The Checklist

It's not how much you make - it's how much you get to keep. That saying goes well with taxes, but applies to asset protection and estate planning as well!

Mitchell Baldridge @baldridgecpa The checklist: - life insurance - long term disability insurance - umbrella insurance - correct liability limits on property & casualty insurance - named beneficiaries on qualified accounts and policies - a written will - powers of attorney - medical directives - named guardians 9:18 AM • Aug 26, 2022 76 Retweets 856 Likes Read 36 replies

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Print this out, put it on your fridge, and cross it off until it's done!

As business owners get older and their lives become more complex with kids, business partners, and everything else, it’s important to consider asset protection and estate planning. But how can you get started?

Here are two critical path items for you to consider as you plan for your financial future.

1. Finding the Right Insurance For You

There are various types of insurance you’ll need to consider in your planning. The most common is life insurance. Term insurance is a life insurance policy that you probably need to have and hope to never use. Actuarially speaking - the policy is designed to not pay out. Term insurance often lasts between 10-30 years. If you pass away during the term your beneficiary receives the policy amount.

Whole life insurance lasts you forever, but as you’d expect, it’s more expensive and can be a racket to deal with. There is a time and place for the product, but whole life insurance is generally sold, where term life insurance is bought.

Long-term disability insurance is often overlooked, but can be critical. More Americans become disabled at some point in their careers than you might think. For younger folks who are building a nest egg and have a long career ahead of them LTDI provides much needed security.

What would you do if you were unable to work longer than 90 days, or unable to go back to work in your career? Long-term disability insurance pays for you to not work if you become disabled until you reach retirement age.

Because the coverage is for a longer duration (generally 90 or 180 days from the time you become disabled to when you are 65), LTDI is more expensive the younger you are. Also you will still need to save for retirement, so you need to make sure you buy enough!

Umbrella insurance lives up to its name as a policy or rider that is an overarching, catch-all insurance for your personal and business insurance. It sits on top of all of your other property and casualty policies providing additional coverage. On the plus side, it isn't expensive. Your policy should cover a large amount of your net worth at risk to lawsuits.

It can be a smart to purchase umbrella insurance through your regular P&C carrier. It incentivizes them to take care of you, as they are the backstop of low liability limits. It would also seem to stop finger pointing when it comes time to make a claim.

Being well insured isn't just about being covered - It's also about optimizing the coverage you have.

Most clients we see have inappropriate liability limits on their property and casualty policies. When you are driving on the road with electric cars that cost hundreds of thousands, you better make sure you are covered!

Your umbrella policy can create a forcing function to set appropriate limits on p&c policies. The reason being is the carrier doesn't want to assume more umbrella risk than they need to.

Another consideration is naming beneficiaries on policies. Insurance and retirement plan proceeds (and several other financial instruments) will often pass through your estate direct to the beneficiaries when you pass away. This allows the money to go where you intended it and go outside of probates (more on that below!)

2. Finding the Planning Partners

There’s plenty more to take into consideration when it comes to asset protection and estate planning outside of the different insurance policies you have.

As you begin estate planning, I encourage you to spend the right amount of time finding a competent estate attorney who will understand your situation. When the time comes and you pass on, this will be a tough time for your family. You want to make sure you’ve done everything you can to ensure your estate directives are clear and your family is set up for the future.

You might look at setting up a revocable trust or family partnership to consolidate ownership and simplify the probate process. By titling your assets in a family partnership, you’ll avoid having to move hundreds of different assets in probate, making it much easier (and more private) for all parties involved.

As you plan your estate, it’s important to consider putting together a written will, naming beneficiaries on qualified accounts and policies, and naming guardians for kids if applicable.

Another aspect to consider is power of attorney. This can cover a wide variety of life occurrences such as:

• Who will take care of you if you become incompetent?
• Medical directives and how you want your care handled.
• Who will take care of your children if you are unable to?
• What happens to your money once you pass? For example, will you have the same person handle insurance proceeds and life estate that cares for your children? Or will you create a check and balance there?

Financial planning for your life and death is necessary as our lives get more complex. I recommend you consult with a Fee Only planner, build a plan, and keep it updated. It is time and money well spent to take care of you and the people you love.

Until next time,

Mitchell

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