Estate Planning Essentials to Ease the Burden

Plus, bitcoin ETFs vs. direct ownership 

Ric Edelman: It's Tuesday, August 20th. Yesterday, I told you about the oldest person in America. She's 115 years old. And at the same time, we're not producing as many babies as we need to sustain our population. So, the overall population is getting older. But what it does also inevitably force us to acknowledge is that even though she’s 115, she's eventually going to pass. We all are, right? And that means estate planning is in your future.  

So I just want to give you a little bit of a heads up of what to anticipate so that you can minimize the hassle and pain and anguish and cost to your family as they deal with the inevitability of your passing. Or you can think about your parents passing, which is, of course, far more likely to come sooner than yours, so that your parents don't settle you with the burden and pain and anguish and cost associated with settling an estate. Bottom line is it can cost thousands, tens of thousands of dollars, and it can take years to settle an estate. The most fundamental issue that you've got to answer is who will be your executor, or who will be the trustee of your trusts? If you have a will, you name an executor. If you have trusts, you name a trustee. And most folks who are affluent have both, they have wills, they have trusts, they might even have multiple trusts because different trusts accomplish different things. This isn't a course in estate planning here this morning. Instead, we're going to talk just more limitedly about the procedural elements of this, and it all begins with, of course, signing a will, signing a trust, which, let's face it, half of Americans don't even do that. But let's assume that you do the adult thing, and you do get yourself a will, you do get yourself a trust. The big question you have to answer is, who's your executor of your will? Who is the trustee of your trust?  

There's a joke in estate planning circles. If you have an enemy, name them your executor. Why? Because it's a distasteful, unhappy task. Conflicts are likely to arise. What if there's an heir who isn't happy with what they got? Or didn't get? If the heirs are unhappy, if they're unhappy with either how much they did or didn't get or unhappy with how you're handling the estate distribution or disposition, they might sue you. Bottom line is, if you think there may be conflicts in the future, rather than saddling the burden with a family member as trustee or executor, maybe you choose a third party. Maybe you select a corporate trustee. I mean, this is what bank trust departments are all about. There are also law firms that will happily serve as the executor or trustee of an estate. They're going to charge fees. You need to keep that in mind. That's a biggie. What it comes down to are some tips for you, just to consider. 

Number one, most fundamentally and basically, as I alluded to already, do sign a will, do sign trust documents, don't die intestate, which is the fancy word for dying without a will. If you die intestate, then the government is going to impose a boilerplate document that the state legislature has passed, and that's what you will use. The problem with dying intestate, and therefore defaulting to what the legislature has prescribed, is that they may not be leaving your assets to who you want to leave them to. So don't abdicate this final opportunity of yours to make a statement, to leave to who you want your lifelong assets. And I'm not just talking about your financial assets of bank accounts, brokerage accounts, and financial assets. I'm also talking about heirlooms, personal items of sentimental value in addition to those of financial value. So that's what a will is all about. Who gets what. Simple, easy, clean. If you have members of the family who you are concerned couldn't handle a windfall, you know, let's say that you're going to leave them hundreds of thousands or even millions of dollars, and you're concerned that they wouldn't manage it properly or effectively, or they may get scammed by somebody who's taking advantage of them, or they're a spendthrift and they would blow through the cash in months... or perhaps they are a special needs individual and they don't have the capacity mentally, physically to manage the assets, or they have a drug or alcohol addiction, or they're married to somebody you don't trust, you have an in-law you're not terribly happy with... for any of those reasons, this is where trusts come into play, where you can prescribe the conditions on which they get the money, you might give them an allowance where they get only a certain amount per month. You might delay them receiving the money. They get only the money when they reach age 35, or 55, or what have you. You may limit the reasons they're allowed to receive money, such as for health care, or education, or to buy a home. So, you can dictate who gets what, the conditions they receive it, the timing that they receive it, and so on. Bottom line is, it gives you the chance to do all of this in advance.  

Let's say that you are on the receiving end. Someone has passed and you find yourself the executor or trustee of their estate. Here's rule number one, step number one, do nothing for a year. There is no urgency, there is no hurry, there is no immediacy required for you to act. The only thing that you want to do, at the outset, is notify Social Security so that those payments stop, notify insurance companies if they had life insurance, you want to notify them right away. And you want to terminate subscriptions and other expenses that they had been incurring that obviously are no longer needed. But in terms of distributing assets to heirs, absolutely not. Do not do that anytime soon. And there's no urgency for doing it. You have plenty of time. Don't worry about paying off bills or debts either. If you're worried that there's a debt that the deceased owed and you're not even aware of it, sit back, relax. Those letters will come in the mail. Give it time. Give it a year. There is no need to take any urgent action, especially while you're dealing with the grief and sorrow of the passing of the loved one. So take a deep breath and relax.  

And that relaxation will be relatively short lived because there's something you need to know about being the trustee or the executor. You have personal liability for your actions. In other words, if you distribute assets out of the estate to somebody, and then another person comes along demanding the money and you've already given it away, you're liable for that. So this is why you want to think twice about accepting the role of executor or trustee. And if you are going to accept the role, you want to make sure you're doing everything possible to minimize your own personal liability. And that means, the only one thing you want to do in a hurry, is hire an attorney and a state attorney to help you deal with the disposition of the will and the trust.  

You're likely going to have to file with the probate court. There are legal minimums in each state, what's the value of the estate in order for it to be required to go through probate. If you're listening to this podcast, I think it's a fair bet you're going to qualify or the estate will qualify. The probate process can take a minimum of one year to complete. It allows opportunity for creditors to come forward saying, wait a minute, don't give money away to the heirs. That fellow owed me money first. It gives an opportunity for disgruntled heirs or omitted heirs to come forward making claims as well.  

So, with the attorney's help, you'll go through the probate process. The bottom line is, this is a challenging experience because most folks who go through it have never gone through it before. And that's why you want to hire an attorney. It is also why if you suspect that you might become the executor or trustee of somebody's estate one day, ask them now, hey mom, who are you naming as executor or trustee of your estate? Is it going to be me? Because if it's going to be me, here's what you say to mom, I would like to see those legal documents right now. This will give you an opportunity to look through them, examine them, ask questions to mom about what she meant, what she said, what are her intentions? Let's eliminate the confusion or the ambiguity or the omissions, and let's do it while mom is still here to give you that information, because after she's gone, you'll never be able to ask any further questions. So, if you're going to be the executor or trustee, get a hold of the documents now. Make sure you're aware of what you're in for. Make sure you're making an informed decision about agreeing to serve. Oh, and yes, by the way, my final point. You're allowed to obtain compensation for your services. That's something you perhaps ought to think about.  

Coming up next on the show, a question that I got from one of our listeners.  

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Ric Edelman: Alan of Orange County, California wrote in to me, and here's what Alan wrote: 

“I am invested in several bitcoin ETFs, but I'm also interested in self-custody as I've been reading and researching self-custody of bitcoin. Is there any advantages to owning bitcoin versus investing in an ETF? I hear different things about bitcoin like, holding it is like owning property versus the ETF where you never own it physically.” 

Well, it's a really good question now. And because now that the bitcoin ETFs are here, millions of Americans who would have wanted to buy bitcoin, but didn't want to go through the hassle and bother and uncertainty of going to a crypto exchange like Coinbase – now you can just buy the bitcoin ETF and it's simple and easy, it's familiar cause you already own ETFs. You already have a brokerage account. You just add it to that and it's familiar and simple. But what are the differences? Really good question.  

For most people, owning bitcoin via the bitcoin ETFs is the better way to go. Why? The ETFs are securities, and that means they're regulated by the SEC. When you go to a crypto exchange, there's little to no regulation. And you've heard of the frauds at these exchanges like Mt. Gox and FTX.  

Second, the ETFs are really convenient. You can buy them in any brokerage account. Any financial advisor can help you not only with buying them, but with rebalancing and dollar cost averaging and tax loss harvesting and tax record keeping.  

Third, the ETFs are the cheapest way to own bitcoin. They cost as little as 0.19% per year compared to 3% round trip commissions at crypto exchanges. And some of these ETFs have even waived their fees for a while, meaning they're free for you to buy them.  

Fourth, the ETFs eliminate the need for you to fuss with protecting your private keys, the passwords that allow you to access your bitcoin. So clearly for most people, the ETFs are the better way to go, but keep in mind, having said that there are a couple of disadvantages to the ETFs.  

Number one, they only trade during market hours. So if the stock market's not open, you can't buy or sell, you can't even transfer your bitcoin. And the market's only open 9:30am to 4:00pm, Monday through Friday. They're closed on holidays and weekends. When you buy via an exchange, on the other hand, you have 24/7/365 access, so liquidity is a little bit better with the exchange. And there's a saying in the crypto community, not your keys, not your coins. In other words, when you buy bitcoin via the ETF, they handle the private keys for you. Some people that means you're taking a higher risk. I don't really support that theory. I mean, stock and bond investors have the same issue. Nobody ever seems to be concerned about you holding your stocks and bonds in straight name at your brokerage firm. So why would you suddenly be worried about it with bitcoin, if you're not worried about it with your stocks and bonds?  

Bottom line is, it's entirely up to you. This is not a good versus bad choice. It's a personal preference. Like I said, I think for most ordinary investors, the bitcoin ETFs are the way to go. 

You can send me your question as well, just send it to AskRic@TheTruthAYF.com. The link is in the show notes.     

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Ric Edelman: I’m glad you’re with me here on The Truth About Your Future. If you like what you're hearing, be sure to follow and subscribe to the show, wherever you get your podcasts, Apple, Spotify, YouTube – and remember leave a review on Apple podcasts. I read them all! Never miss an episode of The Truth About Your Future. Follow and subscribe on your favorite podcast app. I'll see you tomorrow. 

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