Couples, Money, And Retirement

Speaker: Maritess Bott

Maritess:

Hello everyone. I am Maritess Bott of Bott & Associates. Thank you so much for watching or listening to our podcast. Today’s topic is going to be called Couples, Money, and Retirement. It’s actually an article that I was just reading in Fox Business News, and it’s citing a particular survey by Ameriprise with that same name—Couples, Money, and Retirement. They took 1,500 American couples who have about $100,000 or more in investable assets, and they’re between the ages of 45 to 70. Some people in the survey have already retired, some are thinking about retirement, or about to retire. Certainly, a lot of you viewers and listeners fall in this category, so I wanted to share a few things which I thought were quite interesting.

The name of the article is called “Majority of U.S. Couples Do Not Have an Estate Plan.” That perks up my eyes because it’s talking about estate planning, which is my world. The article says most couples actually share the same retirement goals. They have goals they set out to do, such as retiring at 65, 67, or even earlier. The survey says that 95% of the couples actually agree and are transparent with their finances. That’s good; it’s pretty high at 95%. They also cite that 91% of these couples share financial values—the value of how to make, earn, and save money, and things like that. Very important. And before you get married, you should probably check to make sure that your would-be spouse or new spouse also has those same values.

Another statistic I thought was very interesting was that 24% of these couples don’t really agree about how much to save and how much to spend on their children or their grandchildren. I can only attribute that to maybe as you’re getting older, you have some things on your bucket list that you want to do, or you have children who are needing some financial help. I see couples in my office where one is more inclined to help that child and the other is more inclined to say no, let them learn, let them do what they need to do. I’ve seen both. But I’ve also seen the drastic side of that. I’ve seen couples who have—let’s face it, it’s the word—enabled their children into their 30s, 40s, 50s, so that the kids rely on them 100% because they can’t keep a job. There’s a negative to giving too much money to those children.

And then I’ve seen the other side, where they give nothing. And I’ve seen their kids—maybe not being super high earners or super wealthy—but they are independent, because the parents let go of that responsibility and the kids found their way. I talk to many couples, many people in general, and I ask them: What is the value of money to you? How important is it to you for your loved ones—your kids, your grandkids, even your nieces or nephews—to appreciate the inheritance you’re giving them? How important is that? Those are questions to be discussed at the consultation that you have with me as your estate planning attorney.

The biggest number that I took out of this article is the percentage of people that don’t have an estate plan. You recall there were 1,500 couples that were surveyed. The actual percentage is 52%. That’s not very high. That means 52% have no estate planning, so only 48% have an estate plan. In my world, that means we have to educate more. We need to get people to really understand why this is important. This type of article, which is out in mainstream media, I’m hoping people read it and take it to heart and say, we have all these values and conversations about money—let’s now take it to the next level: what does this money mean to us, and what is the legacy that we want to leave to our kids, grandkids, and future generations?

The article, after citing all of these statistics, gives four recommendations, which I completely agree with. One is: don’t be intimidated by this topic. This topic can be misunderstood. People might think, I only need a will, or I don’t need anything more than that. Or, I’ll just do my will online. Or, I’ll go to my other attorney who did my real estate closing, and he can do a basic will for me. But sometimes those are not the right choices. I would say don’t be intimidated by it. Find somebody who can help you understand this topic a little more. Educate yourself. If you’re watching this, feel free to call our office and we can send you a link to a video so you can wrap your arms around this topic a bit better and understand it.

Number two: engage a professional. I can’t tell you how many times I’ve seen homemade wills that go wrong. Homemade wills where the judge is looking at me like, counselor, this will was not properly signed, or didn’t include the proper language. We’ve had wills that were never accepted or entered in as a will because the judge would not accept them. It’s important to engage professionals who will absolutely do it right—make sure your wishes are carried out, as opposed to signing something random just to have something written down that never gets followed.

Number three, which I like, is just a comment: once you’ve completed your estate plan, be proud of yourself. I call it adulting—as many people use that word as a verb. Whether you’re 22, 25, creating your first will, or 60, 65, 70 doing your first, second, or third iteration of your will, it’s a great moment to say, I did it. I established my legacy. And when you’ve not only created the will and trust but also transferred assets into your trust and gotten everything connected, that’s when you say, great job, congratulations. I always try to give all of my clients a big cheer that they did something very important for themselves, their families, and future generations.

Number four is: revisit your estate plan every five years. And if there are more life events, you can do it more frequently. I’m a big fan of that. This is not a “set it and forget it.” Every three years, in our office, our clients will get a reminder to take a look at their estate plan. Maybe they’ve changed jobs. Maybe there’s something to adjust in funding the trust. Perhaps they have a new grandchild and want to set up an education trust. Perhaps one child is going through—not necessarily a divorce—but a separation, and they’re worried the money might accidentally go to their future ex-son-in-law or ex-daughter-in-law. Those are the recommendations from the article. Take a look at that article. It’s important. Don’t be intimidated by estate planning. Engage professionals. Be proud of doing it. And check it every few years—every three to five years.

I do want to address a couple of common questions that came up in my head as I was reading this article. These are very common questions people bring up when they come into our office. One of them is: Should I tell my children about their inheritance? That’s a big question. Is it really important for them to know details? I would say, when you’re still younger and not necessarily facing health challenges—maybe in your 50s, 60s, or 70s—you’ve created your estate plan, and I would say you don’t have to tell them all the details. You could say, yes, we’ve done all right with our lives, you’re going to get an inheritance, it’s all laid out. If you have questions, when I die, go to my lawyer, or go talk to my advisor, whoever that might be, and they’ll provide the details.

But in terms of giving them the full “here’s what I own, here’s what you’re getting”—there are a lot of downsides to that. One is, you might change your mind, and now you have to tell them you changed your mind, which might be awkward. You also might not want to give them the idea that they’re fully set up once they get their inheritance. I think most clients want their children to be ambitious, have their own lives, have their own goals. Telling them “you’re probably going to inherit X” might plant something in their heads. So when you’re younger, I wouldn’t give too much detail.

When you’re older—clients in their 80s or 90s—it’s okay at that point because the likelihood of changing it is less, and if you want to give them a heads-up and also prevent fighting, then the more you can tell them, the better. But not necessarily in the beginning, because again, you might change your mind.

Another question I get is: Should I leave my children all the money in a lump sum—meaning, when you pass away, they just get their money and that’s it? Even if you tell me that you trust your children, and that’s great—it means you raised them well—it’s not really about trust. It’s about unexpected circumstances in their lives that can happen after you’re gone. For example, if they’re in a relationship and they’re married, what if they get divorced? What if they lose their job, spiral financially, and file for bankruptcy? What if creditors come after them? What if they get into a car accident and face a wrongful death lawsuit? How do we protect their inheritance?

And last is, what if your child happens to have a serious medical situation where they become disabled? Maybe they have to go on disability. They might have to get on Medicaid, and you’d hate for them to receive their inheritance and get kicked off that benefit. That’s a special needs situation. All of those circumstances are things you can’t determine today while your kids are perfectly healthy and fine. You don’t know until that happens, and you may not be here when that time comes.

A lump sum sounds great, but if we can protect ourselves from those situations, why not? They can still have the money. They can still have access to it, but we can protect them from all those unforeseeable circumstances.

The last common question I hear is, should I specifically disinherit my in-laws or maybe even future in-laws? What I mean by that is, you may not particularly have a good relationship with your daughter-in-law or your son-in-law, and you might be wanting to say, “No way is John Doe getting it—my future son-in-law,” because you’re not too keen on him.

Should you specifically say that? You can. That’s certainly an option. Or, we can make sure that your son-in-law or daughter-in-law, or anybody else you name, will not get it based on your instructions. It’s something to consider when we have that planning conversation. Let’s figure out who gets this money, who doesn’t get this money, and make sure we put the guardrails in place so that it doesn’t unexpectedly go to the wrong person.

That’s it. I know that’s a lot of information. The big takeaway from this podcast is that 52% of Americans in the survey had no documents, no estate plan. Don’t let that happen to you, because the default will always go unexpectedly to the wrong people—whether it’s the state, the courthouse, the IRS, or even unexpected children you wanted to disinherit. Whoever that might be, just make sure you write your wishes down. It’s so much better than the alternative.

Once again, I’m Maritess Bott. Please feel free to call us or check out our website and look up the upcoming events. We’re doing some seminars this year, so take a look at our website for the next seminar dates. Have a great day. We’ll talk soon.