Estate Planning Tips

Note: This podcast was recorded before dockworkers ended their strike and ports reopened.

In this podcast, Motley Fool analyst David Meier and host Ricky Mulvey discuss:

• How companies are navigating the port worker's strike.
• The disagreement over automation.
• Investor sentiment in artificial intelligence
• One less-discussed company that's benefiting from others' spending on AI.

Motley Fool contributor Dan Caplinger joins Motley Fool personal finance expert Robert Brokamp to kick off a two-part series on estate planning, and how you can help your family avoid going to court.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our beginner's guide to investing in stocks. A full transcript follows the video.

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This video was recorded on Oct. 01, 2024.

Ricky Mulvey: The docks are shutting down. You're listening to Motley Fool Money. I'm Ricky Mulvey joined today by Motley Fool analyst, David Meier. David is not on Strike. He's shown up to work today. Appreciate you being here. Thanks for joining us on Motley Fool Money.

David Meier: Definitely not on strike today.

Ricky Mulvey: Dock workers, though, on ports across the East Coast and the Gulf of Mexico have stopped work. These are members of the International Longshoreman's Association. David, they want a few things. They want more pay, they want better benefits, like employer contributions to retirement, better healthcare plans. One Biggie, and that is to stop advanced automation from taking jobs. If you say, why should I care about the International Longshoreman's Association? Well, it's because this stoppage is going to affect more than half of US imports, and JP Morgan analysts expect this strike to cost about $4 billion per day. That's a good place to start. This is a temporary disruption, but which companies are going to be feeling the impact from this?

David Meier: It's a good question to start off. Well look, the obvious one is trucking companies. In fact, the stocks of companies like Old Dominion Freight Lines, J.B. Hunt Transportation, to name a few, they were off a little more this morning, but are down 1-2% as we tape this. Look, that makes sense, trucks are one way that those shipping containers get from the ports and move around the country. A prolonged strike would see their trucks not moving at the same speed that they once were. When those assets aren't moving, those companies are not generating revenue.

Ricky Mulvey: For a lot of retailers, this is a thorn in the side, especially as they're getting ready for the holiday season when they do a lot of sales. Have any companies gotten ahead of this strike, even though it's making major news today?

David Meier: Also a very interesting question. The threat of the strike seems to have been known for a little while now. There are actually plenty of companies that have been making contingency plans. In fact, there's a wonderful little article in Reuters that captured the comments of some of those few companies. Let's go over them real quick. A big retailer, we may know, Costco. The company came out and said, hey, we've been pre shipping holiday goods that we expect to sell during the season. Not only that, we've been shipping them to alternate ports to make sure that the flow of those products is not disrupted. CH Robinson, which is another transportation company focused on logistics, they said, hey, we've been working with all of our customers to have them pull their orders forward in order to avoid any potential disruptions and to also have them come into different ports as well so that their shipments to their end customers don't get disrupted. Then we get Designer Brands. The reporter here specifically spoke to the head of the supply chain at its DSW brand, who was actively making adjustments to its shipping calendar and port choices. Again, that's the theme in order to make sure that all of its customers don't feel any impact from the disturbance. Companies have known about this, and they have been making plans.

Ricky Mulvey: The DSW logistics head was also name-checking other companies like Nordstrom saying, we're ahead of them, they're not making plans, look at us. That's the impact on the companies. Remember, in the pandemic, we had the supply chain disruptions. TVs got real expensive for a sec. What are the consumer impacts you're going to be watching?

David Meier: If we really think about it, everything could be impacted because we import lots of goods from different markets around the globe. But I think the one for me that comes to top of mine is automakers. First of all, demand for autos is a little bit down, and people are still waiting for interest rates to come down a little bit more before at least in the surveys that they've been filling out. They're waiting for interest rates to come down a little bit more before making that purchase. If there's no cars coming in from overseas and those ships are out there unable to unload the cargo, it could cause another shortage of inventory, which, again, if you're not moving those cars, you're not making money.

Ricky Mulvey: I know. I got to lease a car right now, and as I was looking at this story, I was like, maybe I'm not doing this later in the week. The real fight here, the money is easier to solve. You can pay people more, there's a lot of money flowing through, but the real fight seems to be over automation. Heather Long has a good opinion piece in the Washington Post about this. She said, "The bigger reason that everyone should pay attention to this is that this is an early battle of well paid workers against advanced automation. There will be many more to come." There's two key jobs that is being argued about: operating cranes and moving containers, those can be automated. The people's jobs have become closer to air traffic control. Do you think this is right that this is the first battle in what will be a wider war with labor?

David Meier: This is definitely a battle as old as technological adoption has been alive. In the advancement of technology, this is one of the main struggles: can we replace direct labor with technology? The idea is from a technological standpoint, we should get what's called good deflation, meaning the costs of doing that job should go down over time. In one sense, I think she's right. But automation to replace labor has never been easy and never been straightforward. In another sense, labor has to figure out how to benefit from the tools of automation. That's where we're getting the battle, where do I want to put the investments in order to bring costs down, and where do I still need people? Because in the end, the people do end up either having to organize the machines or take care of them when they're down, things can cause problems, downstream of things that get automated. Again, this is not a straightforward process. But so it's going to be very interesting to see how this plays out, because I think that Heather has really characterized this correctly. You need those people, and they're very important, but we are a nation that moves forward in terms of technology adoption. I really am curious how this is going to be settled in the contract.

Ricky Mulvey: A few ports all ready are fully automated. Continuing on Long story, she quoted Geraldine Knatz, who was a former executive director at the Port of Los Angeles. They found that automated ports basically didn't save as much on labor as they anticipated, as we start getting to our next story. I wonder if this is going to continue to play out with the AI revolution, where you expect AI to save a lot on labor, but there's so much spending on it and so much intricacy with it that maybe it's not going to play out as the experts may think.

David Meier: You're spot on. This is absolutely a very real possibility. That's because, again, during the automation/improvement processes, unintended consequences pop up. I've worked on manufacturing floors as an engineer, and you solve one problem and then you go, hey, what's going on down here? Why did this all of a sudden stop working? Solving those problems requires people and time and money. Again, it just gets back to technology adoption is not a smooth process, but it's one with a lot of inertia. But you said something that's very important. It's not just about the absolute costs. The better way to look at this is actually the return on investment. How much does it cost to implement the new technology versus the benefit that I'm getting?

Ricky Mulvey: There's a few other story lines but this one is how long will this go on? To me, it seems the added variable is that the President of the United States is able to stop this, and we are moving close to an election, so we'll see if this continues on into November, especially if it's a threat to the economy. But any other story lines in this strike that you David are watching?

David Meier: Yes. In the news that I've seen, the news outlets have been focusing lots of attention on the wage increases that labor wants to build into the contract. That's coming across as negative, or oh, my goodness, they're being greedy. I don't think that's quite the right way to look at it. First of all, these are not easy jobs. This is hard work, and as we continue to get more global, not less, the expectation is that we need to move more and more goods through our ports in order to get them to consumers, that's the way our economy works. Look, what labor is looking for is a share of the benefits of those improvements. So there has to be, if I'm going to be productive, and I'm going to help implement the investments and technology that you want, how do we make sure we share them? Again, in looking at the contract negotiations, I'm very curious where that final number for the wage increase escalator that they want in the contract ends up.

Ricky Mulvey: As we talk about automation, let's move the conversation more fully to AI. We have two stories. I'm going to combo in one, because you think it's a signal of where we are in the investor sentiment side, the hype cycle side of AI. Two stories. One is that we're seeing a headline in Bloomberg about AI fatigue setting in for Microsoft. How it's underperformed over just the last six months, even though on a longer time scale, and we look at the longer time scale as Foolish investors. Microsoft's been an out outperformer. Meanwhile, SoftBank's Vision Fund has put $500 million into OpenAI in the latest fundraising round. What do these two stories signal to you about where investor sentiment is in this AI cycle?

David Meier: Yes, let's put a little context around it before we answer the question. We have to remember that markets are part psychology and part fundamental performance of the company. AI has certainly dominated the headlines. There are some companies seeing incredible performance in the early stages of the AI adoption cycle. What we've seen as a result is stock prices have benefited from both. But with these two headlines, maybe these are some early signs that investor sentiment is piking around AI.

Ricky Mulvey: Let's focus on SoftBank for a second. Why? What are you taking that with the OpenAI? I'm going to try to bait you here, because Masa Son, he's done very well when he's stayed in the High Tech lane. He's had fabulous investments in NVIDIA, or how about taking RM Holdings as the chip designer private in 2016 at a 30-ish billion dollar valuation. That company is worth about 150 billion today, almost a five bagger. Why are you skeptical of this OpenAI investment?

David Meier: First of all, you are exactly right about SoftBank and Masayoshi. They have had some incredible wins over their tenure. But in the recent past, they've been trying to deploy incredible amounts of capital, really big sums. In doing so, they've had to wait until companies are bigger in order to put that money to use. They've come to some investments closer to the peak of the hype cycle than not. As long as the story is correct, and I don't have any doubts that it is, I'm sure SoftBank is looking to invest in OpenAI. But if they've invested $500 million in OpenAI at a $150 billion valuation, I'll definitely be poking a little fun at that situation by thinking we're closer to the top of the hype cycle of AI than we are not. Let's make one thing clear: this is not to say that the AI adoption curve is flattening out in any way. It's just that the hype around it right now is probably pretty high.

Ricky Mulvey: You'll notice, I mentioned RM Holdings and NVIDIA, I did not mention WeWork, and a lot of those investments that I mentioned were before a lot of the sovereign money came in to SoftBank. Let's turn our attention to Microsoft because Microsoft and AI fatigue, that's interesting. The stock gained about 60% last year, another about 15% this year. It's doing just fine, but some analysts, including Gil Luria, who's an MD at DA Davidson, essentially saying that competition has caught up with Microsoft, especially in the AI space. Now that this price tag of 31 times earnings, 11 times projected revenue, it's getting harder to justify. Are you buying that story? Is competition really caught up to Microsoft?

David Meier: Maybe. Certainly, I agree that there are certainly lots of good things happening at Microsoft and that the stock price reflects that, and that's OK. But if we look at the recent efforts by Oracle, which has really shifted more of its focus into the AI space, Alphabet, which was six months ago, nine months ago was seen as, Oh, my goodness, they're late to the game. I don't think that's the case at all. Microsoft does have a partnership with arguably the most famous name in AI right now, OpenAI. But it also has a collection of other incredible businesses. The competition in this space to go after these returns, given the promise of AI, which I fully believe in, it's going to be relentless. Have they caught up? They're catching up. Let's say they're catching up.

Ricky Mulvey: They're catching up. The race is getting closer.

David Meier: Yes.

Ricky Mulvey: As you mentioned, the tech isn't going anywhere, but here's what could change, and that's more questions about the spending. We often talk about the spending, particularly with how much cash that OpenAI is burning, for example. But there's got to be some real companies making money with AI.

David Meier: Absolutely. One thing to remember is that AI tools have been available for many years. There are many more tools than just ChatGPT, generative AI, things like that. Those are the newest, and those are arguably extremely cool, groundbreaking. But today, those AI tools are more powerful and more prevalent than they have been in the past, mainly because if you look at the breakthroughs that we've been making in computing power. If we look at a company like Meta Platforms or Facebook, they've been using AI to manage and optimize their platform for years, and they've been getting better and better at it as the tools get better and better. Even if customers don't directly pay for AI, like accessing ChatGPT cost you money directly, Meta has been generating revenue on its AI work for many years.

Ricky Mulvey: Then last question, I'm opening up my notebook. I always like looking for those less discussed names. We know about Meta, we know about Microsoft, but are there any less discussed names, ones we don't talk about on the show that much that are making real money in artificial intelligence that you think David, maybe I should add to my watch list.

David Meier: Now, you're speaking my language as a guy who's looking for emerging tech every day of his investing life. There are actually lots of companies bringing AI to their customers and generating revenue from it, especially in the software industry, shocking, right? The software companies would be working on this. One company that I would like to highlight, that's an active recommendation is Procore. Procore has developed software to help the construction industry become more productive in managing its construction projects. It's now embedding AI tools inside of its software packages to help customers sort through their data that they're generating more efficiently, and to help them make better and better decisions going forward, whether it's scheduling, whether it's budgeting, whether it's, hey, where should I put my next project? We don't really think about construction as a hotbed for AI, but it's there, and Procor is doing a nice job of bringing AI to the industry.

Ricky Mulvey: One to watch. Appreciate you bringing it to our attention. I'll let you get back to looking for those companies. I said countries, not a map, a computer. David Meier, I appreciate having your insight. Thanks, again.

David Meier: Thank you so much for having me.

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Ricky Mulvey: Up next, Motley Fool Contributor Dan Caplinger joins Robert Brokamp to kick off a two-part series on estate planning. Today, they cover the basics and how you can help your family avoid dealing with ports.

Robert Brokamp: We at the Fool are long term investors, but long term doesn't mean forever, because unfortunately, at some point, you're going to pass away. All that stuff that you've accumulated over your lifetime is going to go to someone else. Now, if you act now, you can determine who gets it, and if you do things right, they will get it relatively soon after your demise and with minimal complications from the courts. The first step is to see a qualified attorney who can create the right estate plan for you and your family. But today, we're going to talk you through what that attorney may recommend for you, and it starts with getting a will. Dan explain to us what a will is and why it's important.

Dan Caplinger: Hey, Bro. A will is a legal document that does two primary things: it says what you want done with your property after you pass away, it also allows you to recommend a guardian for your children or other dependents once you're not available to take care of them. A will is important because every state has laws that says what happens to your property if you don't have a will. Those laws don't always give your property to the people that you actually want to have it. Also, if your children or other dependents, a court will have to name a guardian without your recommendation, and that person might not be a person that you want being responsible for your loved ones once you're unable to take care of them.

Robert Brokamp: It's crucial to get a will. We do think generally, you probably should see an attorney to help you with that. But there are other ways to dictate who gets what. It's actually pretty easy to do, and that's by updating beneficiary designations and maybe even retitling your other types of accounts. Dan, why would someone want to do that?

Dan Caplinger: There are several types of assets. I'll name a few: retirement accounts, life insurance policies, annuities, where you name a beneficiary to receive those assets after your death. The person that you name in that beneficiary designation, he takes precedence over your will. It's essential to keep those designations updated. If not, then the wrong person, you might erroneously think that the person you name in your will is going to get them, but they're not if the beneficiary designation says something else. With many financial accounts, you also have the ability to name what's called a pay-on-death or transfer-on-death beneficiary. We see that as POD, TOD, that person will have full rights to your account after your death.

Again, that designation, the person you name there overrides what you say in your will. That's a little bit different. The pay-on-death, transfer-on-death, a little bit different from a joint tenancy with rights of survivorship. There, the account co owner also has full rights to the account after your death, but at the same time, they also have rights to the account during your lifetime. A pay-on-death, transfer-on-death designee, no rights to do anything with your account until you pass away.

Robert Brokamp: One of the benefits of these is that those accounts will bypass what is known as probate. That's this legal process by after someone passes away, the courts validate the will. Depending on where you live, this can be a minor annoyance or it can take a very long time and cost a lot of money. Tell us a little bit about why people would want to bypass probate if they can.

Dan Caplinger: Bro, I think that you've been through this process before. You know firsthand just how much of a pain in the neck it can be. Basically, you have a court, you have a judge looking over your shoulder at everything that you are doing. You are responsible as the person as an executor running the show. You are responsible for gathering all the assets, finding out who the deceased person owed money to, taking care of those debts, looking through a will, looking through other types of instructions to make sure that the right people get the assets that were remaining. It's just a long and complicated process. It can be expensive. You usually have to hire a lawyer, you usually have to hire an accountant, there are just a mess of professionals that you have to deal with in order to get the job done right.

Anytime you're dealing with a court system, you're dealing with delays, you're dealing with a long drawn out process. It can be extremely frustrating to family members who are counting on getting those assets sooner. You basically have to be the person saying, no, you're just going to have to wait a little bit longer, it can create frustration, especially in a family situation where there's often personal things that all ready exist among family members.

Robert Brokamp: Bypassing Probate is really something to try to do, if you can. These beneficiary designations in the way you title, these accounts do it. One other way is to get a trust. Now, everything we've talked about up to this point, everyone should consider and probably everyone should do. A trust may or may not be right for your situation, though. Dan tell us about what a trust is and why someone might want one.

Dan Caplinger: Yeah, Bro. A trust is a little bit more complicated than a will. It is a legal document. It creates a fiduciary relationship between a person called the trustee, trustee overseeing the trust property, and the beneficiaries of the trust. That's who the trustee is holding that property for. The beneficiaries are the ones who get to enjoy the property under the terms that whoever created the trust sets up. Now there are many different kinds of trusts. I'm sure that people heard of all different kinds. Probably the one that's the most commonly talked about, you hear by a couple of names, a revocable trust or a living trust. This trust, it can essentially take the place of a will. It lets you give instructions on what you want to happen to your property after your death.

But the nice thing about trust, if they are set up correctly, if they are funded correctly, you do everything that you need to do, you can avoid this complicated probate proceeding that we've been talking about that wills have to go through. Instead, the trustee can just follow the instructions in the trust. It's not a public process, there's no judge overseeing it. As a result, it can often happen more quickly. It's not to say that it isn't complicated because it can be complicated, it's just not a subject to this outside influence of a court that a will that has to go through a probate proceeding is.

Robert Brokamp: The other type is an irrevocable trust, let me say that again. Irrevocable, 3, 2, 1. We'll just briefly mention the other type, the irrevocable trust, it's probably most interesting to people who are trying to avoid estate taxes. But these days, you really have to die with an awful lot of money. Really, well over $10 million that might change over the next few years, but most people these days don't really have to worry about estate taxes, right.

Dan Caplinger: Yeah. It's the way that we have changed the laws so that now you need eight figures per person in order to be subject to have even one dollar subject to the estate tax. A lot of the complicated planning that people who happen to live in expensive real estate markets and therefore had taxable estates, just don't really have to worry about that anymore. As a result of that, a lot of the planning, the market for estate planning, I think is a lot smaller than it used to be. Although just bear in mind, we do have this potential, what we're calling a sunset provision in the tax laws. At the end of 2025, if lawmakers in Washington don't take action, we may see a big reduction in that amount of money that you can have and not pay estate taxes. If that happens, then some of these strategies might need to come back into play for people with a lot less wealth than the people who have to worry about it right now.

Robert Brokamp: Even that lot less is something like 6 million per person, twice that if you're married. We don't know exactly, but still, you have to be a multi millionaire to worry about it.

Ricky Mulvey: As always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell anything based solely on what you hear. I'm Ricky Mulvey. Thanks for listening. We'll be back tomorrow.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Dan Caplinger has positions in Meta Platforms and Microsoft. David Meier has no position in any of the stocks mentioned. Ricky Mulvey has positions in Meta Platforms. Robert Brokamp has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale, Meta Platforms, Microsoft, and Procore Technologies. The Motley Fool recommends C.h. Robinson Worldwide and Designer Brands and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.