Today, Paula Christine is joined by estate planning attorney Shannon DeWall of DeWall Law. Together, they answer a number of common questions about estate planning, including:
To reach Shannon DeWall at Dewall Law, you can visit her website: https://dewall-law.com/
Or give her a call at (734) 772-1220.
To contact Financial Coach Paula Christine, you can send her an email. Paula@PaulaChristine.com
Or learn more by visiting our website: https://paulachristine.com/
Paula: Hi, I'm Paula Christine, and welcome to Beyond The Paycheck, Living paycheck to paycheck and struggling to get ahead really sucks. What if you could take control of your money and have the life you dream about? I know you're saying, " Yeah. But it can happen with knowledge and commitment. That is my goal. To provide you with the knowledge to take control of your money. And it's up to you to make the commitment.
Everybody hates to have that conversation about what happens when they pass away. Who's gonna get what? Who's gonna take care of my children? It's one of the toughest subjects to talk about.
And not only do you have to worry about what happens when you pass away, but you also have to worry about what happens if you were to be incapacitated. I've asked my friend Shannon DeWall to join us today. She is an estate planning attorney, and she's gonna talk to us about the basics of estate planning. Welcome Shannon.
Shannon: Thanks, Paula. I'm really glad to be here.
Paula: So let's just start off with the basics. What is estate planning?
Shannon: That is a great question. And in order to answer that, we're gonna break down that phrase a little bit. Let's talk about estate. It's everything you own. So your bank accounts, your house, all your personal items, those are included in your estate.
And so estate planning is planning for who gets all that stuff when you pass away. And I'll take it a step further. Who's gonna manage that stuff if you're incapacitated and you can't do it yourself?
Paula: Everybody needs an estate plan. I've always encouraged everybody who's 18 or older that they need to have something in place, but how are assets transferred from one to another?
So if I pass away, how are my assets then transferred to you?
Shannon: So it really depends on the type of asset or the type of property. Different property has different, ways to show its ownership. But so something like a house, to tell who owns a house, you have a deed. And so to transfer a house to someone else, it's usually signing a new deed.
You can either do that while you're alive, or you can write those instructions down in something like a will. And then that would be processed by going through probate. Or if you have a trust it's processed by the trust process, which is your trustee or someone you've chosen that can do that for you.
Paula: Okay. We'll get into those definitions and a little bit. So for people who don't know what will trust and all that stuff is. But what if I have a joint bank account?
Shannon: So a joint bank account means it's owned by multiple people because of the word joint. So you could add someone on to an account which makes them a co-owner.
I don't recommend doing that necessarily, depends on the situation, but that is a way to transfer property because when you die, then that joint owner, if they're still alive, they would then become the owner of that account.
Paula: And why don't you recommend that?
Shannon: So if you're talking about a married couple, then I do recommend joint ownership.
Oftentimes married couples co-own their property together. But if you're talking about, what I see a lot is a parent and a child and a parent might put a child on to their bank account in case something happens to the parent. So the child can write checks, but that's really better handled a different way. By putting the child on as a co-owner, then that money, which really belongs to the parent, also now belongs to the child.
And that's not really accurately reflecting what's going on and can cause problems later on if a parent needs Medicaid for a nursing home, or if the child gets sued for something or defaults on a student loan or something, they might take the parent's money. So it just muddies the waters a bit.
Paula: Yeah. I always tell people, try not to use a joint bank account when that's a parent in a child situation. So I know other ways is by beneficiary. So then if you pass away, everything passes by beneficiary, but a lot of people forget to update their beneficiaries. Can you wanna talk about that for a second?
Shannon: Yeah, we see that all the time. Beneficiary designations on bank accounts and the life insurance and 401ks. Those are great tools. Then they're very straightforward ways to transfer ownership to the next person. If you pass away. It is really important though, if you do that, I tell people when you check your smoke alarms, check your beneficiary designation.
Cuz a lot of times they get stale or, gosh, I had a situation once where it was an ex spouse who was on the beneficiary designation form and the company that holds that account. They're gonna honor that even if that's not what you want now. So ex spouses on beneficiary forms, that can be a big problem.
And those beneficiary designations are gonna overrule anything that's in your will or in a trust. It's really important to keep those up to date.
Paula: Not only your primary, but also your contingent. Right?
Shannon: Exactly.
Paula: So what if I decide to do no estate planning and I become incapacitated or I pass away and I have no documents?
Shannon: Without documents, the state law is followed. So for example, here in Michigan, when someone passes away and there's no document for instructions, the state law says it goes first to surviving spouse, a certain amount. And then if there's no surviving spouse, then we look at relatives. So children first, and then if there's no children or grandchildren maybe parents or siblings, nieces, and nephews.
And so just follows the family tree until we find a relatives who are living. And that's where that would go. If there are none, no relatives that can be found, then it could just go to abandoned property to the state.
Paula: Yeah. Don't want that to happen. What happens if you die and you haven't chosen someone to take care of your children?
Shannon: Typically at that point, someone who is willing to do that would petition the court or in, in other words, ask the court that they be chosen to be the guardian of the minor children. So then it becomes a court process.
Paula: So you could have five people petition the court and your children could end up with the person you least would want them to be with.
Shannon: It's always better to have control of that. And to go through a thoughtful process while you're alive to choose who you would want that person to be and to talk to them about it and make sure that they're willing to do it.
And there's forms that can be filled out ahead of time so that you can have all of that in writing and documented. And then it's a simple process of it's still going to the court and producing those forms that had been signed. But now we know the intent of the parents and that's really important.
Paula: Could you do also do that on a will, which is one of the necessary documents that everybody should have?
Shannon: Yes, you can. When I do those types of documents, I do it in a couple of different places. I do put that in the will, but then I have a standalone document also because sometimes the will could get revoked or lost or for other reasons they don't wanna use that will.
And so I have a standalone document that we use so that we have that documented multiple places. .
Paula: Good to know. I'll have to talk to my children about that. I'm sure that they don't have that in place. Now we just talked briefly about a will, but I know that a will. And then at minimum you should have a will and power of attorneys?
Shannon: Yeah. Powers of attorney are, I'm really passionate about that. Those are documents where you get to remain in control and you get to choose who would manage your property while you're alive. So who's gonna make decisions for you medically and financially, who do you trust to do those things? And so that's really important without those, it becomes a court process and a guardian or conservator would be named.
And then like you mentioned a will or a trust, which would be some type of document that would. Who gets your property when you pass away.
Paula: Okay. So I have a will, and then I have a power of attorney for financial and for medical. How do I determine who is the best person to be my power of attorney?
Shannon: That is a great question. There's a couple of things to think about. For financial power of attorney, of course you wanna pick somebody you trust and you wanna make sure that they can handle the responsibility. Some of the things I talk about with my clients for instance, I would not choose someone as my financial power of attorney.
If maybe they're not good with their own money or their own budgeting. Are they a person who has a lot of debt? I wouldn't want them in charge of my finances, if that were the case. For medical power of attorney, are you choosing someone who will respect your end of life decisions or do they have different opinions about end of life decisions and are their different opinions gonna influence what they're gonna decide for you?
So these are all things I talk about with my clients to say the person you're choosing, have you had a conversation with them? What are their beliefs? And do they know what yours are? Those are really important things to discuss.
Paula: Yeah, that's a, a tough one. I know when my parents were preparing their documents and we had that conversation, I didn't wanna be either one.
Shannon: Yeah. It's a lot, it's a lot of responsibility. And so it is, it's choosing the right person. Yeah.
Paula: Yeah. And that's not me. So I chose to not be involved in that.
Shannon: Yeah. And see, that's good for them to know ahead of time so that they can say who else would we choose?
Paula: Yeah. And it went to my sisters so they can have it. So we talked about the will, the power of attorneys. Now, if you want a little bit more in depth estate planning, you would look at a trust. So talk briefly about what a trust is and who would need one and why somebody wouldn't need one.
Shannon: A trust. I like to think of a trust, more like a bucket, and this is not exactly legally accurate, but it's a great way to think about it. So if you think of a trust like a bucket, you can place your property in the bucket, the transfer ownership to the bucket. And then while you're alive, you manage that bucket yourself, while you're alive, enable you have full capacity.
You're managing that property in the bucket. If. Something happens and you're not able to manage your property in the bucket anymore. Then you're choosing another person as manager of that bucket, that manager type role is called a trustee. And then the actual document that we're drafting up as the trust is the instructions for that manager on how they should manage that property.
And so that's different if we contrast that with a will. A will is more like a funnel. And so property just funnels through probate and is passed out where a property in a trust or in the bucket can be held onto and maybe not passed out right away. Maybe you want it held in that bucket even after your death and passed out slowly to different beneficiaries.
And maybe there's reasons for that. For instance maybe your beneficiaries are minor children. And so you want that property held in that bucket until they're older. Maybe your beneficiaries might have maybe substance abuse or gambling issues that if they were to inherit a lump sum of money that might actually be harmful to them.
So a trust can hold that property in, and distribute it slowly over years, where a will can't do that.
Paula: So does everybody need one? And by the way, that is an excellent way to present that.
Shannon: Oh, thank you.
Paula: Very easy to understand. Okay. But does everybody need to have a trust?
Shannon: No, not everybody needs to have a trust. When I have clients come in, we talk about and design their plan. We go through some of the things I mentioned a minute ago and see if any of those are issues, but if they're not, a person does not have to have a trust. Some clients, we just do a will, some clients maybe they don't have any of those issues, but they wanna avoid probate.
And so avoiding probate might be a good enough reason that we do a trust, but each client is a case by case and we explore that together and then they decide.
Paula: Let's just recap really quickly here. So we have at minimum, we need either a will, and power of attorneys. And then if you want something a little bit more in detail, then we would go with a trust.
Now let's say I put all these documents together and I decided five years from now, it doesn't work. Can I change it?
Shannon: Absolutely. Yep. I like it when, if I'm the attorney that drafts those original documents, I like a client to come back to me because I remember. I have notes and I know why we chose all those things so I can undo them easier. But certainly I've had clients come to me that the original attorney was somebody else. We have a process where we can go through and either, we're making changes where they have a trust, they just wanted to say something a little tweak it a little bit to say something different.
Or they want their powers of attorney changed a little bit and that's no problem. And sometimes they want a complete new plan and they don't, maybe they had a trust and they don't wanna trust anymore. And so we have a process for undoing all of those things and then putting everything in a new plan.
Paula: Okay. Good to know, because I think sometimes people think that when they put this stuff together that's the end of it. And they have to review it every year and it is possible to make changes to it.
Lots of times when I talk to people and clients they'll say I'll just go online and research. Just using Michigan as an example, a generic Michigan will. And I just put my name in there. I know there's estate planning kits that you can get. Is there a reason that you could do that? Or I always encourage people to sit down with an expert.
Shannon: Yeah. I think that's a better idea too. I guess you could compare it to, I could go out and build my own house I could watch a YouTube video and do some research and I could go build my own house, but I know I'm gonna make mistakes. I know it's gonna take a lot of time, a lot of effort. I'll probably spend more money fixing the mistakes that I made.
And so I say, it's just, I wouldn't recommend going and building your own house for the first time. I wouldn't do my own estate plan for the first time. Talk to a professional. Hire a professional who does it all the time. They already know those mistakes to avoid, and they're gonna be much more efficient at it than you would be trying to figure it all out.
Paula: And each state has different rules, correct?
Shannon: Absolutely. And so I guess you can go on the internet and you can download something, but is that gonna be state specific? Was that document originally written by an attorney in a different state and have some nuances in there that your state doesn't use. And that can be really difficult to figure all that out.
Paula: I'm amazed at some people have said to me that they've just gone online, printed out a generic document, and that's what their estate planning is. And it might be fine while they're alive, but it's when you've passed away and you can't make any changes or if you're incompetent. And you figure out it's not a good document and there's nothing you can do about it.
Shannon: And I've seen those all the time and sometimes we've been lucky enough, the client was still alive so we could fix them. And I've seen them come in where the client had a stroke or something and couldn't make any changes.
And we were doing some advanced planning and the power of attorney document was not Michigan specific, and it didn't have certain things we needed to have in there. And so our hands were really tied as to the different strategies we could use. So I hate seeing it when that happens.
Paula: And then we'll close in a second, but I know, what was it, when HIPAA came out, and it was recommended that everybody go back and have all their power of attorney documents changed because of the HIPAA laws. So you have to be proactive and at least having your documents. What reviewed every, what? Five years? Three to five years? What do you recommend?
Shannon: Yep. I would say that every three to five years, like you said. Yeah, there was some changes in the laws that now you have to have a specific language in your medical power of attorney.
And an attorney is more in tune with that. We know what needs to go in there rather than like you were saying earlier, doing your own. You may not be up to speed on all of that type of information.
Paula: Thank you, Shannon. This has been really helpful. I know a lot about this subject, but every time I talk to you, I learn more and more. So I really appreciate you spending time with us. So if somebody wants to get ahold of you, how can they reach you?
Shannon: It's been my pleasure to be here. So thank you for those kind words. People can get ahold of me at my office. That phone number is (734) 772-1220. And of course I have a website too that they can visit, and that is DeWall-Law.com.
Paula: Thank you, Shannon. I can't stress how important it is to have these documents. And if you're a parent who has a child, that's just turned 18, it is so important because you can't make medical decisions for them to make sure that you get that healthcare power of attorney as soon as they turn 18. A gift I gave to all my children when they turned 18.
So if you'd like to talk with me, you can email me at paula@paulachristine.com, or check out my website at paulachristine.com. Thanks again, Shannon. And I appreciate it.
Shannon: Thanks Paula.