Monday, November 28, 2016, AM | 1 Comment
You are going to die. Sorry. This prospect can be intimidating for some, but everyone needs to be proactive and intentional about the way they plan for this inevitability.
Failure to do so can have devastating effects on your estate (the net assets you leave behind) and the relationships of your beneficiaries.
Following these 5 tips will help you face the unpleasant reality of your mortality with peace and confidence.
Pay Off Debts
Hopefully you plan on going into retirement debt-free, as carrying your debt with you into retirement will rob you of the quality of life that you have worked so hard to build.
Similarly, if you leave debts or lousy investments behind when you pass on, it will put pressure on your estate and rob your heirs of your financial legacy.
In the United States, heirs do not inherit debt that you leave behind, but creditors have claim on your assets before your heirs.
You will want to leave your family with a legacy, so don’t burden that legacy by leaving debt unpaid any longer than necessary.
Get Term Life Insurance and Long-Term Care Insurance
If your financial advisor sold you whole life insurance or a cash value plan, you need a new financial advisor.
Those policies will cost upwards towards twenty times as much as a level term policy, and the cash value (which makes roughly the same interest as a mediocre money market account) cannot be inherited.
As a rule, keep your investments and your insurance separate, and make sure you understand how each one operates.
If nobody is relying on your income, a very small policy is all you need so that in the worst case, your funerary expenses will not cause a financial burden on your spouse, parents, or estate.
If you are a breadwinner in your home, you should plan to have about 10-times your annual income in level term life insurance to make sure your dependents are well taken care of should you be called home.
If you are a healthy weight and don’t smoke, this level of coverage should be reasonably inexpensive.
If you are buying your policy through work, make sure you get to take it with you if you are laid off or change jobs.
If you are approaching 60 years old, it is time to start thinking about long-term care insurance.
The miracle of modern medicine is extending life by decades. Those decades, however, can be a massive financial burden on your nest egg and on your family.
Insurance against chronic age-related health issues will help you spend your last years with dignity, without overburdening yourself or your family.
Get a State-Specific Will
Even if you are young and have very few assets, it is important to specify your last wishes and priorities to those you leave behind.
If you die without a will, or with a will that was not properly drafted, the state determines asset allocation and other financial decisions.
Worse yet, surviving family members who disagree over the allocations may end up fighting and not speaking for years and years. Don’t do that to your family! Talk to your estate planning attorney today about putting together your last will and testament. Not tomorrow – today!
Put Your Assets in Trust
A common strategy for estate planning is putting assets in trust for your beneficiaries.
A trust is essentially a legal entity that owns property and against which debts can be levied (although the laws on this differ by state).
Control of the trust is placed in the hands of a “trustee” who can be given legally-binding instructions for administering the distributions of the trust.
The trustee is typically also the executor of the will, but this is not mandatory.
Setting up a trust can help you manage exactly how your assets are distributed and under what conditions (for example, if you want to make a child’s inheritance conditional upon graduating college or completing a twelve-step program).
There can also be tax advantages to administering your estate in this way. The trust is typically built into the will and set up with your estate planner.
Read Your Will With Your Family
Once your will has been drafted and your trust established, you should be very transparent with your family (and anybody else affected by your estate) about what the will says and what will happen when you pass on.
Sit down as often as once a year with everyone and have the will read. Explain exactly what you want done and why. Yes, this may create some conflict. Better that the conflict get out in the open now while you can address it, rather than later when it can tear your family apart at the seams.
When the conditions of the will are surprises to your beneficiaries, this is how brothers end up not speaking to each other for decades.
No matter your age or life circumstances, you never know what tomorrow will bring. I’m not trying to be morbid, but it’s a fact of life that must be faced.
If you follow these 5 tips, you can approach each day with confidence, knowing that should something happen to you, God forbid, your affairs are in order and your family will be taken care of.Facebook.com/doable.finance