Prepare to Pass on Your Possessions

0:02Prepare 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 of the Motley Fool Hidden Gems Investing Podcast.

0:18I'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 of the 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. 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.

0:51Here 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 Marini. 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 weirdo. Actually, just kidding. I like talking about this topic too, because estate planning is really the one aspect of financial planning that everyone needs, yet it's the one that's among the most neglected, right?

1:20According to the Pew Research Center, less than a third of adults have a will, which is 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.

1:58A 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 advice that you really should see and experience the estate planning attorney in your state to actually do your plan, because a lot of estate planning laws are very specific to each state.

2:42That 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.

3:12They have to hire a lawyer, 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 account types, 401ks, IRAs, brokerage accounts, even down to checking and savings account, high yield 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.

3:57So often there's even a way to designate a secondary beneficiary. 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 estate planning process. Life insurance policies to that as well, something that you put the beneficiary designation on. 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.

4:42And you mentioned probate, which is the legal process that takes place after someone dies. It involves all kinds of steps. Proving in court that a will is valid, identifying and inventorying the person's property, maybe having it appraised 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, TOD designations can do that. And in some states, property like a house or a car could have one of these designations. It's usually done on the deed or the title.

5:14So 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 too. 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 level with individual state laws, and they determine how assets are passed down.

5:54So do you know what your state's laws are? Are you happy with them? You know, I'm going to be honest. I didn't have a will until I had kids. I 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.

6:34We can touch a little bit more 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, uh age milestones should really be those pillars um for for when to get a will updated check in to see if things have changed um if you're looking at those life milestones new kids blended families retirement um those are all great life milestones and then from an age front i like 10-year 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?

7:33Is everything still the same? Do we need to make adjustments? Just from a time-based perspective, I think every three to five years, even if you haven't had a major life event, 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 touched on the personal property part, right? And we all have a lot of stuff. Furniture, clothes, jewelry, art, collectibles, you know, 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.

8:14So 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. 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.

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10:38So, Stephanie, what do you see as the most compelling reasons to get a trust? 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 there are extra instructions for their loved ones. So we're talking businesses that are going to be handed down. We're talking about maybe blended families or contentious families, something that needs a little bit more than asset one goes to kid two.

11:21So 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 money all at once.

11:57Maybe they have special needs and they can't handle the money, or 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.

12:31But now let's move on to an important document that should be a part of an estate plan. But I think it's often 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.

13:21So it's that resource that your loved ones can use as that map during an already emotional time for them. and i'll just highlight that uh it could also be helpful if not only in death but if you ever become incapacitated right you 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 um 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 It's a great way to really think about your entire financial empire.

14:01I 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.

14:37So I would say the vault setup is where is this information going to be stored? Is it like a 1Password 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. 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, you know, I've heard about 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.

15:23Or 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 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 include make sure to include crypto but again including the accounts listed out um maybe what they're used for or maybe what payments come out uh from which account so that if someone like you said you are incapacitated that someone 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.

16:17Think 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 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.

16:59And then to take it a step further, based on the resources available at 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. So really, this is just putting it all together in one lovely document and resource for your family to use.

17:37You mentioned crypto, but boy, that's particularly important because people have all kinds of ways of storing 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.

18:17What 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, 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 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.

18:58With 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 be an executor. 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.

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22:21Again, a lot of times there are beneficiary 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 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 on a sunday dinner table oftentimes so it should be it needs to be included in this type of list in this type of vault.

23:02And 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 have, like a flexible spending account, company stock. 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 who 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.

23:37So 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 settings, like anything that you want someone to have access to.

24:23I just think it's interesting to think about. Do you want your Facebook account to continue beyond what 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 but almost that cover letter table of contents uh style page it should be front and center and then on top of all of this fault.

25:18There could be other messages. If you've been listening to this podcast for a while, you've heard me mention Bob Hassmiller, 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 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 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?

25:55Like 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 i know that a lot of people are returning digital i have to say i'm super old school i have a copy uh in our home safe and i have uh my sister is the closest person uh 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.