by John R. Berry
When I visit with clients of Corner Post Financial Planning, they inevitably mention that having their affairs in order is a top concern. Meaning: They want to ensure that in the event of incapacity, medical emergency, or death, their wishes are followed and their families taken care of.
Many mention not wanting to be a burden on their families as they age.
Despite our best intentions, though, we often put off what is necessary but not right in front of us.
Estate planning can be simple if your situation is straightforward, complex if the scenario dictates, or as hairy as the participants make it! But ensuring the basics are covered is a good way to get started.
Below I emphasize three areas that are important to address.
Beneficiary Review: Do the beneficiaries and transfers on death (TOD) on your investment accounts align with your wishes? In most circumstances, accounts with such designations pass directly to the named individuals(s) regardless of what a will or trust says. If there has been a birth, divorce, death, or other key change in your family, check beneficiary/transfer on death instructions. Employer retirement plans like 401(k) accounts as well as IRAs have beneficiaries, as does life insurance. Brokerage accounts can have a TOD. Similarly, you may designate that your bank accounts pay on death.
Often, clients have specific flows of assets in mind, including per capita (by head) and per stirpes (by branch) designations as it relates to beneficiaries and contingent beneficiaries. Sometimes forms don't offer all options. Work with your financial advisor or insurance agent to ensure your wishes are noted. You may need to write a letter to the insurance or investment company laying out your beneficiary designations.
Insurance Review: Long term care. If you are age 50 to 70, do a needs assessment for long-term care insurance, which can cover at least a portion of any home based care, assisted living, or nursing home stays you might require. If you have parents in this age range, frankly discuss their long-term care insurance situation with them.
Generally, clients with substantial assets may be able to self-fund for long-term care, and those with modest savings likely will rely on Medicaid. But those in the middle should consider the impact of an extended care incident on their nest egg.
Life insurance. Individuals who have others relying on their income or contribution to the family should review their life insurance coverage. Do you have life insurance? Is it enough? My simple rule of thumb is: If someone might miss a meal if you died, you need to think about life insurance.
Key documents: We recommend every adult have the following five documents, regardless of financial situation:
Will or trust
Advanced health care directive (living will)
Statutory power of attorney
Medical power of attorney
HIPAA release
In most instances these are straightforward documents, and a local attorney in your area can craft a set for you. If your situation is complicated, consider an estate specialist.
Failing to take the time to review your beneficiaries on your investment and banking accounts, sit down with an attorney to draft a will, or purchase life insurance if needed can cause serious issues if an untimely death or illness strikes.
I encourage you to take stock of your situation today and make arragements to rectify any shortcomings in your basic estate planning.
If you have all of the above in place, but it's been a few years since your revisited your strategy, you should consider making an appointment with your attorney for a review. Sometimes laws change, including the 2019 Secure Act, which limits many beneficiaries' ability to stretch IRAs they inherit.1 In short, a second set of eyes every few years is never a bad idea.
John R. Berry is owner of Corner Post Financial Planning in Mineral Wells.
1) Marketwatch 2/20/2020, "The Secure Act upended estate planning and taxes for a lot of people — here’s how to adapt"
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual