Life happens, when we’re not prepared. A woman is recovering at home from minor surgery when her older sister dies unexpectedly, thousands of miles away. She can’t fly from her home to her sister’s home for weeks. What will happen, asks Considerable in the article “This is the most helpful thing you can do for the people who love you” ? If you’re not prepared, the result is a mess for those you love.
The recent changes in the tax laws created increased year-end activity for those trying to finalize their divorces by December 31—prior to the effective date of the new rules.
The new tax laws stipulate that alimony is no longer deductible by the payor, and it’s no longer taxable by the receiver—this creates a negative impact on both parties. The payor no longer receives a tax deduction, and the receiver will most likely wind up with less alimony because the payor has more taxes to pay.
Forbes’ recent article, “9 Things You Need To Know About Estate Planning After Divorce” suggests that if you were one of those whose divorce was finalized last year, it’s time to revise your estate plan. It’s also good idea for those people who divorced in prior years and never updated their estate plans. Let’s look at some of the issues about which you should be thinking.
See your estate planning attorney. Right off the bat, send your divorce agreement to your estate planning attorney, so he or she can see what obligations you have to your ex-spouse in the event of your death.
Health care proxy. This document lets you designate someone to make health care decisions for you, if you were incapacitated and not able to communicate.
Power of attorney. If you had an old POA that named your ex-spouse, it should be revoked, and you should execute a new POA naming a friend, relative, or trusted advisor to act as your agent regarding your finances and assets.
Your will and trust. Ask your attorney to remove the provisions for your ex-spouse and remove your ex-spouse as the executor and trustee.
Guardianship. If you have minor children, you can still name your ex-spouse as the guardian in your will. Even if you don’t, your ex-spouse will probably be appointed guardian if you pass away, unless he or she is determined by the judge to be unfit. While you can select another responsible person, be sure to leave enough cash in a joint bank account (with the trusted guardian you name) to fund the litigation that will be necessary to prove your ex-spouse is unfit.
A trust for your minor children. If you don’t have a trust set up for your minor children, and your ex-spouse is the children’s guardian, he or she will have control of the children’s finances until they turn 18. You may ask your estate planning attorney about a revocable trust that will name someone else you select as the trustee to access and control these funds for your children, if you pass away.
Life insurance. You may have an obligation to maintain life insurance under the divorce agreement. Review this with your estate planning attorney and with your divorce attorney.
Beneficiary designations. Be certain that your 401K and IRA beneficiary designations are consistent with the terms of your divorce agreement. Have the beneficiary designations updated. If you still want to name your ex-spouse as the beneficiary, execute a new beneficiary designation dated after the divorce. It’s also wise to leave a letter of intent with your attorney, so your intentions are clear.
Prenuptial agreement. If you’re thinking about getting remarried, be certain you have a prenuptial agreement.
It’s a great time to settle these outstanding issues from your divorce and get your estate plan in order.
Reference: Forbes (January 8, 2019) “9 Things You Need To Know About Estate Planning After Divorce”
Some people confuse Long-Term Care (LTC) with Long-Term Disability Insurance. The disability insurance coverage is designed to replace earned income in the event of a disability. Others think that LTC is a type of medical insurance.
nj.com’s recent article entitled “The benefits of long-term care insurance” explains that long-term care insurance isn’t meant to be disability income replacement, and it isn’t medical insurance. LTC insurance covers the varied personal needs of persons who are ill and (even temporarily) incapacitated. This includes feeding, clothing, bathing, and driving to appointments and doing the extra washing.
Some people consider LTC insurance as what was once called “Nursing Home Insurance.” This evolved to include either care at home or care in a rehab or nursing home facility.
Married couples are especially susceptible, when one spouse becomes ill or injured because the extra costs of long-term care can eat up all their savings and bankrupt the caregiver spouse. For that reason, those in their 50’s should start to look at LTC insurance for several reasons:
- Annual premiums are lower when acquired at younger ages; and
- Aging may bring health issues in the future, which may prohibit the opportunity to buy LTC insurance coverage altogether.
There are many ways to tailor LTC coverage to make it affordable. The most critical components of an LTC insurance policy include the following:
- The average period of need for most is three years.
- The daily amount of coverage varies by geographical area.
- Home care should be the same as that for care in a facility.
- The waiting period, which determines when the coverage actually starts after the date the incapacity began.
- Married individuals can get a combined policy with a discount.
- An inflation rider: The daily cost of coverage will naturally increase over time with inflation, selecting a rate of inflation will ensure keeping up with rising costs in the future.
Every family should have an open discussion about potential illness or incapacity of family members, and LTC should be a part of that.
Reference: nj.com (January 6, 2019) “The benefits of long-term care insurance”
Whether you’re 30 or 39, retirement will come up fast. Many people are surprised when they see how much they need to put away to keep their current standard of living in retirement.
Once you decide when you want to retire, you need to calculate how much money you’ll need and how you’ll get there. Of course, you should take advantage of company matching and various tax deductions, when saving for retirement. Don’t wait until your 40s or 50s to try to catch up. That will be painful, or worse, impossible.
Forbes’s recent article, “3 Steps To Financial Fitness In Your Thirties,” advises that when you start to accumulate wealth, be sure someone is watching your investments and that those investments are suitable for your time frames and financial goals.
Work with a financial advisor you think can help improve your situation. This should be someone you trust, and most important of all, who you feel has your best interests at heart.
If you are accumulating assets, make sure they’re protected. Be certain you and your family are covered by having the correct insurance policies. Of course, in a perfect world nothing would happen. For instance, most people on disability would much rather be healthy. They’d love to be able to joke and say that having that disability insurance was a “bad investment”. However, those who are disabled and aren’t covered with a disability insurance policy, most likely wish they’d made sure they had this income protection in place.
Another form of protection is an emergency fund. If you don’t have one, start by regularly putting some amount of money into a non-retirement account. Even if it’s a small amount, something is better than nothing. If you were to be laid off, chances are that your unemployment benefits would not be enough to pay the rent or make a mortgage payment.
If you’re single, you should protect yourself—even more so than someone who has a partner to rely on. Many life insurance policies have living benefits that can protect you, if an emergency happens. You may also be able to use cash value life insurance to partially fund your retirement.
Finally, it’s critical that you think about estate planning. You should have an estate plan, including a will, Powers of Attorney, health care power of attorney and, if you have minor children, a guardian should be named in your will.
Let’s say you’re living with someone. If something happens to either of you, the living partner will most likely will be treated as a roommate—and have no legal rights to your property. An estate plan can be prepared to provide your partner with legal protection.
Reference: Forbes (December 17, 2018) “3 Steps To Financial Fitness In Your Thirties”