More By This Author

Current Issue

Current Issue

Posted: August 21, 2012

Seven essential financial questions: No. 7

Is your estate planning in order?

Michael Hood

People often think of estate planning as having a will and owning life insurance. Both of these are important items to consider, but there is much more to this topic. The essence of estate planning is making decisions today about what you want to have happen to you, your family and your assets when you can no longer control your circumstances because of death or disability. The document that directs these activities is a will or trust. In this legal document you are designating who will be your beneficiaries, who will be in charge of distributing your assets, and what sort of controls you want put in place. If you have young children, you will choose who will be their guardians and direct how money will be handled for them.

You will want to designate someone to oversee your financial and medical affairs if you become unable to do so yourself. This involves putting in place special “powers of attorney” documents. This is separate from your will and is an important part of your estate planning process.

These are all very important decisions, and you are not going to get a “do over” if they are implemented incorrectly. I strongly recommend that you meet with a lawyer who specializes in estate planning. There is no “one size fits all” set of recommendations. It is well worth the time and money to meet with a lawyer to get advice that is unique to you.

Life insurance benefits are often used to fund estate planning for younger families who have not had the time to accumulate financial assets. You should have enough life insurance to pay off mortgage debt, fund college costs, and replace some or all of your work income for your surviving spouse.

Consider what would happen if you became disabled. Losing your ability to work could quickly destroy your family’s financial situation. Many employers offer long-term disability coverage, and some provide it as part of a benefit package. Take the time to find out exactly what coverage you have available. If your employer does not offer coverage, or if you are selfemployed, you should consider purchasing an individual policy. Most policies cover a set percentage of your annual income until you are able to
go back to work or until you reach retirement age.

There can be other needs for insurance coverage that are beyond the scope of this discussion, including long-term care insurance. I recommend getting the help of a financial planner who understands the use of insurance as part of the financial planning process.

Once you have your estate plan in place, review it at least every five years to determine if any changes in your family situation require changes to your plan. Having the various aspects of your personal estate plan in place now will provide real comfort to you and your family.

 

Michael Hood, CIMA®, is a Certified Financial Planner™  and First Vice President of Wealth Management for Morgan Stanley Smith Barney in Denver. He can be reached at 303-925-9648 or michael.j.hood@mssb.com. Visit his website at http://fa.smithbarney.com/hood.

Enjoy this article? Sign up to get ColoradoBiz Exclusives. The opinions expressed in this article are solely that of the author and do not represent ColoradoBiz magazine. Comments on articles will be removed if they include personal attacks.

Readers Respond

Commenting is not available in this channel entry.

ColoradoBiz TV

Loading the player ...

Featured Video