Financial Safety Net for Women – Part 2

Last week we discussed the importance of building a form financial foundation. This week we will cover the first step; pouring and solidifying the concrete. This step involves meeting with an insurance agent and/or a financial advisor so you can complete a survey entitled a fact finder (needs analysis). This fact finder will uncover where you are financially and where you want to be in the future. It will formulate a plan for your financial objectives and goals. Some of the questions on the survey are: 1) Where day you want to be in 5, 10, 20, 40 years? 2) Do you need long-term care coverage? 3) How much life insurance do you need? 4) How much money should you have in savings for emergencies, etc.

Women are especially vulnerable in planning for their financial future. Schedule an appointment with an agent or planner to get started building your foundation.

Financial Safety Net for Women – Part 1

We are starting a new series for women. This series will focus on areas that are of importance to women, their families and their businesses. Statistics has shown that if we aren’t already, most of us will be the sole person responsible for our financial security. A woman who is out of the workforce due to family obligations or illness will have a longer recovery period financially than her male counterparts. On average, it takes about five years to make up for every one year of absence.

We are all concerned about retirement and investments but to have a strong foundation we must start with protection. Our next blog will cover creating a financial safety net for women.

Estate Planning

■ Make tax-free gifts. Under current federal law, you can give up to $13,000 to as many people as you wish each year. This is a great way to reduce the size of your estate (and potentially save estate taxes) over time. For example, if you give $13,000 per year to your two children and three grandchildren, you would remove $65,000 from your estate in just one year and $325,000 in five years. (You can double these amounts if you are married.) Charitable gifts are unlimited. So are gifts for tuition and medical expenses, if you give directly to the institution.
■ Secure/update health care documents. At the minimum, everyone over the age of 18 needs 1) a durable power of attorney for health care, which gives another person legal authority to make health care decisions (including life and death decisions) for you if you are unable to make them for yourself; and 2) HIPPA authorizations, which give written consent for doctors to discuss your medical situation with others, including family members.

In addition, a revocable living trust* is preferable over a will at incapacity because it can prevent the court from controlling your assets.
■ Review/update guardian for minor kids. It is quite likely that the person you name as guardian for your children when they are small will not be the best choice as they get older. Also, this person could change his/her mind, move away or even become ill or die. Revisit your choice from time to time, and name more than one in case your first choice cannot serve. Remember, if you haven’t named a guardian who is able and willing to serve and something happens to you, the court will decide who will raise your kids.
■ Review/update beneficiary designations. This is especially important if your beneficiary has died or if you are divorced. If your beneficiary is incapacitated or is a minor, setting up a trust for this person and naming the trust as beneficiary will prevent the court from taking control of the proceeds.
■ Review/update your insurance. Check the amount of your life insurance coverage and see if it meets your family’s current needs. Consider getting long-term care insurance** to help pay for the costs of long-term care (and preserve your assets for your family) in the event you and/or your spouse should need it due to illness or injury.
■ Talk to your children about your estate plan. You don’t have to show them bank and financial statements, but you can talk in general terms about what you are planning and why. The more they understand it, the more likely they are to readily accept it — and that will help to avoid discord after you are gone. You can also talk to them about your values and the opportunities that money can provide. Even better, show your values by doing — the holidays are an excellent time for families to do charitable work together.
■ Get basic documents for your unmarried kids who are over 18. Unmarried adults (18 and over) need to have a durable power of attorney for health care and HIPPA authorization, so you can act on their behalf in a medical emergency. And, while you’re at it, go ahead and have your attorney prepare a simple will and durable power of attorney. Hopefully, these will not be needed, but if an event does occur, you will be glad you have them.

*A revocable living trust may be amended, altered or revoked by its settlor at any time, provided the settlor is not mentally incapacitated. Revocable trusts are becoming increasingly common in the US as a substitute for a will to minimize administrative costs associated with probate and to provide centralized administration of a person’s final affairs after death.

**Long-term care (LTC) is a variety of services which help meet both the medical and non-medical needs of people with a chronic illness or disability who cannot care for themselves for long periods of time.

Small Business Planning – Part 3

Key Person Insurance

Key person insurance is another essential component of a smart business continuation plan. Key person insurance is life or disability insurance purchased by the business on the life of such an employee and payable to the business. When a “key person” dies or becomes disabled, insurance can help make up for lost sales or earnings or cover the cost of finding or training a replacement.

~ via Lifehappens.org

Small Business Planning Part 2

Life insurance can be structured to fund a “buy-sell” agreement. This is an agreement among owners to buy a deceased owner’s share of the business at a previously agreed upon price in the event of death, disability or retirement.

Why are these agreements so important? You might think that if you die, your family could maintain their income by running the business themselves or by hiring someone to handle the day-to-day management. The fact is, your loved ones may not have the skills or the desire for the job, and your co-owners may not welcome the idea of an unintended partner. With a properly structured and funded buy-sell agreement, your business partners won’t have to scramble to come up with the money to buy out your share of the business and you’ll be guaranteed that your survivors will be compensated fairly and promptly.

Buy-sell agreements are typically funded by life insurance policies purchased on the lives of each of the business owners. The amount is usually specified in a contract created with the help of an attorney. You can enter into a buy-sell agreement at any time, but it often makes sense to do so when a business is formed or when new owners are brought into the business. Because business values can fluctuate, it’s important to review the contract with your accountant at least once per year or to include a calculation method in the agreement. Also be sure the insurance coverage funding the agreement is up to date.

Though not as common as insuring against death, business owners can also insure against the risk of becoming disabled and unable to work. In this case, disability income buyout insurance would fund the buy-sell agreement, allowing the disabled owners to be bought out, typically after a one-year waiting period.

~ Lifehappens.org

Small Business Planning Part 1

As a small business owner you are responsible not only for the welfare of yourself and your family but for many others as well, including partners, employees and customers. Whether you run your business out of your home or from an office, factory or warehouse, a well-conceived insurance and benefits program is essential.

It can help protect your family and your business if you die or become disabled. It can help you bridge an important gap if one of your key employees dies or leaves the business. It can assist you in attracting and retaining the best talent. And depending on the size of your company, it can even offer an innovative way for you to compensate your most valuable team members.

First up…Indvidual Life Insurance

Let’s start with the worst-case scenario, the death of one of the business owners. What will happen to your business if you die? Many small business owners take out loans to help grow their businesses, and often secure these loans with personal assets. If you have business loans and were to pass away before they were paid off, you might think your family could sell or liquidate the business to cover the debts and provide financial security for them.

In reality, this rarely happens. When the family is forced to sell the business quickly, they may have to sell at a discount or during market conditions that make the business less attractive. In other cases, the business may be worth very little without the proprietor or partner. Individual life insurance can protect your family by providing funds to cover debts, ongoing living expenses, and future plans in the event that something happens to you.

~ Lifehappens.org