No one likes to talk about their own death, so estate planning is something often put off—or not done at all—with unfortunate consequences. WorthPointe advisor John Chapman talks with estate planning attorney Darlynn Morgan about why it’s so important to have a plan in a recent podcast. In addition to detailing what documents are involved, Darlynn shares two stories that should give listeners pause for thought: one that’s her own and another that involves Kobe Bryant.

Listen to The John Chapman Show episode, “Proactive Estate Planning,” here.

Audio Transcription

Speaker 1: (00:00)

Welcome to The John Chapman Show, where we talk about the path of a wealthy millennial uncovering the truth about building and protecting your nest egg. Join us on this journey as we hear the stories of millennials and mentors alike, to help you plan, manage, and protect your wealth. John is an employee of WorthPointe, LLC. All opinions expressed by John and podcast guests are solely their own opinion and do not necessarily reflect the opinions of WorthPointe. This podcast should not be relied upon for investment decisions and is for informational purposes only. 

Speaker 2: (00:33)

How would you or your family be impacted if someone became incapacitated or even worse passed away suddenly? Hey everyone, it’s John Chapman, back on the podcast to help you grow and preserve your wealth so that ultimately you can get the most from life with the money you do have. And this week we talk with Darlynn Morgan at the Morgan Law Group about the importance of estate planning and its impact on your peace of mind. During the episode, we talk about things like an advanced healthcare directive, a financial power of attorney, a will, and a trust. We also talk about some recent news about Kobe Bryant’s estate plan and some of the gaps that he had and how we can learn from them. Be sure to subscribe and leave a comment or a rating. And with that, let’s dive in. Darlynn, recently, you had an email about Kobe Bryant’s estate and it was startling. And I’m curious for you to tell the audience what’s going on and maybe some of the lessons we can learn about how we should draft our own estate plan.

Speaker 3: (01:28)

Sure. And thank you for having me, John. Well, we all were just heartbroken in January when we learned about Kobe’s just unexpected passing away at such a young age with his 13-year- old daughter. And, you know, we always think that celebrities who have a lot of money probably have their estate plans in order, and that they have lawyers who are doing that for them, and it just recently came out that he did have quite a lot of estate planning in order. He had a trust, of course, and it was set up in such a way to provide for his wife and his daughters, but Kobe had a six-month-old daughter. And apparently what we found out with some of the recent court filings is that he had not had a chance to update his estate plan, to provide for his daughter who was just six months. She was just born six months before he passed away.

Speaker 2: (02:25)

So what would that mean in a worst-case scenario, not having his youngest daughter named in his trust? What would the impact be to her?

Speaker 3: (02:33)

Most of the time when someone passes away, their trust becomes irrevocable. They’re not here, they can’t change it anymore, but what you can do is go to court and request a modification. And so that’s apparently what’s happening here is that his wife, along with his trustees and advisers, are petitioning the LA probate court to modify the trust, to add his little daughter—Capri is her name—as a beneficiary so that she’ll have equal rights with the other sisters.

Speaker 2: (03:13)

In some ways it feels like such an innocent gap, an innocent mistake. And she was so young and this was so untimely. So from the outside, it would seem that a court would be willing or want to grant that sort of thing. But are there maybe principles to where they can’t? What’s the likelihood of this passing or going through?

Speaker 3: (03:32)

You know, I would say it’s pretty likely that they will be able to find some language, some intent that shows that he did mean for all of his children to inherit equally, and that they will be able to modify, but really, you know, here’s his wife, his best friend is one of the trustees who are grieving his loss. And now they’re having to go into court. And, you know, of course right now with all that’s going on, the courts are even slower than usual. They were closed down for many months and backlogged. So it’s very difficult. And it just adds to the hard situation that they’re already going through to now to have to wonder and worry, you know, go to court to get this change made.

Speaker 2: (04:23)

It’s as I mentioned, a startling story. And I guess it’s just one more reminder about how important estate planning is. As a financial planner, at least over the past decade or so, as I’ve been meeting with folks, it’s one of those things that people realize they probably should have something in place, but there seems to be so much friction, Darlynn, with getting started. And I’m curious to ask what that friction looks like from your perspective, is it time or confusion or is it cost? What do you feel like stands in the way of folks being able to execute on their estate planning?

Speaker 3: (04:55)

You know, you bring up some good points and I do think it’s a combination of things. Sometimes people just don’t know who to turn to, who they can trust as a lawyer to give them good advice. Sometimes they’re, you know, fearful of what the costs will be. And sometimes it’s emotional because, you know, thinking about your own incapacity, death, you know, and sometimes difficult family relationships, all of that brings up a lot of emotions that can be very hard to address as well.

Speaker 2: (05:26)

Good point. Okay. Well maybe we can use this as an opportunity to talk a little bit more about the structure, what goes into the estate plan and talk about the different components of that. So as just a matter of sort of defining all of this process, Darlynn, what do you typically go through? How would you explain the estate planning process?

Speaker 3: (05:45)

I really focus less on the documents. The documents are important, of course, but really it’s about putting a plan together that really is going to accomplish what you want to accomplish. And for most people it’s thinking about, gosh, if I was incapacitated or if I was disabled and I couldn’t manage my own affairs, or if I did pass away, what’s that going to look like? Who’s going to be able to have the legal authority to take care of me, to pay my bills, to make sure that they can speak to doctors and make medical decisions on my behalf? And so it’s really estate planning is a misnomer. In some ways, a lot of people think I need to be like a Kobe or a celebrity or having an estate, but really anybody who’s over the age of 18 needs to have a plan in place for if I was incapacitated, who’s going to have legal authority to act on my behalf?

Speaker 2: (06:49)

Okay. So that’s interesting. Let’s touch on that for a moment, because I think in another one of your emails, you talked about recent high school graduates and even maybe recent graduates. I think some might be surprised to hear that even someone as young as 18 or 22 needs some form of estate planning, so tell us more about what documents they might need.

Speaker 3: (07:12)

I’ll tell you a story about some clients of mine. We’ll call them Rich and Nancy, who just lived here close to my office in Orange County. And they called me one day and said our daughter went off to Northern California to go to college. And she’s always been a great girl and she has good grades, and we always trust her. And she has great friends. And one Saturday afternoon, they got a phone call from their daughter’s—we’ll call her Ashley—roommate. And her roommate said, we all went mountain biking this morning with a bunch of friends from our dorm and Ashley fell and she’s in the hospital. So of course, oh my gosh. I know. Can you imagine they are down here in Southern California feeling really helpless and turns out that they tried, of course, to call her cell phone.

Speaker 3: (08:06)

And there was no answer. The roommate pointed them in the direction of the hospital that she thought she was, where Ashley was taken to and they called the hospital. Because of the privacy laws in place, specifically called HIPAA, they could not confirm or deny that Ashley was there and they could not let the parents speak to her. So yes, they were completely distraught. The story has a good ending because Ashley recovered and on her first break, when was back down here in Orange County, they brought her into my office and we talked about what legal documents would have given them the peace of mind. And there are three essential legal documents for anyone over 18. Ashley didn’t have any money. She was just an 18-year-old. And so we immediately put in place for her an advanced healthcare directive; what’s called a HIPAA release or a HIPAA authorization, which is the medical information form that protects privacy rights; and the financial power of attorney. And it was those three documents for really any adult over 18 years old for a situation that could happen to anyone.

Speaker 2: (09:32)

So just to make sure I have them all, one is an advanced healthcare directive. Another is potential power of attorney and say the third again?

Speaker 3: (09:41)

It’s called a HIPAA release. HIPAA is a federal law that says no one can speak to your doctors or access your medical records unless you’ve given specific written authorization.

Speaker 2: (09:53)

So it seems as if these documents need to go in, in both ways, maybe in some cases it could be for the daughter for her on her parent’s behalf, if maybe one of the parents gets sick or both at the same time or injured, and then the opposite parents for the daughter. So when you go through this process, they need to have multiple documents so you know, I guess it goes both ways.

Speaker 3: (10:17)

Well, every adult needs their own plan. We have a lot of families, once their kids turn 18, they have them sign these three essential documents. And then of course, if you have any financial accounts, investment accounts, of course, if you own any property or you own your home or business, then you might need additional documents such as a will or a family trust or a trust to make sure that we avoid probate as well. So we’re doing incapacity planning; it’s very important, and then we’re also planning for your financial assets and also planning to avoid a probate if you pass away and really avoid not just going to court, because going to probate court is very difficult, but also avoid conflict. So it’s avoiding court and conflict as well.

Speaker 2: (11:18)

That’s some good structure and since you bring it up, can you talk to us a little bit more about the purpose of a will and then talk a little bit more about a living trust? It sounds like there could be some confusion about how those two documents mix and mingle. And so tell us a little bit more, maybe first about what a will is trying to accomplish. 

Speaker 3: (11:40)

That’s a question I get almost every day, John, you know, if I have a trust, do I need a will? If I have a will, do I need a trust? If all a person has a will, then they may still have a probate. And I say may, because it’s hard to give general advice that applies to everybody. Generally speaking, wills are probated. So if all a person has is a will, they will most likely still have a probate. A trust is really how we avoid probate. Now, the bigger picture and what I think really hits home for people is whether it’s a will or a trust. What you’re doing is you’re putting clear instructions in place, a trust or even a will is a document where your instructions are laid out clearly, so the people that you care about know who’s going to be in charge. Who’s going to get what, when are they going to receive it? And of course any estate plan is really about more than just who gets what, you know; that’s an important question, but it’s really about so much more than that, when you think about the bigger plan of what we’re really trying to accomplish.

Speaker 2: (13:01)

So we talk about a trust can accomplish avoiding a court, but you also mentioned avoiding any conflict. So talk to me a little bit about how any of these documents avoid potential for conflict?

Speaker 3: (13:15)

Down the line? Well, because we’ve put in place what your wishes are. We don’t have to guess who you wanted to be in charge. It’s laid out. We don’t have to guess about who’s supposed to get what, when, because we live in a culture where there’s lots of blended families, single parents, all different kinds of people who are non-married people who care about each other and want to provide for their loved ones, but that’s not necessarily going to happen legally if we don’t have a plan in place that lays it out. 

Speaker 2: (13:56)

Well, so this makes me think of so many stories that come to mind during my financial planning conversations over the past year or so, that I want to throw a couple of scenarios toward you and maybe they resonate with some of the audience. And maybe you can give your two cents on each of these for a lot of folks that are in the pre-retirement or early retirement phase, they may have elderly parents. So for the 50s or 60s, their parents are in their 80s or 90s. And so if somebody is in that pre-retirement phase or in their 50s, and they’re starting to see their parents age, if they have not yet talked about their parents’ estate planning wishes, and they see their parents starting to have cognitive decline, what is their next step? Or are they able to get a power of attorney after dad starts to show cognitive decline? Or is that too late? What should these folks in their 50s and 60s be doing for mom and dad? 

Speaker 3: (14:52)

That’s a great point. You know, we have to be proactive, because our legal system is sort of unforgiving in a lot of ways. If somebody is developing that cognitive decline, then it definitely can be too late for them to get to have the capacity in the legal world. We call it to know what they’re signing and to be able to put legal documents in place. So I know it can be a tricky conversation to have sometimes with parents, but I think that the way it’s approached, it’s so important that they do get those things in place. Because if not, I can only tell you being on this side of the phone, we have a lot of calls where it is too late and something unexpected happened. And now we have no recourse, but we have to go to court.

Speaker 2: (15:49)

Okay. I see. So maybe another scenario then if I switch gears, I think about that same, let’s say 50- or 60-year-old family that has young children. And we touched on this maybe a little bit earlier, but still just to explain the example, what if they think to themselves, I have two kids and a spouse. I’ve got a home and some retirement and investment accounts. I want it to be clean and simple. I want to leave it split my kids. So there’s really no need to go through the hassle of some estate planning documents. So what would you say to a family in that situation?

Speaker 3: (16:24)

Well, if the kids are under 18, then it’s critical that a plan is put in place ahead of time, because until they’re 18, they’re not legally able to manage money. And right now we have a case where the father passed away very unexpectedly. He was in his late 40s and the mom, you know, they were married, but unfortunately the house was only in the dad’s name. So now, not only was there a probate, but the son who was 10 years old when his dad passed away, the son’s getting half of the value of this house, but it has to be in what’s called a guardianship, meaning the court is going to oversee that until he turns 18. And then when he turns 18, he can have a lump sum distribution of whatever amount that is. And it’s six figures. And so the mom is devastated. She’s grieving the loss of her husband. She’s having to hire attorneys, go to probate court. Probate is very expensive. And the simplest probate takes at least 12 to 18 months. Of course, there’s complications nowadays with everything that’s going on, as well as not every case is simple and at least 18 months. And do you really want your 18-year-old to get a big chunk of money? For most people the answer’s going to be no.

Speaker 2: (18:00)

Yeah, definitely. Well, Darlynn, it sounds like you’ve had a lot of experience and a lot of stories that you’re sharing. Would you mind telling us a little bit about how you first got into estate planning and what your experience has been over the years?

Speaker 3: (18:12)

Yeah, I’d love to. I have been a lawyer for 24 years now and I started off my career doing business law, working in a big law firm and going to court, helping business owners when they were fighting about something. I was married and met my husband and we fell in love. We bought a house, my husband had his own business. I was at this law firm and I thought, perfect. My life is going great. One day in the middle of my perfect life, my husband called me at work and said he wasn’t feeling good. So we went to the emergency room and they took a lot of tests to try to figure out what was wrong. He was 36 years old and they came back and they said that he had cancer and that it was already very, very far along. It was bad. And that we did not have a lot of time.

Speaker 3: (19:06)

Now we were shocked. We had always had estate planning on our to-do list and we owned a home. My husband had a business, I was a lawyer. I could have done my own planning, but here we are. At this point, we were told you need to get your affairs in order. And I was not in good shape at that point. I was not in any shape to try to do my own planning. And so we went to a law firm that was recommended to us and we had what I’ll call a traditional experience. And what I mean by that is the lawyers used a lot of big, fancy legal words and legalese, and I didn’t ask a lot of questions, not a lot of listening. We ended up getting a very templated, sort of fill-in-the-blank Morgan family trust. And that was it. I called the lawyer with a question and it was so hard to get them on the phone. Finally, I would talk to him two weeks later, and I’d get the bill in the mail for the phone call. And about 14 months after we signed our estate plan, my husband who had just turned 37 passed away and I was in pretty bad shape. I had a trust, but I really had a mess on my hands.

Speaker 2: (20:24)

I’m so sorry. I wasn’t experienced enough to go through as a young person.

Speaker 3: (20:28)

Yeah. I was 31 when my husband passed away and it was pretty difficult obviously, but I knew that there were legal things that I was supposed to be doing. I had his business partner calling me, cause now I own half of this business I had no idea about. And, I knew that first lawyer was not a fit and I knew I was going to have to go out and find someone who could really help me through it all. So I did, I found someone great, got me through everything. And when I got back up on my feet, I had to decide what I was going to do next with myself, and you know, to make a long story short, I did start Morgan Law Group in 2005 with the idea really that it would be the law firm that I would have wanted to go to. We do things a little differently here, as you can imagine.

Speaker 2: (21:25)

Yeah. I can only imagine. Well, I appreciate you sharing your story and it sounds like you have a lot to offer clients given that you’ve had your own personal experiences estate planning. So we’ve covered a lot, Darlynn. Is there anything else that you’d want to share with those listening about the process or stories or things to watch out for? What else should the audience be thinking about?

Speaker 3: (21:49)

You know, we really have systems in place to make the process as easy as possible for people. And we do everything by flat fee, agreed upon an advance. We do this because I recognize that for a lot of people, it is nervous to talk to an attorney and wonder, like how it happened to me, about getting that surprise bill in the mail. So I would encourage people to really look for an attorney that has systems in place to meet periodically. We do three-year review meetings for our clients for no charge, because I want to make sure that we really develop a relationship with people over time. So they have a plan that’s going to work. We don’t charge for emails and phone calls. So we do quite a few things. So that the goal is that a person has a relationship with their attorney here that really is going to result in a plan that’s going to accomplish their objective.

Speaker 2: (22:53)

So if those listening want to reach out, Darlynn, what’s the best way for them to get in contact with you?

Speaker 3: (22:58)

We’d love to hear from you. My email address is Darlynn — D a R L Y N n@morganlawgroup.com. And our website is Morgan law group.com. And our phone number is (949) 260-1400. We’d love to hear from you. 

Speaker 2: (23:20)

Well, I’ll make sure to put the information in the show notes, Darlynn. Thanks for stopping in and talking a little bit about estate planning, such an important topic for those listening that if you don’t have an estate plan set up, please reach out to a trusted attorney or Darlynn’s group. And with that, thanks so much for listening. Have a great day.

Speaker 1: (23:39)

Thanks for tuning into The John Chapman Show. Be sure to subscribe on iTunes, Stitcher, or Spotify. We encourage your questions, comments, and feedback. For additional information, check out the John Chapman show.com or look for John on LinkedIn and Twitter. See you next week.