Ep 227: Lessons from Hulk Hogan, Theo Huxtable, Ozzy, and Ryne Sandburg

Wow.

It's been a rough last week and a half or two weeks with celebrity deaths.

We lost Hulk Hogan over the last couple weeks.

We lost Ozzy Osbourne.

We lost Ryan Sandberg and Malcolm Jamal Warner.

These are all people that kind of had their heydays during my teenage and early adult years.

And today I want to talk about some estate planning lessons.

I want to talk about our own mortality.

And if you've ever been tempted to think, if I just made more money, if I just had a higher net worth, all my financial problems will go away.

We're going to talk about some mistakes that some famous people, some celebrities, and some super rich entrepreneurs have made with their finances.

So I hope that you enjoy this episode.

I hope that you learn a lot.

And here we go.

Welcome to the weekly Wealth Podcast.

I am certified financial planner David Chudick.

This podcast and my wealth management practice are both designed to help the mass affluent to live better lives, better by how they handle their money.

We talk about financial strategies, prosperous mindsets, and simply how to build true wealth.

So come on and let's enjoy this journey together.

Hey, everybody.

Certified financial planner David Chudick here.

And would you do me a favor before we get the episode started?

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And just a reminder, we're going to be talking about estate planning.

And typically this would require that you work with a licensed attorney.

So no, this is not legal advice.

Make sure you're talking to your attorney.

Your financial advisor can help guide you in the right directions, but make sure to use a really good attorney who is licensed in your state that also has estate planning knowledge.

Probably not a good idea to try to write your will on the back of a napkin because who knows if that will actually hold up in court.

And also make sure you hang out until the end of the episode where we're going to talk about some of the major mistakes that we've seen celebrities make.

So even with their millions and millions of dollars and enough money to pay for financial professionals and attorneys and advisors all, oftentimes celebrities, famous people, athletes and entrepreneurs just didn't deal with their own estate planning issues, just like it's easy for us, the plain old normal people, to not deal with our issues.

All right, so now that we got that out of the way, let's talk about some estate planning issues that you need to be thinking about, since we had some major celebrity deaths over the last few weeks.

So what are some of the key components that your estate planning should include?

Okay, so first of all, I think it's really about just thinking, like, what do I want to happen with my assets if I pass away or if I'm unable to make decisions and things like that.

First thing I think that we need to do is thank ourselves or talk with our loved ones about what we want to have happen.

Then, of course, we need attorneys to draw up some documents.

So attorneys can handle wills, they can handle trusts, they can handle all of those types, types of issues that will help to make your desires actually happen.

Right.

So we're all one heartbeat away.

We're all one diagnosis away from really the inevitable.

And we want to have our wishes legally documented.

Okay.

Now, another important component of your estate planning is your beneficiary designation.

So your accounts, like your life insurance accounts, your IRAs, your Roth IRAs, your 401ks, like that, they typically have a beneficiary designation.

So inside of the application, when you're signing up for those accounts, there'll be a place where you'll write down the name of who you want to inherit that money if you pass away.

Now that who it can be an individual person, it can be an entity like a trust.

So when you pass away, a trust can inherit your life insurance or it can even be a non profit organization.

So maybe it makes you feel great to know that after you pass away, your life insurance benefit will be paid to, let's say, the local United Way or to your church.

So we have to make sure that we get our beneficiary designations correct, because there really is no way to dispute them other than disputing that they were fraudulent.

After you pass away, oftentimes we have maybe children that are not walking, adult children that are not walking the straight and narrow, and we don't want for them to inherit a large sum of money because maybe that would not be beneficial to them.

So we need to make sure that they are either not listed as a beneficiary, or maybe the trust can be a beneficiary that might have some limitations on how that adult child can use the money.

Also, second and third marriages and children of other Marriages need to be carefully considered as to how they will be listed as beneficiaries.

So hugely important, make sure that you're looking at your beneficiary designations.

And again, this is on life insurance.

This is on annuities.

Make sure that you're looking at some of maybe those forgotten life insurance policies.

Maybe you have a policy through work that's just been there for a while.

But your life insurance, Your annuities, your IRAs, your retirement accounts and such, make sure that your beneficiary designations are what you want them to be.

Because we're all, like I said, we're one heartbeat away, one accident away, one bad diagnosis away from really getting closer to needing to use these designations.

And a huge mistake.

Let me repeat it.

A huge mistake can be leaving the beneficiary form blank.

Because if you do that, the funds, whether it's the IRA funds or the.

Or the death benefit proceeds, will go into your estate and that will go through probate.

That will create a waiting period.

It'll be public knowledge.

It'll create a lot of different issues, really.

Make an appointment with yourself or your financial advisor and just go through your accounts, go through your IRAs, your 401ks, your Roth IRAs, your annuities, your life insurance.

Look at who the beneficiaries are, and make sure that the beneficiaries are who you want them to be.

And yes, it's a little bit of a pain in the neck, but it would save a tremendous, and I've seen it happen in real life, where there are huge inconveniences and issues.

It will save a tremendous amount of hardship and even some expenses for your heirs.

And while you're alive, let's talk about powers of attorneys, and they can be referred to as poas.

What is a power of attorney?

It's a legal document that gives someone, and this is called the agent or attorney, in fact, the authority to act on your behalf.

Now, this can be limited to specific tasks.

Oftentimes, people might be a power of attorney for somebody else, literally for one day, so that they can sign real estate closing papers because their friend or family member is out of town.

Or it can be broad and cover many or all areas of life.

It is private.

And unlike a will, it becomes crucial in incapacity situations.

There's a durable power of attorney so that lets somebody handle your financial matters, things like paying bills, managing investments, filing taxes, running your business if you're incapacitated.

And the durable part means that it's effective even if you become mentally or physically incapacitated.

Now here's the thing.

Without a durable power of attorney, a court might have to appoint a conservator or guardian if you are incapacitated.

This is something that I think happened a lot during COVID People ended up on breathing machines and they were not able to make their own decisions.

So the powers of attorney would have ability to make decisions for them.

And if not, the courts would have had to jump in.

Now we also have medical or healthcare powers of attorney.

This would allow a trusted person to make medical and healthcare decisions for you.

If you are unable to speak for yourself and other unable to make these decisions.

You also want to work with your attorney to pair this possibly with an advanced health care directive or a living will.

And these can guide decisions about life support and end of life care.

So that's a very basic informational explanation of powers of attorney.

But they are critical.

So work with your attorney.

Powers of attorneys can help to avoid court intervention.

They can keep business continuity if you're incapacitated.

They can be very flexible and customized.

They can give family peace.

And they do work with your estate plan so they can complement wills and trusts to make sure that they're covering situations while you're alive.

I would not attempt to drop a power of attorney myself.

I would work with a competent attorney that specializes in that area.

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So it's tough for me to go an entire episode without talking to the business owner because I love the business owners because I am a business owner.

What happens when a business owner passes away?

Let's talk about one scenario where maybe the owner is not the only owner of the business.

So let's say maybe XYZ business is a partnership or is an LLC with two members.

Now when one of the owners passes away, if things had not been dealt with now, the other owner is typically going to be a business partner with the deceased owners spouse.

Now the spouse may not have any interest in being an owner of the business.

The spouse may not have any expertise.

So this creates a major problem because the living owner now has to buy out the spouse.

And where will that money come from?

How much will they have to buy it for?

So these are things where business owners who are not the sole owners of their businesses need to think about working with an attorney and working maybe with a guidance of a good financial advisor to come up with a buy sell plan.

So very simply, what a buy sell plan says, when if owner one dies, owner number two would buy out owner number one's family interest in the business.

And it will typically have a predetermined price or a formula of how the price will be determined.

And both parties sign this, and then it becomes a contract.

Now where will the living owner get the money to buy out the deceased owner's interest?

And that can either be just from cash flow, it can be through obtaining debt, or it can be through life insurance proceeds.

So oftentimes, business owners have life insurance policies on their business partners, and then when or if the partner dies, the life insurance benefit will fund the buy sell agreement.

So this is really a big one.

If your business partner passes away, it creates many issues if you don't think about it before time.

Now, another thing to think about if you're a business owner is if one of your key employees did not make it home, if one of your key employees died, how would that affect your business?

That so maybe you have a CEO, maybe you have an office manager, maybe you have a salesperson that generates a lot of your company's revenue, and this person is now deceased.

How would that affect your business?

Would your business have a decrease in revenue, at least for a while?

Would your business have some scalability issues?

Would your business have some efficiency issues?

And if the answer is yes, you should consider a key person life insurance policy.

And what that means is that as the business can take out a life insurance policy on the key employee, now the key employee will have to go through underwriting, sign the application, do all of those things.

But then if that key employee passed away, the business, the entity itself would inherit money.

And that money would help the business.

It would help to lessen the financial impact of the death of that key employee.

So give that some thought for sure.

And let's also make sure that if you are the sole owner of your business, you want to make sure that you have some succession planning in place.

So make sure that your management team, make sure that your spouse, they know how to run the business, they know where the appropriate documents are, they know the, the important passwords, and that they know how to keep the business going in the event of your death, hugely important.

And also the powers of attorneys, the business owner, the business decisions will still need to be made even if a business owner is incapacitated.

So somebody needs to have either full or limited power of attorney so that they can keep the business going in the event of the incapacitation of the owner.

A lot to think about here, a lot to do.

But it's one of the privileges of business ownership is that you get to make these decisions for yourself.

So if you have any questions, email me davidarallelfinancial.com that's davidarallelfinancial.Com and we can talk through some of the thought processes of succession planning for you now.

Speaking of succession planning, if you are at a point in your life where you are considering either in the immediate future or in the next few years, selling your business as a way to fund your retirement, I think you should take the Value Builder questionnaire.

Takes you 12 to 15 minutes.

It'll help you to determine a range of value for what your business might sell for and it'll also tell you where your business is doing well as far as sellability and what areas of your business you can improve.

So if you go to www.weeklywealthpodcast.com valuebuilderscore, take the questionnaire and we can chat about it and we can see if you are on the right path.

How we sell our business, when we sell our business, and how attractive we make our business to purchasers is one of the most important financial decisions a business owner may make in their lifetime.

Before we move on to talk about some of the known details of some famous people, some athletes, some celebrities and such, let's talk about your estate planning privacy.

So if one of your goals in estate planning is to keep your financial matters and your family matters private, there are several tools and strategies that can help you to minimize or even completely avoid public disclosure of your estate.

Now some people just don't want the public knowing how much money that they left behind or how much money they had.

Other people might appear to be rich or they might be appear.

They might appear to be extremely wealthy, but but they know that their net worth is not incredibly high on paper and they want it private for that reason.

So whichever of those applies to you is great.

And also if privacy doesn't matter to you, then that's the right answer for your family.

But there are some tools with regard to estate planning guidelines for privacy.

So the first one is revocable living trusts.

Here's where you transfer the ownership of your assets into a living trust during your lifetime and upon your death, the successor trustee and distributes assets according to the trust instructions.

And this is without going through probate, which is the public process.

So the advantage is, unlike a will, the trust is not filed through the probate court.

So asset details and beneficiaries stay private.

You have pour over wills you can talk to your attorney about.

They act as a backup.

They pour over any assets not already into your trust, into the trust upon the death.

So there may have been an asset that you forgot to put into the trust and the pour over will can be a solution for that.

Now, we've already talked about beneficiary designations, but it's important to note that this is not public knowledge.

So if you have a million dollar life insurance death benefit that you inherit, nobody else will know about it.

It does not go through probate and it does not become public knowledge.

So your retirement accounts, your life insurance, your pod, which is payable on death and your tod, your transfer on death, they pass directly to the name beneficiaries.

And it's not a matter of public record.

We can also talk about joint ownership with rights of survivorship.

So property owned jointly with survivorship, and a lot of times this might be a home or real property, they pass automatically to the survivor without probate.

So there's no court filings and ownership change is just an administrative handling.

Now it may not be appropriate for all estate sizes or a blended family.

So make sure you're talking with your attorneys about it.

But joint tenants with right of survivorship can be an option for you.

Now we have others that become a little bit more complicated.

We have offshore and domestic asset protection trusts, charitable trusts, private foundations, family limited partnerships.

So a lot of ways that you can potentially keep your, your estate information private.

So remember avoiding probate scenario where your financial issues are not going to be public record.

If you don't avoid probate, then yes, it is all public record.

So if it's important to you, make sure that you're talking to your attorney, make sure that you're talking to your financial advisor about some strategies that can help you to protect your privacy when or if you pass away.

So moving on to the last segment of this episode, let's talk about some estate planning mistakes.

Estate planning, details of celebrities.

And let me preface this, none of these are my clients.

This is all information that I found on the Internet.

And we know that everything on the Internet is true and exact, right?

Yes.

Ha.

Okay.

So Prince, or the artist formerly known as Prince, or that symbol that he changed his name to or whoever he referred to himself about.

Prince died in 2016 and his his estate was worth an estimated $156 million.

But he had no will, he had no trust.

So there were years of legal battles and finally in 2022 his estate was settled.

Now dozens of would be errors surfaced and they actually required DNA testing to prove family relationships.

So his estate took a massive 40 plus percent federal estate tax hit.

Harris fought for control over music rights and royalties for years and his legacy of unreleased music was delayed to reaching fans.

Just remember, even wealthy people need their estate planning documents done.

Now these are the people that they can afford, the high priced advisors and they can afford a plan, but sometimes they just don't get around to it.

Did you know that Aretha Franklin?

Yes.

Respec t. She died in 2018 with an $80 million estate initially believed to have no will.

But later, three conflicting handwritten wills were found in her home.

One was actually under the couch cushions.

Each will had different instructions for her sons.

There was a multi year battle to determine which will was valid.

Valid.

The estimated value diminished due to legal fees and delays.

So let's make sure that our wills are done, our trusts are done.

And they're done properly.

And they're documented properly.

And they are handled by an attorney, James Gandolfini of the Sopranos.

He died in 2013 with a $70 million estate.

He left 80% to family members outright, not in trusts.

And he had no strategies for tax minimization.

So approximately 55% or $30 million was lost to the IRS.

Simple, revocable trust could have saved himself millions.

So remember, the largest states require tax efficient planning, not just a will.

What about Howard Hughes?

The aviation tycoon died in 1976 with an incredible $2.5 billion fortune and no will.

So that's back in 1976, he had 2.5 billion dol.

There was a suspicious handwritten will that surfaced, but it was deemed to be a forgery and 400 plus people filed claims as his heirs.

So court battles lasted for over 30 years, consuming millions in legal fees.

And eventually his estate was split among 22 cousins, far from what probably were his likely intentions.

So your lesson here is to avoid dying intestate.

And that means without a will, especially when you're dealing with a complex multi, multibillion dollar emp.

Here's one of those estate planning maintenance items that we might just put off or not get around to.

So did you know that Heath Ledger died in 2008 with a will naming parents and sisters as heirs created before his daughter was born.

His daughter Matilda was initially excluded.

Now, fortunately, the family voluntarily gave the inheritance to Matilda, but legally, it could have gone very differently if the family wasn't cooperative.

So don't leave these things to chance.

Make sure that you're reviewing your estate plan documents, your estate plan and your intentions every few years.

Because don't forget, your estate planning desires will change over time as your family changes, as your financial situation changes, and even as your beliefs change.

So don't put your heirs in a position where they might have messy family fights because your intentions were not clear or your legal documents were not prepared properly.

Make sure that you don't have funding errors.

So if you have a trust, make sure that you have a method to fund the trust.

And yeah, what about the tax implications?

If you are fortunate enough to be in an estate tax planning scenario, make sure that you're dealing with it now so that you're not losing roughly half of the value of your estate that's over the estate tax exemption to the government.

So lots to think about here.

And don't be like the famous people that have made these mistakes.

Let's deal with them and let's make sure sure that we're getting it right.

All right, everybody, so what do you think?

Are there some items in your estate plan that need to be done?

Go to our Facebook group.

Just go to Facebook and type in weekly wealth podcast and let us know.

Are you needing to do a will?

Do you feel like you probably should have power of attorney paperwork in place, but you just haven't gotten around to it?

Is having a trust something that interests you, but maybe you need to understand it a little bit better to know if it is the right decision for you.

It's really interesting.

And maybe we can help our help each other out with some accountability and nudge each other to making these decisions.

I don't know about where you live, but in my state they say that the mortality rate is hovering right around 100%.

So this means that it's going to happen to all of us.

And let's make sure that we are taking the proper precautions to protect our loved ones and our heirs from having to make difficult decisions, from having to fight issues in court.

And it's just really, really, really important to have our wishes documented in a proper and legally valid manner.

So make sure you're talking to a great local attorney for that.

All right, everybody.

So as always.

I really appreciate that you take time out of your day to listen to the weekly wealth podcast.

I'm very thankful for the tribe that we're building here.

Like I always say, how we handle our money should positively impact our lives of those around us.

Hopefully this podcast, hopefully our social media content, and even the way that I work with my private wealth management clients is helping the world to be a little bit of a better place.

As you know, this podcast is really a marketing tool.

It helps me to get my knowledge out there, helps me to get my philosophies out there, and it's helping me to build my private wealth management practice.

So if you ever thought about working with me personally on your financial matters, just email me davidarallelfinancial.com so that about wraps up this episode until next episode.

I wish everybody a blessed week.

Thanks everybody.

Investment advice offered through Parallel Financial and SEC Registered Investment Advisor able to conduct advisory business in states where worded, registered or exempt or excluded from registration, contents contained herein or for informational purposes only and should not be construed as an offer or solicitation for investment advice or for the purchase or sale of any security, insurance or other investment product.

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