You work hard. Very hard. You strive to grow your business and build wealth so that you can create financial stability not just for yourself, but your loved ones.  

On this episode, we talk about what it takes to protect the results of all your hard work—and to keep safe the things that matter most in life. We break down the most impactful strategies for protecting your income, family, and estate.

As Michael says in the episode, there are no guarantees in life. But listening to this episode will help clear up some important questions you probably have about planning for your financial future.

How You Can Steal The Show

  • Learn what income protection entails and how you can incorporate it into your financial strategy.
  • Explore different insurance options so you know which policies are best for you.
  • Write a family playbook that sets your loved ones up for financial stability.

Listen to more episodes of Steal the Show from this season and previous ones at https://stealtheshow.com/podcast/

Learn more about Michael’s public speaking training company, Heroic Public Speaking, at https://heroicpublicspeaking.com/.

Learn more about Matt’s specialized financial services firm, Valley Oak, at https://www.valleyoakcpa.com/.

In this episode…

Resources Mentioned:

HPS Design

In today’s ad break you heard about HPS Design. For more information you can click here or email questions@heroicpublicspeaking.com and make sure that “Speakers Site” is in the subject line. (P.S. Don’t forget to mention that you came from the Steal the Show podcast!)


Transcript

Michael Port (00:05):

Hello, and welcome to Steal the Show with Michael Port, a podcast from Heroic Public Speaking. I’m your host, Michael Port. This season’s theme is Speakers with Money and I’m joined by my very good friend, Matt Rzepka, the Owner and Chief Wealth Strategist at Valley Oak, a specialized financial services firm. Together we’re exploring some of the most common and daunting challenges facing speakers, entrepreneurs, and small business owners when it comes to finance. Now to be crystal clear, I have no conflicts of interest here. I don’t stand to make money at all from you adopting any of the educational content you hear on this podcast. My company is Heroic Public Speaking. We’re a public speaking institution based in Lambertville, New Jersey, and we provide world-class training to aspiring and working professional speakers around the world. I don’t sell anything related to financial services. Matt however, does, and you are welcome to hire him. I do. I will not be compensated however, in any way at all, if you do. I’m doing this podcast purely because I love this topic and I think everyone in our industry can benefit from learning more about business and personal finance. That’s it.

Michael Port (01:20):

Alright, today we’re discussing how to keep your income, your family, and your estate safe and sound. So let’s get to it. Okay. Matt, as an accountant, I have to believe that financial security is something that you thought about at an early age. Now, I could be wrong. You’ll tell me if I am…or maybe earlier than most at least. So when did you start to first seriously think about the concept of financial security and what it means for you and your family?

Matt Rzepka (01:54):

Yeah, I do think I started thinking about that pretty early. You know, it probably first hit home for me is, you know, the college experience and you’re spending all this money on college. I paid for all my own schooling and I’m like, okay, I’m doing this and am I, am I gonna get a job? And am I gonna make enough money? And you know, thankfully that all happened pretty simply for me when that was going on. And it just kind of got me into alright, well, now I’ve done this, I’ve got these student loans and I’ve got a girlfriend who became a fiancé who became a wife. And now I’ve got, and you know, as all those things start happening, your brain starts to think about, okay, well, what happens if I lose my job back when I was working for somebody or what happens if I pass away or, you know, all these things start coming together.

Matt Rzepka (02:37):

And thankfully in the industry I was in, I was able to learn a lot about that as I was having those thoughts and conversations with myself, almost like, alright, well, what am am I gonna do if? And that’s really what I want to focus on a lot this episode is, well, what do we do if is kind of what to think about? You want to think about what could go wrong. Hopefully it never happens. Hopefully you don’t have to deal with those things, but life has its way of throwing you some curve balls. So I think about this a lot. I want to do things in my own personal life that help me sleep good at night and make sure, you know, what, if I’m not here to see something that everything’s gonna hopefully go as best as it can if I were here to see it through. So those are kind of my thoughts and how I got on this track. And I definitely like to help people feel safe and secure.

Michael Port (03:21):

Yeah, it is important, I think, to feel like your money is relatively secure. That your family is as secure as is realistic or reasonable. And that your business is as secure as is possible. There are no guarantees.

Matt Rzepka (03:38):

No.

Michael Port (03:38):

Ever. I mean, we just had to spend, you know, and still are spending hundreds of thousands of dollars that we did not plan on spending this year because we have to outfit an entirely new headquarters for Heroic Public Speaking, because our 10,000 square foot rental space was totally destroyed during Hurricane Ida. And every, everything that we owned was totally destroyed. There was five plus feet of water in our space, and there were maybe two or three things that were salvageable and they just happened to be metal. But anything else? Gone. Done.

Michael Port (04:14):

So, you know, we did have insurance, but they don’t cover you for floods. So none of the insurance covers us. So, you know, that kind of sucked, but because we are fiscally responsible, we are able to manage that situation and to carry on and continue to thrive. With your family you can do everything in your power to help keep them safe, but ultimately kids are gonna be choices kids do. You can’t control everything that they do, even though you’d like to. You can’t always control every aspect of your health and the same thing with your money. You might not always be able to control exactly how much money you make. You might not always be able to control exactly what the market is or isn’t doing, but we wanna do as much as we possibly can to try to create more safety and security for our money, our family, and our businesses. Financial security is just simply a way to protect what you love.

Michael Port (05:12):

So in this episode, we’re gonna talk about a few key steps that you can take toward financial security. But I do think it’s important to note that this will not be an entirely exhaustive discussion, because there are probably hundreds of other things you could do to financially fortify yourself. But just to keep us focused, Matt and I are going to focus on the most common and impactful or important things that you can do to keep your income and your family, and your estate safe and sound. So Matt, let’s start with income protection. How do you define income protection?

Matt Rzepka (05:46):

Income protection is if for some reason you lose the ability to work and make money and earn income. That means you’re gonna have to figure out a different way to pay your bills. What is a short term loss of income earning ability mean? What does a long term loss of income earning ability mean or otherwise referred to as disability? And that’s the industry term that is used out there quite a bit.

Michael Port (06:10):

Yeah. And so both Amy and I have disability policies. If something happens to one of us, we’re either disabled in the short term or worse, disabled in the long term, we need to, at this point in our life, protect the income that we make. Now, there will be a point where we will drop our disability coverage, most likely, because we won’t need it anymore. But for what we get, I think even though most disability insurance is pretty expensive, I think it’s a pretty good deal. I mean, I feel much more secure having this kind of disability policy. And it’s important I think for speakers to know, and maybe we should address this, that they may need to get special policies. It’s not always really easy for underwriters to understand what a professional speaker does or an author who speaks.

Michael Port (07:04):

So for example, when I got my disability policy, it was a long time ago, so it was before really HPS was HPS when I was on the road speaking, et cetera. I had to get insured through Lloyds of London on what is referred to as an Entertainer’s Policy that usually is written for sports figures and artists, well known artists. That was really the only way that I could get the kind of coverage that I needed for the amount of coverage that I needed. But that might not be the case for everybody, Matt. So what about most speakers? Are they gonna need to get policies that are a little bit more specialized or through a company that specializes in those kind of policies? Or do you think some of the typical players would quickly or easily ensure for disability short term and long term speakers like our audience?

Matt Rzepka (07:55):

Depends on specialty. Depends on income. Also depends on, you know, oftentimes there are organizations or groups where you can get group coverage. You know, my personal example on that is with being a CPA. We have CPA societies at both the state and national level where they offer group plans through those societies. So you can get combinations of approaches because a group plan is almost always less expense than a personal plan. But the group plan is very, here are the cut and dry rules and this is the way, and this is the maximum you can get. On a personal plan through a direct carrier, not all Lloyds of London or maybe just a, a standard carrier in the marketplace, you can get a lot more customization. And then if you have a specific additional item that if were to lose your voice as a speaker or some of those things, that’s where really kind of Lloyds comes in to make sure you can get that really extra value out of if that bad thing happens.

Michael Port (08:49):

One of the things that’s interesting, what you just said is that you could combine plans. You could actually have a few different disability plans and each one of them may be smaller than you would need, but in the aggregate they end up covering what you would need if you were in fact to be disabled in some way.

Matt Rzepka (09:08):

Yeah. And really you don’t know exactly. You wanna look at basic expenses. If you’re disabled, you might not be able to live the lifestyle. Different forms of policies can provide different components of that. And then you also may be able to do social security disability through, you know, a government program, but there’s a long waiting list and that can take time. And usually if a disability happens, there’s a lot going on in your life at that moment. So you want to have that short term plan of, okay, how do we get through this in the moment, but then how do we have a consistent income long term if it does end up being over the long period?

Michael Port (09:43):

So Matt, can you just talk about the different tax implications of disability policy because they’re taxed differently or the income that you get from the policy if you make a claim is different. If it’s own personally or it’s owned by the business?

Matt Rzepka (09:58):

Yes. The simple way to think about the tax components of disability is if the benefit you were paying for was tax deductible. The income claim, if you have a claim and receive income is gonna be taxable income. If you took your premiums and you paid them with after-tax dollars, meaning you didn’t take a tax deduction, then that income from a claim is going to be tax exempt. So you wanna understand those decisions when you’re making them, this is a, a big conversation with business owners because oftentimes business owners are wanting as many deductions as possible. But when you look at the true outcome of a disability, you’re likely gonna need every dollar that you can get. So I really try to encourage people to take the after-tax approach. Then if you have a disability and have a disability income claim, you’re gonna get a hundred percent of those dollars to use for whatever you’re needing to pay for at that time.

Michael Port (10:48):

Especially because if you do go on disability and you don’t have income from your business anymore, but you have a large enough policy to really cover all the income that you were making and all the needs that you will have if you’re disabled, because my expectation is that your expenses aren’t necessarily gonna go down. If you’re disabled, you might need a lot of really special care equipment or services, et cetera. And of course your partner or your spouse may need to also care for you, which means that may interfere with their ability to produce income or focus on their work for a period of time. And so what might happen if you have a large claim, it may keep you in a high tax bracket because it’s a little harder to find deductions through the business, because it’s not coming through the business. So it’s really, I think, beneficial to not have to pay taxes on that income, if you are disabled. That’s just my personal preference. I like knowing that that number is what I’m gonna get and is gonna be tax exempt.

Matt Rzepka (11:56):

Yeah. I concur. That’s always the direction I recommend. It’s everyone’s own decision, but you wanna understand that you’re actually statistically more likely to become disabled than you are to pass away prematurely. So again, statistically, you have to remember, alright, what game am I playing?

Michael Port (12:11):

Yeah. Although, you want some really interesting statistics that are incredibly depressing? That a good lead in? Good setup?

Matt Rzepka (12:19):

That’s perfect.

Michael Port (12:19):

I’m sure you’re like, yes please. What are they?

Matt Rzepka (12:21):

Yes, please. More.

Michael Port (12:22):

All right. Well this is from, I think it was the Wall Street Journal today. COVID spurs biggest rise in life insurance payouts in a century.

Matt Rzepka (12:31):

Oh wow.

Michael Port (12:32):

Death benefit payment jumped, get this, 15% last year. The biggest increase since the 1918 flu epidemic.

Matt Rzepka (12:41):

Wow.

Michael Port (12:42):

So do you think that means we’re gonna see higher rates for life insurance in the near term?

Matt Rzepka (12:47):

Most likely.

Michael Port (12:49):

I would think so because you know, they’re not in this for our benefit.

Matt Rzepka (12:52):

Yeah.

Michael Port (12:52):

The life insurance company just need to make up that revenue somehow. And so if, you know, if their tables change and more people are dying, they’re gonna be raising the prices for everybody. So go get your vaccine and don’t die. Okay. Just had to add that in there.

Michael Port (13:07):

Alright. So let’s talk a little bit about family protection. What do you think a typical speaker’s family would need in order to protect the family?

Matt Rzepka (13:17):

Certainly not an all inclusive list here, but a lot of things you can think about from a protection perspective- creditor protection, you’ve got income protection, you’ve got premature death protection, litigation protection, tax protection. What if you do a accumulate a mass amount of wealth and the government wants to reach in your pocket and take some of that from your kids, you know? Understanding what some of those formulas look like. And there’s, there’s a lot of protection things that you have to prioritize to say, okay, how can we do this one at a time? And what are the ones that are most important or that would be the most detrimental if you don’t address them? You know, life insurance, as an example, term life insurance is extremely affordable and premature death is one of the hardest things on a family if you don’t have life insurance. And I tell you, you know, that’s one of my personal goals is to make sure we have that conversation with everyone because I never want to be in a meeting with the survivor or a survivor family and them sitting there not realizing how they’re gonna pay their bills because the income, the breadwinner or the main earner passed away. And now we’ve got a whole different financial situation. That term life insurance, at a minimum, can help you make sure that they are gonna be okay if you’re not there to see it.

Michael Port (14:37):

So that’s one strategy for long term income protection. Short term disability will cover you for short period of time, but you’re still alive. If you have a long term disability, if you have a policy that offers a lump sum payment, when you become long term disabled, that can be helpful. But some of the long term disability policies work like annuities where you’ll get a certain amount of money per month until a certain age or until your death. But term insurance or any other kind of life insurance will produce a lump sum to protect your family because you won’t be able to provide income for them for the rest of their lives because well, you’re not alive. But there will come a point where you won’t really need that kind of life insurance protection because either (A) your kids are out on their own and they’re financially stable and they take care of themselves. And (B) you may have amass enough assets so that if you died, there’s enough left to your partner that they wouldn’t need an additional amount of money from term or any type of other life insurance policy. Do you agree with that?

Matt Rzepka (15:44):

Yeah. There’s a lot of different ways to structure some of those things. The earlier you are in your career and your earning years, the more insurance you may want or need. And it’s kind of a want versus a need. A lot of times there’s a needs analysis, but you’ve really gotta sit down and say, okay, well, what do I want to happen for my family if I’m not here to see it? And then you can game out the timelines. You know, I call it a term ladder. I’m gonna throw out some numbers here. And they may seem like really big numbers, but in as low interest rate environment, we’re in, it’s kind of forced us to get more death benefit protection in my opinion. Because typically a survivor doesn’t necessarily wanna take as much risk with investments in different things as they might have with both spouses alive.

Matt Rzepka (16:27):

Let’s say I had a million dollar term for 20 years. A million dollar for 15 years. And a million dollar term for 10 years. Well that means my term is gonna slowly drop off as time continues to pass. Once I get through those first 10 years, hopefully I’ve been saving at a high rate, earning a good income and building some net worth and nest egg. I might be able to let that term expire if I don’t feel I need it anymore. Or you could always convert it into something else to keep bit, if you wanted to do something like that as well. But there there’s a lot of ways to structure those things and try to keep the cost as low as possible, but protect the income. The insurance companies have a formula if you’re ever curious how much life insurance protection can I buy. They’re not gonna let you buy an unlimited amount.

Matt Rzepka (17:10):

They’re gonna look at your assets. They’re gonna look at your income. They are gonna look at your age and they have a formula. They’re gonna plug all that in and say, okay, your maximum coverage is X. We like to calculate that number for clients because it often surprises them at how big it might be. Especially the younger they are. Because if you’re 35 or 40, they’re counting on at least 25 more years of working income. So 25 years, times income is kind of the bare bones number that you should look at to say, Hey, I want to protect that amount. And then from there it will vary based, on again, individual goals and preferences of the household.

Michael Port (17:44):

Yeah. I mean, that’s a pretty big number. You know, if you just multiplied 25 times, even if you were making, say like $150,000 a year, right? That’s $3.75 million. Right now, if you’re making $300,000 a year, well, now you’re looking at double that. I remember when I started thinking about it, I was surprised at how much was really needed to protect my family long term. But then over the years, I sort of just been shopping it down because we’ve built up more assets. So, you know, we might not have to keep as much life insurance. But since term life insurance is so cheap, the difference between $4 million and $5 million is not usually that big a difference or even five and six, you know. Once you’re buying a policy in a certain category, it seems like the difference between $500,000 and a million dollars is not actually that big of a difference in terms of premium.

Matt Rzepka (18:37):

Yeah, not at all. It typically is very prorated. And the biggest mistake I see here is, oh, I’ll do it later. Health is the most important part when you’re buying term insurance and age. The younger you are, you get a fixed annual premium when you buy a term policy. So if you’re younger, the younger you are, the more likely you are to survive the term. So the insurance company is a lot less costly in pricing your product. I have lots of clients today who wish they could buy term insurance, but no longer can because they had a health event that now disqualifies them. And so you have to remember that, that if you’re putting off life insurance, that’s a big risk if you have a weird health event that doesn’t take you out and you’re still alive, but the insurance companies don’t like it. You could be prevented or could be too costly to buy that insurance going forward.

Michael Port (19:30):

One of the things that I’ve discovered over the past few years is how problematic having incorrect medical information on your record is because, a couple years ago I was having trouble sleeping. Well, I always have trouble sleeping. That’s nothing new. I don’t really sleep that much. We were trying to figure out what was going on and I had been to a couple different doctors and I got false positive test on something that suggested maybe I had an autoimmune issue. And then that came back and turned out it was false positive. So the rheumatologist who I was speaking with said, listen, I’m just, I’m gonna send you to a pulmonologist just to do a sleep study, just to see what’s going on. I did an at-home sleep study and I went in and she said, look, don’t have sleep apnea. I mean, you’re waking up nine times per hour.

Michael Port (20:15):

And you know, normal is like six. So you don’t really have sleep apnea, but you know, I can give you a machine and you can try it. I was like, oh, cool. One of those machines I’ll try it. So I tried it for a week. I could not tolerate it at all. And since I didn’t actually have sleep apnea, I just gave it back. And that was the end of it. Well, I went to renew my disability policy and this came up on my record that I have sleep apnea because apparently she wrote sleep apnea because of the nine versus six. Now people who really have sleep apnea like you, Matt, Wake up. How many times in an hour, what’s typical for you?

Matt Rzepka (20:48):

My study was 41 times an hour.

Michael Port (20:51):

Yeah, there you go. 41 times an hour. That’s legit sleep apnea. But the point is, is that we had to go through all this rigmarole to try to prove to them that I don’t actually have sleep apnea. I couldn’t get the doctor on the phone because she had changed offices and moved out of the state. They office were like, well the other doctor wrote it. So we can’t change… I was like, oh my God.

Matt Rzepka (21:10):

It’s yeah…

Michael Port (21:10):

So they excluded on my disability policy any issues related to sleep. Period. Like they took that whole category out because that was on my record. When in fact I don’t have sleep apnea. I still don’t sleep very well, but I don’t think I should be penalized for having sleep apnea when I don’t. But there wasn’t that much I could do about it unless maybe I wanted to start a letter writing campaign every day for the next six months. But I was like, all right, just exclude it and we’ll move on.

Matt Rzepka (21:36):

Yeah.

Michael Port (21:36):

But the point is is that these things really do make a difference when it comes to all insurance policies. Because if they find anything that they want to avoid covering, they absolutely will.

Matt Rzepka (21:47):

Yeah. You have to pay attention. When you’re at the doctor with that stuff. I had a situation where went in for my annual physical and they started asking me about a prescription that I had. I’m like prescription. I’m not taking any medications right now. Like, whoa. We show here that you’re taking a prescription to help you quit smoking. And I’m like, um, yeah, no, that needs to be removed right away because I knew that was gonna be a, a problem. Especially smoking and insurance is really bad. I don’t smoke. And like, yeah, we gotta get that fixed. And we gotta find out how that was. Thankfully I didn’t have the issue, but we run into that all the time with underwriting, with clients, finding out stuff is in their medical records and then takes a lot of time to try and straighten that stuff out. And a lot of tenacity, because it just is tedious to chase people down and get ’em corrected.

Michael Port (22:30):

Absolutely. Well you talked about a couple different types of protection. You talked about litigation protection and tax protection and creditor protection. But let’s just hit each one of those if we can. Litigation protection.

Matt Rzepka (22:44):

Yes. So as you accumulate more and more assets, you want to understand how those assets are owned. How many entities you have. Whether you should be using trusts. What type of trust to help protect different pieces of your wealth if you were to ever get sued and you know. You’re gonna have personal assets, you’re gonna have personal insurance. One of the things I think everyone should have is umbrella insurance. You know, umbrella insurance is an overlay, like I like to say, of your other insurances. It’s very, very inexpensive, but let’s say, you know, nothing to do with business, you got in a car accident and somebody says it was your fault and they try to sue you. Now again, states are different, but let’s just use this example. Let’s say they sue you for a million dollars, but your auto coverage is only $600,000. Well that other $400,000, if they were to win, you would be personally liable for. Well, if you have a million dollar umbrella policy, it would cover you in that situation to fill the gap. The umbrella is meant to fill that gap if any, if your homeowners is short, your auto insurance is short or other areas as well. So those are some of the quick things on the litigation perspective.

Michael Port (23:49):

Yeah. So the umbrella policy surprised me at how inexpensive it was for the amount of protection that you got. And that tells me that they’re not used as much as say auto insurance, which seems expensive for the amount of coverage you’re getting. But it’s more like you’re going to use that coverage on a regular basis. The umbrella insurance is there just in case. But if you have any means at all and someone sees you as a target, you know, they’re gonna come after you. I have been shocked by the behavior of some people that I’ve met over the years that borders on criminal or fraudulent. That they would go after somebody who has money because they don’t. Like this does happen. You just have to protect yourself and especially if you’re in a field where you are in the public eye. People, they also assume you are much richer than you are when you’re a well known author or speaker.

Michael Port (24:40):

They just have this idea that, oh, you must be worth like hundreds of millions of dollars. And the answer is, I’m not. Now maybe Tony Robbins is, but you know that that’s not the kind of business I have nor do I want. So I just think it’s important to have. It’s a nice layer of protection. It’s pretty inexpensive. And generally, tell me if this is correct, Matt, generally, you’re gonna get that umbrella insurance through the carrier that has your homeowner’s insurance and/or car insurance. Generally the insurers don’t like to sell umbrella insurance to people that they’re not covering in their other policies. Is that accurate? That was my understanding.

Matt Rzepka (25:18):

Yeah.

Michael Port (25:18):

When I talked to USAA about it a long time ago. Yeah.

Matt Rzepka (25:21):

Yep. Definitely accurate. They like to bundle your coverage as they will call it. They even often will give you some discount incentives to bundle all of that coverage together. That way, if you have a claim they’re fully in control of the claim on the big picture of the whole level. So if you have your auto insurance with them and an umbrella policy and you have a lawsuit on your auto, they’re gonna be able to control the dynamic because they they’re worried about minimizing the coverage or the claim that they have to pay. So if they can and control both sides of that, if you actually are in a situation where you’re getting sued, then they’re gonna be able to feel as best as they can about whatever claim gets paid.

Michael Port (25:55):

So what about tax protection? That seems like a big subject.

Matt Rzepka (25:58):

It is. It’s a moving target. This has been a 20 year storyline. So to speak. Estate taxes is really what I’m talking about here. Meaning if you’ve accumulated assets over your life at your death. So when we’re talking about a married couple at the death of the second spouse is when this really comes into play. Because if the first spouse passes away, the surviving spouse gets to inherit all of the assets themselves. So they become a surviving spouse and there’s no estate tax issues at that first passing. It’s the second passing. So you have to add up all your assets and see how much that total is. And if you’re over a certain amount, what they call the estate tax exemption, then they say, well, welcome to the world of estate taxes. And you owe us 40% of the amount over the exemption.

Matt Rzepka (26:43):

The exemption, however has been a constant moving target. Right now the exemption is very, very high compared to where it’s been over the years. So when I first got into the CPA practice world, the exemption was $650,000 total. Right now the exemption is $11 million and change per person. So that means as a married couple, you’re getting $22 million and change, maybe even $23 million of exemption. So if I have $23 million or less, when the second person dies, I don’t have to worry about estate tax. However, as little as five to seven years ago, that number was $3 million. You know? So it it’s been all over map. And then we even had a year back in 2010 where it was unlimited, no exemption whatsoever. And ironically two billionaires passed away. They apparently died of old age from everything I’ve seen, but you might see an expose or a documentary at some point of, uh, whoa, 2010…

Michael Port (27:40):

Two very influential billionaires died. It just so happened. That was the one year there were no federal state tax exemptions. Alright. So since it’s a big topic and it’s a constantly moving topic, what’s something we can do to try to mitigate tax exposure or protect ourselves. You know, we might say right now, like, okay, well this is great. $22 million, you know, maybe someone who’s listen, they say, well, I don’t, we don’t have $22 million right now. So I shouldn’t really think about this right now. But given that the current administration has proposed changing it already, certainly another administration could come in and change it again. What do you think people should do now? Even if they don’t have that size of a net worth. But at some point they’re gonna have a substantial net worth, maybe not $22 million, but could get up there. So what do they do now?

Matt Rzepka (28:32):

Yeah. There’s some really simple ways to protect yourself from this changing, and also these same simple ways. We’ve talked about term insurance already. Life insurance at your passing is includeable in your estate. So if you two or three or 4 million of term insurance and you pass away, well, now that asset is part of your estate. So a simple way to mitigate estate tax exposure is to use a trust. It’s called a irrevocable life insurance trust. And instead of owning that term policy personally, you set up the trust and the trust owns it. And what that allows is it allows that death benefit to be excluded from your estate formula. So it’s not part of that estate tax calculation, which seems simple, but it it’s a big deal and it’s not very difficult to administer. You just wanna make sure you get the logistics right.

Michael Port (29:20):

Yeah. The logistics are important. They’re not difficult, but they’re critically important is my understanding.

Matt Rzepka (29:28):

Yes.

Michael Port (29:28):

When it comes to estate protection, certainly, you know, we need a will. We may need some trusts, either ILITs, irrevocable trusts for insurance policies to keep that money out of your estate. We might want revocable trusts. You wanna talk a little bit about those vehicles, wills and trusts? Just, uh, expand on it a little bit more.

Matt Rzepka (29:47):

Absolutely. A will and a trust are some basic estate planning documents. In addition to powers of attorney. Powers of attorney are extremely important. What powers of attorney allow is someone to act on your behalf if you’re not able to act for yourself, but still living. You want a medical power of attorney and a financial power of attorney. And you want your wishes to be spelled out very clearly in those documents so that people aren’t making decisions for you when you can’t that are contrary to what you would want. And so I highly recommend at least having a will and powers of attorney for everybody so that the state has some direction at your passing as to what’s to happen. Or if you’re incapacitated, again, how do we handle your medical care? How do we handle your money, et cetera.

Matt Rzepka (30:31):

A trust again, a great document. If you have minor children, I highly recommend having a revocable living trust. It is a critical document to not have to deal with a lot of the hoopla of the probate courts and the family law courts if you were to pass away while those kids were under 18. We are very adamant about making sure clients do that. And we have a situation right now where a client didn’t listen to that and the kids are dealing with the ramifications, which are annual court notices, annual fees from the court, annual fees from the attorney, and all that stuff just starts to erode what assets were left over at that point. Plus it’s just extremely tedious and not very fun to deal with. So a revocable living trust allows you to create a directional book or instructions that say, Hey, if I’m not here, here’s what I want to have happen. And then you get to a point a trustee that makes sure those things happen and it keeps it away from the court instead of having to go through that court process,

Michael Port (31:33):

We have a revocable trust while I had one before we Amy and I together, and then we have now another one together. But one thing, you have to fund that trust. That’s really important. A lot of times people forget to actually fund it.

Matt Rzepka (31:43):

Yes.

Michael Port (31:43):

So they make the trust and then they just assume everything they own is automatically in the trust. That’s not necessarily the case, at least from my understanding. I’m not an attorney, but I did play one on TV once. So I think that gives me a little bit of authority here. So it’s gotta be funded, but then also probate is different from state to state. So here in PA, probate’s actually not that big a deal. When I was talking to an estate planning attorney about this many years ago, he was like, yeah, here you just walk in, you do a little thing, you’re done it’s over. But in other states it’s a really big deal. Now I’m not taking for granted the fact that PA is supposed to be a little bit easier. I’m doing it through a trust rather than everything going through probate anyway, because then it’s a public process. Regardless of whether it’s easy or not. I’m a private person there’s no need for my estate to go through a public process of any kind.

Matt Rzepka (32:27):

Yeah. Public is extremely important to remember and funding the trust. You may hear that. And you’re like, okay, what the heck does that mean? It means you actually have to direct your assets to either be owned by the trust or that the trust becomes the beneficiary. Let’s use a bank account as a simple example. If your bank account is in your individual name, you can do one of two things to fund the trust. You can actually have the account become a trust account. And it’ll actually say like, in my case, Matthew Rzepka Trust on my bank account instead of just Matthew Rzepka. Or there’s something called a TOD or transfer on death. I can tell the bank that I want a TOD designation to my trust. So that way, if I die and I have that bank account, it automatically becomes an asset of the trust if I do one of those two things. If I don’t that bank, account’s gonna go through probate and trust. Isn’t gonna do anything with that money until it goes through probate and ends up in the trust. So you funding the trust is critically important and it means making sure the ownership of the asset is somehow currently changed to the trust or pointed to go directly to the trust by matter of law at your death.

Michael Port (33:35):

I have to mention at this point, because I could see somebody listening, going, I, oh, jeez, this is just too much like, uh, I gotta do all this stuff and make sure it’s right. And you know what? It can be a real pain in the neck.

Matt Rzepka (33:46):

Yeah.

Michael Port (33:47):

But when I got interested in, it was when I kind of got really excited about this concept of doing death even better than I lived. I may seem a little bit morbid, but it, I go out and maybe this is my maximizer. I went every and be like, Michael was the best. He was the best. When I go out, I went, you know, my whole family and everybody associated with us to have the easiest time with it, to know just what to do. Everything’s all set up is protected. So they go, you know what, Michael took care of us, even in death, he was responsible.

Michael Port (34:18):

And then I got excited about it. I’m like, ooh is really cool. I won’t be alive to get the praise and approval, but they’ll be giving it to me anyway. So then I got really excited about it. I wanted to start doing more with it. So I created a family playbook. The Port Family Playbook, as well as what I call a checklist in case of Michael’s death. But sometimes people call a Death Book. So I wanna talk about the family we playbook and the death book when we come back, I’m gonna take a quick break. But then when we come back, I’m gonna share the family playbook and the death book. And we’re gonna discuss those documents.

AD BREAK (34:53):

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Michael Port (36:43):

Okay, Matt, let’s talk about the family playbook. Now this isn’t something that everybody needs to do, but I did this crazy thing. I wrote a 50 page playbook. That includes advice for me, from Amy, from my father, my mother, Amy’s mother, Amy’s father, and Amy’s stepmother because this is some generational knowledge and wisdom here. And I thought, why don’t I start writing out what I want to share with my kids so that if I’m not here or even if I am here, but they don’t really want to come and talk to me about it, they can always just open up the playbook and have a look to see if you know we address that and see if that advice is in any way helpful or relevant to them. I’ve sent it to all the three kids already, even though they’re 13, 17, and 18. And they’re completely uninterested in it at the time.

Michael Port (37:35):

Like, you know, I think one of them skimmed it maybe a little bit. Even if they never read it, I just feel better having done it. But I do think that if something did happen to me, I know they’d like to have it. I believe that to my core and hopefully nothing will happen to me. I’ll get another 50 years and I’ll live to be 101. But I think it’s a really important for kids when they’re trying to make big decisions to get your advice without actually having to talk to you because sometimes parents are annoying. Just have to say, you know, as much as we try to help and as much as we love them and they love us, we can be a little bit much. At least I can be a little bit much sometimes. So I know that this is gonna be something that’s helpful for them in the future.

Michael Port (38:16):

So what did I do? I did a book where every section was on something. So the first section was on this guidebook. What the heck is the point of this thing? Then the next one was on family. Then on simplification, status, luck, learning, reading, freedom, greed, trust. I even did one on con men, scams, and conflicts of interest. Jobs, success, enjoying your work, perspective, grit and adversity, marriage. One of the things I said about marriage is please don’t marry anybody that is not financially responsible. Thank you. On changing your mind on approval on guilt versus shame, on money, on buying a home, how it’s not as good an investment as people often think it is, because it’s supposed to be the American dream, but usually it just costs you a lot more money than you’ll ever get out of. It doesn’t mean it’s a bad thing, but it’s something to understand. And then a whole big section on investing. On your savings rate on investing in something you don’t understand, on financial advisors, asset allocation, wealth accumulation, wealth preservation, rebalancing investment companies, on what not to do with your money. A 30-point plan for financial independence and then managing money during retirement. And then there’s another page, I’m not even halfway through. Have you seen people do these kinds of things? Have you done this? Do you think that there’s value in this? Or am I just some kind of crack pot?

Matt Rzepka (39:34):

No, I love it. Not everybody does this. That’s for sure. I think a lot of people have a desire to do this, but probably get frozen in how to execute. So it’s interesting to hear you describe it and maybe it’ll give people some peace of mind to just start with one piece at a time and see how many pieces you can build. Information and knowledge that you can pass along and, and if you’ve got multiple generations still alive, I think first all like if a grandma and grandpa’s still alive, it would be probably the honor of their life to provide some of that information to be even asked. If you’re thinking about having a playbook for your family and you want to go to grandma and grandpa and say, Hey, would you write some things of maybe something you want to tell the kids now while they’re alive and then maybe even put one in there that they don’t get to read until you’re gone. You know, if there’s a way to do that and give them some context from your perspective, I think that’s super powerful. And, and I love it.

Michael Port (40:26):

Sometimes you might have a relative who doesn’t write often and so they might feel a little awkward writing it. So you say, Hey, listen, I’m just gonna ask you some questions. I’m gonna record it and then I’ll write it up for you.

Matt Rzepka (40:37):

Yep.

Michael Port (40:38):

And so you say, so what are your feelings on family? What are your feelings on status? What are your feelings about the jobs you take or the choices you make with respect to work? What are your feelings on investing? What about marriage? You know, et cetera, et cetera. And then they’ll just talk it and you can write it up. Maybe not sleeping helps. This is why I’m able to write this because I do it at like three or four in the morning. I’m like, what should I do? I’m up? Oh, okay. I’ll write a little bit more in the playbook. There we go.

Matt Rzepka (41:01):

Love it.

Michael Port (41:02):

But I also have a death book. I don’t call it a death book. I just call it a checklist in case of Michael’s death. But I think you call it a death book and some other people do as well. I think it’s a cool name, death book too. But I think some people in the death book, they put a lot of this advice type stuff, which I put into the family playbook. But in the checklist, in case of Michael’s death, it’s literally literally a checklist because I’m obsessed with processes and systems. I think if you don’t create processes for the things that you need to do during high stress times, then you’re gonna have a much harder time doing it because you’re gonna have to think of everything step by step by step. But if there’s a process that’s written out, you can follow that process.

Michael Port (41:40):

It’s much easier. And when somebody dies, it is the most difficult time for their family. That’s the last time that you would want them actually having to think about what to do. In that particular case you want them to not have to think about anything, know exactly what to do and can just focus on dealing with the pain that they feel and the anguish that they feel. And of course, you know, you want them to write good eulogies. So they need the time for that.

Matt Rzepka (42:06):

Yes.

Michael Port (42:07):

Let’s talk a little bit about this checklist or this death book and what you might put in there. I’ll throw it over to you. And then I’ll share a little bit about how I did mine. What do you think goes in this type of death book or checklist?

Matt Rzepka (42:18):

A lot of it depends on, you know, who’s doing what in the household and who’s responsible for what. So if you’re responsible for a set of things, I think one of the most important things is, Hey, this is what I’ve been doing because you know, you don’t have an insight onto every intricate thing your spouse might be doing. What bank accounts exist? What passwords get you into online banking? What of all of that stuff? Where do you find passwords? Do you have a password tool? I know people have had issues with social media accounts when someone has passed away unexpectedly and you know, all those little things that you don’t think of until they’re gone would be really nice to just have a document that says, Hey, if I’m not here anymore, this is the first place you wanna look. So I love the checklist approach. You wanna put as many tribal knowledge things in there as you can about what to do or how to get at the most important things. Where are the life insurance policies at? Are they in a safe? Are they in a safe deposit box? How do you get in the safe deposit box? And can you get in the safe deposit box without a power of attorney? You know, all these little things start to pop up that you’re gonna have to deal with. If you don’t have a roadmap and you definitely want to have one.

Michael Port (43:21):

Yeah. And it doesn’t need to be fancy. It just needs to have the information. So for example, mine starts out with just a headline that says preparing for dealing with finances. And then I get a little short paragraph about it. What might be helpful. And then it says all essential documents are in the safe, in my closet for easy access. Here’s the code to the safe. Then I detail look, there are two large according folders that contain important insurance and legal documents. There’s also plastic document storage container that has among other things, ID cards and birth certificates. And in the accordion folders, you’ll find the following documents. Then I list them all out. Last Will and Testament for MP and AP, healthcare proxy, power of attorney for MP and AP, Michael Port living trust own’s the house which transferred, you know, like all of these things, MP and AP prenup, MP AP operating agreement, uh, Last Will and Testament for Amy’s mother, power of attorney for Amy’s mother.

Michael Port (44:10):

So this goes on. You’re just listing all the things that are in there. And then in the plastic folder, you’ll find this birth certificates for the entire family, my, our certificates, passports for the entire family, social security cards for the entire family. Then the next section is an emergency kit about how to access 1password, even though they already know, but it’s here. This is where the emergency kit is stored with like annotated PDFs. And then first action items, contact a funeral home to make arrangements for funeral preparations and payment. Number two, ask the funeral director to help you get 24 certified copies of the death certificate or contact the county clerk’s office. Who would know to do these things? I didn’t know to do these things until I researched it. Why 24? Well, there’s a reason that we would need 24. But the point is, is that are specific and prescriptive you can write this the better. Next action items, contact Katie Commons to begin a review of my will to discuss how this process will work, right? Contact all life insurance policy providers. And then here’s the owner beneficiary of Amy’s policies, owner and beneficiary for Michael’s policy. This just goes on and on and on and on. Not interesting for our listeners to hear all of those to details. But nonetheless, it just gives you a picture of what is in there. Then like every life insurance policy with a policy number, the insurance type who’s insured, who owns it, how much the coverage is, even what the annual premium is just so there’s a record in it of here. And then guess what it says, contact Matt Rzepka or any administrators of investment retirement accounts to begin the process of assigning assets to beneficiaries. So confer with Matt on all financial decisions before cashing out any investments or moving any money, right?

Michael Port (45:39):

Because like I’ve said to you before, and I think I mentioned in an earlier podcast, if something happens to me, you got my back. You’ve always said yes, absolutely. And so I think it’s so critical to have people that you trust like that in your life, because your family’s gonna need help. If something happens to you, even if you’re not the primary one, dealing with all this stuff, there’s still a lot of stuff that you deal with on a regular basis that your partner may not. And certainly your kids may not or not know anything about. So yeah, this is a pretty long document too. This one is about 21 pages.

Matt Rzepka (46:11):

That person that you can reference or trust, unfortunately, the vultures can come out when someone passes away because…

Michael Port (46:17):

Yep.

Matt Rzepka (46:18):

You’re getting life insurance checks and big sums of money and people see it as an opportunity instead of a way to help. And so you wanna make sure you’ve got somebody you can trust to help guide you. Because again, it’s an emotional roller coaster when that happens and you don’t wanna be making any decisions in that moment.

Michael Port (46:34):

Okay. So now that we’ve gone through the family playbook and the death book, we’ve given people lots of exciting morbid concepts to consider. Let’s just do one last thing before we wrap up. Just a little bonus here for credit and identity protection. You have any thoughts about that, Matt?

Matt Rzepka (46:50):

Yeah. This is an extremely important item, especially in today’s world of understanding what your credit report says. Making sure no one gets control of your credit report and that you don’t have any unauthorized access or stealing of your identity. So a lot of free credit monitoring systems today, but you also want to have somebody who’s looking out for your identity. So there are a lot of different programs. Identity Guard is one of them that I’m a big fan of. There’s others, but you want to have somebody watching your digital data to make sure nobody is taking your money or trying to spend money on your behalf.

Michael Port (47:24):

I would not be happy about that. If I woke up and someone was spending my money and I didn’t know who they were, I think I would be a little frustrated that day.

Matt Rzepka (47:33):

Yes, it is not a fun experience. I’ve only been through it on a minimal basis with like credit card theft. That unfortunately happens a lot today, but the credit card companies do help protect you.

Michael Port (47:43):

Yep.

Matt Rzepka (47:44):

But when somebody gets ahold of the lion share of your info, it can get really bad. So you want to have alerts and you want to have dark web protection. That was one of the things about Identity Guard that I liked is it’s scanning the dark web for my information. And it’s alerting me if it’s found so you can do something or change passwords. Two-factor authentication is key. You should have two-factor authentication for logging into accounts on as many accounts as possible. Meaning I put my username and my password in, but they send me a code on my phone. So that way they have to compromise your phone in addition to your password. And from all the tech experts that I’ve talked to about this stuff, they say you’re really foolish if you’re not using two-factor authentication because it’s one of the best ways to help keep your stuff safe.

Michael Port (48:26):

Fantastic. Thank you so much, Matt. Safety is not guaranteed ever, but if we can make really sensible choices and smart choices that give us as much protection as we can get, it is a comforting feeling.

Matt Rzepka (48:45):

Yeah.

Michael Port (48:46):

We never wanna have to use these things that we’re buying to protect us, but you’d much rather have them than not if you did need them.

Matt Rzepka (48:56):

And be informed. You know, you never want, well, I didn’t know. Be informed so that you can try to make the best decision possible.

Michael Port (49:02):

Fantastic. So Matt, what are we gonna talk about next week?

Matt Rzepka (49:07):

Next week we’re gonna talk about how to keep more of what you make.

Michael Port (49:12):

Didn’t we already cover that in savings and efficiency episode?

Matt Rzepka (49:16):

Tip of the iceberg, Michael.

Michael Port (49:18):

Oh, you are full of surprises. Okay. We will see you all next week then. In the meantime, keep thinking big about who you are and about what you all for the world. By for now.

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