Skip to main content

Stay updated on all areas of tax filings and business processes affected by COVID-19.  Learn More.

Getting It Right

There’s no doubt we’re living in historic times, but the men and women I speak with on a daily basis are truly optimistic. 

Why?  For them, this has been a windfall in one of two ways – they were positioned in such a way to make the most of their portfolios OR they are using the “extra” time they currently have to make changes they might have been putting off for awhile. 

Let’s look at one great example, from a client and friend of mine and a conversation we had yesterday…

I’m not going to name names, but this person is taking the time they have to actively get their estate planning structured and in place.  NOT because they fear for their lives, but because they have been busy living and have neglected it for too long…

First things first, one of the key mistakes I share with EVERYONE is the biggest mistake people make in estate planning is simple – they don’t do it at all OR, they have a poorly structured plan in place.  Why not spend the time (and I know you’ve got it) to educate yourself on what you need based on your assets, your state of residence, and your goals?  The reason is obvious – do you want the state to determine how your assets are distributed and taxed after you’re gone? 

So, Estate Planning Rule Number One?  Have a plan!

The next step?  Having the discipline to update that plan at certain specific milestones.  It might be every year that is divisible by five, or when you or your spouse reach certain milestones (40, 50, 59½, etc…), or when you move to a new state.  Also, understand that certain laws and tax changes can impact how your estate could be impacted, so staying abreast of changes in tax code (of course, you can use me and my team for this) is a great idea. 

Another mistake my client realized and shared with me was simple:  Being realistic about the level of care you or your spouse might require.  Sure, we all envision an active retirement filled with trips and grandchildren, but that doesn’t excuse us from planning for long-term care and disability provisions in our insurance accounts.  The good news about those is that the younger you are when you purchase or create those types of plans, the more money and protection you’ll have if something does happen. 

The goal in all this is actually simply another key point of this exercise – To ensure you limit the liabilities of the estate AND that you won’t run out of money in retirement.  Years ago, it was very fashionable to put money into CDs and cash them out after they matured.  That was fine, but if you needed extra money for an unexpected financial challenge, then you might find yourself a bit short in terms of liquidity.  With the availability of software today, you can literally plan to the penny in terms of the amount you’re contributing now and the amount you can withdraw in retirement, month after month.  The challenge of estate planning is to balance the liquidity of the estate with the assets to ensure there is a legacy for the family, not a tax bill. 

A last factor that many men and women I’ve spoken with through the years is how the estate can handle a provision for charitable work.   Many, if not all of us, want to leave a legacy beyond our families.  It might seem easy, but if you aren’t clear on how that is to be done, the money might never do the work you’ve envisioned – or it might be wasted in “general funds” by the organization and not for the impact you want it to have – college funding for underprivileged youth, for example.  Getting clear on how your estate will handle any charitable giving is important and needs to be clearly stated. 

Look, not many of us want to be reminded we’re all mortal, especially in these types of times.  O the other hand, with so many people “stuck” at home, this might be the ideal time to really get clear on the legacy we wish to leave and how we can mitigate the tax burdens you’ll leave. 

This is a perfect time to do this and the team and I are happy to share more insight on this with you!