overlook and probably the most mistakes we see is just relating to beneficiary forms.

James Nelson:
Now, if we look at wills versus trust, when do I need a will, and when do I need a trust? Like you mentioned, Nate, most people think it’s based off assets and not necessarily. The trust allow you to avoid probate and put in some contingent terms, I would say, to maybe have some more control than outright distribution through a will, and there’s obviously plenty of other differences, but I think those are maybe two of the big points. Avoiding probate, which can be a long, drawn-out, expensive process, and having some control when kids get it, when beneficiaries get it, how they get it. Is it held in trust or is an outright distribution later on when they’re maybe a little bit older? All of those things can be accommodated through a trust, and people need to know those differences, and kind of weigh the pros and cons, and figure out what the best path is.

Nate Kreinbrink:
Right, and I think that probate point that you mentioned is extremely important because, again, a lot of times, people see the estate planning price tag upfront, and it may cost them a little bit higher right now than what they’re thinking of what they wanted to spend. But then, when we start going through it and they start understanding as far as if your… all your assets would go through probate, and how they add everything up, and it’s a percentage of your total value that you’re paying on just for the estate or the courthouse to be able to tell the descendants as far as where your assets should go, I think they start swaying their decision quite often.

Nate Kreinbrink:
Then, again, the privacy thing. I mean, as far as with the… If you go through probate and through a will, everything is public knowledge. You go down to the courthouse, someone wants to look up as far as what value you had and all your assets, that’s public knowledge. If you go through a will, they can actually look that up. Where a trust is you can maybe keep it a little more private as far as what you had in your assets and how that’s going to be distributed, and I think that’s an important thing when you start looking at multiple generations.

Nate Kreinbrink:
Then, when you said as far as being able to add some different layers to the trust, being able to control… essentially, being able to control your assets after your death. Again, this comes a lot into where people have kind of younger children where they don’t want them to have access to the whole estate right away when they turn 18, or right away when they turn 21, or whenever the age that may be, but try to prolong that a little bit out to make sure that that… the assets that the individual had in their estate that they worked so hard to save and accumulate are met for good generations, and can be spread out, and have that long-term exposure to them.

James Nelson:
Yeah, it’s really just trying to protect the beneficiaries. Right?

Nate Kreinbrink:
Mm-hmm (affirmative).

James Nelson:
I mean, the last thing you want is to hand an 18-year-old a check for whatever dollar amount and basically tell him, “Good luck.”

Nate Kreinbrink:
Right.

James Nelson:
That’s probably not going to work out so well, so having the flexibility of the trust and being able to put the terms in, “Hey, you get a third when you’re 25,” or, “You get the second third when you’re 30,” or whatever those contingencies are can be a really good thing. Now, the wills, wills… Going back to just wills in general, they can be fairly efficient for people that maybe have limited assets outside of beneficiary-driven forms. If I’ve got my 401(k) or I’ve got my IRA, and I own my house and very little assets outside of that, that that can be appropriate. I mean, we’re not saying that wills are bad, but the probate process can be expensive and it can be drawn out, but may fit in some situations.

James Nelson:
Other people have problems kind of coming up with an executor or a successor trustee if we’re talking about a trust, and those are issues that you deal with on both sides, but sometimes going through probate if you don’t have those people in line, maybe not the worst decision just because it’s kind of a somewhat streamlined process. So anyway, these are all things to consider and something that we do.

James Nelson:
We sit down with the attorneys that come to our office about every other week, and we sit in with clients and help through this planning process, and I think it’s a tremendous value because a lot of people really haven’t given some of these things much of any thought or they just don’t know how to implement, and for us to be able to sit in there, and then actually have some changes, and take care of beneficiary forms, and take care of all that stuff on the back-end for clients, I know they really appreciate it. It’s something that everybody should go through.

Nate Kreinbrink:
Right, and I think the most important thing with this whole topic is to kind of move it up the list on priorities.

James Nelson:
Yeah.

Nate Kreinbrink:
A lot of times, again, we sit down and meet with people, and we bring up this topic of estate planning, “Hey, do you have a will? Do you have a trust in place?” “No, but we need to. We’ve talked about this for the last 10 years, and we still haven’t done anything, but yes, we need to do that,” or, “Hey, we’re going to go on a trip next week out of the country. We need to get a will or trust done right now.” Well, just because again, it’s usually a life-changing event, something that happens. They’ve seen a family member that has passed away and kind of maybe not so smooth transition of assets from one generation to another, so they’re like, “Yeah, I need to get something done.”

Nate Kreinbrink:
But again, making sure that we make this part of the overall discussion. If you’re not having this discussion with an advisor that you’re working with, it really needs to be because, again, the worst thing we want to do is work all of our life to save assets, to accumulate them, to sacrifice, to maybe have something to pass on to the next generation, and then it’s not set up the way it’s supposed to be.

James Nelson:
Sure.

Nate Kreinbrink:
Or if there’s a life-changing event, you get married, you remarry, you have an additional kid, whatever it may be, we want to make sure that all these documents that we have are continuously updated. Is it something that needs to be updated every month? Absolutely not, but every couple of years, again, we want to take a look at it to make sure that, “Hey, this is what you wanted. Is this still the route that we want to go with everything? And if it is, then we’re good to go. If not, then again, we want to make a little amendment to it to make sure it’s up to date.”

James Nelson:
Yeah, and the other thing we haven’t really touched on, but I will real quick is just POAs, powers of attorney. Who’s in charge of… something happens, and I’m incapacitated, and somebody needs to act on my behalf, sign the tax return, sign checks, talk to doctors? We’ve got power of attorney for property and power of attorney for healthcare. Both of those are vitally important and something that people should consider, and most good attorneys will include those documents when they deal will and a trust. But if not, people need to be aware of that, and ask for those documents, and make sure those are in place because oftentimes, those POAs are used a heck of a lot more than… filing a will or a trust.

Nate Kreinbrink:
Than what they…

James Nelson:
That’s pretty straightforward when somebody passes away, but the POAs are living documents and used all the time if there’s health issues.

Nate Kreinbrink:
Right. I think along with that is understanding those individuals that you are going to put in that position. Are they able to handle that and make sure that they’re aware of that kind of responsibility should that become enacted?

James Nelson:
Absolutely.

Nate Kreinbrink:
The worst thing we want to do is it be a family member. They’re in not a good state because you’re not in good health or whatever, and now they got to make these decisions or whatever, and kind of talk them through what your wishes are, and so they have a better understanding as far as how they should act should some of those be enacted.

James Nelson:
Yeah, no doubt.

Nate Kreinbrink:
I want to mention real quick that every Friday, NelsonCorp Wealth Management is wearing jeans for charity. Money raised in the month of July will be donated to the Fulton Windmill Educational Center. James, I appreciate you joining me today.

James Nelson:
Yeah, always great to be up here.

Nate Kreinbrink:
Again, Nate and James with NelsonCorp Wealth Management bringing you this week’s Financial Focus. Thanks again for tuning in and have a great rest of your week.

Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indexes mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker dealer, member of FINRA, SIPC. Investment advisor representative Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and Nelson Corp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information visit our website at www.nelsoncorp.com.