Kiplinger: 10 Financial Boxes You Should Check During COVID-19 Pandemic
Kiplinger – 5 Financial Boxes You Should Check Before COVID-19 Strikes, by Evan T. Beach, CFP®, AWMA®, Wealth Manager, Campbell Wealth Management, 4/23/2020
I’m not sure I’ve ever read, let alone written, a title so morbid. These are unprecedented times.
The unfortunate reality is that, according to the CDC, the fatality rate of this virus is over 10% for those 85+, but the virus can be deadly no matter what your age. These sobering statistics should be eye-opening, but the fact is, I meet with people all the time who, by spending just one hour today, could save their heirs many more hours, upon their passing.
Below are five items that will save your loved ones significant heartache, time and energy should you be one of the unfortunate few.
1. Make sure your legal documents are in order
There are certain legal documents that everyone over the age of 18 should have in place. Of course, I have yet to meet anyone who headed to their local estate attorney’s office after purchasing their first legal lottery ticket on their 18th birthday. More typical are couples getting a basic set of documents drawn up upon the birth of their first child.
A basic will package (details below) often includes a will as well as a durable power of attorney, a health care directive, and a living will. In the current environment, those pieces are much more important than the will itself. If you’re incapacitated, who will pay your bills and sign on your behalf? Who will make health care decisions for you? If you become terminally ill, do you want to go on life support? An estate attorney can draft these documents for a small fee, or you can try your luck with services like LegalZoom.
2. Create and document an inventory of your assets, liabilities and insurance policies
If the above title weren’t already too long, I would have added “and tell someone where they are.” I’ll never forget when my parents visited the Grand Canyon for the first time and my dad brought me into his home office to show me where all the estate and financial documents were stored. They were going to be riding donkeys down into the canyon, which got him thinking about covering his bases just in case. This was an uncomfortable experience for a 20-year-old. That said, it was the right thing for him to do.
A better practice, or perhaps an additional step, is to store the inventory digitally. What if my parents’ house caught fire? If you use a financial planner, that individual or firm should have access to software that keeps a live net worth statement. All of our clients’ next of kin know how to get in touch with us, in the worst-case scenario. If you do not want to involve a professional, platforms like Personal Capital will allow you to aggregate all your accounts in one place. Just make sure you’re not the only one who knows where the password is.
3. Review your beneficiaries
If today were your last day, would the people, places and causes you care most about be left with a check — or with a mess? That’s a simple question that most people can’t answer. First, you need to have a conversation with your family about who you want the money to go to. Secrets are no fun, and they will leave a mess for everyone. Once you’ve identified the recipients, make sure your beneficiaries, the trust (if applicable), and the will, dictate that. I listed them in that order because that is typically the order of importance. If you have a beneficiary listed on your account, what your will or trust says does not matter. The beneficiary designation will supersede them.
Typically, retirement accounts, annuities and life insurance contracts will have beneficiaries. Bank accounts, taxable investment accounts and property usually do not, outside of joint ownership. A best practice is to review these annually. We have a form we use to go through beneficiaries once per year in reviews with our clients to make sure they are still aligned with goals. Pro tip: Take your ex-spouse off your old employer’s life insurance policy.
If you would like to add beneficiaries to bank accounts or investment accounts, this is a simple step, done with a short form, that will help your heirs avoid probate. For bank accounts, this is called Pay on Death or POD. For investment accounts, this is called Transfer on Death or TOD. Certain states will also allow you to add a TOD to your home.
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