8 Key Ways to Protect Your Wealth & Your Family! (Part 2)
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Welcome back!
In this edition of Budget and Grow Rich®, we’ll continue where we left off in Part 1 of this series and deliver break trend a bit from our usual theme of saving money and building wealth and focus on wealth protection and asset protection.
This edition isn’t about saving money but more about protecting your wealth and making sure that you protect yourself, your family and your heirs!
Believe me please – these tactics could save you and your family Big Money! And lots of headaches too!
Take these 8 mission critical steps right now to avoid this unnecessary mess and protect yourself and yourself and your family, money and wealth.
Do NOT delay. Don’t dawdle! Don’t watch yet more Netflix or more ballgames. Don’t meander. Don’t whatever. Jump on these tasks right way! Get Moving Now:
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1. Conform all documents.
This means that the form of the documents matches the substance (the meaning and import).
Move assets, liabilities and money around so they ‘sit’ – are owned – by and in the correct entity or are owned by the correct entity according to your financial plan and estate plan.
If for example:
You have a life insurance policy and you now have children or grandchildren or got married or divorced, maybe you want to change the beneficiaries. Or. . .
If you establish a life insurance trust, make sure that the trust owns the insurance policies and not you as individual.
If your financial plan and estate plan state that your assets should be titled in a certain way, in a certain name, Make Sure that they in fact are.
Make Sure your Last Will & Testament (your Will) matches your financial plan.
Sign all the papers and paperwork.
If the law requires (which it typically does in my experience), have the correct number of witnesses present, pen in hand.
File any and all documents and forms that need to be filed on a timely basis.
You might have to file certain documents with the Town Hall.
Right away usually works best so things don’t slip and fall through the cracks.
Make sure that everything is in order.
2. Create or Update Your Estate Plan – what happens to your money and your personal belongings when you die. In other words, who gets what.
And over time, your personal and financial circumstances, financial goals and wishes will change.
Discuss with your Trust and Estate Attorney (T&E attorney) whether a “Revocable Trust” is right for you.
A Revocable Trust is an entity that owns your assets and is designed to avoid the probate process.
The Revocable Trust has your Social Security Number (SSN) and you pay income taxes and potentially other taxes on the Revocable Trust’s income as an individual.
3. For retirement plan assets, for example 401(k) plan, 403(b) plan, IRA, etc., designate beneficiaries.
Beneficiaries are the people or entities (for example trusts, charitable organizations, etc.) who you want to receive your money and other assets.
Examples of assets include stocks, bonds, securities, real estate, gold bars, collectible coins and personal belongings (called ‘personalty’).
Make sure the beneficiaries listed are the ones you want to inherit your financial assets (money) and other assets.
Look into an “Inherited IRA” (Individual Retirement Account). Under current IRS (Internal Revenue Service) rules (under the IRC or Internal Revenue Code), an Inherited IRA allows your beneficiaries to take over (own) your retirement plan assets (assume ownership of your retirement plan assets) and continue the tax deferral. This enables them to defer when taxes are due and payable for some period of time.
I also understand that you can name beneficiaries for your 401(k) retirement plan and 403(b) retirement plan assets.
My understanding is that for Inherited IRAs to work, your beneficiaries have to be individuals and not a trust. But. . .
Be sure to meet with your lawyer, accountant, CPA or financial planner to learn the current rules and regulations – whether an Inherited IRA is still allowed; whether you and your heirs qualify for the deferral and can defer the taxes; and what you have to do to qualify to receive the benefits.
4. Draft or update your Last Will & Testament (Will).
Hire a competent Trust & Estate Attorney (T&E attorney).
Don’t Skimp on this please.
While most people need a relatively straightforward (simple) will only, the world has gotten increasingly complicated.
And people like Susan’s ex-husband may be lurking in the shadows to gum up your works.
And over time, your personal and financial circumstances, financial goals and wishes will change.
Make sure you leave (draft) clear instructions about where you want your money to go – who gets what and when.
Assets often include money (cash) and stocks, bonds, securities, real estate, gold bars, collectible coins and personal belongings (called ‘personalty’).
Again, create, review and update your financial plan and estate plan periodically and whenever your circumstances change.
5. Meet with your accountant, CPA or financial advisors periodically to assess the tax implications of your finances and your Last Will & Testament – your Will – and all the aspects of your financial plan and estate plan.
Make sure everything hangs together and meshes.
Ben Franklin said, “. . . nothing is certain except death and taxes.”
But that doesn’t mean you can’t take steps to minimize your tax bill.
6. Durable Power of Attorney (POA) – meet with your attorney to draft a durable power of attorney.
A Durable Power of Attorney is a legal document that gives one party – the person you select or the person you designate – the right and power to act on behalf of you – to handle your finances (financial affairs) and make medical decisions if you are unable to.
7. Health Care Proxy is a legal document which gives another person the right and power to make health care decisions in the event you become incapacitated and are unable to make these decisions on your own.
Also discuss with your healthcare advisors and attorney a Living Will and an Advance Medical Directive to see if they’re applicable to you.
8. Life insurance. Make sure your life insurance and property & casualty insurance (P&C) and other insurance coverages and insurance policies are up to date, comprehensive, and meet your current and possibly your expected (foreseeable) future needs.
Over time, people’s financial needs and financial and personal circumstances change.
Perhaps:
You have children or grandchildren.
You got married.
Your once young children are now adults and out of the house.
You own a home now and need homeowners insurance.
Your home has increased in value or its replacement cost has increased in light of inflation and you need more insurance coverage (a higher face value or higher policy amount).
You got divorced.
A relative died.
Someone left you money – an inheritance.
Tax laws have changed.
And so on. . .
My divorce agreement required me to name my ex-wife as a beneficiary on my life insurance policies. Made sense.
In the event I died before our Children were emancipated (reached the age of majority – often 18 or 21 or when they graduated college although the rules vary by state and divorce agreement), my eX-wife and our Children would need the proceeds (money) from my life insurance policy to cover living expenses and possibly college tuition.
But once the Children were emancipated and the Divorce Agreement lapsed (expired), I was free to change the beneficiaries. And I did. I removed my ex-wife and added my Children!
Thankfully, I’m still on the right side of the ground; but like Susan, one never knows.
If you want your insurance policies to remain in force, make sure you pay the premiums when they’re due. Don’t let your insurance policies lapse inadvertently. You might not be able to reinstate them or the premiums (cost) might increase.
I set my insurance premiums on automatic payment. The insurance company pulls the premiums from my checking account every month, like clockwork.
This ensures that I pay my premiums on time and in full and my insurance policies remain in force and in good standing. Payment requires adequate ‘good funds’ in your checking account. . . In other words, there’s enough money in your checking account to cover the payment – ACH).
OH and Please Remember, we are not attorneys and are not providing any specific financial, tax, or legal advice here. Be sure to consult your own professional advisors to get sound professional advice that’s specific to your financial and personal circumstances!
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In case you happened to miss the first 9 tips and tactics to protect yourself, your family, and your wealth, see Part 1 in this series.
And to grab the Road Map, see Part 3.
Don’t miss!
Let the Budget and Grow Rich® Team know how we can help you!
See you next week,
Arthur V.
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