Thursday, December 5, 2013


Forgetting to Update Your Beneficiaries and Other Estate Planning Horror Stories

            For many workers and retirees in the public sector, having a serious discussion about estate planning is almost as exciting as touring a funeral parlor.  Thinking about the impact that serious illness or death will have on your family is something most of us would rather not do.  Similar to how life insurance is actually ‘death insurance,’ most of estate planning is really ‘sickness and death planning.’  Even though it is uncomfortable and takes a bit of time, getting an estate plan in order is something everyone should do.
            Estate planning is not only for the wealthy because everyone benefits from planning for the possible (serious injury or sickness) and the inevitable (death).  Taking care of a few simple things ahead of time helps family members move on after a serious illness, injury or death without having to deal with a lot of the problems caused by a lack of planning.  As you read on, you’ll find a handful of ideas that can be carried out immediately to ensure that your loved ones will not have to needlessly suffer emotionally and financially.
            Although you may not realize it, chances are that you have already done some sort of estate planning.  If you have named a beneficiary for your 457 plan, IRA account, or life insurance policy, then you have already done some estate planning.  The best part is, you didn’t even have to spend any money!
            The very first step in planning for who will receive your assets when you pass away is to update your retirement plan beneficiaries.  Is your ex-spouse still listed as a beneficiary of your 457 plan?  If so, then it’s best to review and update all of your plans as soon as possible.  Did you name your children as beneficiaries but eventually have a falling out with one of them?  If you have tried everything possible to repair your relationship, but were not able to, then it’s time to update your beneficiaries.  Lastly, give some thought to what will happen to your retirement plan assets in the event your main beneficiary passes away before you or around the same time.  For example, if you and your spouse are killed in a car accident and have not listed any secondary beneficiaries, while the kids will most likely get your assets, if your accounts have to pass through the court system to determine who gets what, then part of their inheritance will be chipped away by court costs and attorney fees.
            If you plan to or already own assets with someone, another way to take care of some estate planning at no cost is by titling your property so that at death, your half automatically passes to the other co-owner.  For example, if a husband and wife want to, they can title an account as “joint tenants with right of survivorship,” meaning they are 50/50 owners and when one spouse dies, the other one automatically becomes the only owner.  By titling property this way, your assets avoid being dragged through the court system.
            So far I’ve covered a very basic estate planning technique that anyone can do, and the good news is you can designate your beneficiaries without spending any money.  Now, however, it’s time to cover some things that require a bit more planning and money.  For starters, everyone needs to have a valid will.  No exceptions!  By writing a will, you are letting the entire world know whom you want your assets to pass when you die.  Remember though, accounts like your 457 plan will automatically go to the beneficiaries listed on your account, no matter what your will says.  One of the drawbacks of having assets pass on to family and friends through a will is that the local court has to oversee the distribution of your assets, which means some of the money will go to pay attorney fees and court costs.  Even though hiring an attorney to draft a will is going to cost you some time and money, you can’t afford not to have one. 
            Because of the nature of your job, the chances of suffering a serious injury is a lot higher for you than it is for someone who doesn’t make a living dealing with dangerous people or burning buildings.  Unfortunately, way too many of you in public safety haven’t thought about who will make your health care and financial decisions in the event of a serious illness or injury.  By creating a healthcare power of attorney (HCPOA) and a durable financial power of attorney, if you wind up not being  capable of making financial and health care decisions, somebody can step into your shoes to make those decisions for you.  Most often, a husband and wife will grant each other a power of attorney so that medical and financial decisions can be taken care if you become incapacitated.
            Death is an inevitable part of life, but for police officers and firefighters, quickly coming to terms with an early death is an unofficial requirement of the job.  Although an early death will be painful for your family, it will be even more painful for your spouse and kids if they have to watch as you’re kept alive by a machine with no reasonable chance of coming out of your current state.  If only you could speak, you would tell your doctor not to keep you living; the emotional burden is too much for your family and unnecessary medical costs will drain your assets.  However, this dreadful situation can be avoided.  By creating a living will, which is what I call a “dying document” you can let your wishes about being pulled off of life support under certain circumstances known to your doctors and family.  The language in a living will may read something like this: “If at any time I suffer from an incurable and irreversible injury that my physician thinks is terminal, then I don’t want any medical treatment that is going to unnecessarily keep me living.”  Basically, you are telling your doctors and family that if you are in really bad shape and there’s no chance that things will turn around, then it’s time to check out for good without anyone interfering. 
            The importance of having your estate plan in place, especially for law enforcement officers and firefighters, cannot be stressed enough.  Even though it’s uncomfortable thinking about serious illness, injury, and death, you still need to make sure your assets will pass to those you care most about as easily and at the lowest cost possible.  Like I showed you, there are a couple of very easy and free ways to make this happen.  There is also a way to make sure that if severe injury or illness strikes, you can have someone – usually a spouse – make your healthcare and financial decisions for you.  By following through on some of the ideas that I shared, you can make things a lot less uncomfortable for your loved ones should the realities of your job pay you an unwelcomed visit.  Of course, it’s best to speak with a competent, experienced financial planner and estate planning attorney to decide which estate planning techniques best fit your individual situation.

Securities and advisory services offered through Ausdal Financial Partners, Inc.  Member FINRA/SIPC  5187 Utica Ridge Road Davenport, IA 52807  Davenport, IA 52807  563-326-2064  Public Retirement Planners, LLC and Ausdal Financial Partners, Inc . are separately owned and operated.

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