It is tragic when a client contacts us after losing a spouse - even more so when it is unexpected. Often the surviving spouse was not the household’s financial decision maker, so their grief is compounded by the financial responsibilities they suddenly have to take on.
Having to deal for the first time with unfamiliar financial issues like cash flow budgeting, college planning, retirement planning, and possible estate and trust issues can be overwhelming. Many surviving spouses don’t know where to start and worry about whether they’ll be OK.
Don't leave your spouse and surviving family members in the lurch. By taking just a few key estate planning steps now, there’ll be a plan in place for your loved ones if something happens to you. Following these guidelines will provide a smooth transfer of wealth to your dependents.
Review your insurance coverage
One of the most important elements of a sound estate plan is to maintain adequate insurance coverage. Naturally, you should carry homeowners’, automobile and, if appropriate, inland marine coverages for your property. It is equally, if not more, important to insure yourself and your earnings. You should hold life insurance (term and/or permanent), short and long term disability insurance and perhaps annuities, if circumstances warrant.
You may also want to evaluate long-term care insurance which will address morbidity risk (life insurance covers mortality risk). With the right insurance portfolio, you can provide your loved ones with tax-free benefits and/or a guaranteed income stream, no matter what the future holds.
Consider establishing a trust
Establishing a trust can have several benefits, including:
- The avoidance of probate (i.e. the proving of a will). Assets held in a trust fall outside of your estate and therefore do not require probate - a costly and often time-consuming process. The trust assets transfer cleanly to the intended beneficiaries which is the ultimate goal.
- Shielding your assets for the benefit of future generations;
- Providing tax planning strategies to reduce current and future tax burdens; and
- Providing a vehicle for charitable giving.
Open Transfer-on-Death and Payable-on-Death accounts
If you open a Payable-on-Death bank account with a named beneficiary (known as a Transfer-on-Death for brokerage accounts), the relevant assets will automatically transfer to your heir when you die. You can also designate more than one beneficiary. The beneficiary or beneficiaries named on a TOD or POD account simply need to show the financial institution a form of identification along with a certified copy of your death certificate to access the funds in the account. You should let your beneficiaries know in advance about which accounts they are named in and the procedures for claiming their inheritance.
Update your last will and testament
The suggestions above will help with a smooth transfer of assets upon your passing. But you must also have a last will and testament to make sure that any assets not passing by contract (per above) go to your intended beneficiaries through the court system (i.e. probate). A person who dies intestate (without a will) loses the opportunity to name their inheritors - and state statutes will determine how their estate is allocated. This is not an ideal scenario. A will allows you to create conditional bequests (e.g. if my brother does not survive me, his inheritance will go to his children), name guardians for minor children, and select an executor to administer your estate and navigate its settlement through probate. Your will should be updated periodically (e.g. every five years), upon major life changes (e.g. marriage, divorce or having a child) or the occurrence of major financial events (e.g. winning the lottery).
Create an emergency file
You should create a list of people to contact in an emergency. Keep this list in a safe place and maintain secure backups if you are storing it electronically. Let your spouse and loved ones know where to find this list, any safe deposit box keys, and applicable passwords.
Create a plan with your financial planner
Do not go this alone. If you don’t plan your finances prudently, and comply with legal statutes and tax laws, the results can be devastating to your loved ones. Contact a financial planner who can champion your planning, assemble the necessary team of experts and help you develop a financial blueprint that will help you make sure your loved ones are cared for after you’ve gone.
Once your plan is developed, give your spouse and loved ones copies of or access to it as well as the contact details of your planning team (advisor, attorney). That way everyone involved will know exactly what to do in an emergency.
Contact Glass Jacobson to start your plan today.
Securities offered through Triad Advisors, LLC, member FINRA/SIPC. Advisory services offered through Glass Jacobson Investment Advisors, LLC. Glass Jacobson Investment Advisors is not affiliated with Triad Advisors, LLC.
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