THE THREE PHASES OF YOUR FINANCIAL LIFE

THINGS ABOUT MONEY YOU MUST KNOW TO AVOID FAILURE – PART 3 LEGACY
Pedro M. Adao, Financial Counselor

PHASE 3 - LEGACY

Intro to Legacy
• This is the third and final part of a three part series that we have been in titled the three financial phases. • I have suggested to you that there are three financial phases that each of us will go through should we be blessed with longevity, those phases being: Accumulation, Distribution, and Legacy • We have said that accumulation is the period where you are working, earning income, and saving and investing surplus for a future time when you can no longer work or chose not to work. • We have said that distribution phase is that phase in life where we begin to make withdrawals from the various assets that have been accumulated to provide for our needs now that our body is no longer at work. • We have spent the past two days exploring the common mistakes that 95% of Americans are making each and every day that have them on a path to a future that they do not want to live in. • To recap all that here would take far too long so of this is the first message you are hearing from this series then be sure to go back and listen to the previous two recordings. • What is Legacy or Transfer Phase: This is the phase where you no longer need material wealth and transfer all your assets to the people and causes that you care the most about. • As you are probably seeing each phase is highly dependent and influenced on how someone has done in the first phase. For example: Just like in our triathlon example 2.4 Mile swim, then a 112 mile bike ride, then a 26 mile run. If you come out of the swim 30 minutes behind the leader then you know that if you want to win you not only have to keep pace but pick that 30 min up in the next two events. • DISCLOSURE: I AM NOT AN ATTORNEY AND THIS IS NOT BEING GIVE OR SHOULD BE TAKEN AS LEGAL ADVICE. PRIOR TO MAKING ANY CHANGES OR CREATION OF ANY LEGAL DOCUMENTS YOU SHOULD CONSULT WITH AN ATTORNEY. ADDITIONALLY THE COMMENTS MADE BY ME ARE NOT NECCESARILY ENDORSED BY ACN, ROBERT OLIVAN, OR LEADERS IN THE ORGANIZAION.

PHASE 3 - LEGACY

Intro to Legacy
• Practically speaking how and when do you do Legacy or Transfer? Several ways • Traditionally we think about legacy/transfer as something that happens at death. • Therefore, Beneficiary designations and title on real property accomplish legacy transfer. These are common in the following : • How you take title to real property. Joint Tenants, Community Property w/ right of survivorship, tenants in common… • Beneficiary designations on IRA or 401(k) accounts, beneficiary on annuity or life insurance policies, beneficiary on checking and or savings accounts. • Aside from beneficiary designations wills and or trusts serve as the legal instruments that carry out desires as it relates to transfer. There are several potential process that must occur to transfer assets to the people or causes that you care about the most. • The default plan or the “no plan, plan”. Not having a plan is still having a plan because it means you get the default plan that the government has set up for you. • That is called Probate. Here are some highlights about probate in California • Petition is filed by a personal representative to the court – public process • Official notice printed in local paper to give notice to any potential creditors • Court process by which your entire life is made public record of the court, can take 6 – 9 months and cost tens of thousands in legal fees and can take 6 to 9 months

PHASE 3 - LEGACY

Intro to Legacy
Intestate Succession – Fancy term for dying without a will or trust The following is an attempt to simplify the manner in which separate property is distributed when one dies without a will. 1. If there is a surviving spouse, but no surviving children, parents, brothers or sisters: All to surviving spouse 2. If there is a surviving spouse, and one surviving child: 1/2 to surviving spouse 1/2 to child 3. If there is a surviving spouse and more than one surviving child: 1/3 to surviving spouse 2/3 to children 4. If there is not a surviving spouse and no children, but there are parent(s): All to parents 5. If there is not a surviving spouse, no children, and no parents: All to siblings 6. Can keep going through a list of relationships looking for a heir lastly if no heir then State of California takes the property. • What happens if you and your spouse die with a will and have minor children in California, the State of California will select the guardian for you children and pick an administrator to manage any assets in your estate until they reach of age.

PHASE 3 - LEGACY

Intro to Legacy
• Ok Pedro, now that you have thoroughly scared my pants off what do I need to do? • Make a plan, consider the complexity of your family situation, and financial life and get guidance on what legal documents make the most sense for you and your family. • Common Complexities: Divorce situations, blended families kids form multiple parents, kids that may have special needs, kids with wide age gaps, kids with varying degrees of ambition and or aptitude, family business (which by the way all of you are building)..The traditional family is unfortunately becoming less and less traditional. • Get professional advice from an attorney or paralegal before spending any money on documents. • A living trust will avoid the public, lengthy, and expensive probate process in California • Where do you get one, Estate Planning Attorney, Documentation Preparation Specialist, legalzoom.com, Uslegalforms.com. These are prepared in order of most expensive to least expensive. Sometimes the saying you get what you pay for applies. It sort of does in this arena. $2,000 for Attorney under $250-500 for internet forms.

• We saw in earlier meetings that 95% of Americans are failing in the Accumulation, and Distribution Phase lets take a look at the statistic in this phase and see how we measure up. Published in 2007, Harris Interactive® for Martindale-Hubbell® conducted a research study1 • 55% of all adult Americans do not have a will. • Only one in three African American adults (32 percent) • Only one in four Hispanic American adults (26 percent) have wills, •My experience in the industry these numbers are actually high. In my personal practice especially in working with those under 50 I would suggest that as much as 75% of people I meet with do not have legal documents in the form of either a will or living trust or if they do it is now outdated for legal or family reasons

PHASE 3 - LEGACY

Intro to Legacy
• Legacy: Something handed down from a an ancestor to the next generation or generations. • Common thinking considers this something that occurs mostly with material wealth and then mainly as a one time event that happens at death. • I would like to challenge this common thinking. This is a very limited way of thinking about legacy that creates significant waste and fails the Stewardship test. • What is Stewardship test? Stewardship is the process by which a Steward goes about managing the property, affairs, and finances on behalf of another. • The Stewardship test is simply if you were the CEO/CFO of You Incorporated, would you be fired? If the leadership of ACN ran the companies finances like you run yours would you want to be a part of this organization? Would there even be an organization to be a part of? • Please hear me that there is no judgment here, no condemnation here, I believe these are moments of truth where we can make life changing decisions that can have multi generational impact. • If we are planning on only giving away our wealth at death then we are burying our treasure? • Pedro – I have nothing to give I am barely making it? • You have more then you think. Financial wealth is just a small part of this legacy conversation. There are more then just financial inheritance. • Wisdom – You can pass on the valuable wisdom and life lessons you have learned as you have moved through life. Sharing your greatest success but more importantly your greatest failures and struggles. When your children are of appropriate age share this with them. • No one and no family is perfect. My family was very private. My dad whom I love tremendously at least two made significant mistakes. I was never made aware of them until recently unfortunately, I was learning about each of them after having already made the very same mistake.

PHASE 3 - LEGACY

Intro to Legacy
• You have more then you think. Financial wealth is just a small part of this legacy conversation. There are more then just financial inheritance. • Family history and traditions – What’s special traditions does your family have. If after consideration nothing really comes to mind. Get excited because that means you get to create it. You will get to start something, you will get to have the first annual and fill in the blank…What would have loved to see your family do when you were a child that never happened? Do that for your kids…. • Give generously of your love and support to your family and friends and maybe even sometimes strangers. • Spiritual Inheritance: What is your belief system, your world view, is it important to you. Do you want your children to believe what you believe or at least know what you believe. Do you want to pass down general blessings or generational curses? History will be kind to me for I intend to write it. - Winston Churchill A small body of determined spirits fired by an unquenchable faith in their mission can alter the course of history. - Mohandas Gandhi You as an individual still have the opportunity to write your history, the history of your family… • Start a legacy and inheritance for yourself and kids now. Building positions for your kids, what a fantastic way to provide for their college expenses and give them a business to run while studying in college. Free job training that will absolutely help them get a “real” job if they need or want one. • As a member of this organization corporately all of you working together have the ability to shape the future of this country? • Impact on local economy of everyone actually said yes and worked the business. Ask him numbers

PHASE 3 - LEGACY

Intro to Legacy
• The last thing I will leave you with relates back to the Stewardship Concept? Must of us take better care of other peoples things then we do our own. If you borrow something from a friend you certainly want to gibe it back to them in at least the same way you found it if not better. If you are moving and your friend lets you borrow his truck. If he gives it to you half full, then not only should we give him the truck back with without any dents and scratches but also with a full tank of gas. That is called honor and it is a powerful force that unlocks blessings. I am going to ask you to consider something. For those of you that have fallen asleep or have been day dreaming this would be a good time to come back. Consider how would you live if your found out that your life was not yours? Consider with me what if your life was created to be a gift to the people in your life ? How would you live if at the end of your life you knew you were to give an account for how you managed not just your money, but your time, your talents and abilities? • For some of you, many of you in fact there are things right now coming to your mind. Capture them, right them down, these things just might be the WHY in your life we have been talking about for the past 3 days.

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THIS CONCLUDES THE NOTES FOR PART 3 - LEGACY

THE THREE PHASES OF YOUR FINANCIAL LIFE
THINGS ABOUT MONEY YOU MUST KNOW TO AVOID FAILURE – PART 3 LEGACY

Pedro M. Adao, Financial Counselor 925-778-5626 Office 925-584-1312 Mobile Pma.adao@gmail.com

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