Floyd Shilanski (00:00) 

Hi, I’d like to welcome you to Plan Your Federal Retirement Podcast. I’m Floyd Shilanski, managing partner and wealth advisor. Today I’m going to talk about some key points. Why a will is not the entire state plan. Beneficiary forms, the TSP, FIGLI, and retirement accounts. Powers of attorney, there’s two types we’ll talk about today. What happens if the documents are outdated, or could happen if the documents are outdated? And why federal employees should review estate plans even before retirement? 

Those are the things that’s gonna occupy my time as I talk to you today. When we do public seminars, as we have one coming up in October in Anchorage, Alaska, I typically am blessed with been doing the opening of the program and typically blessed to do the closing of it. And I do the closing of it because I wanna talk about estate planning. 

Typically what we want to talk about are your FERS benefits, right? But so, so many times I have seen people come in my office and they have their estate plan done and it’s really and truly not done. So we’re to talk about that today. As I go through this, I’m gonna say the tell everyone the same thing. There’s three documents you really need to have, maybe four, but there’s three. And let’s put them in order. The number one document is referred to as a durable power of attorney, all right. 

The second document is a medical directive, and the third document is a will. So let’s start with a durable power of attorney. The durable power of attorney is designed to take care of you if you become incapacitated. And I tell people right off the bat, when you’re going to assign someone to be your power of attorney, just make sure you trust them because you’re going to give them opportunity to write a blank. 

check. That’s how important this thing is. All right. So you’re coming down the highway, you’re involved in a car accident, regrettably, you’re laid up in the hospital, you’re traveling with your spouse, and you’re both laid up and you can’t make financial decisions. Who’s going to step up and make sure the house doesn’t get foreclosed on? Who’s going to pay the bills while you lie there? All right. And that’s what a durable power of attorney is designed to do is upon this problem, all right, your incapacitation and many times what it takes is a doctor says that, hey, Floyd is in 

and capable of making these financial decisions at this time, it breathes life into this power of attorney. You should be able to take that power of attorney to the financial institutes and get access and pay bills for a limited period of time. Pretty important document. All right. The second document that is equally as important is a medical directive. Used to be called Living Will. The medical directive is designed for you to tell your spouse or your living others to make final decisions for you. 

All right. I also want to include some decisions in here about long-term care. How do you want to be taken care of? So let’s take care of that first. You may want to make sure they keep you your you remain in your home as long as possible before you move to some type of assisted living home. You may want to direct your caregivers to spend that wealth you created to make sure you can live in the home that you want versus being put into an assisted living home. Very important. 

The other part of that is to tell the people that you love when to pull the plug. All right. And why is that important? Sometimes when you’re compelled to make a decision, it can leave a lasting mental impression upon you. I didn’t know the mom wanted to live. I didn’t know the mom wanted to die. I didn’t know what how she wanted to go. I didn’t know how he wanted to go. So having these documents ahead of time and talking to people ahead of time is just, just really extremely important. So I’ve got two stories for you. When my mother-in-law passed away, 

All right, she was in the hospital for pancreitis. And we knew my wife was the person in charge of that. And when it came obviously clear that she wasn’t going to survive, is that they told the nurses to put her on comfort care, wrapped up the medication so she would expire without having pains. My wife’s sister showed up one night about 3 A.M. in the ICU and said, My mom never called never wanted that and created a disturb. So what happened was everything got put on hold. All right. 

So it extended my mother-in-law’s life by about three days, put her in excruciating pain, unfortunately, until we got all that squared away. So it was important, again, to make sure you communicate. My mother-in-law communicated with my wife. She failed to communicate with her sons and other daughter. That was problem number one. Several years ago, while we were doing a seminar in Anchorage, Micah decided he wanted to do the close on the program. And he’s up there talking about doable power attorneys, medical directors, and so on. 

And it was interesting because what he said, and I quote, I could pull the plug on my dad without a problem. However, I don’t know if I could pull the plug on my mom. Hmm. Made me had to rock back on my heels and think a minute. But that’s the reality. Parents, you know, we we think we have close relationships. And typically it’s the the mom or the grandmother that has the closest relationships, and they want to protect those. So by doing this medical directive, and 

Stipulating what you want and when you want it to happen takes that struggle off of the individual saying, is this right? Should I or shouldn’t I do that? That’s very, very important. Okay. And then we get into the will. The will is designed to transfer assets that are not titled correctly. All right. And those that are not titled correctly go through a process called probate. 

Now, probate can be a bad thing or a good thing. If you live in the state of California, typically it’s not a great thing because it’s extremely expensive. In the state of Alaska, probate’s not a bad deal at all. All right. Now, how can you avoid probate by titling the documents that you have? We all know about the TSP and FIGLI and retirement accounts, but do you know that you can put a beneficiary designation on a savings account? 

It’s called the payable on death clause or TOD clause transferable upon death. Now, why is titling so important? All right, because you may think with your will, you’re going to transfer everything and that’s okay. All right, that works. Except the courts have continually relied on beneficiary designations. Now, if the will says transfer it to you know your daughter, but the beneficiary says transfer it to someone else, the beneficiary is not probably going to drive that. 

that entire issue. So something to be real concerned with. One of the things when you walk with an or talk with an advisor and work through it, they should help you kind of figure those things out. Now what happens if the documents are update or out of date? And that’s more important. So many times when we work with individuals, we find that getting the estate planning done, which is we start as the number one process, takes the longest. Why? 

We don’t want to think about our demise unless we’re on a deathbed. We don’t want to think about what happens if I’m not going to be around. All those things we have a tendency to procrastinate. It typically takes six months to nine months once we start a process on the estate planning to get it done. One, because attorneys sometimes are a little slow, two, because we are a little slow to get the information back to the attorneys. So those things that we kind of will call a walk through. Now outdated documents. We had a client, Bob and Sue. Bob and Sue had been around for a while. 

And second marriages on both. We had a blended family. And every year in the Q4, we as a firm want to go through and review all estate planning. And typically people say, Floyd, it’s all taken care of. I’m not worried about it. We did that last year. Don’t worry about it. We started a rule several years ago that if we don’t see it personally, it’s not done and it hasn’t happened. We don’t take the word that you’ve already done this. And let me tell you why. We’re sitting with Bob and Sue and going through the estate planning. Remember, blended family. 

All right, we’re going through and we’re looking at the life insurance. We change beneficiaries, look at the house, we change the title, look all those things. And we got down to the TSP. And we’re going through the TSP at the allocations and I look at the benefit designation. And Sue’s across the table, but it’s not Sue’s name on this. So I’m looking at my file to make sure it’s Sue and Bob that I’m talking to. Then I turn the TSP form around and I put it in front of Bob and I say, Who is this? And I circle an A. And it was his ex. 

spouse. All right. He got embarrassed. Sue got pissed. We got it fixed. What had happened was he had completed the change of beneficiary for him, submitted it, all right, but it never got processed. Why do you think we want to put eyes on it? Very, very, very important. Those are the type things that we need to review. And we sh they should be reviewed long before we get to the retirement side of the equation. And that’s the tougher part. Sometimes we put things off and procrastinate and put things off into a time when it shouldn’t happen. 

And we should be done already. So, one of the things that we think is extremely important before you get ready to retire is to go through the estate planning process. Make sure that we have a you have a durable power attorney. Make sure you have a medical directive. You know, you probably should have a will, and in the will is called a pour over clause. So if we have something that you bought and then you passed away, but you didn’t get a chance to get it retitled. The courts historically have honored that we wanted to put this into the trust if you want it, if you do have it. 

trust, all right, and put those things in place. Now, speaking of trust, I leave it towards the last because not everyone needs a trust. I personally like happen to like trust, but they’re not for everybody. And my belief is if you’re young and just getting started and you don’t have a lot, you don’t really need a trust. After you start accumulating assets, you have a family or a blended family, you may want to have a trust in place to protect those people that were going to inherit these funds ultimately. 

You might want to incentify grandchildren or great grandchildren that, hey, you’re going to get this inheritance, but you’ve got to do XYZ to get that. And in my world, it has to do with I don’t want my grandkids or my great granddaughter getting a lump sum of money that goes up her nose because of some type of drug addiction. So we have in place that, you know, before you get a distribution in your inheritance, you have to be drug test. 

And I’m very specific using hair follicles versus the urinalysis. Why? Because hair follicles carry the drug residuals for a longer period of time. Now, people say you want to control from the grave, and my attorney will laughingly say Floyd does want to re control from the grave. We didn’t work as hard to build what we have built to watch it simply disappear. And historically, three generations after wealth is creation, the wealth is gone. So we want to struggle very diligently, not or tenify. 

mitigate that possibly happen out in the future. All right. So one of the things, if you haven’t reviewed your will’s powers of attorney, durable and medical directors, and you think you want someone to put second eyes on it, log on to planyourfellow retirement.com. Ask for a consultation with one of the advisors will be happy to help develop a one-page financial plan to talk just about those. And the number one thing that we want to talk about is a state plan. And until next time, happy planning. 

The content in Plan Your Federal Retirement is for general informational purposes only and should not be considered individualized advice. Investing involves risk, including possible loss of principal, and past performance does not guarantee future results. Guests are not affiliated with CWM LLC Investment Advisory Services offered through CWM LLC, an SEC Registered Investment Advisor. Planary Federal Retirement is not affiliated with the federal government.