Power Up Wealth podcast – Episode 94 – Navigating Life’s Unexpected Transitions Part 2
James Derrick 0:00
Expect the unexpected. I’m James Derrick, and today we will explore specific actions you can take with our expert, Parker Thompson, to prepare for any unexpected transitions coming in your life.
Sharla Jessop 0:23
Welcome to the SFS Power Up Wealth podcast, where we provide impactful insight and expert opinions on timeless financial principles and timely investment topics, preparing you to make smarter decisions with your money.
James Derrick 0:47
Thank you for joining me today, Parker.
Parker Thompson 0:49
I appreciate you having me on.
James Derrick 0:50
Parker Thompson is a private wealth consultant at Smedley Financial Services, and he is a Certified Financial Planner. Parker, you’ve been working on a series of articles all about expecting the unexpected in life from the perspective of a financial advisor. Give us an idea of what kind of life changing events you have in mind.
Parker Thompson 1:11
This one specifically, we’re focusing on the events in life that really disrupt things or that pull us one direction or another. It’s really life altering our life events. In this case, it’s usually the later in life, or it could be earlier in life, things like death, divorce, dementia, things that incapacitate some people, and then eventually someone has to step in, whether it’s a spouse, whether you’re a divorcee, whether you’re the son or daughter of of an aging parent, and you’re having to step in to take care and saddle a lot of those responsibilities that can be a life changing event, not only for the person you’re taking care of, but for you as well, having to dive into this mess of the state of whoever you’re taking care of, that’s what we want to make a little bit easier.
James Derrick 1:57
I can see how moving is a big life event, or switching jobs or having a child, but all of these have typically an element of planning involved, and you’ve done it intentionally. But these events you’re talking about are maybe less intentional, and they have handoffs to other people, and that handoff is the danger, because it’s like, well, what information was lost? What assets were lost. What mistakes are made as you hand off responsibility from one person to another?
Parker Thompson 2:24
Right. One of the number one stressors I see in the clients that I meet with and the children of the clients that I meet with is that that initial just stress, or that initial weight on their shoulders of they can’t take care of themselves, or now it’s all on me, and I’ve never been the financial person. I’ve never been the one who looks at the books or knows where the accounts are, or knows where to get access to things that is now on me, and I’m not sure where to access that that causes an immense amount of stress on people, and especially clients that we see, whether it’s the spouse or, like I said, a son or a daughter or a caretaker of someone’s estate.
James Derrick 2:48
Well you wouldn’t even know where to get started. So I think on March 3, we released part one on this discussion, and we talked about getting started with a list, right, a document where we list things out. Could you just a quick review of what would go on that document?
Parker Thompson 3:17
For now, we’re calling it sort of a reference document, or something like that, right? Some sort of a document that prepares whoever is going to be taking care of taking over the estate of the different areas of finances and administrative objects in someone’s estate or financial life that they can kind of get a hold of. Some of the precursors that we talked about, just to bring everyone up to speed on in the last episode, we talked about how communication early and often, is really key. We talked about how setting up access to things like logins or passwords. Obviously this is a trusted person that we want to give access to these things, but if that’s all set up previously, a lot of this becomes a lot easier because all of that is already just pre documented, or it’s pre given. This reference document goes through some of the main areas, and we’ll dive down deeper into each of these like the first section being your advisors that you work with, your trusted contacts, your assets that you have, and other financial information around those assets or accounts. The other section that we’ve gone on to is liabilities, right? What are the expenses? What’s the monthly budget? What are the debts that we owe? What are the responsibilities that this person is going to be taking on the bills that need to be paid. Some of these things are what caused the most stress is because there’s so many moving parts. How do I control all of them? How do I know what each purpose is? And how do I log in to get access to these things?
James Derrick 4:35
I can see the logins will be tricky, because oftentimes you have to have two factor authentication now, and so it’s like, well, we’re gonna send you an email or we’re sending you a text. And it’s like, well, you better have access to that cell phone.
Parker Thompson 4:46
Right! Yeah, better have access to the cell phone. Better, I mean, even better, if, if you have the actual login to the website, right? That’s the first step. If you know where to go, what website do I even go to? What’s the URL? Sometimes people get stuck up at that certain point. They know that there’s maybe money out there or that there’s a liability out there that needs to be taken care of. But where do I go? Where do I start? Who do I contact? Who’s the advisor? Who’s the name behind it? What’s the number? A lot of that research, and some of those steps to get to that point is the initial roadblock that a lot of people get hung up on.
James Derrick 5:17
So what about titling things correctly, beneficiaries, taxes. Does all this detail come into play as well?
Parker Thompson 5:27
It does so as a part of just listing out what certain assets are. A lot of people have questions about, okay, I know there’s money out there. What type of money is it? Is it in a 401(k)? Is it an IRA? Is it a taxable account? Is it a non taxable account? Is it listed in the name of a trust, or is it listed in jointly between someone else, or is it just individually? How do I get access? Is it at the bank? Is it at an investment firm? There’s, there’s so many different types of accounts out there to have those details initially helps out. Having the advisors and the numbers, like I said, the contact information, can clear a lot of that up. But what if you don’t? What if it’s more of a DIY situation where these, these accounts, have been set up in certain areas. And then the next question is, okay, if this is a life altering event, then we look to okay is it titled correctly? How is it titled? Well, who are the beneficiaries on it? Where is that count going to go, and how do we distribute it? And some of these, as we know, are more tax friendly than others. There are ways that money will get transferred that can sometimes transfer the tax burden onto the receiver, as opposed to the giver, in this situation. So we want to be cognizant and mindful of those details. And it’s not necessarily our choice if we’re just taking on that estate to decide those factors, but if it can be decided beforehand, or we can at least have knowledge of that. We can know the steps to go forward and have a clearer picture of that, that next step or those next things that are needed.
James Derrick 6:48
Yeah I think living in this modern world is pretty complicated, and when somebody passes away, you find out probably a lot of things about their financial situation that you didn’t know. You know it could have been better than you thought. It could have been worse than your thought. Or maybe it was just fine, but in their later years, they weren’t able to keep up on it, be it because of dementia or some other reason, and you find out, well, maybe they hadn’t filed their taxes for a couple of years. Who knew?
Parker Thompson 7:14
Right?
James Derrick 7:14
And then it’s going to take you a couple of years to sort it all out.
Parker Thompson 7:19
Yeah, it creates more chaos than anything, and more of a mess. If these things are not planned out or at least known beforehand. I’ll tell you a story or kind of a, not necessarily worst case scenario, but we’ve seen a few clients that will forget to take off a co-signer or co-borrower. We don’t necessarily advise people to put their sons or daughters on their their mortgages or their loans on their home or on the deed or the title, but sometimes they’ll forget to take those people off, and instead of that house being sold and then distributed evenly to all the kids, like what was expected, all of a sudden, that person’s name, that one child’s name, is on the deed or on the title, and all of that property just instantly gets transferred to them, and they’re left and saddled with, you know, what’s morally and ethically correct, and who do I have to give some money to? And how do we split it up evenly? Do I have to sell it? And if I have to sell it, I get all the tax burden rather than it being inherited. So there’s different factors. We’ve had a few clients that run into that situation, and that’s that’s why we try to set up all of these, this reference document, all this information, and to know this upfront, and to have it out in the open and to plan for it means that if we need to make some changes, if we need to retitle it, if we need to put the home in in the name of the trust, if there is a trust, let’s make sure and do that, because that’s going to help alleviate a lot of the stress going forward.
James Derrick 8:36
At times, I see in the media that they undervalue what a financial advisor does? Like, like, there’s no expertise, which I totally disagree with. Like, there’s a lot here. Just on this topic alone, that makes me think, wow, when an unexpected event calls, the first person you need to contact is the financial advisor.
Parker Thompson 8:56
Right! And hopefully you’ve talked to them before, the fact too, right? Not just as the event’s happening, some transitions happened, hopefully before the years and years and years that you worked with this financial advisor, they’ve been setting things up in such a way that it works for your family and that it’s the most tax efficient, and that it goes to the right people, and that you get the right amount of privacy in that transition. Because if you don’t, then we’ve had clients that, you know, nothing is set up correctly. There’s no will or no trust, and the home is not titled correctly. That have to go that have to go through probate. For those who aren’t familiar with probate, it’s a very long sometimes can be expensive process, but it’s also very public and out in the open. If you want your family’s estate and family’s assets to be sort of a more private, secret event, and it just happened to happen efficiently and cost effectively, you want to have everything titled correctly, make sure the beneficiaries are correct. We have a lot of clients that forget to do these things. That’s why we we ask about that. And a lot of people think of financial advisors, of just someone who manages the money, and they think of a fee for managing that money, and that’s about, you know, the cost of a financial advisor. But they don’t think about all the hundreds of 1000s of dollars that we save people throughout these estate planning processes and throughout the processes in their life. How we set things up? It’s not just managing this bit of money, it’s how do we transfer to the next generation? What happens if this money gets transferred to your beneficiaries? How do we do it in a way that works for you and your family?
James Derrick 10:15
I can see the added benefit, which we haven’t touched on yet either, is you want your beneficiaries to get along. I mean, like, if these are your children, for example. I mean, you don’t want your death to be something that leads to a schism in the family.
Parker Thompson 10:29
And so often it does. It’s, it’s one of the hardest things to watch is a family of really well knit, tight knit children that all of a sudden, money comes, the conversation, the house, whatever’s being inherited, and everyone starts to just turn on each other.
James Derrick 10:45
They get emotional, right? And, yeah, and I imagine that even with the best intentions, there’s just a lot of feeling there.
Parker Thompson 10:51
There is a lot of feeling it’s it’s a lot of feeling from either a loss or some sort of a like I said, transition in life. But when it comes to money, people kind of lose sight of of what the initial goal was, and the relationships can be burned. Bridges can be burned. It’s those are some of the sadder situation reason. But we’ve also seen situations where the estate plan was communicated early. It was communicated often to the kids, the will, the trust, everything is set up in a way that all the kids know about what’s going to happen. They all can work as a team. They’re either trustees or co-trustees or or executors, and they can all work as a team. And we’ve seen people that go through it without any issues, and families that get out of it and everyone knows exactly what’s happening, and there doesn’t seem to be a lot of stress. So what separates those families from the families that have kind of the back biting and the bickering? It’s, it’s really the the communication up front, it’s how they set those things up, and it’s and it’s how the expectations are with either the beneficiaries of the kids or the remaining spouse.
James Derrick 11:47
And I think this is a fascinating reminder to people. Anything else you want to add before we finish up?
Parker Thompson 11:53
What’s most important is, is making sure that we’re doing what’s in the best interest of your family. So whether whether we want to minimize taxes, or whether we want certain beneficiaries to get it. How is it going to affect their life? Right? Let’s consider all the different facets here rather than just the dollar amount, because it means so much more than that. And so I think if we keep that in mind, this can just be an arduous list of things to do, right? Listing my assets, my accounts, my advisors, my liabilities, and future episodes will feature more and more things to write down. It can be all that, and it can be time consuming and almost like a checklist, but let’s keep in mind the emotional side of it and the psychological effects that it can have if all this is planned and done beforehand.
James Derrick 12:34
Well, I think it’s fascinating to think about how, if you get it right, you’re not only helping your beneficiaries financially, but you’re also helping them, helping to protect them in who they become as well. So thank you Parker for coming in to talk about this.
Parker Thompson 12:49
Right, yeah, thanks for having me on.
Shane Thomas 12:55
Thank you for joining the Power Up Wealth podcast. Smedley Financial is located at 102 S 200 E Ste 100 in Salt Lake City, UT 84111. Call us today at 800-748-4788. You can also find us on the web at Smedleyfinancial.com, Facebook, Instagram, Twitter, and LinkedIn. The views expressed are Smedley Financials and should not be construed directly or indirectly as an offer to buy or sell any securities or services mentioned herein. Investing is subject to risks, including loss of principal invested. Past performance is not a guarantee of future results. No strategy can assure a profit nor protect against loss. Please note that individual situations can vary. Therefore, the information should only be relied upon when coordinated with individual professional advice. Securities offered through Osaic Wealth, Inc., member FINRA/SIPC. Investment advisory services offered through Smedley Financial Services, Inc.® Osaic Wealth is separately owned, and other entities and/or marketing names, products, or services referenced here are independent of Osaic Wealth.
