Building a Trusted Team to Help You Manage Your Financial Affairs – Episode 141

This transcript was auto-generated and may contain errors.

[00:01] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your host, bestselling author, Kim D.H. Butler and No BS Money Guy, Todd Strobel. Hey everybody, welcome back to the Prosperity Podcast. This is No BS Money Guy, Todd Strobel. Once again, we have the president of Partners for Prosperity and our co-host, Kim Butler with us today. And today we’re going to be talking about an article that came out in the September issue of AARP Magazine and it’s about building a trusted team of advisors to manage your financial affairs. Now, you know, I think this is directed at more people, 50 plus, but this is really something that should be thought out about maybe even 50 backwards too, because a lot

[01:01] of times with divorce and things like that, there’s children and decisions to be made that you probably don’t want to delegate to somebody else unless you’ve properly prepared those people to do so, correct? Absolutely. You know, when you talk about a team of advisors, and I really want to reiterate that it is important to deal with this, no matter how old you are, you know, all of us just think, oh, you know, that’s something for when I’m 70 or 80, but death and disability issues do occur in younger people. And not that we want to talk about that much, but it is something to be prepared for so that then you can set it aside and not worry about it anymore. And the typical team of advisors you hear people talk about is you need to have an

[01:45] accountant, you need to have an attorney, you need to have, you know, maybe a real estate expert, mortgage broker, financial planner, stockbroker, etc. But this article, it sounds to me, is more about the team of people that would help if you were not able to handle your finances yourself. Is that correct? Correct. So it would be, you know, while you’re disabled and after your death. So one of the things that we’ll do at some point in our future podcast is have on it our personal estate planning attorney, Rick Randall, because he’ll be able to share some good ideas about this area from a legal standpoint. What we want to do today is share some ideas about this from a financial standpoint, because it is a challenge when somebody gets to the point where

[02:38] they’re not able to handle their own finances. And I think it’s so critical that we have people that we truly trust to step in and take care of this. And oftentimes the default person is going to be a spouse and a family member. And the spouse may be very distraught because of having to care for someone that used to be alive and healthy and is now barely alive and possibly not healthy, or obviously if they have passed on already, the spouse may not always be the best person to do this. I’m aware of a situation where somebody just kind of lapsed into a mental funk and they weren’t paying the bills or anything. And that was the person that not only was supposed to take care of themselves, but this person that had passed on.

[03:31] And so now the entire household is a mess. So how do we find these people that we could trust? Do we have some suggestions that we can throw out questions to ask, discussions to have? I mean, this is a toughie. Yep, we absolutely do. And I think the first thing I’d like to add is, is you also want to have that person in your life that you trust to tell you when you’ve reached the point that you can no longer handle your financial decisions. Because I think that a lot of times part of not being able to make your good financial decisions is not knowing that you’re not able to make financial decisions. Absolutely. And just as difficult as it is to, for example, take away the car keys from a mom or a grandma that isn’t driving properly, taking away the

[04:22] quote checkbook from a mom or a grandma that isn’t mentally capable of doing that is equally as challenging. And I think always, always the best way to handle tough subjects like that is to first find an area to praise. Like, let’s say, you know, we’ve talked in this podcast about, are your habits serving you? We’ll find a habit that is still serving that person well. You know, maybe they’re still eating or maybe they’re still walking every day, or maybe they’re still handling other aspects of keeping the home clean and praise that. And then at the same time, as bluntly as you can, explain that you’re concerned that they don’t have a good habit around the checkbook and that you’d like to talk about it.

[05:14] And so many times I think we sugar coat a discussion like this, and we, I mean, I even use the word pussy foot around it, you know, like a little kitty cat carefully, carefully, and that is not helpful because this person that we’re talking with may not even get the hint that we are trying to drop, whereas if we will just bluntly, nicely. And again, after a compliment, provide some proof that this habit is not sustaining you and blame it on the habit. Like your current habit with a checkbook is not serving you well. That takes it away from you can’t handle your checkbook, mom, to this habit is not serving you well. Let’s talk about a different way to handle this habit. That’s going to give you some value.

[06:06] It’s going to give the other person some confidence and it will enable that conversation to go better. Okay. I’m going to go with a number one suggested in, like I said, this is the AARP June, 2016, uh, magazine. Um, I’m going to go with their first suggestion is to think creatively when seeking financially capable family members. And this is from an attorney. It might be a cousin or an in-law or one of your adult children. And to make sure that you provide them a reasonable fee as managing your affairs will take time and thought. Interesting. Well, I love the suggestion of providing a reasonable fee. It absolutely will take time and thought and the further the relationship, the more likely they are to actually accept that

[07:00] fee because so often if it’s family, it’s going to be, Oh no, you know, that’s fine. I’ll just do it. And you certainly don’t want to end up with a martyr of someone that’s doing it begrudgingly or not doing it well at all because they don’t want to do it or can’t find the time to make it a priority, et cetera. So great suggestion. Yeah, I think it absolutely is. And you know, this might be a family member that’s distant enough away that they’re not going to be included in the distribution of the money. So it takes that pressure off of them too. So they’re being compensated for what they’re doing, but they’re not in line for anything. So it doesn’t look suspicious to all the other family members.

[07:36] They’re kind of an independent third party in a way. Right. Well said. The second suggestion is to choose a health care agent who lives nearby, if not family, then a close friend or even your doctor. Interesting. Okay. So health care agent. Now, this is the formal health care agent. Isn’t it a cert? I forget. It seems like there’s another word that goes with that, but this is the formal one, right? Yep. This is the, it’s called PULST, P-O-L-S-T, Directive, which is Physician Orders for Life Sustaining Treatment. There’s a website they direct you to called PULST, P-O-L-S-T dot org, to see if your state recognizes you to basically give a directive to health caregivers of exactly what you want to do or not to do in the

[08:30] event that you’re unable to make decisions yourself. Okay. Yes. So absolutely agree with this. And again, a toughie, but anytime you’re updating your estate planning, this person, this relationship needs to get looked at because so often, especially people in their 50s and 60s, they might actually still choose their parents. And okay, so now you’re talking about maybe somebody who’s 75, 80, 85 years old, and that could be completely legitimate for a period of time. And then all of a sudden, that person’s no longer to help you either because they need the help. So this is something that you want to review if you feel like you’ve already gotten this handled. Some attorneys would call this a living will.

[09:12] Some of them are going to call it the healthcare power of attorney and this PULST thing. And there are other websites that support it. Another one is 5wishes, 5wishes.org that spells out how you want to have some end of life areas handled. Any of these kinds of things can not only help you have the conversation, but also pick the person. Third suggestion is choose a community with ample resources for those 65 and older. Participating in group activities helps you build a network of friends who can lend a hand and help you find advisors you can trust. Interesting. So are they suggesting that you should move if your current community is not valid? Well, maybe you could. I mean, even if you didn’t live in a community,

[10:00] if maybe there’s like meetings and things like that where you could go to make friends. And I mean, certainly if you have a group of people who are of the same age and facing the same issues, they may be able to pass along suggestions. Absolutely. One of the websites that can go along with that is seniorshelpingseniors.org. And this is a matching website where, let’s say, your skill is still being able to go to shopping and you can go to the grocery store and run errands without any trouble at all, but you’re losing your capacity around handling paperwork, you know, the daily paperwork that’s necessary to keep a house running. Well, there might be a senior somewhere who has lost the ability to run errands,

[10:47] but is still really sharp with handling the paperwork. And so they pair these two seniors. And what happens is there’s also a lot of good dialogue that goes on because I think for a lot of people, what they’re missing is some good conversation and their children and grandchildren don’t always have time for the conversation. Whereas another senior, senior citizen, so you mentioned 65, I’m thinking like 85 and older, but, you know, another senior, senior citizen might have the time as well as the capacity. So they get together on seniorshelpingseniors.org. And the person that can do the paperwork does both families’ paperwork and the person that can do the shopping does both families’ shopping.

[11:32] Sometimes they do it all together. And so it becomes, you know, a day of an outing plus handling some of the paperwork plus getting some of the groceries loaded up into the fridge and et cetera, et cetera, where everybody’s got the time to do it. And sometimes there is pay for that. Sometimes it’s done as a share or a swap, if you will. All right. Now I’m going to give you one that I don’t think you’re going to be too happy with. All right. Let me add it. This is going to be consider buying an immediate annuity. This would be a life only annuity to pay for your basic lifetime care. Interesting. Okay. And any age around that? Nope. It doesn’t really say, but I mean, obviously, if it’s an immediate annuity,

[12:16] you have to be over 59 and a half. Right. So this is like, so I don’t have to think about it anymore. I take my $500,000. I turn it into $1,000 a month in income for as long as I live. And I don’t have to think about my money anymore. Right. So immediate annuities should be deferred. So not to confuse our viewers, not to confuse our listeners, and there are deferred annuities and immediate annuities. And deferred annuities are what most people put IRAs and that kind of thing. And immediate annuities are what Todd just described. And immediate annuities, in my opinion, should not be bought until you’re in your late 80s. Because first of all, you are making an irrevocable decision. And I can’t tell you how many people in their 70s

[13:03] have come to me with an immediate annuity that they bought in their early 60s. And now they want to get out of it, and they can’t. So the purchase of an immediate annuity should be something that you delay, delay, delay, delay. And second of all, they are determined by your age. And so if you buy it when you’re older, you’ll get more income. And since you are making an irrevocable decision, that higher income, which as you’ve indicated, is payable for life. But they have little riders that you can add to them where there is a refund. And a lot of people steer away from immediate annuities because they think all of the money is now gone to the insurance company forever. But you can, for a little less income per month,

[13:51] and essentially pay for the rider that way, get a refund if a death occurs so that your family does get whatever remaining money is left back into the family. But again, yeah, let’s not be doing immediate annuities in our 60s. That needs to be done in our 80s. Well, and I think it still needs to be done on a case-by-case basis, too. Because $1,000 a month, and we’re just using that as an example, may pay your bills now, but that number is not adjusted for inflation. So if we have a 4% inflation 10 years from now, that $1,000 a month is not going to feel like it does today. That’s right. There’s no way of changing it at that point. That’s right. Yeah, big challenge in terms of loss of control.

[14:40] Yeah, I’m going to have to disagree with that one. You were right. Simplify your financial life by gathering your assets into a single bank and a single investment company. Ooh, okay. So that could work. You have to, of course, be careful of dollar figures in a bank with the Federal Deposit Insurance Corporation, assuming that you even trust that at all. I prefer to hold my liquid money in cash value of life insurance instead of at a bank. I still use a bank, and I would agree that sometimes people’s finances get messy when they have two or three different checking accounts at two or three different banks. And there’s no need for that. If you’re just talking about checking account money, that should be maybe one, two months expenses at the most.

[15:25] That absolutely can be in one bank or even better, a credit union or a small local bank where if we do have any bank problems, we won’t probably be as affected in the credit unions and small local banks. The investment company concept is interesting. I’m going to have to say I disagree with this one as well because there are a lot of investment companies out there that try to be all things to all people, and consequently, they don’t do a good job of any of them. And as we’ve talked about on our podcasts, we want our clients very, very focused on what job their dollars are doing. And some dollars need to be liquid in store cash as well as be available for other jobs. Other dollars need to be available to create income.

[16:10] And then other dollars need to be available to create growth. And we find that those two very specific jobs are handled best at two very different types of companies. To try to get one company to do the other or one company to do both is taking away the fabulous ability that these companies have. So I have to say I disagree with the oversimplification. Yeah, you can do some consolidating of IRAs and some consolidating of the same type of IRAs, I should have said, and some consolidating of miscellaneous savings accounts and maybe a bond fund here and that kind of thing. But I do think you still really want to work towards unique ability for the investment company to do the job that you want done.

[17:02] Is it income? Is it growth? Is it cash? Those are three, just off the top of my head, specific different companies that do those three jobs. All right. This is the sixth and final suggestion is limit the powers you give to an agent through a durable power of attorney, for example, by denying the right to make gifts. The attorney who talked about this prefers living trust to power of attorneys because the law holds trustees more accountable. Interesting. Well, I’m a big fan of living trusts and I always thought that living trusts had powers of attorneys in them. So that’s an interesting suggestion. I’m going to have to defer that one to Rick when we get him on our podcast. And Rick Randall, just as a setup for him,

[17:49] it may be another two or three weeks before we can get him, but he has a nationwide network of estate planning attorneys at NNEPA, Nation Network Estate Planning Attorney, NNEPA.com. And it is a group of attorneys that have been proven to have a process whereby they will do your estate planning process and they will give you updated documents for your review every single year. And their process is solid and it’s something that my husband and I have gone through ourselves and we refer a lot of clients there. And though Rick happens to work in Indianapolis, he can help via the web and some other legal affiliations that he has in all 50 states. And so if you need some help in this area, please take a look at NNEPA.com

[18:51] or you’re welcome to reach out to us at hello at partners number four, prosperity.com and we will refer you directly because getting updated estate planning documents is super critical making sure that your living trust is funded and that it has all the appropriate additional documents in it like powers of attorneys if you choose to include them, living wills if you choose to include them, medical powers of attorney, et cetera, is paramount and must always, always be current. And of course, it’s not an easy thing to do. It’s something that us human beings want to put off all the time. But Rick and his team make it easy. They do it online if that helps. They can pull in one spouse at work and another at home

[19:33] or both at different places at work, et cetera, and make the whole deal very efficient. And then like I said, it gets automatically updated every single year. So that’s NEPA.com, N-N-E-P-A.com. Got it. There are a lot of places that offer to send you the trust documents at a very, very inexpensive price, usually like $99 or something. I have never had one of those reviewed that was properly completed. Meaning that if it ever had to speak for you, it was not legally binding. Have you noticed the same thing? Yeah. It’s a you get what you pay for world in the state planning arena. And I think typically Rick’s process is, oh, I shouldn’t quote, but I want to say 1,500 to 2,000. So well worth it for the peace of mind

[20:24] that you know you have a legally binding document that’s going to do the job. Super. Well, we kind of went long today, but we hope we’ve given you some ideas. And if anybody has any suggestions or has any additional questions, again, that’s hello at partnersforprosperity.com. This is No BS Money Guy, Todd Strobel. Take care. We’ll see you next time. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit us at partnersforprosperity.com. If you liked this episode, make sure you subscribe and leave a review.