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How do you know

Peter T. Waldron

“I have it all done,” that is a statement that I have heard multiple times over the years when I ask about their long-term financial plan, I respond with, “how do you know?” You must have your strategy tested with a real-life scenario to know for certain that you “have it all done.” There are a few major life events that can test your strategy: death, a major health event (disability, stroke, dementia, etc.), retirement, divorce, the sale of a company, or receiving an inheritance. You can plan for the worst, but it is not until a major life event occurs that you can be certain your plan will be successful. Over my next six articles I will go in-depth and analyze these six major life events and how they can adversely affect your plans. In this article, we will explore what is commonly overlooked in the event of a death.

No one wants to think about their own mortality but it is a certainty that we will all face at some point in our life. Planning for this eventual reality is important for your loved ones after your passing as they are the ones who will be left with any burdens of responsibility. The following things should be taken into consideration when preparing a financial plan upon your demise.

First and foremost, having an estate plan that clearly lays out your wishes for your beneficiaries so they easily understand. It is important to manage the transition of wealth from one generation to the next, since we do not know when we will pass, it is best to be prepare for your family. By including your beneficiaries (spouses, children, grandchildren, and/or charities) in the estate planning  conversation, it requires them to understand the complex elements of investing, taxation, and ownership. Most importantly, it is the ability to tie all these elements together to allow your beneficiaries to make prudent decisions. Often, beneficiaries are not capable of handling the fiduciary responsibilities, and if that is the case, then it is important to lean on professional fiduciaries or private trustees to help further your wishes.

There are several roles within an estate plan. We will focus on the following two roles: a guardian and a trustee. An important question to ask here is, “do the people you have selected for these roles have the necessary competencies to handle the responsibility?”

A guardian can loosely be defined as the replacement parents for a minor. There are many important questions to consider when choosing a guardian. Will your guardian raise the children the same way you would? Will they instill the same values and morals that you want them to grow up with? Will they take your children to the church that you attend? Will they give them the love and support they need to be excellent citizens and overall good people?

A trustee is the person that you entrust to be the fiduciary for your finances. A question that must be asked before appointing someone as your trustee, is can this person handle the complexities associated with trusteeship? This role a trustee includes: estate equalization, tax payments, insurance, auditing, reading legal documents, and most important would be the hiring of advisors, such as attorneys, financial advisors, and accountants. Oftentimes, trustees of estates have never made any major financial decisions before, or if they have, not to the magnitude of what is required when they inherit wealth.

Lastly, a question that is frequently neglected is to ask, “is this amount being given going to be enough?” What is the right number? There are rules of thumb you can follow, but the reality is that “enough” is very specific to each situation and should be thought about prudently. Considering the future and mapping of financial needs is important when allocating resources at death. One of your beneficiaries might need more than another beneficiary. One beneficiary might be able to handle one type of asset, while another might need an appointed trustee to manage their wealth for them. Furthermore, your business partners/shareholders might demand an appointed trustee.

This article only scratches the surface of what you might consider when the thought of “do I have it all done?” comes yourto mind. Working with an advisor or a team of advisors will help you answer these questions. My next article will explore the financial impact of a major health event. “Preparing for death is one of the most empowering things you can do. Thinking about death clarifies your life.” —(Candy Chang)



Peter T. Waldron: California Insurance License #0E47827. Peter T. Waldron is a registered representative of Lincoln Financial Advisors, a broker/dealer, member SIPC, and offers investment advisory service through Sagemark Consulting, a division of Lincoln Financial Advisors Corp., a registered investment advisor, Spectrum Wealth Partners is not an affiliate of Lincoln Financial Advisors. 3201 Danville Blvd, Suite 190, Alamo, CA 94507. Insurance offered through Lincoln Marketing and Insurance Agency, LLC and Lincoln Associates Insurance Agency, Inc. and other fine companies. This information should not be construed as legal or tax advice. You may want to consult a tax advisor regarding this information as it relates to your personal circumstance. The content of this material was provided to you by Lincoln Financial Advisors Corp. for its representatives and their clients.


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