Your Estate Planning Defined

This is the Truth Network. Welcome to Finishing Well, brought to you by CardinalGuide.com, with certified financial planner Hans Scheil, bestselling author and financial planner, helping families finish well for over 40 years. On Finishing Well, we'll examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Social Security, Medicare, IRAs, long-term care, life insurance, investments and taxes.

Now, let's get started with Finishing Well. Welcome to Finishing Well, certified financial planner Hans Scheil, and today's show, you are going to be so thrilled you tuned in for this one. It's called Your Estate Planning Defined.

Oh, it gets so simple, but then it is so helpful, today's show. I am excited to share it with you, but I thought it might be fun to kind of take Hans' board that he uses on the video and take it over to your spiritual estate. So here's sort of your spiritual estate planning defined real quick. And number one, you've got to take stock of what you have. So a spiritual estate is not yours to claim as a possession, but yours to carry as a commission, right? It's the mystery of God entrusted, a portion passed down through generations of fire, kindled by ancestors meant to keep burning, right? You're a steward, not an owner, and these truths we carry we first heard and received and now have been entrusted and meant to be poured into others. So who do you want it to go to?

Is number two on the list. And this estate is both an inheritance and an assignment, so you walk what others built and prepare the ground for those who are yet to come. So your faithfulness really completes this race and opens the door for the next.

And under what terms and conditions is number three on Hans' board. Do you want to transfer your estate? And so I love this. So spiritual estates transfer when the beneficiary has proven faithful, right? And they're in divine proximity, walking with God in his timing, and right, they too have to be willing to carry on what's been entrusted to them. And so how fun is it that we get to do that? We get to do it through prayer, we get to do it through teaching the Word, and certainly in discipleship.

And so speaking of discipleship, we're ready to learn about how to estate plan, Hans? Yeah. Well, I got this definition. I like to try to make things simple. You know, in our radio shows, in our YouTube videos, you go to our website when we're in meetings with clients.

I try to use, you know, not big words, just regular words to describe things and break it down and make it simple. And I just heard from this gentleman that was giving us a talk on estate planning, his definition, and he goes over this with every client when he starts the estate planning. And so I'm just going to go through it. So the first part of it is getting what you have. So we've got to define what you have. You know, your money in the bank, your money in investments, your money in your IRA, your house, your possessions. If you have a business, just everything, jewelry, things that are real personal to you, if you've got a boat.

I mean, everything needs to be in there, and you need to take an inventory and take what you have. You don't know when you're going to die, but when you do die, then the next part of the thing is to who you want it to go to. So getting what you have to who you want it to go to, which, you know, most married couples, I want it to go to my spouse. And that's a mutual thing where they don't know who's going to die first. But when the first one dies, they want most of the time just about everything they have to go to their spouse.

And then there's exceptions to that. Some people want, when they pass away, to have certain personal things or certain money or a certain amount to go to their kids or the church or somebody else. So, again, it's getting what you have to who you want it to go to. You get to define that. And then the third piece of the thing is it says under your terms and conditions. So, I mean, that's a mouthful, but I thought he did a wonderful job, and I actually took a few words out of his thing just to simplify it.

So tell me what you think of this, Robbie. Well, what you see there, and I think it's so beautiful, is you are totally in control of this, but you're also a steward of it, right? So, you know, you make these decisions on who and you make these decisions on the terms and conditions, but it's a real opportunity to do some planning and to have some really good discussions before you end up with a bunch of fighting with your kids or whoever the beneficiaries are of all your stuff, to really simplify this, to create family harmony, and to truly finish well? Well, yeah, I mean, your terms and conditions. So when you have minor children or even young adults, I mean, you just don't want to lay a bunch of money on a 26-year-old kid. I think about when I was 26, if I would have inherited $100,000, there's no telling what I would have done.

I might have quit my job. I don't know if I would have done that, but I certainly would have gone out and blown it on some things that certainly are not with my dad's intention. So there's ways you can set things up so that your young adult kids, if they're young adults when you pass away, can't go out and blow all the money. I mean, it's just going to be pieced out to them in such a way that they're just going to give so much a year, and maybe you don't want to do that. I mean, maybe you have a lot of faith in the responsibility of your 26-year-old kid.

I'm just picking that out. Like my one that is 26 now, my youngest son, I wouldn't have any problem leaving a whole lot of money to him because he would be very smart with it. Now, his brother, who's 37, at any age, I got some issues with just leaving him a whole bulk of money. And for that matter, I've sat down with his wife and made sure that she has her fingers on things. So what do you think of that? Oh, I think it's exactly right that the beauty of it is, and the beauty of this show, is to get us to begin to think of what would work out best for those we want to give it to and how we want to give it and how we want to take care of these folks.

It's just wonderful to do the planning. Yeah, and so there's a little add-on to Vince's piece of this thing that he puts at the end of the definition as less than exposure to divorce, lawsuit, and transfer taxes. And what he's talking about here is he's sitting down with somebody many times in their 50s and 60s, and they own a business, and then they have some wealth accumulated, and their kids are probably young adults, just like what I was describing, what I have now, which are young adults. And he's just thinking about if one of them were to become divorced way into the future, then setting things up so that the money properly gets to your kids, to the intended beneficiary, and then your grandchildren, and it doesn't get into the hands of the ex. They think about lawsuits that if your children were sued or you were sued over some event, that this money would be protected in ways, and there's ways to do that.

And then thinking about estate taxes and transfer taxes. So, you know, those are things that I kind of add on because they start to complicate things, and we come up against people's values. I mean, I have to be real careful talking to people because I'm talking about their, you know, like if somebody starts talking to me about my son getting a divorce, and then my daughter-in-law and how he's going to effectively write her out of things, I mean, I might not take to that too kindly because I don't really think that's going to happen, and it kind of goes against my beliefs. But when I'm a planner, I don't need to force that on everybody I'm doing planning for. I need to sit down with each client, I'm a fiduciary, and just talk through these things that might happen in the future. Oh, yeah, well, I can tell you, my dad took huge advantage of that type of planning because, you know, he knew that I had all kind of exposure based on having lost the dealership and end up doing things in a living will so that my children received the bulk of the estate right straight through and gave me rights to it. It's just really beautiful what that kind of planning can do when people really communicate well with what's going on in their lives.

Sure. So, you know, like I'm an estate planner, Tom's an estate planner, you know, we're financial planners, and we sit down with people and we construct financial plans, retirement plans, and a piece. One of the seven worries is estate planning. So when we do a financial plan for people, it may not be the top priority. A lot of times retirement income is one of the top priorities, long-term care, but then the estate's going to be there, and we're going to figure out how we're going to leave what's left to who we want it to go to, and we're going to find out what your terms and conditions are, how you want it to go to them, and then we're going to do our best and possibly probably get you to an attorney or line the attorney up for you and then tell the attorney what we want to have happen, and you put it in effect.

I mean, that's the work we do. That's beautiful. Well, this would be a good time to remind you that this show is brought to you by CardinalGuide, cardinalguide.com, and there at cardinalguide.com, you're going to find the seven worries Hans was just talking about. Today's worry that we're talking about is estate planning, and so if you go to the estate planning tab, you're going to find a wonderful video that, again, as this board, we're talking about with all these steps and very, very beautifully lined out. It's all there at cardinalguide.com with show notes and all that, as well as Hans' book, The Complete Cardinal Guide to Planning for a Living Retirement, and, of course, the Contact Hans and Tom page, which, believe me, is to me the simplest way, especially, you know, when you're coming to this estate planning thing, they can really, really, really help you with things that you never might have thought of, and so the Contact Hans page is definitely what I like at cardinalguide.com. And so we'll be right back with a whole lot more your estate planning defined. Welcome back to Finishing Well with certified financial planner Hans Scheil and today's show, Your Estate Planning Defined. And so, Hans, we got some amazing examples, right? Yeah.

Okay, we'll start with the first one. I never met this man. He just passed away a few months ago, and I was referred, he sold annuities in his retirement. He was a medical doctor before retirement, but he got into the annuity business, and I think of most of his annuities he sold to himself.

But in any case, annuities are a great way with beneficiaries to avoid probate. I mean, we've only been involved with this case for about a month, and we're in the process of, I think there were 14 different insurance companies for 14 different annuities. It might be amongst like seven or eight companies that were getting the beneficiary. So the beneficiary came into us as a referral from the people we get many of our annuities through as they said, you need to meet Hans, which I consider very flattering. And so this young lady came to us, and she lives up in Chicago, and her father lived down in Florida, and she had her brother on the Zoom, and he's in Indianapolis where the family is from. And father just passed away, and he left all the annuities about two and a half million dollars in annuities to his daughter who is unmarried, and she's 30 some years old, almost 40, and he didn't leave much to the two sons. And as explained by both of them is because the daughter is single, he wanted her to be taken care of, figuring that she needs something or something to take care of her, and both the brothers are doing very well.

He did leave the house to the one brother and her, and so she's forgoing her part of the house just so that the one brother gets all of that to keep, but that's not really the point of why I'm going all over. Most of this money was in an IRA, and she is falling under the 10-year rule on about 1.6 million of it is in an IRA, and she's going to have to distribute that to herself over 10 years. Yeah, of course, she didn't know any of this. She's going to have to file claims with all these companies.

She's got minimum distributions. She's got the 10-year rule, and if she doesn't handle things properly, taxes are going to be more of her problem than, you know, like what she invests the money in. Because she came into us thinking we were going to tell her the whiz-bang choices to make to put this money in, to make her money, and she left us, or she's still with us, I mean, she left us thinking about taxes. And so we put together a very simple plan for her that's just going to evenly distribute the IRA money over 10 years, and then we're pulling out the money that was not IRA money, that was just regular money that was in annuities.

We're taking that out and using that for cash up front, because we don't have to pay tax or much tax on that, only the growth that had occurred inside of there. So it's not a real flattering story, other than just the fact that we're getting a lot of this now, where people, just after somebody passes who is in their 80s, that it's their kids that are finding us to help them get the estate settled, and then what to do with the money in there after it's done. So you got any questions about that one, Robbie? Well, I know, it was really a fascinating study when I saw it on the video, that the siblings were so agreeable in the situation, because clearly there had been a lot of planning done, where the brothers knew the sister was going to get this and why, and I thought it was just a beautiful example of families working together like they should under the circumstances of the passing of the patriarch. Well, yeah, and she's going to ultimately, should she not get married and have children, she's going to leave this money to her brother's kids anyhow, her nieces and nephews. That's all part of the plan. And it's interesting, her father didn't force any of them into any of this. He schooled them well, and this is just all going real smoothly, and I'm happy about it.

So let's move on to the next one. This is a client, another MD, retired, that this fellow, he had very large disability policy, and he also had quite a bit of life insurance, and he was in an accident at age 57, and which was, he just passed away about a month ago at age 80, and at age 57, which was well before I met him, he was in an accident that he couldn't do his work anymore, and his disability insurance paid him $17,000 a month for the rest of his life. So this was a plastic surgeon. He basically insured his hands and his ability to do surgery, and because it was an accident, it was a lifetime pay. So when I met him, he was spending $17,000 a month because there was no taxes on it, plus a little Social Security check. And to cover himself, he knew that he was going to die someday and that those disability checks were going to stop, so he kept his life insurance in force, and I was helpful with him 10 years ago working with this because the disability, the life insurance was on waiver of premium. I mean, so he didn't have to pay premiums in all these years, but the life insurance company wasn't crediting him properly.

So I don't want to get into the details of that. I helped him out a lot 10 years ago, and then we've monitored those policies every year up until his death to just make sure that there was $1.4 million worth of life insurance available for his widow to replace those checks. And we can't replace $17,000 a month, but we were certainly able to replace about $10,000 a month, which is pretty sweet out of that. You know, I don't want to get into all the breakdown of what we did and tax deferral and that life insurance money came tax-free, but this guy all along just told his wife and family that you just go to that Hans Shiel guy, and they knew because we got their health insurance, and we were in contact.

They knew us well. They had been to the attorney, and we just have kind of completed getting the money from the life insurance company and getting it distributed in the proper annuities to send her the check every month, paid off all their debts. It's really joyous when a plan comes to fruition. Yeah, that was what I thought when I heard this one, like, how beautiful is that? That this surgeon had that kind of insight and made those kind of great decisions, and then he just finished well right through the end of it in providing his wife with that income because you can imagine losing a $17,000 a month income, and all of a sudden, what are you going to do? And wow, I mean, what a great man. Well, and to see all that play itself out, I mean, we're very sad that he passed.

He was a great guy. His wife is still in very much grief, but she's coming up here with her son and sat down, and she's back to the attorney, and she just took so much joy. She didn't even really want to hear the details, so I'm going to have that much? Yeah, and so we put a bunch of, let's just say we moved that $1.4 million. We paid off some debt. We put some of it in an immediate annuity that's going to pay for her life, the IRA, and then we put some of it in an immediate annuity that's only going to pay for five years, and then we put a bulk of it into something that starts the sixth year and then pays for life.

And so it's just movement of a bunch of pieces around the board. She's got, I think it's $9,600 a month for the rest of her life guaranteed. It doesn't have any concern, and then we've got $300,000 set aside in multi-year guaranteed annuities spread over five years that we really don't intend to touch, but it's there for emergencies. And so it's a pretty good deal. That's awesome.

Yeah. And so the third example that we wanted to talk about was a client that we've done many things for, and this guy has an estate problem, this couple, estate tax problem, and he's 68. She's 58, and the estate tax problem is a way out there problem unless both of them would die soon. And in talking about the federal estate tax credit, and I don't want to get into the details of this, but what they decided to do is buy some survivorship life insurance.

They bought a policy that's a million dollars. It doesn't pay until the second one of them dies, but the whole idea is to have some money coming to the daughters. They have two daughters that is going to be tax-free and estate tax-free to actually pay the estate taxes.

And to do this, we set up an ILIT, which is the Irrevocable Life Insurance Trust, or an attorney set that up for them, directed by us, and he's paying 10 premiums of $34,000 a year starting right now and then for nine more years. We'll pay in a total of $342,000 after 10 years, and his daughters are going to get a million bucks when both of them are gone, and they're going to get a lot more than that out of the estate. But this is a whole way to set up money to pay estate taxes, or somehow we can set things up and keep the estate tax bill low or nonexistent. Then the daughters are going to get that inheritance before they get – these people have a lot of real estate holdings.

So I don't want to give all the details, but this is just more talking about one of the solutions that people can set up to have a cash payment, tax-free, go to their children, their adult children, when the second one of them passes. Once again, we've run out of time before we ran out of show, but it's so fun, again, just to have this estate planning defined. Again, there's a beautiful video if you go to cardinalguide.com. Again, the show is brought to you by cardinalguide.com. If you go there, you're going to find the seven worries tabs, one of those being your estate planning, and when you click on that, you're going to see this beautiful video with these examples aboard to show how the money went and all those things. In the show notes, it's all there at cardinalguide.com. Of course, the book that Hans wrote, which is a real resource, like a real good thing to have, you got a question about Social Security, you got a question about Medicare, whatever, the complete cardinal guide to planning for and living in retirement. It's right there, again, at cardinalguide.com. And of course, the all famous contact Hans and Tom page, which I highly recommend on this subject because they really can come to your aid with that.

It's all there at cardinalguide.com. Once again, thank you, Hans. Awesome show.

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