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Take Ample Time to Plan for Tomorrow

Anticipation is exhilarating. A new car. An exciting family trip. A vacation home. Hearts beat faster and smiles are broad as we contemplate such acquisitions.

These pleasures of life are usually planned far in advance. Google gets a workout, brochures pile up in profusion and many meetings are held to share details. The more preparation, the better.

What is interesting is the plethora of planning for such milestones compared to time devoted to financial futures and retirement. A laissez-faire: There’s always tomorrow attitude is all too prevalent among Americans. Sometimes tomorrow comes too soon and we’re not ready.

Think of a financial plan as something bright, shiny and new. With the guidance of an independent financial planner, your future can be as exciting as that sleek car, European vacation or home at the shore. Why? Because with a solid, well executed financial plan comes peace of mind, which is, perhaps, the greatest asset of all.

Here is a Top Ten List Pete Hoover recently shared with me to help individuals and couples get their financial houses in order. It’s important to note both spouses should be involved in planning. If something unexpected happens, knowing what to do, where to look for documents and how to proceed is essential.

  1. Consolidate and Simplify.

    When a spouse dies, all accounts must be re-registered. Instead of holding multiple investment accounts, consolidate IRAs and other assets into brokerage accounts. This will reduce the number of accounts that will need to be re-registered upon death. At the same time, reduce the number of bank accounts. Consider selling government savings bonds if near maturity as each bond will need to be dealt with at a federal reserve bank. Consider placing out-of-state real estate in a trust to avoid probate in two states. Planning ahead will make the process easier, more efficient and less costly for the intended beneficiaries.

  2. Review Mandatory Documents.

    Be absolutely positive you have these four documents current and in order: Your will regulates the rights of others over your property or family after death. Power of Attorney (POA) is an authorization to act on your behalf in a legal or business matter while you are alive. POA ceases at death and the will takes over. Medical Power of Attorney gives another person authority to make health care decisions on your behalf if you cannot. A living will instructs physicians and health care professionals your wishes concerning extraordinary measures, such as life-support equipment to prolong life if you are severely ill.

  3. Determine Primary and Secondary Beneficiary Designations.

    All insurance policies, IRA, and other retirement accounts have beneficiaries. Beneficiary designations control the disposition of these accounts, not your will. For example, your spouse could be primary beneficiary of your estate and a child or children secondary beneficiaries. List each designated beneficiary by name and DO NOT leave any forms blank. If documents are incomplete, accounts could go to probate court for distribution and rules vary from state to state. Generally, if your estate is named as beneficiary, adverse tax consequences could occur. Discuss these points with your financial advisor.

  4. Review All Estate Planning Documents.

    Make sure all fiduciaries are correct and up to date. Be positive all documents, including wills, insurance policies and retirement accounts are consistent and state exactly what you want to happen. Consider the use of a corporate trustee or co-trustee to provide the necessary fiduciary responsibilities required by a trust.

  5. Organize, Store and Share.

    Organize and review life insurance policies and accompanying annual statements and store them in one binder. Keep only current policies. Update contact information. Keep all these documents in a secure designated place and be sure someone knows the location. This will avoid painful searches and squabbles upon the death of a spouse. Safe deposit boxes may not the best choice, because they could be frozen in some states, including Pennsylvania.

  6. Be confident children are ready to inherit.

    If you wish children to inherit your estate, be confident they are capable of acquiring such a life-changing gift. Establishing a trust as beneficiary may be smarter. The trust will indicate an inheritance schedule. Do not name children as beneficiary if they are a minor or incapable of handling money.

  7. Know How Income is Derived.

    Be very aware of the terms of pensions. Make arrangements for pensions upon the death of a spouse. Review Social Security benefits and understand if you are collecting your benefits or your spouse’s. A widow’s spousal benefits may be higher than her own and converting could be financially beneficial. Be aware of monthly income changes upon the death of a spouse. Also, understand if dividends and capital gains are being re-invested or being sent as income? Are there annuities that could be annuitized if needed?

  8. Analyze Future Income.

    Periodically review monthly and annual income from pensions, Social Security, annuities, investments and other sources, as well as fixed and discretionary yearly expenses. Determine the ongoing percentage of income not tied to investments and the amount of income from your investment portfolio required each year. As a general rule, annual investment withdrawals from your portfolio should not exceed 4 percent. Meet with your financial planner to help sort through these questions, explore options and determine how long your assets are projected to last. At this meeting, discuss and explore alternatives to strengthen your financial outlook.

  9. Secure Information.

    Shred or destroy vital financial information to protect against identity theft. Use a 207 fraud-prevention ink gel when writing checks or signing important documents. Check your credit status each year; reports are free. Cancel unnecessary credit cards. Store original legal and other important financial documents in a fireproof safe in your home or attorney’s office instead of a safety deposit box. Do not carry your Social Security card with you. That can be stored along with documents.

  10. Establish a Legacy.

    Although, this is an intangible, it is extremely important. Pass along your values, life lessons and family traditions to children and grandchildren. How many times have your heard someone say they wished they had a treasured family recipe for a favorite dish prepared by their grandmother? This is part of a precious legacy to be appreciated for generations. Discuss your wishes for end-of-life celebrations and memorials. Write an I love you letter or record a video for family members to cherish. If a charity is important to you, establish an endowment fund for the organization.

These are the tasks to think about and perform when you are healthy, thinking clearly and not influenced by illness. It’s never too early to cushion your tomorrow and ensure a bright, financially secure future for you, your family and your heirs. Your financial advisor can help you get started.