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#18 - Why You Need an Estate Plan With Chris Downs

Are you prepared for the unexpected?

Confronting fears isn’t just a personal journey; it’s a critical aspect of financial and estate planning. This is the central theme of today’s discussion, where host Eric Blake, joined by esteemed estate planning attorney Christene “Chris” Downs, dive deep into the unique challenges and essential strategies needed for successful retirement and estate planning.

 Key Highlights: 

  • Untangling Estate Planning: Chris Downs simplifies complex estate planning concepts and emphasizes their importance
  • Estate Planning for All: Whether widowed, divorced, or single by choice, learn the critical role of estate planning in securing financial futures
  • Beyond the Will: Explore key aspects often overlooked in estate planning, such as incapacity planning and the power of decision-making delegation
  • Avoiding Unintended Consequences: Understand how an effective estate plan prevents scenarios like ex-spouses unintentionally remaining beneficiaries
  • Intentional Asset Distribution: Insights into the pitfalls of dying intestate and the value of deliberate asset allocation in accordance with one’s wishes
  • Powers of Attorney Explained: A deep dive into the significance of Statutory Durable and Medical Powers of Attorney in managing personal and health affairs
  • Living Wills and Beneficiary Designations: Clarifying the role of living wills and how to align beneficiary designations with your broader estate plan
  • And much more!

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Ways to Enjoy Today's Episode

📚 Read a Transcript of the Episode Below
👀 Watch us on YouTube
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Episode Resources: 

➡ Join the Simply Retirement Newsletter
➡ Ask a Question
➡ Terry Schiavo and the Importance of a Living Will
➡ LinkedIn: Chris (Christene) Downs
➡ Krupa Downs Law, PLLC

Episode Transcript

Eric Blake: "Each of us must confront our own fears. Must come face to face with them. How we handle our fears will determine where we go with the rest of our lives." - Judy Blume

Wendy McConnell: Welcome to the Simply Retirement Podcast with your host, Eric Blake. I'm Wendy McConnell. That’s a Judy Bloom quote?

Eric Blake: That's right, talking about fear. When it comes to money, fear often plays way too big a role. It’s the topic we're discussing today. 

Wendy McConnell: Well, I've never gotten over my fear of Ferris wheels. I have just retired from them. But when it comes to money, we have to face our fears. 

Eric Blake: One of the topics that many people fear is estate planning. That's what we're going to be talking about today. Nobody wants to talk about it except for attorneys and financial planners, but your financial planner should be talking about it. If they're not, you might need to have a conversation with them about why they're not asking you about it. In my experience, it’s one of those topics that people just like to avoid.

But the other thing I'll say is that, once it's done, it’s like a weight has been lifted off your shoulders. “I finally got it done. It's off my plate. I don't have to worry about it anymore!” 

I have a client who has been with me almost since Day One of my career, for almost 24 years. After years of me bugging them, they finally got it done, and it was just like a weight had been lifted off. 

Wendy McConnell: We have somebody here with us today to help weed through some of these questions, right? 

Eric Blake: Absolutely. Today, we're going to be joined by Chris Downs. She's an estate planning attorney with Krupa Downs Law. One of the reasons I wanted Chris on the podcast is that she’s very big into education.

If you see any of her content on social media, LinkedIn, or Instagram, there's a lot of education involved in what she puts out there. I really wanted to have her help us understand some of the basics of estate planning and hopefully remove some of the fear and hesitancy that many people have about estate planning and how can we move forward and get some of these key documents in place. 

Chris Downs, welcome to the Simply Retirement Podcast. 

Chris Downs: Eric, thank you so much for having me. I'm looking forward to our conversation. 

Eric Blake: As I said, I think one of the reasons so many women and people, in general, are hesitant is a lack of understanding of what an estate plan really is, as well as the acknowledgment of their own mortality. Many people only think about it in terms of when you die, not realizing that an estate plan can be really impactful or more important while you're still alive. If it's okay with you, can you just give me a basic definition of what an estate plan is or what it means to have an estate plan?

Chris Downs: When I think of an estate plan, I think of a word cloud. If anyone is unfamiliar with what a word cloud is, it’s where all these words are put on a sheet of paper. They're random, but there's usually a common theme behind them.

For me, my estate planning word cloud includes words like retirement accounts, houses, cars, jewelry, vacation home, and my art collection. Pets, unfortunately, are personal property, but all this other stuff is property that we need to consider what will happen to it when we pass away. Part of estate planning is figuring that out. It's figuring out the who, the how, and the when they get it. It also tacks on the notion of providing incapacity planning for myself with additional documents or the use of a trust that says, “I might be here another 20 or 30 years, but what happens if I'm really not okay and I need someone to manage my estate for me? That's just generally how I explain estate planning. 

Eric Blake: Perfect. If you don't mind, I’d like to take a quick step back and ask what drew you to estate planning in the first place. Did something inspire you? 

Chris Downs: The need to help people. I'm a second-career attorney. I had a first career working for a company, and I loved everything about it. But one day, I was faced with the same decision that a lot of women are, where you ask yourself, “Is this still the right path for me? Do I need to make a shift in my career, and what would that look like?” For me, that shift was asking myself, “If I could do anything I wanted to do, what would it be?” And the answer was to go to law school. So, I did do that, with the support of my family and my now husband.

And as I was going through law school, I kind of knew the things I didn't want to do as a lawyer. I didn't want to be a trial attorney. I didn't want to be in litigation. And it was just naturally, through taking classes on estates and trusts and federal taxation, that I realized that I had an affinity for them.

It made sense to me and gave me the ability to help people: to help them by saying, “It's okay. We can step through this together and create a plan together, prepare the documents together.” I felt like it was what I was being called to do, to just be a helper. 

Eric Blake: I hear that a lot, the theme of being able to help people. One of the things I really value is that education aspect. I've had the opportunity to refer a couple of clients to you, and when they come back to me, every time, they say, “She took the time to help me understand what I needed to do and what direction I needed to go.” That's a valuable skill, especially when it comes to estate planning. 

Chris Downs: Thank you for that. Did they tell you about my illustrative devices, where I use pens and pen cups to illustrate particular concepts? 

Eric Blake: Hey, when you can actually illustrate a point in a way where people can visualize the concept, it can make a huge difference. 

Let's start with some of the basics. Estate planning is important for everybody, but why is it particularly important for single women who may have gone through a divorce, been widowed, or be single by choice? Why is having an estate plan so important? 

Chris Downs: I think that, through any of those chapters, single women have to answer the tough questions and get them out of the way, so if we're not able to take care of ourselves and make decisions, we’ve identified those who are our trusted individuals who we want to step in for us. It’s about peace of mind and knowing that when I'm not here anymore, I’ve set up the individual or individuals or maybe a charity that I want to benefit from my hard work and effort. If we tug the thread a little about divorce, what's important is that we actually revisit and update our plans to make sure we don't inadvertently leave our ex-spouse as the beneficiary on our employer retirement account and that we consider that if we have children from that marriage, that we’ve set up the proper plan for them when we're gone: maybe we don't want our ex to have control of the money we leave for our children.

I feel like estate planning is almost like tying a bow on it, if you will, to say, “This is something I need to do. Let's get it done. Let's tie the bow on it and say we've got it taken care of.” 

Eric Blake: Perfect. We'll talk about some key documents in a bit and how you go about accomplishing some of these things, but can you just touch on the importance of having an estate plan in place while you're still alive?

Chris Downs: Oh, absolutely. If we don't do our own estate planning before we die, we die intestate, which means we die without a will. Texas has written a will for each and every one of us, and it defines who our heirs are when we die. And those heirs may not be who we intend them to be or who we want them to be.

I'm going to give you an example. Let's go down our theme of being single. I'm a single woman, not blessed with children or grandchildren. My heirs would be my mom and my dad if they're still alive, and if my mom and dad are not still alive, it would be my siblings and nieces and nephews. 

Now think about life circumstances and different types of nuclear families. I might not have living parents, and I might be an only child. I might have siblings I don't care for, and I might not have nieces and nephews. We have to think through that. If all of that generation is gone, the state can go back up my family tree on my maternal side and paternal side and begin looking for living relatives and cousins that would inherit from me, and I may not actually want that, Eric. I might be that woman who says, “I have worked hard to build what I have and what I’ve done. And yes, I might have family, but maybe I want to leave my assets to a trust or a lifelong friend. Maybe I'm leaving it to a charity, leaving it to a donor advice fund or something. I'm working with my financial advisor to give back to future generations.

If we think about that stuff now, as hard as it is, we're building something that will live beyond us with love and making it easier as well. That's the other thing that everyone needs to know about when you die without a will. It’s very hard. The probate process becomes more complicated and more expensive. It can add more heartbreak to families who are already grieving the loss of a loved one. So, it's always better to take the time and get it done and not have unanswered questions later. 

Eric Blake: Perfect. Let's move forward with defining some of these key documents: what they are and how they work, and some of the key decision points. Again, we'll use the single-woman concept. Say they've gotten past their fear of having their estate plan done,The ‘who’, I think, is relatively straightforward. and they’re ready to start taking action. The first thing is probably going to be a will. Can you help us define what a will is and some of the key decisions that need to be made?

Chris Downs: A will is our opportunity to say who gets our property when we die, how they get it when we die, maybe when they get it after we die, and who's in charge of making that happen. Let's break those four points down. 

The ‘who’ I think is relatively straightforward. Let's build a history for our single woman. She has one sibling and a couple of nieces and nephews. Mom and daughter are gone. We have a tight family situation, and she wants everything to go to her sister when she’s gone, and if she's not here, I want it to go to my nieces and nephews. That's the ‘who.’ When we die, the ‘how they get it’ encompasses the notion of whether they get it outright. Meaning I just write a will and everything goes to my sister outright, with no contingencies or trust surrounding it. We’ll explain that a bit more in a moment. 

The ‘when they get it’ is another component of how. Let's say my sister's not here any longer, and now it's going to my niece and a nephew, who might be minor children. Minors cannot control property until they're 18, so I can build into my will the instruction that it's going to go to them, but we're going to put it in a trust for them until they reach 25, for example. That then brings in a ‘who's going to make this happen’ component. Who's going to probate my will with an attorney? Who's going to be the trustee if a trust is created through my will? 

A will is our ability to answer those questions, and a will can do a lot more than that. If we have a taxable estate, a will can have provisions for how to address estate tax consequences, which a lot of us won’t have right now with the exemptions being as high as they are, but things like that can also be addressed in wills. It's really our way of answering those questions. 

Eric Blake: You talked about the concept of a trust. What type of trust might be included in a will that would make some of those decisions a bit easier in terms of how assets may be transferred in a way that benefits a minor child?

Chris Downs: I love that question. Usually, a contingent is going to do that. I like to use the visual of a light switch. A will can contain a sort of light switch that says, “If I have a beneficiary who is under the age of 25, the light will turn on for them, and the assets will go to a trust for their benefit with a trustee who would manage it and control it and would be able to make distributions for the beneficiary’s health, their education, their maintenance, and their support. Think niece and nephew, and Eric, I'm going to make you the trustee. You're able to look at their life and what's going on with them, help them maybe buy that car because it's time to drive, and help pay for college. If they love sports and they play select soccer, for example, funding the cleats and the uniforms as they continue to grow. You're doing all of that through the lens of a fiduciary for their benefit: you're trying to protect the money and let it grow so it doesn't get flushed away.

That's a contingent trust, and I think every will that talks about leaving things to children or grandchildren or nieces and nephews should have one. The other type of trust used within a will is called a disclaimer bypass trust. It’s a federal estate tax exemption trust that usually works best for spouses, where if I die with a taxable estate and I need to circumvent inclusion in my spouse's estate for state tax purposes, my spouse can disclaim part of my assets into a bypass trust. That minimizes the estate tax for him. 

The other type of trust I want to mention that estate planning attorneys will make sure to put in as a contingency is a special needs trust, which is meant to protect the government benefit. Say that my nephew in the example above is autistic or intellectually or developmentally delayed — maybe cerebral palsy or Downs Syndrome — something that allows them to have government benefits based on their need and lack of assets. If they inherit money, they'll lose their government benefits. We can build in trusts to supplement their needs while protecting that government benefit.

Those are just some of the trusts we can put in wills. 

Eric Blake: I have to ask this question. I’m sure you’ve illustrated this in writing, but do you draw a light bulb? Do you draw a light switch? How do you go about illustrating that? 

Chris Downs: I like bubbles. I'm not a very good artist, but you can go into PowerPoint or something like that and use the little icons and add bubbles with arrows to show things down and over and above. My favorite illustrative device is a pen cup that I have on my desk. I take all of the pens out of it, and I put it down and say, “This is the concept of a trust. Again, it's a light switch. It'll turn on if we need it to, but the pens will connect to it as points and prongs to show how a trust works.” But no, I can't draw a light switch. 

Eric Blake: Let's get into something that confuses a lot of people, and that’s power of attorney. There are different types of power of attorney. If you can, give an overview of what the different types are and the situations where they apply. 

Chris Downs: All right. The first one is a financial power of attorney. In Texas, it’s called a statutory durable power of attorney. I like to think of it as a business-of-life power of attorney because we can appoint someone to act as our agent for our business-of-life type transactions. So, if I need help paying my bills, or I need you to talk to a third party on my behalf regarding an insurance claim. I need you to talk to my financial advisor for me because I'm laid up in the hospital recovering from major surgery, and a decision needs to be made on something. You can act as my agent, represent me, step in my shoes, and take care of the business of life things for me. 

Some real-world examples I use when I talk about power of attorney is how it's impacted my own life, as I’m my husband's agent, and he’s mine.  I had to use my power of attorney for my husband to take care of registration on one of our vehicles. I'm not on the title, and the county clerk wouldn't talk to me about it. So, I took my power of attorney document along with all of the insurance cards and everything I thought I’d need and was able to get the registration issue resolved.

My husband has used my power of attorney with the IRS to answer questions about a tax return that the IRS was convinced I hadn’t filed. Spoiler alert — it was a joint tax return. He was able to use that power of attorney, send it to the IRS, and work out that situation. These can be really important tools to have. And if we go back to the topic of women and single women, this gives us the ability to pick that trusted advisor. Maybe it's our best friend. Maybe it's our sister or our cousin who we trust to step in and help us. If we're traveling a lot for business and our house floods, and I need someone to start working with the insurance company to get something done, then having power of attorney means they can step in and help me.

The other thing about this document that I think is so important for people to understand is that it can become effective in two ways: it can be effective the moment we sign it, or if it’s a springing power of attorney, it can be effective once a doctor certifies that we are disabled or incapacitated. These are okay for people who don't want to give up oversight and control and who are worried about negative things happening and other ramifications.

But I tend to lean towards having it effective immediately because if I were to have a tragic incident happen to me tomorrow, a car crash, a stroke, something that has taken my capacity away from me, I'm not sure I want to wait for someone to get the doctor to say I can't do anything anymore versus just equipping my trusted person to step in and immediately be dealing with bank accounts and paying the bills and taking care of that business-of-life things for me.

Eric Blake: Is there a scenario where the springing power of attorney might make sense for anybody in particular? 

Chris Downs: I can. When I was much younger than I am now, my power of attorney was a springing power of attorney because I didn't have as many things in my life that needed to be managed or taken care of if something happened to me.

I was married at that point, and even though it could have been immediately effective with my spouse, I wanted it to be springing. It was a control thing for me. I think that was okay because the younger we are, the less mortality speaks to us, right? With younger people, I talk about the dangers of not having it be effective if you're disabled. But if they’re adamant after we talk through it, that's their choice to make. The older a client is, the more I suggest having it effective immediately because we're more open to the idea of unforeseen things happening in our lives. 

Eric Blake: Let's talk about medical power of attorney and why that’s so crucial. 

Chris Downs: A medical power of attorney is our ability to appoint someone to make medical decisions for us when we can’t, with the key emphasis being on when we cannot. So again, if I have a stroke tomorrow, and I'm a single woman, I need someone who's going to step in, who's going to make medical decisions for me on a treatment plan, talk to the doctors. If I need to shift into rehab or something like that, I need someone who can do that for me.

The Texas Health and Safety Code provides an order of priority when there is no medical power of attorney. It says who the law would look at to make medical decisions. In some ways, it has certain people on the same line. Kids are all on the same line, so they might need to be unanimous in making this medical decision. It’s much better to pick one person who you want to make the decision.

Eric Blake: Let's get into one of the most confusing topics. What is a living will, and how is it different from a regular will? Where does it fit in? 

Chris Downs: In Texas, it’s called a directive to physicians, family, and surrogates. I think we call it a living will because the concept behind it is that it's our end-of-life choice while we’re living. This document is about our ability to make choices when we're fully able and capable of saying, “Look, if I’m terminal and I have less than six months to live, even with life-sustaining treatment, and I can’t communicate any longer, it’s okay for me to have end-of-life care, hospice care, palliative care, comfort care. Keep me very comfortable, but let me die gently and naturally: do not sustain my life.” In addition, it allows us to say that if we have an irreversible fatal condition and can no longer communicate, I'm giving permission to discontinue or not have life-sustaining treatment. Let me go. 

Here's where I want to bring in the name Terry Schiavo for listeners. Terry Schiavo was a woman who had something happen to her, and she was in an irreversible vegetative condition. She did not have one of these documents, and her husband said, “We talked about these situations. We didn't want to be kept alive if nothing else can be done. If the doctors are saying there's no brain activity anymore, we're brain dead, we can’t reverse this, we didn't want to be on the machines and kept alive.” But her family, her mother and father, felt differently. They believed that she would want to be kept alive in the hopes of a medical cure or a miracle. So, we had a conflict, and they ended up going to court, and it took many, many, many years to work through all of the court systems to come to a resolution that her support could be discontinued.

She did end up passing away. With a directive to physicians, a living will, you make that choice for yourself and make clear to your loved ones that if doctors are saying we can’t do anything else, please, I don't want to put you through the heartache. I'm permitting you to say goodbye to me. I am directing you to let me go comfortably and gently. 

Eric Blake: Very helpful. I want to hit one more key topic that’s a point of confusion. Many people think that if they have beneficiary designations, they don’t need a will, or conversely, if they have a will, they don't need beneficiary designations. Please help us understand why it’s so important to have beneficiaries and your estate plan coordinated to make sure it all fits together. 

Chris Downs: We need both, and they definitely need to coordinate. Beneficiary designations are our opportunity to allow our assets to pass outside of probate so they won't have to be pulled into our estate through a probate process. To just say I'm naming my spouse on these life insurance and retirement accounts doesn't cover non-probate assets. A will can cover things like houses, cars, jewelry, books, and all the things that our lives are surrounded with and that fill our lives deeply. 

If my ultimate goal is to leave everything in trust for my two kids until they’re 25, then I shouldn’t name them as the beneficiary of my life insurance because that will go directly to them. If they’re minors, they can’t control it until they're 18, which then opens up complicated notions of guardianship of the estate because parents are not natural guardians of their children's money.

So, then they have to go to court to get the ability to access their life insurance for their children’s benefit. That's legal fees. It's complications. it's stress. It's a headache. 

We need to look at insurance and retirement account beneficiaries and wills as combined elements. If we sit down and write a will and an estate plan that says X, we want to make sure that the beneficiary designations align with X and say the same thing.

Eric Blake: I think this is so important. I think we have to take a look at the documents we prepare for clients every two years to identify who our clients’ beneficiaries are because things change, and life happens. We actually do it a little bit differently instead of just showing percentages, we actually break it down into dollar figures.

So, if you have a $500,000 IRA and your daughter Jane is going to get $250,000 and your son Joe is going to get $250,000, you might think twice about if one of them is not as good at managing money. You need a process for reviewing this every couple of years to make sure you understand what's going to happen and that you're comfortable with what's going to happen.

That’s something that I think all financial advisors should be doing, but if they're not, if you're not working with a financial advisor or your financial advisor isn’t doing it, put a reminder in your phone every couple of years to make sure you’re reviewing your beneficiaries and make they’re still what you want.

Chris Downs: I absolutely agree with that, Eric. I think that’s a great strategy because, on the probate side, we often find that when someone dies, there’s a disconnect. We’ll have a spouse who passed away five or ten years ago, and now the second spouse is dying, and they never removed the other spouse as the beneficiary on their life insurance or 401k, and they didn't have any contingencies there either.

That’s adding headache stress to a family. It's so important to take a look at all that stuff every couple of years. Things might change as life goes on. When you see your beneficiary designations in a couple of years, you may look at your life and realize that's not necessarily what needs to happen anymore. You might need a change. You might have a child who is divorcing, and we want to make sure that if we die, what is left to them is insulated from that divorce. We might have someone who has other issues in their life; drug or gambling addictions. Maybe we have a child or a grandchild with special needs that we didn't have in our prior thought process. We might need modifications.

Eric Blake: Thank you so much for that feedback. It's just one of those important items. I feel like I was spot on having you on to talk about some of these key concepts and breaking them down into the basics to help people understand and remove that fear. 

How can our audience connect with you to learn more about your services and what you do?

Chris Downs: Well, they can certainly connect with me on my website, www.KrupaDownsLaw.com. Also on LinkedIn and Instagram and Facebook. Check out Google because there are some things there. 

I really want the main message to be, please don't delay. Please take a look at this. It doesn't have to be a painful process. With the right person to help, it can be handled efficiently and maybe even with a little bit of fun as we get to know each other. 

Eric Blake: Right. Please reach out to Chris. She's got a lot of great content online. Very educational information that can help you move past those fears and take action.

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