You're Dead. Now What?

A lot of Financial Zen members are currently going through the estate planning process with us and our favorite Bay Area estate attorney - Jennifer Jaynes

To get you warmed up, below is a checklist of the decisions you'll need to make to create yours.  (These decisions are the hardest part.)

(By the way, if you don't have an estate plan or aren't in the process of putting one together, read this first - Do You Need an Estate Plan?)

Even after signing and dating your estate plan, your decisions are not permanent.  It can be amended at a minimal cost, and we'll review it every 5 years to ensure it remains accurate and up-to-date.  

Point being - don't get paralyzed coming up with the perfect answer.  Answer the best you can, and we'll update it later if we need to. 

Guardianship & Trust Distribution

Scenario:  You and your spouse go down in the same plane while the kids are staying with grandma/grandpa.

  •  Guardians - Who will care for your kids?   You need to designate a primary and a back-up (as many as you’d like). 

  • Trustees – Who will manage your money for the kids?  You need a primary and back-ups (as many as you’d like).  This is often the same person as the guardian, but doesn’t have to be. 

  • Beneficiaries Who would get your money?  Your kids?  Other family?  Charities? 

  • Distribution & Timing – How much would each beneficiary receive and when? For example, your kids get $100,000 for a wedding at 28, $200,000 for a down payment at 33 and the rest at 38 to help fund your grandkids’ college.   The only limit is your creativity.

  • Final Instructions – Cremation or burial?  Location?  Celebration of life party?  (It's your funeral, so have fun with it!)


Scenario: You're hit by a bus, but don’t die.  You're in a vegetative state, unable to make your own decisions.

  • Healthcare Power of Attorney - Who would make decisions about your healthcare?  You need to designate a primary (usually your spouse) and a back-up (as many as you’d like).  You need two lists, one for each spouse. 

  • Financial Power of Attorney – Who would make decisions about your money.  These are often the same people you designate for Healthcare POA’s, but don’t have to be.

  • Advanced Medical Directive – If your condition is terminal, do you want to be kept on life support or yank that plug?

Last Step: After making these decisions, talk to the people you’d like to designate.  They can turn down the responsibility if/when the time comes.  Better to have those conversations now.  (We’d be happy to be a part of that conversation to explain their responsibilities. Just let us know!)

An estate plan is one of the most important pieces of your financial health, but it's also the most overlooked (and therefore undone).  Make sure you have one.  It's not for you.  It's for the loved ones you'd leave behind. 

Do You Need an Estate Plan?

I don't know. Do you have a kid?

Yes? Then absolutely.


If you and your spouse get hit by a bus tomorrow, guess who decides who takes care of your little one?

Grandma? Your sister?

Nope. The State of California (or wherever you live).

There's something called the probate court. It's the court that decides what happens to your children (and stuff) if you're gone…

…unless you have an estate plan.

If you have an estate plan, then the probate court doesn't make any decisions for you. YOU decide what happens to your kids and stuff if you're gone.

So do you need an estate plan? Only if you don't want some judge making those decisions for you.

But where do you start? What decisions do you need to make? What do other people like you do?

There's 3 steps:

1. Decide:

a. Who will take care of your kids?
b. Who will take care of the money for your kids?
c. What can they use your money for?

2. Talk: Discuss your decisions with those you've designated. Make sure they are up to the task.

3. Draft: Make your decisions official (and legal) by creating an estate plan with an estate attorney.

Pretty simple, right?

You'd think. Just wait until you try to do it. On average, it takes our Financial Zen members 3-6 months to make the decisions and talk to their people.

We're not estate attorneys, but we quarterback our Financial Zen members through the process. So if you want some help getting pointed in the right direction, schedule a few minutes with us.

BONUS TIP: A will is NOT an estate plan. This is a common source of confusion. Even if you have a will, your kids (and your stuff) will go through probate court.

DISCLAIMER:  This publication is for educational purposes only and should not be considered financial, tax or legal advice.  These statements have been simplified for illustration purposes.  Consult your financial planner or tax advisor for help with your specific situation.

Who Pays the Gift Tax?

Pop Quiz:

Your very generous parents give you the down payment to buy a house.  

Who pays the gift tax?

a) You
b) Your parents
c) Both of you
d) Neither of you

Did you answer a) You?  Congratulations!  You are in good company.  Unfortunately, you are also wrong.  Thanks for playing.

(Anecdotaly, I've never spoken to anyone except estate attorneys or very, very smart financial planners ;-) who understand how this works.  In fact, the inspiration for this blog came from 3 very smart people asking about it recently.) 

The correct answer is b) your parents.   The person gifting money is the one who also pays the gift tax.  

How much will the gift tax be? 

a) 40%
b) 25%
c) 10%
d) 0%

The correct answer is: d) 0%….well, not technically.

Technically, you can pay as much as 40%.   

HOWEVER, the federal government gives you a bucket of money - $5,490,000 to be exact - to pay your gift taxes.    Woohoo!  (In legalese, it’s called your “Lifetime Exemption”)

Everyone has $5,490,000 to use towards paying gift tax.  If you give away more than that in your lifetime (lucky you), THEN you're paying for gift tax out of your pocket.

So a married couple has $10,980,000 to give away before they actually write a check to Uncle Sam.

Currently, that number is adjusted upward each year for inflation.  (I say "currently" because this number pretty much changes with every new presidential administration.)

"But wait," you say.  "I've heard that you can only give away $14,000 a year tax-free.  What about that, Rick?"

It's very simple.  You can give $14,000 away each year and it won't count against your $5,490,000.

The cool (is that a stretch?) part is that you can give $14,000 to everyone you know and it still won't count against your $5,490,000.

It gets better.  Your spouse can give $14,000 to everyone THEY know and it won't count against their $5,490,000. 

So if you and your spouse want to give your kid $28,000 every year for the rest of his life, then you'll still have $10,980,000 left to give away without paying the gift tax.


Disclosure: This blog is for educational purposes only and should not be considered financial, tax or legal advice.  These statements have been simplified to illustrate the concept.  Consult your Financial Planner or Estate Attorney for help with your specific situation.