Motley Fool Money - Prepare to Pass on Your Possessions

Starting point is 00:00:02 Fair to pass on your possessions because it's eventually going to happen. That's right. We're talking estate planning on this Saturday personal finance edition on the Motley Fool Hidden Jabs Investing podcast. I'm Robert Brokamp and welcome to the next installment of our 2026 financial planning challenge. A few days early, usually you publish each episode of our year well-planned series on the first Saturday a month, but we figured this Saturday was close enough. And today we're going to cover perhaps the most unpleasant aspect of financial planning, estate planning.

Starting point is 00:00:36 But it's necessary because while it's nearly impossible, to predict the future when it comes to most aspects of personal finance, there's one thing we can guarantee, and it's that you, me, and everyone we know, will one day pass away, leaving assets and step behind to be divvied up. Here to join me to talk about what you should do to ensure that all your assets go to who you want as quickly and efficiently as possible is my foolish colleague certified financial planner, Stephanie Barini. Welcome back, Stephanie. Thanks so much for having me. I know this may be weird to admit, but I actually really like this topic. So I'm excited to go through it. Okay, you're weirdo. Actually, just kidding. I like talking

Starting point is 00:01:12 about this topic, too, because estate planning is really the one aspect of finance planning that everyone needs, yet it's the one that's among the most neglected, right? According to the Pew Research Center, less than a third of adults have a will, which of just one aspect of estate planning. So let's start with the fundamentals. What's your definition of estate planning and what it entails? estate planning to me is making sure that your wishes are clearly defined so that your assets can be transferred the way you want. So more importantly, though, estate planning is a way to take the stress off of your loved ones to help make the decisions for them ahead of time. And I love that part because estate planning isn't just a collection of documents. It's really a gift to your family.

Starting point is 00:01:58 A thorough estate plan is going to save them time, money, hassle, maybe having to hire a lawyer, and really potential family strife because without an estate plan, what fills the void, sometimes fights, disagreements, resentments. So it's important to do all that now so that when you are gone, your family has mostly pleasant memories and not family fights. In this episode, we're going to cover some estate planning essentials at a pretty high level and then dig deeper into creating a document that will provide a roadmap to follow if something happens to you. And first, I'm going to start with the standard device that you really should see

Starting point is 00:02:34 and experience the state planning attorney in your state to actually do your plan, because a lot of estate planning laws are very specific to each state. That said, I'm often a little reluctant to say that because then people think, well, I can't do any estate planning until I get an attorney. But that's actually not true. You can get an awful lot done today, right? After you're done listening to this episode without a lawyer's help. So Stephanie, tell us about how beneficiary designations as well as payable on death and transfer on death designations can do a lot of the heavy lifting when it comes to estate planning. So I think you hit the nail on the head. Most people, I would imagine, avoid estate planning because they think it's this big thing. They have to hire a lawyer,

Starting point is 00:03:13 get all of the documents, like taxes, but on steroids. But in reality, there's a lot that an individual can handle that would help further the process along. So for most accounts, types, 401k's, IRAs, brokerage accounts, even down to checking and savings account, high yield savings accounts. There is a way to designate a beneficiary directly. Usually that happens during account opening, but it can be modified at any time. And it's so that you, the account owner, can directly name the person and percentage that your account will go to upon death. So this is huge because these designations allow the account to avoid probate and go directly to the individual based on your wishes. So often there's even a way to designate a secondary beneficiary.

Starting point is 00:04:01 So as an example, for my individual brokerage account, I have my husband listed as the primary beneficiary at 100%, but then my two kids are listed as secondary beneficiaries at 50% each. So I think it's a great place to start because it's a step. that usually takes less than 15 minutes. Oftentimes you can do it through your online portal, and it's a low-lift, high-reward step in a state planning process. Life insurance policies to that as well, something that you put the beneficiary designation on.

Starting point is 00:04:33 And when you think of the accounts and assets that you own, this pretty much takes care of most of the net worth for a lot of Americans. You mentioned probate, which is the legal process that takes place after someone dies. It involves all kind of steps, proving in court that a will is valid, identifying and inventorying the person's property, maybe having it appraise, and then distributing the property. Depending on the state, this can be time-consuming, it can be costly. And in most situations, you really want to do all you can to bypass probate. And these beneficiary, POD, T-O-D designations can do that. And in some states, property like a house or a car could have one of these designations.

Starting point is 00:05:12 It's usually done on the deed or the title. So find out what's possible in your state. Now, we just mentioned wills, which are often considered the foundation of an estate plan. So what are some of the most compelling reasons to get or update your will? So bear with me, because this is a stretch, but I've heard an argument made about prenups that I think really applies in this situation to. Everybody already has a will. It's either you have drawn one up or the state has drawn one up for you. Because like you mentioned, most of estate planning is handled at the state.

Starting point is 00:05:46 level with individual state laws, and they determine how assets are passed down. So do you know what your state's laws are? Are you happy with them? I'm going to be honest, I didn't have a will until I had kids. It probably should have had one sooner, but as soon as kids were involved and you needed to get done. But the will is a legal document that provides direction for executing all of your wishes. It should encompass things like accounts, physical assets, house, but also includes things like guardian for your children and allows you the power to name an executor for the person who is going to be the one to execute the will and your wishes. I do think that everyone should have a will right now. We can touch a little bit more

Starting point is 00:06:35 on that later. But even as single in my early 20s, my parents wouldn't have known where my accounts were or who my health insurance provider was. I lived on my own. It would have been a major headache for them if something had happened to me. So even after you get an initial will set up, I'd say things like major life events, age milestone should really be those pillars for when to get a will updated. Check in to see if things have changed. If you're looking at those life milestones, new kids, blended families, retirement, those are all great life milestones. And then from an age front, I like tenure increments, 40, 50, 60, 72, specifically before RMDs start. Not that all of these would involve a full will rewrite, but it's a good touch point of, does everything still make sense?

Starting point is 00:07:33 Is everything still the same? Do we need to make adjustments? And just from a time-based perspective, I think every three to five years, even if you haven't had a major life of it, it's a good idea to look at your estate plan and see if it needs updating. My wife and I actually are in the process of doing that ourselves. And you touch down the personal property part, right? We all have a lot of stuff. Furniture, clothes, jewelry, art, collectibles, on and on. Closets are full, garages are full. And this stuff may not seem as important as who gets your IRA or 401K, but attorneys will tell you, that some of the biggest family fights are over who gets stuff like a treasured family heirloom or some other item with sentimental value. So you can direct in your will who gets this stuff. It could be directly in the will. Sometimes it's in an accompanying document, usually known as the personal property memorandum.

Starting point is 00:08:25 And part of this could be asking the people who you're going to leave stuff to, like your kids, like what of our items do you want? and if there's a situation where like two or three kids want the same item, you work that out now, put it in your will, so there's not a fight after you're gone. Two and five Canadians will hear the words, you have cancer. That's why every step and dollar raised matters. On September 19th, join thousands in Toronto

Starting point is 00:09:01 for the Princess Margaret Cancer Foundation Walk. Challenge yourself, friends, and family to walk 21 kilometers in support of life-saving research. Together, we can carry the fire and help create a world free from the fear of cancer. Register today at pmcfwalk.ca.ca. This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales,

Starting point is 00:09:31 using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandums that matter most. Learn more at Accenture.com slash Spotify. All right, let's move on to one of the more complicated questions when it comes to estate planning, and that is whether someone needs a trust. So, Stephanie, what do you see as the most compelling reasons to get a trust?

Starting point is 00:10:03 I'm going to say complexity. And I know that that's a really generic answer when it comes to a complicated question. But ultimately, it's one that that one needs to be decided with an attorney in your specific state, with your specific circumstances. But the families that have additional complexities are going to need those extra protections in place. Maybe they're extra instructions for their loved ones. So we're talking businesses that are going to be handed down.

Starting point is 00:10:32 We're talking about maybe blended families or contentious families, something that needs a little bit more than asset one goes to kid two. So it could be many different reasons, but ultimately, if it's something more challenging or difficult than that, I would get an attorney involved. Yeah, and I'll just point out that if you're getting a trust that is going to increase the cost of your estate plan, that's why it's somewhat debatable because you generally don't want to pay for a trust if you don't need it. But in many situations, it is the absolute right thing to have. a couple other benefits to highlight is that assets held in trust do bypass probate, so that's a big benefit. And they're definitely worth considering if your heirs perhaps shouldn't inherit all their

Starting point is 00:11:16 money all at once. And maybe they have special needs and they can't handle the money or the money that having it in trust protects them so that they can get some government benefits. Maybe your heirs have addiction challenges or maybe they just don't have good financial habits or maybe they're married to someone who doesn't have good financial habits. So a trust is a way to have some control beyond the grave, as they say, and dictate how the money is managed and how it will be distributed. All right. So those are the estate planning essentials. There's a lot more to talk about with all these documents. But again, you really should see a qualified attorney for doing that. But now let's move on to an important document that should be a part of an estate plan. But I think it's often

Starting point is 00:11:56 neglected. In fact, even many attorneys don't bring this up. So Stephanie, tell us about the financial vault. So circling back to things that we have, control over without going through an attorney. I'm going to be honest, it doesn't have legal standing. But what I'm calling a financial vault is an inventory of all things finance in one spot. So not just account types, but it's something that you'd want immediately accessible and that you'd want your executor to have access to. So we're talking about things like not just having the account listed out, but where it is, what is a login for it, and what are some first steps that needs to be taken. So it's that resource that your loved ones can use as that map during an already

Starting point is 00:12:46 emotional time for them. And I'll just highlight that it could also be helpful if, not only in death, but if you ever become incapacitated, right? You're in an accident, you're in a coma, something like that, and someone has to take over your finances while you're incapacitated. all this information will help them manage your finances while you recover. And I'll just say the process of doing this is a great way to go over your finances because you and your spouse, if you're married, have to look at everything you own and put all that information in one place. So it's a great way to really think about your entire financial empire.

Starting point is 00:13:22 I would add, even from when my husband and I went through the will process and we did have to create some type of financial vault, I mean, I'm in this world and two weeks later I remembered things that I didn't include on that list. So starting that process now and then adding to it, and again, this is not, this financial vault is not a legal document, but it is something that would consolidate all the information together so that your loved one can access it and then access the account further. Let's go through each section of the document and highlight what's important, starting with the vault setup. So I would say the vault setup is where is this information going to. to be stored. Is it like a one-password digital site? I know that's become very popular. Is it a file cabinet? Is it a safe? I'm not saying you have to share your passwords to your loved one today,

Starting point is 00:14:16 but there should be one place to go where this is consolidated and where the resources will be. So that's the first set of the setup. Where is it going to be? And how will you let somebody know where that place is? And there's so many options here. There's the virtual I've heard about it on a podcast where someone's dad just told the podcast host, If I Die, there's a file on my desktop, which is titled If I Die, and it has all the information. Or it's in a box or a safe. But you just have to decide where you're going to put it and then tell the select few people

Starting point is 00:14:48 who need to know where to find it. All right. And a key part of this vault is going to be the account inventory. What's that? Pretty straightforward, right? The list of accounts, and I would make sure to include crypto. But again, including the accounts listed out, maybe what they're used for or maybe what payments come out from which account so that if someone, like you said, you are incapacitated, that someone

Starting point is 00:15:14 could come in and take over and manage your financial life. So what the accounts are, maybe what they're used for, what automatic transfers come, but then including a login and password, maybe even a customer service number to reduce that number of steps that your loved one would have to take in order to get that access and see what they need to see. Think about it. Like without this, if something were to happen to you, how would your relatives know where to find everything? This is almost, I mean, it's essential to tell people not only your accounts, but all the other policies and everything you own. Well, and I would say, especially in today's age, think about how spread out that information is. I mean, we don't live in an age

Starting point is 00:16:00 where it's your local bank down the street where John knows you, your family, your mom, your dad, nobody's lived more than five miles apart. They've watched you grow up, right? Not only are we spread across geography, but I can bank somewhere that might not even be in North Carolina because of today's digital age. And then to take it a step further, based on the resources available about my job, the resources as I've changed jobs, there could be accounts all over the place. I mean retirement accounts, old retirement accounts, where's your health insurance, where's your life insurance? There's a lot. How could anybody, even the closest people in my life, I don't even think my husband might know everything off the top of his head. And if you think about if something happened to me, I hope he would be mourning or at least overwhelmed that it wouldn't come to mind right away.

Starting point is 00:16:51 So really, this is just putting it all together in one lovely document and resource for your family to use. You mentioned crypto, but boy, that's particularly important because people have all kinds of ways of stored crypto. Wallets and USBs and the passwords, you know, they're usually not held at Schwab and Vanguard where you could find out if there's an account there. So just do an online search for articles about people losing access to their family members, crypto, because they didn't have the right information. So you definitely want to get that down somewhere. All right. The next section you should have in your vault is information about executors and guardianship. So if you have kids, you never want to think about this, but you have to think about it. What happens if you're not around to take care of them? And this is where I could see it getting very, very messy within families.

Starting point is 00:17:44 Because everyone hopefully loves you and wants the best for your children. And everyone thinks that they know best for your children. So having a written out executor and guardianship for your kids. And I would also, you know, make sure that is clearly communicate to those parties responsible so that it isn't a surprise. I think is important. But this should also be included because if there are kids involved, there are immediate decisions that need to be made. And so having those available and what instructions with what those wishes are is very important. With the executor, it's always important to choose someone ideally in your state and someone who's very detail-oriented. And you might want to list a backup because you can't make someone being an executor.

Starting point is 00:18:28 Someone might say, yeah, I'll be the executor, and then they change their mind later. And I will say, too, as someone who's been an executor, if you take on that responsibility, you should ask for this document and as much information as that person is willing to share because you're going to be on the hook for a lot once you become the executor. And since you mentioned kids with guardianship, I'll also point out it could also be older adults. So we have a former foolish colleague whose brother was the guardian for their mother. And then his brother passed away. And he had to step in and be the guardian for his mother, but then find where all the accounts were and all that stuff too. So that's another thing to think about. Two and five Canadians will hear the words you have cancer.

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Starting point is 00:20:01 Adion's single platform automates the entire policy lifecycle. One platform to manage how money moves, control claims fraud, and automate operations. Adion, fintech built for your next move. All right, let's move on to life insurance. So I think life insurance is separate. I kept it separate for from the account side of things because it is often that separate line item. Again, a lot of times there are bed and fishery designations, but this one I kept because it could also have been from a current employer established a long time ago and then forgotten about. But knowing what life insurances are available

Starting point is 00:20:44 to heirs or to the estate as a whole, should something happen to you, is important and not always something that people think about. Again, it's not something that you might get a statement for every week or every month. And so if someone is stepping into your life, they might not even know it exists. That's not something that's talked about

Starting point is 00:21:00 on a Sunday dinner table oftentimes. So it needs to be included in this type of list and this type of vault. And since you mentioned employer, you might want to include information from like your HR department because you don't know what employee benefits may be due to you or some other thing you had, like a flexible spending account, a company stock.

Starting point is 00:21:21 So you want to have someone at the company to be able to reach out to it. And I guess you could expand it to really any professional, your financial planner, your accountant, someone else that you think is a professional knows your situation who someone should contact if they need to. Let's move on to a relatively new development, and that is platform legacy settings. So this is a new problem, new generation, but with so much being controlled and saved on our phones, our devices, our computers, having access to that cloud storage and just technology is important to set up ahead of time. So similarly to beneficiaries, that's something you can do now, but set up a trusted contact with Apple, Google, that would be able to be named so they can access. again, cloud storage, your phone, your history, either after a certain waiting period or providing medical legal documentations. Yeah, and this includes social media too, right? Facebook has certain

Starting point is 00:22:26 settings. Like anything that you want some data access to, I just think it's interesting to think about do you want your Facebook account to continue beyond when you've passed away? You might or you might not. But so whole set of things that, you know, 20, 30 years ago, people weren't thinking about, but certainly worth thinking about today. All right. As a final part of it, you might want to have a letter of instruction, even though it comes at the beginning. Tell us about the letter of instruction. So I'm thinking about this is like a cover letter. So what you're about to find behind all of these behind this page, it's all to come. So a list of maybe just two to three immediate steps that you're going to need to take a list of maybe two to three red flags to watch out for,

Starting point is 00:23:13 but almost that cover, letter, table of contents style page that should be front and center and then on top of all of this vault. There could be other messages. If you've been listening to this podcast for a while, you've heard me mention Bob Hasmiller, a longtime Motley Fool member who every year would update his, what he called his letter from your dead husband for his wife to look at. that because he handled the family finances. Sadly, Bob passed away in 2016 and his wife. Sue wrote a book about what it was like to move on from Bob, but talked about how valuable

Starting point is 00:23:48 this letter was. And some of the aspects in that letter from Bob was very loving messages to Sue and his family, but also advice of like who to turn to and who to avoid, right? Like family members, don't take any advice from these people. So anything like that that you just think people should know about moving on without you and handling your assets would be very helpful. Okay, so this collection of documents is going to have a lot of sensitive information. So Stephanie, any suggestions on where this should be kept? So I mentioned one password early.

Starting point is 00:24:23 I know that a lot of people are turning digital. I have to say I'm super old school. I have a copy in our home safe. And I have my sister is the closest person in my life outside of my husband. and so she knows the code to that safe and knows what is waiting for her should she need to go into it. So I'm really, really thankful to have a great relationship with my family. Also, I'm thankful that we are super open about a lot of these things. So everybody's got a financial vault.

Starting point is 00:24:54 We kind of use the same framework around it. Some are thicker than others, depending on our life stage. But everybody has a person and knows what steps they would need to. to take. And I also think it's important that you mentioned you were an executor at one point, and it is cumbersome. It is labor-intensive. And so if you can be mindful of that, too, I come from a bigger family, spread out the wealth a little bit. So something happened to us. And I think I'm very thankful for my parents who brought that up, because they knew not to give, you know, too much power to one person, more so from the emotional weight of it all. Yeah, my wife and I have

Starting point is 00:25:33 a box that's a kit, and you can buy these kits online, that walk you through the process of inventorying all you have, providing the instructions, and often comes in a fireproof box, or at least a fire resistant box. And we've told our four kids where to find this if they ever needed. So that's how we've handled that. I will also add because, again, I'm very thankful my family is open and we have this conversation. But one thing that came up was my sister, who is the guardian or future guardian, if needed for my children. She asked questions and she wanted additional information right front and handy. And so it did also prompt those conversations. Her big thing was she wanted to know doctor's information right away. You know, we are very close,

Starting point is 00:26:15 but she doesn't live in my same town. So some of those daily tasks for my kids and updating those as they get older, I think is another way to keep things up to date. But having the conversation, making sure the person responsible feels comfortable, having anything available for them, they might have a preference. You know, if you're talking to your kids and how to store it for them, that might be better digitally, especially if they're not close or nearby proximity-wise. So I would add that to the mix. Well, Stephanie, any final thoughts about estate planning?

Starting point is 00:26:49 I would just say that I've watched families fight over very, very little, and estate planning is not very little. I have felt myself personally like I was drowning in sadness when I've had loved ones past, and I could not imagine needing to put one foot in front of the other and make steps with no map or no roadmap. So having things written out both legally through a will, but then also more as this brain dump with a financial vault has given me a lot of peace of mind that I'm providing clarity and direction to my loved one should something happen to me. I'll add that I strongly encourage you to reach out to your family. Talk to them about your estate plan, but then nudge them to talk about theirs, right? And you don't need to know all the details, unless they're executive, by the way.

Starting point is 00:27:40 But otherwise, you don't need to know all the details. But you do want to make sure that they have a plan because if they don't, you and the rest of your family will be the people who pay the price. And on that sherry note, our show has come to an end. Thank you so much for spending part of your weekend with us. And thanks to Bart Shannon, the engineer for this episode. As always, people on this program may have interest in the investments they talk about, and the Motley Fool may have formal recommendations for our guts,

Starting point is 00:28:04 so don't buy or sell investments based solely on what you hear. All personal finance content follows Motley Fool editorial standards, and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. You see our full advertising disclosure, please check out for show notes. I'm Robert ProCamp. Hold on, everybody.

Motley Fool Money - Prepare to Pass on Your Possessions

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