126 | Estate Planning With Mark Moss

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126 | Estate Planning Wills vs Trusts | Mark Moss
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Brad and Jonathan are continuing the conversation about estate planning and planning for your family’s future with estate lawyer, Mark Moss.

Why Estate Planning?

If the worst happens to your family, it is vitally important to have an estate plan for your survivors. Estate planning is not just for the extremely wealthy. It is for any adult that has any assets. The goal of an estate plan is to really allow your wishes to be known. It can also save your family from potentially fighting over your assets and additional court costs down the line.

It is an uncomfortable subject to think about your death, but it is so crucial to plan. It’s important to not leave them holding the bag with no idea what to do.

Mark Moss, a lawyer, will talk us through why anyone over the age of 18 should have an estate plan in place. In his private practice, Mark works with folks in the Jacksonville Florida area to create estate plans.

Mark’s Story

At an early age, Mark benefited from an estate plan set up by his grandparents. His parents wisely invested his windfall for him wisely. With that money, he was able to partially pay for his law school loans and buy the best possible house that they could get approved for in their pre-FI life.

Law School

In total, it took around $100,000 of student loan debt in order to graduate from law school. When he graduated, his monthly payments were between $700 to $800 a month. However, after refinancing he was able to bring that down.

Before you choose to attend law school, ensure that you know the reality of many lawyers today. The reality is that you no longer come out of law school with a six-figure salary and a signing bonus. Instead, it will be a grind to success.

You need to really want to do this, otherwise, there might be an easier path for you.

Podcast Episode: Student Loan Debt Repayments with Travis Hornsby

Life As An Entry-Level Attorney

Many of us think that lawyers are automatically wealthy. At least from appearances, that’s what it seems like. However, that is usually not the case. A starting salary for a first-year attorney is around $40,000 to $45,000, which is far from instant millionaire status that some assume with the law school route.

Mark’s lifestyle cost was starting to get out of control shortly after graduation.

I really reigned it in just looking at the inflow and outflow of assets and what sort of position am I putting myself in…What’s the legacy I’m going to leave for myself, for my family, for future generations? And things needed to change if I wanted to leave a positive one.

Eventually, he started to think about what he wanted out of life. He realized that things need to change if he wanted a different life for his family.

Going Into Private Practice

After a few years of working for someone else, he transitioned out into his own firm. It was not an easy decision, but he knew it could make him happier. He enjoyed helping people and educating them about their plan to leave a legacy for their family.

It was a risky proposition, but he had some savings to fall back on. Plus, his wife is still working so they could survive on her salary if necessary.

Related: When A Life-Sucking Job Forces You To Rethink Everything

Estate Planning

When you start thinking about estate planning, it is important to think about your goals. If you choose to talk to an attorney, then realize that the conversation should be mostly about you and your goals. Of course, you will discuss your assets, but that shouldn’t be the driver of the conversation.

Estate planning is not a one size fits all approach. Everyone has a different situation to plan for. The purpose of your estate plan is to cover all of the possible bases.

It’s things you might not ever think of. But I do. “Wow! I didn’t even think of that!” “Could this really happen?” Yes, lots of things could happen and we want to prepare for this. While this might not actually happen, it could. We want to make sure we’re prepared. Because why are we planning if we don’t cover all bases?

It is more than just deciding who gets your stuff, especially if you have children. You can use your Will to pass along life lessons if you aren’t going to be around to do that.

Lessons For Your Children

If you want to leave a legacy of knowledge behind, then you can leave notes, letters, and audio as a part of your Will. The knowledge would be referenced in the legal document, similar to a set of instructions.

The notes wouldn’t necessarily be binding, but they are included to be read to your children.

Timed Releases Of Money

Instead of a lump sum payment upon your death, you might prefer to divide the payments into three parts. You would be able to include this as a part of your estate plan in a Trust.

Think of a Will as things go outright. It’s you get my shoe collection, you get “Golden Boy.” If you wanted to start putting restrictions or using the carrot and stick approach to accessing the assets, then you are looking at a Trust.

It is possible to release money at certain times in your beneficiaries’ life through a Trust.

Will Vs. Trust

You might be wondering what the difference is between these two. If you want a complete estate plan, then you probably need both.

Probate is the judicial process in which a Will is proved in the court. It allows an opportunity for creditors to come and claim any debts you might owe. Anything that’s left is given out based on the terms of your Will.

[You want to avoid probate because] it’s a public process, it’s expensive, and it takes a long time. It could take six to nine months on the short side, on average.

It’s possible that your assets could be tied up completely during the probate process.

If you have a joint checking or savings account, then those assets shouldn’t be a part of the probate process. Also, any accounts with a designated beneficiary should be kept out of probate but it depends.

The best thing to do with your accounts is to have a POD (Pay on Death) designation set up. With this, the account would not change titles but if you died, then your designated POD could come to claim the money with your certificate of death. Through this, you would likely be able to avoid probate. For a non-spouse beneficiary, this is the preferred method.

A Trust allows you the ability to execute your wishes over a period of time. It is a private entity that is not subject to public records. However, if the Trust is created as a part of the Will, then the assets transferred Will be public record.

Components Of An Estate Plan: Wills And Trusts

Mark calls this a Life Plan because it helps to re-frame the conversation.

Will

Your Will is the execution of your wishes–one time–on the public record. First and foremost, it identifies who your family is without any questions. You can also specify your treatment of bodily remains, specify tangible gifts of property, appoint a guardian for your children, and appoint a personal representative.

Usually, if you want to give specific property gifts then you would create a separate list and reference it in your Will. That way you’ll be able to update the secondary list without formally amending your Will.

Most Wills drafted by a professional attorney will include survival provisions that dictate how you want your expenses and taxes to be paid. If you go the DIY route, then this may not be the case.

Designation Of A Preneed Guardian

Importantly, you should consider creating a separate “Designation of a Preneed Guardian” document and reference it in your Will. This document outlines a first choice guardian, a successor, and an alternative successor. Plus, you can have both a physical and financial caretaker designated for your children.

It is critical to draft this document to protect your children.

Unfortunately, in many cases, when there is a lack of a Will, your children will end up with whichever entity is the loudest.

Also, if you aren’t appointing a local guardian, then you should appoint a temporary local guardian. This document should ensure that your children never become wards of the state for a single second. A ward of the state is an obligation of the state. The state would act as their legal guardian until someone else was appointed.

Even if you were incapacitated temporarily, a legally appointed guardian would need to be appointed through this document. If you are still alive, then your Will won’t be activated and a guardian couldn’t be appointed without this documentation of your wishes.

Healthcare Surrogate

Also called a Medical Power of Attorney. If you can’t make healthcare decisions for yourself, then you appoint someone to do it for you. You would include HIPAA release documentation in this paperwork.

Living Will

If you had a terminal condition or persistent vegetative state, then you would outline what level of medical care you would and would not want in this document.

Power Of Attorney

You assign the power of attorney in various ways for various situations through these documents. Durable Power of Attorney, Limited Power of Attorney, General Power of Attorney, etc.

Different Types Of Trusts

Trusts allow you to execute your wishes over a longer period of time. If you do not want people to know what you are passing along, then transfer assets into a Living Trust while you are alive. Also, set up POD and beneficiary designations.

You might want a Trust for a variety of reasons. For example, if you have a property and pass it to your children. They may have trouble taking out a HELOC because they are not on the title. In order to transfer ownership, the house would have to go through probate. However, if your property is in a Living Trust then the successor of the Trust will be able to take ownership without the courts getting involved.

The entire goal of the Trust is to keep things private and avoid probate. You can even create a pour-over Will that will transfer anything not specifically designated in your Will to the Trust automatically.

A pour-over Will, think of a cup of water and a pitcher of water. Your Last Will and Testament is the pitcher. The Trust is the cup. Anything not specifically devised in the Will, we are transferring over into the Trust.

The executor you name for the estate will be in charge of making sure your wishes are respected. They are held to a fiduciary standard and can have an attorney assist them in the process.

Testamentary Trust

With this type of Trust, your Will effectively sets up a Trust upon your death. The assets would still go through the probate process to an extent. The assets in this Trust are public knowledge because the terms of the Trust are set out in the Will.

It is more cost effective to go this route, but things will become public record.

You might not think it is a big deal now, but your beneficiary’s future creditors would be able to see what money the beneficiary would receive at a particular age or date and the creditor could lay claim to the money at that time.

Living Revocable Trust

You can transfer assets into this Trust while you are living. However, it is revocable so you can move these assets out at any time. At your passing, the assets in the Trust are the property of the Trustee and they can continue to use the assets as needed without being a part of the public record.

You may want to consider putting your home into the Trust because that allows the Title to the home to be in the Trust, allowing the next generation to maintain the property as theirs.

While you are living, you are the Trustee. Upon your passing, you’ll name a successor Trustee.

Related: Disability Insurance: The Most Important Insurance People Don’t Buy

Cost Of An Estate Plan

Depending on your area, the cost of an estate plan may be around $1,000 to $2,000. However, this cost will vary widely based on your needs.

You can go the DIY route. However, if you have dependents then it is important to get these documents right. It is better to be safe than sorry.

As an 18-20-year-old, take advantage of a free consultation to see what your needs really are.

When To Revisit Your Estate Plan

You should check these documents every three to five years because things change throughout life.

Where To Store Your Estate Plan

Whatever you do, do not store your Will in a safety deposit box! It can be extremely difficult to retrieve for your survivors. You can keep it at home or in a safe, just make sure someone has a combination.

Check out Brad and Jonathan’s Friday round-up of this episode.

The Hot Seat

Favorite blog: ChooseFI and Millennial Mom Confessions

Favorite article: Andy Hill’s “How Fatherhood Sparked My Desire For Financial Independence

Favorite life hack: Not procrastinating. Plus, utilizing credit card points and miles as best as I can.

Biggest financial mistake: Has yet to occur. Trying to take the viewpoint that it is just money and we can always make more.

The advice you would give your younger self: Pay attention to opportunities earlier. Specifically, opportunities to invest and take advantage of compound interest.

Bonus! What is the purchase you’ve made over the last 12 months that has brought the most value to your life? A set of erasable pens for my “pen and paper calendar”.

Connect With Mark Moss

You can connect with Mark on his website Mark Moss Law, on Facebook at Mark Moss Law, or on Twitter @estateplanjax.

Related Episodes And Articles:

New to FI? Be sure to check out Episode 100: Welcome To The FI Community!

ChooseFI has partnered with CardRatings for our coverage of credit card products. ChooseFI and CardRatings may receive a commission from card issuers.
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7 thoughts on “126 | Estate Planning With Mark Moss”

  1. Thanks for this concise review of estate planning. Is there some net worth threshold at which estate planning makes financial sense but below which it may not? I know every situation is different but curious about general guidelines?

  2. Thank you for the show notes on this one. I got lost in all the terms during the episode — but I found it helpful to have the notes break it all down. Thank you; this is a really important topic that we should understand.

  3. @Life Outside The Maze – Glad that you enjoyed the podcast! The answer to that depends on who you speak with. I do not like to apply a blanket threshold amount. I have seen estates that may fall below this line in the sand that rack up legal fees quickly. Fees that may surpass the value of the estate, but unquestionably surpass the cost of planning.

    @bri – Thanks! I agree more people need to understand the importance of planning. I’m hoping to help further educate and inforn on this topic.

  4. Mark, I recently had a trust created with a lawyer and he suggested a “Standalone Retirement Trust” because I have a large 401K (like I’m sure a lot of people in this community will have as well). My lawyer is very nice and he’s explained it a couple of times and I’m still not sure I fully understand the pros/cons. Are you familiar with a “standalone retirement trust” and do you have any thoughts?

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