Planning for Loved Ones

Written by: Anthony Striker, MBA – Senior Wealth Manager

When building our overall financial picture, we cannot forget those near and dear to us. This can include planning for our spouses, children, grandchildren, nieces and nephews, and many more! For this blog post I wanted to touch on life insurance, saving for the benefit of future generations, and making sure that we have an estate plan in order to transfer assets to those who we will leave a legacy to.  

Life Insurance:  

You may be thinking, “If I am retired or going to retire soon, do I still need life insurance?”. In many situations, life insurance may not be needed in retirement, but it can still bolster a plan that is already put in place. Life insurance in retirement can help your loved ones in several ways, such as:  

• Paying off final expenses (funeral and burial) 

End of life costs today can be up to $20,000. Your loved ones may benefit from a policy that will cover these expenses, or even a pre-paid funeral that you pay for while you are still here.  

• Paying outstanding debt 

If you still have a mortgage or other debt, life insurance for this amount may be a good idea to make sure your loved ones can pay it off and are not financially burdened with this debt when you pass. 

• Temporarily replacing the loss of income you were providing 

If you retired with a pension and elected to have it pay for your life only, having a life insurance policy with a death benefit of 5-10 years times that income may be a good plan to replace that income if you pass away unexpectedly. 

*It is important to remember that while Life Insurance can be a solution for many of these situations, not everyone is insurable. Every situation is different, and it is important to discuss with your advisor whether Life Insurance or other forms of planning can help solve the above obstacles.  

Helping with College Expenses:

If helping a child or grandchild pay for college is a goal for your family, a 529 plan may be the right fit for you. A 529 plan is a flexible, tax-advantaged account that is designed specifically for saving for college. Here at Wheelhouse, we call these the “Roth IRAs of School” because the funds in them are tax-free if used for qualified education expenses. Here is a link to an article that Fidelity published regarding how 529 plans work:  https://www.fidelity.com/learning-center/personal-finance/college-planning/abcs-of-college-savings-plans

One important factor to be cognizant of is that assets in a 529 plan are often included in the student’s assets. This can interfere with a student’s ability to obtain a student loan in some situations.  

Estate Planning:

I consistently tell our clients that the basics of an estate plan are figuring out “who your assets go to and how it goes to them”. Will it go as a lump sum, or a payment plan of some sort? Are some of the assets slated to go to charity, if so, which assets and which charities? Sometimes having Transfer on Death (TODs) on all your accounts is what makes most sense for a family for an estate plan. Other situations may require a revocable living trust for an iron-clad strategy.  

If you haven’t done any estate planning, or it has been more than 5 years since revisiting your plan, it may make sense to sit down with a fiduciary estate planning attorney to make sure everything that you wish happens when you pass is reflected in your documents. This process is not just for when you are gone, but also if you are incapacitated in some way. Having financial and healthcare power of attorneys in place and directions for your loved ones could make some very hard decisions easier for them during an already difficult time.

All three of these items: Life Insurance, College Savings, and Estate Planning have a common theme of “planning for the ones we love”. This is something that we feel we do very thoroughly here at Wheelhouse.