Why Everyone Over 18 Needs an Estate Plan

[00:00:00] Cody Barbo The trust has always had a connotation: You have to be wealthy and rich to have a trust—and that's simply not true. Most time, if you're a homeowner and for most families, the home is the largest asset they own. That's where most of your nest egg is. You might be building up hundreds of thousands or maybe millions of equity in your home over the course of 20, 30 years. And that's what you want to pass on to the next generation.  

[00:00:21] Jennifer Borget Estate planning may sound like something that only rich and famous people need, but the truth is nearly everyone could benefit from some level of estate planning. And it's especially true once kids come into the picture because most people think it's for the rich or it's expensive. Yet it's a key financial topic that's often put off or overlooked entirely.  

In this episode, we're breaking down the basics of estate planning, helping you demystify the process and understand the key steps to help create a secure plan for your and your family's needs. We'll help you feel prepared to check this one off your list so you can focus on enjoying time with your family. In this episode, I'll be joined by Cody Barbo, founder and CEO of Trust & Will. It's an online solution for estate planning. Cody is also a dad, and he's going to help us discover why estate planning is so important as a parent. Then I'll chat with Kelley Daugherty, an attorney with Northwestern Mutual. Kelly will share some specific things parents may want to think about in their estate plan and talk about the intersection of your financial and estate plans.  

But yeah, looking forward to having you here today, Cody. Why don't we just start with you telling me about your company, Trust & Will.  

[00:01:37] Cody Barbo Yeah. So grateful for the opportunity. So, Trust & Will, we started the business seven years ago. I really had a personal need. I was getting married at the time, and I had talked to my (at the time) fiancé about, like, money, taxes, insurance and a will, kind of, you know, the fun conversations when you're about to spend your life with someone. But it was important to like on the will piece specifically, it was important because you know she'd lost her dad when we'd started dating. And for like the first three years of the relationship, I watched the pain for her, the brother, the stepmom of going through probate. There was a house in Waco, Texas. There were cars and a guitar collection and other kind of, you know, just family heirlooms that, you know, very sentimental. And I never felt like it was my place to say anything, which is fine. But in our life, I was like, this is something that we should do if we're going to spend the rest of our lives together. And like, my instinct was to go to an attorney, and I kind of got priced out almost immediately$3,000 and $5,000 quotes almost upfront, which I didn't have. And I was like, I don't think we have the complexity here. So naturally I look online, and other companies have done this for a long time, like LegalZoom, but nobody was specifically doing estate planning, kind of with like a modern brand, best-in-class education. It's a good tech experience overall. And I remember talking to Daniel and Brian, my co-founders, and we ended up, you know, for three months in late 2017, kind of, just noodling over this. Why does nobody have an estate plan? Why is it so expensive, and why is it just still predominantly offline? And that's really what inspired us to start this company.  

[00:02:57] Jennifer Borget High level, like what is estate planning exactly?  

[00:02:59] Cody Barbo Yeah, estate planning, really, it starts with legacy. And legacy is one of these interesting words that, you know, if you actually look at the definition of it in the dictionary, it's the money and property you leave behind in your will. And when people think of legacy, it's how somebody made you feel. Maybe it was their career accomplishments or the relationship you had with them. But when ultimately the people that start to think about estate planning more seriously, it actually get them to do it, it's usually kids. It's major life events like marriage, having kids, buying a home, or on the sadder side, you lose someone, typically after mom and dad passes. Sometimes you are the one that's handling the probate, or you have a diagnosis, maybe a terminal diagnosis or a divorce.  

So, there are lots of positive inside of reasons that people start thinking about this. But at the end of the day, when people go to an attorney, or they're thinking of a trust and will or any other online option, to be honest, it's really around family. That's really what gets people to do this. And most of the time when you're either meeting with the attorney or in our flow, you spend about 30 to 45 minutes going through a trust and will. It's asking questions about your family dynamics. Do you have kids? How old are your kids? Who do you want to have as guardians for those children? Even through your assets—how do you want your assets to be passed down? When do you want them to pass down, and how do you want them to be divided? Health care decisions are really important. Who can make medical and financial decisions on your behalf if you're incapacitated? Whether you're in an accident or you're in a coma or you just had an older age, you actually do need to have loved ones step in and make those decisions for you, all the way down to your final wishes, burial, cremation. Are there any specific songs that you want played at your celebration of life? Any special gifts you want to leave? Or people are very specific about ... who do you want to exclude from your estate plan?  

[00:04:34] Jennifer Borget What happens if there's something that isn't decided in the estate plan? Like if someone doesn't have this in place, you know, what happens?  

[00:04:42] Cody Barbo Like in certain cases, like generally speaking, if you die without an estate plan, you die intestate. Intestate is the term. You go to probate. And if you die with the will, you have a will, you still go through probate. A trust is really where people start to avoid probate, meaning you set up a trust, you retitle your assets, you put the home in the name of the trust, you can put your financial investment accounts in the name of the trust. You could put other assets in the trust. But generally speaking, most of the time, if it's set up correctly—and we have a whole trust funding guide, and most attorneys do a great job of this—it'll avoid probate.  

And like in my passing, my wife and I are both trustees, and the house is in the trust. If I passed, she just stays in that role as trustee and then appoints a second trustee—maybe an older family member, not our kids. But like the idea there is that it creates the least amount of friction and the least amount of money going to the government and to probate courts, and we'd prefer to keep it in the pockets of families.  

The trust is add to your point earlier in the opening remarks, like the trust has always had a connotation of you have to be wealthy and rich to have a trust, and that's simply not true. Most of the time if you're a homeowner, and for most families, the home is the largest asset they own, that's where most of your nest egg is. You might be building up hundreds of thousands or maybe millions of equity in your home over the course of 20, 30 years. And that's what you want to pass to the next generation.  

[00:05:53] Jennifer Borget What does happen if you're wanting to start this at a young age? You're like, “All right, this is something I'm putting on my adulting to-do list. I'm now an adult.” You know, what is the flow of things? Like maybe when you're starting out, when you're 18 and then as you're growing older and maybe updating it, or if you're starting when you're older.  

[00:06:12] Cody Barbo I was in Boston in early 2020 with a large financial institution, CEO of this company, and I was in college; I was in a fraternity, and I was in student government. And like the first weekend, always every year at most campuses, there's always a couple of kids that drink too much. They go to the hospital. They have to get their stomach pumped, or worse things happen. But I'll start with that example. So, the conversation somehow led there because he asked where I went to school and if I was in Greek life, etc.. And and he said, “Hey, my kid, he joined a fraternity. He got too drunk one night; they had to take him to the hospital and pump his stomach, and like he was in a medically induced coma for like days.” And he and his wife could do nothing. Literally nothing. And this happens quite often.  

And, you know, like as a parent, it doesn't matter if your kid's 18 or 35, like it's still your baby, and you want to be able to be helpful and to just be there for them. So, this is a use case. It's a little sadder, but it does happen quite often every year. You could say the same for military. I mean, like we've got our own family and a lot of our teams, a lot of our colleagues, family members are military because we started in San Diego. You know, we've got folks that are deploying at 18 that they need to set up an estate plan and are really thankful we've got some wonderful organizations. We work within the military and veteran community to help educate this audience. But like you're 18 years old, and you're shipping off on your first deployment. You're not thinking about this—or maybe you're getting married or having kids, starting a family a little bit younger. And the same thing applies here. You maybe not see your family for a year if you're going off overseas. Your ability to create the estate plan updated even at a young age: super important.  

[00:07:40] Jennifer Borget Are there any conditions people have to meet in order to create a will or to start planning?  

[00:07:44] Cody Barbo Not really, honestly. You could have the 18-year-old, whether they're in school or not. You're broke. You're just starting your life. So, it's really the health care wishes, or you have any sentimental items or messaging, like what you would want to tell your friends if you got into an accident. What's your final message to them? And if they did have a celebration of life for you, as specific as the songs are—people are very particular about the music they want played, how they want to be honored.  

[00:08:15] Jennifer Borget How can you balance the needs if you have multiple kids, especially if one kid has more needs than another?  

[00:08:22] Cody Barbo You can be really specific. I think that's the thing that I love about estate planning: You can be as specific as you want.  

So, I try to use my family structure. My brother's four years younger. We've got a great relationship, and he's got a family now. He's got his first kid. And my mom and dad, modest retirement, they live here in Dallas as well. In the event of their passing, everything is to split 50/50. But I remember the first time I looked at that paper estate plan back in 2017, I saw these age base conditions. I said, okay, X percentage at 18, Y percentage at 24 and Z percentage at 30. And until then, my aunt and uncle were in control of the estate in the unlikely passing of my parents. That's really interesting.  

And it makes sense. You don't want your kids to get everything at 18 so they burn through all the assets, the cash, or they sell the home. I think that most families want control over that, and that's what estate planning can do. Whether it's with a trust and will or you go through an attorney or another service, you can do that. It's really special. Or just age-based conditions, that's the easiest way to start thinking about it. A lot of people want more specific life events.  

So, to your point around education, a lot of people tied to a milestone. When my kid graduates college, they get X. When they get married, they get Y. When they have their baby, they have their first child, they get Z. And if they need to go buy their first house, they can tap into it. There are very specific situations. Usually it's around life milestones, positive ones.  

The number one advice for parents is to talk to each other. It's very obvious. Talk to your spouse and partner about your estate plan. If you have one, have you ever thought of it? Talk to your parents about it. Or if you have kids that are older, talk to your kids about it. Just let the conversation flow.  

[00:09:59] Jennifer Borget I'm curious what other surprises you've seen. I'm hearing that a lot of people make plans for their pets.  

[00:10:07] Cody Barbo Yes. Yes. Before you even said that, my head was going here. I've got a big, fluffy dog at home. His name is Scooter. He's in our estate plan. I haven't gone ...  

[00:10:18] Jennifer Borget What he's going to get?   

[00:10:20] Cody Barbo There's this celebrity, Karl Lagerfeld, famous, I think fashion mogul, who literally left millions, tens of millions of dollars to his cat. And it's legit! It made headlines, and this cat lives a lavish New York penthouse lifestyle, better than any human, and lives the life in New York on Park Ave. But for most people, every friend that I know, including our colleagues, got pets during the pandemic. Everybody has a cat or dog.  

[00:10:51] Jennifer Borget We got a pet snake.  

[00:10:52] Cody Barbo You got a pet snake! That counts, and I think snakes live a really long time.   

[00:10:57] Jennifer Borget They do, actually.  

[00:10:59] Cody Barbo Who looks after the snake if the snake outlives you? It's really common. The parrot, actually, was the surprise pet. And people are very specific. His parrots lived 50, 60, 70 years.  

If you have a pet, you care about your pet; you can appoint a pet guardian the same way you would appoint it for your children. And you could have specific wishes that you wish for them to be raised a certain way or be fed a certain pet food. People are very particular about their pet food or the treats or where the pet sleeps—not in a cage, this pet sleeps in a bed or on the couch. And I love the specificity you can get with your wishes there.  

[00:11:34] Jennifer Borget I really enjoyed speaking with Cody, and his conversations made estate planning feel much more accessible. I hope you feel the same way because Cody emphasized an important point: Estate planning is something you can start at any age. When you turn 18, it's smart to establish powers of attorney so that someone can make decisions on your behalf if you're unable to. And as your assets grow or you have children, creating a will becomes essential. And as your assets continue to increase, setting up a trust can help you ensure you get everything to the right people at the right time.  

Next, I sat down with Kelley Daugherty, an attorney at Northwestern Mutual. As a parent herself, Kelly and I dove into specific things parents should keep in mind when estate planning and also explored the intersection of financial planning with your estate plan.  

So, we had a great conversation with Cody about the importance of the estate plan and why most people need one. And I know that Northwestern Mutual's recent Planning and Progress survey found that only 38 percent of people who were surveyed actually have a will. Why do you think that number is so low?  

[00:12:43] Kelley Daugherty Honestly, estate planning is a big blind spot for a lot of people. Either they just think they don't need a plan, or they don't want to confront the possibility of potentially getting seriously hurt or even passing away. I get it. Dying is really scary. It's scary to think about, and it's something too many people put off. What's interesting is that can even be the case when people have really great financial planning going on. They might have these great tools for financial planning during life, but then they don't have an estate plan.  

[00:13:11] Jennifer Borget How are these two things connected—financial planning and estate planning?  

[00:13:15] Kelley Daugherty I think it's a really natural connection. Financial planning and estate planning are different but interconnected exercises. You're talking about building wealth and managing your assets, and then you're talking about how you want those things handled when you're gone. I think that's why it makes a lot of sense for that to be something that's done together.  

So, for instance, part of your financial planning conversation is often going to be discussing goals like paying your mortgage off or sending your kids to college and paying for that. That's one of the places where your advisor might identify blind spots for people by asking, “How is your family going to do that if a parent is gone?” This often leads parents to include life insurance in their financial plan. That's a really important step in protecting a family. But then what if the unthinkable happens? Both parents pass away. Honestly, it's really important to think about what happens in that circumstance, because if you haven't done your planning, if you don't have your estate plan in place, a court decides who takes care of those funds and who takes care of the children. And so when a child reaches the age of majority, adulthood age, they actually just get those funds outright. It's often a result the parents aren't comfortable with: having their children have a lot of money in hand right at age 18. This is where estate planning can go hand in hand with financial planning. You want the right assets going to the right people at the right time.  

[00:14:46] Jennifer Borget And probably when they're minors, you might be thinking about it, but you're not necessarily thinking, “What if I die before they turn into an adult?” You're thinking, “I'll be there when they're older,” and heaven forbid something happens, you know? But yeah, we’ve got to think about the unthinkable, I guess.  

So how do you protect your beneficiaries, especially your minor children? How can you protect them through estate planning?  

[00:15:15] Kelley Daugherty First and foremost, and this is what gets a lot of people through the door for estate planning, an estate plan will ask you to name who will take care of your children. So name a guardian. And it can even actually allow you to name who can take care of pets, which is important to a lot of people and can often be another reason to get that in place. Without a plan, a judge is going to make that decision.  

From a financial perspective, there's really two things. Your estate plan allows you to choose someone that you trust to manage what you leave behind, and then it allows you to protect your kids from yourselves. As I was saying, a lot of the time as a parent, we know that kids don't always make the decisions that we want them to and that we would help them make if we were there with them. It's our job to guide them as parents. An estate plan is about protecting them from themselves, too.  

I don't know, Jennifer. I don't know. But think about when you were 18, you might make different decisions with money than when you were at age 25 or 30. It's just that teenagers have a different headspace and have a different mindset. So, a lot of the time you can use your estate plan to put some guardrails in place so that your kids don't make a decision at 18 that they're going to regret later.  

[00:16:27] Jennifer Borget I was going to say—my daughter—just this morning, I was telling her teenagers’ brains aren't fully developed yet. She's 14, and we were talking about high school and stuff, and she's “Well, my mind is—I'm mature.” Okay, you are mature, but your brain still isn't fully developed.  

[00:16:43] Kelley Daugherty Exactly. The nice thing about planning is you can release funds over time. You know, you can still provide for your kids and give them some responsibility but also protect them from that impulse and that idea that they maybe don't realize what stage of life that they're really in.  

[00:17:01] Jennifer Borget Right. It's hard to see when you're in the middle of it. You think you're ready, but having those guardrails in place sounds like a really smart idea. So, what provisions can you include to guide how your children's inheritance is managed if they're still minors?  

[00:17:18] Kelley Daugherty When you leave money to minor kids, the person who's appointed as the guardian, the person who's going to be taking care of them, they can be given the power to handle their finances as well. This only lasts, though, until the kid is 18, until they become an adult. So depending on state law, that could be 18. Sometimes it can be a little longer.  

But basically, if you want to provide continued oversight past that time, that's where naming a trustee comes in—managing their inheritance for their best interests. It doesn't mean they don't get any of the funds. It just means that someone's there to help make those decisions for them. And honestly, I think of the trustee as an extension of the parents. The idea is that you're trying to get someone in place to carry out your wishes by providing funds for the same types of expenses that you would have provided for if you were still there. You're just trying to—not that the trustee can replace that parent role, but at least get something in place to do the best that you can. It often makes sense, though, to give the trustee a fair amount of discretion so you can allow them to handle a lot of different expenses, just like a parent would. But they can have some flexibility in place in order to respond to what the circumstances are at the time, because things change. Life is unpredictable.  

I like to just advise that it's often the best approach to give them that flexibility, because if you give really specific milestones that children have to reach in order to receive the funds, they might not reach those because of the way that life plays out. And so you want to give your trustee just enough flexibility and guidance to make some of those decisions. A nice way to do that, honestly, is oftentimes there's language in the trust itself that someone will work on with their estate planning attorney. But then there's also the opportunity to write a letter to your trustee that's a little bit more informal so you can “be there” to provide them with some of the “here's how I approach parenting. Here's what I'd like my kids to have. Here's what I’d like to see as far as what's important to our family” and your values that can be included in a letter to your trustee to get a little more of that personal side included.  

[00:19:19] Jennifer Borget I didn't realize you could do that. That's really nice because I feel like I am constantly living in this gray area of okay, yes, these are the rules, but you know, I like to have some flexibility and understand that things change and stuff like that. The idea of having a letter that you can provide of “this is kind of what I'd like to happen,” I didn't know that.  

[00:19:45] Kelley Daugherty Exactly. As they reach adulthood, you can arrange for the trust to automatically make certain distributions. A lot of time people set it up so maybe a portion like a third or a fourth gets distributed at a certain age, maybe it's 25 or 30 when they do start to get it. Before we had kids, this is what I did; I have that in place. And my daughter was born three years ago, and when that happened, we sat down together and we were like, “This is on paper. Is this really what we want?” And it turned out our plan made a lot of sense for us, but it was a great opportunity to take a look at it and think about it with that reality lens of, “Okay, we had the idea of having kids; now we've got our child here. Are we still comfortable with the people that we've selected to take care of her if something happens to us?” And then after my son was born earlier this year (he just turned eight months), we took that opportunity to just take another look, just sit down together, think it through. Life changes happen that might make our decisions shift a little bit. So, we didn't end up making changes to our plan, but we were able to think it through.  

You'll have the time when you name someone, and then years down the road, life changes can happen. So maybe someone has gone through a divorce or relocated, or maybe they've had kids themselves and now they wouldn't be able to take care of additional children. So just having a chance to take stock is a nice a nice step to take.  

The other thing that I really thought about when I was becoming a parent was just double-checking that my beneficiary designations actually line up with what I want. If you've made beneficiary designations on some of your accounts or some of your life insurance or maybe retirement accounts like your 401(k), you check boxes; then, you end up down the road, you've got children now, you might want to change how those payouts—especially if you've done your estate planning, you want to make sure those line up. It's really important to make sure beneficiary designations line up with your estate plan; otherwise, things might not play out how you want them.  

[00:21:52] Jennifer Borget Yeah, that makes sense. Checking in every kid or so, making sure ... I didn't think about that. It's true because when you set up your first retirement account, maybe you're on the ball, your first job and you're setting it up. And life changes happen, and your beneficiaries might not always line up on all of your documents. So yeah, that's a good tip.  

For some of our listeners (I know talking about this like this is your job, so you're on top of it with your husband), this might be anxiety just thinking, “I've got to plan my will; what about when I die?” What advice do you have for people who are putting this off because it's just so stressful or they're worried about it?  

[00:22:37] Kelley Daugherty Yeah, I totally get it. It's not easy to think about your own death. It's really tough to imagine your kids growing up without you. So I totally understand.  

And people shouldn't feel guilty or bad about it. I mean, tons of people are in their shoes, but once you do get your plan in place, it can bring so much peace of mind. So, I can just at least recommend strongly that people do that to get that peace of mind in place and you know that you've done what you can to help your children and your family members or whoever you've asked to take care of them. You've really taken away some of the difficulty for them at a time that's going to be difficult no matter what if both parents pass away or if one parent passes away. The pain at that time ... if someone can at least then know what your wishes were and know that they're doing exactly what you had in mind, it can really take away some of some of the difficulty and decision making at that time and also, can you really take away some of the conflict that might happen.  

I just try to think of those as additional motivators for people to get through the door and try to get their estate planning taken care of. Because it's easy to have it hanging over your head, but that peace of mind really comes through, and just knowing that you're maybe giving that gift to your children and to your loved ones can be a motivator.  

[00:23:57] Jennifer Borget That's a good point. Talking about your loved ones worried, they're already sad that you're gone, but knowing that they're doing something that you would have wanted could maybe help them through that process, too. I think about it that way.  

Thank you so much, Kelly. This is so insightful. So much good information. Those were two great conversations. Here are some of my key takeaways.  

First, everyone needs a plan. It doesn't matter if you're 18 or 80. Having a plan in place is critical. A plan could ensure that your loved ones are taken care of if something happens to you. And while it might seem morbid, estate planning is actually a critical part of adulting.  

Second, estate planning gives you control. Cody pointed out that an estate plan means you can control who gets what and when and who doesn't get anything. Eighteen-year-olds don't always make the smartest decisions, and a well-thought-out plan can ensure that they won't receive everything all at once or can only receive certain assets when they reach milestones.  

And finally, estate planning is a critical part of financial planning. A great financial plan can show you how you'll reach your goals even if something doesn't go according to plan. But building investments or getting life insurance is just a first step. It's not fun to think about, but what if something does happen to you? Estate planning helps ensure that the financial planning you're doing will pass to your children the way you want it to.