An estate plan is of value for everyone, not just for the wealthy. Regardless of what you own or owe you should create a written estate plan and share it with family. This document outlines your will, power of attorney, and medical directives. Of course, families with children should have an estate plan, but there is another overlooked demographic who needs this safety net too. Many young professionals, who have recently graduated from college to start their careers, need an estate plan. These young adults are responsible for their own decisions, and need to plan appropriately. It does not need to be complex or expensive, but it does need to be prepared. Change is constant and your estate plan should be revisited, from time to time, to reflect any life changes. Your financials are more valuable when integrated with a written estate plan.
Reviewing insurance policies, timeline of coverage, including an audit of beneficiary designations should take place annually as part of your safety net review. Below are several insurance policies you should be familiar with that support your financial plan.
- Disability insurance is often provided by your employer and benefits are determined based on your income. That’s straightforward for W2 employees, less so for high income earners and those who’s compensation may include stock, bonuses, and other incentives. These policies provide a percentage of income replacement should you be unable to work. Often the benefits payable may not be enough when you factor in taxes, any waiting periods, and your current lifestyle. This policy protects your best asset, your ability to earn income to take care of yourself and those you care about. This insurance is often the most overlooked yet most utilized when it comes to assisting in a life event. A complete disability is not necessary for the policy to pay benefits and address a loss of income. Check your work policy to see what you own and ask yourself, is this sufficient or is additional protection necessary?
- Life insurance may also be provided by your employer, typical protection levels are a multiple of your base compensation up to a stated limit. What if you change jobs? Group life insurance policies typically won’t travel with you. Like Baskin & Robins there are 31 flavors (and then some) of life insurance. It’s important to own a personal policy that you can afford and that is portable so your protection continues should you change jobs or careers. How much do you need? That is an individual decision based on various factors. Enough to pay off all current liabilities, final expenses, perhaps a college education or two, and to replace a lost income to a surviving spouse. Here in the Metro area that may easily surpass two million dollars based on income, housing, and lifestyle. Good news is that there are various solutions and prices in protecting who is important to you.
- Long term care insurance provides monthly financial assistance should you be unable to live life independently. Policies often pay a benefit that allow you to avoid cannibalizing your other assets so your legacy may be kept intact.
- Medical insurance is easy to take for granted. Good medical coverage provides peace of mind should you or your family need immediate medical attention.
- Umbrella Policy provides additional liability protection above and beyond what your homeowner policy offers.
The harsh reality is that most of these insurance and estate planning options are rarely integrated as part of a financial plan. Scheduling time each year to simply review your estate plan and corresponding policies is important to keeping a strong safety net in place. While we continue to live and work from home, take the time to review what you have and assess your safety net.
Advisory services through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Flowerstone Financial are not affiliated.