Estate planning and personal risk management are usually not dinner table topics. And if there is going to be a conversation about personal finance among friends and family, these days a betting person would guess Dogecoin or AMC’s stock price would come up before wills or life insurance. That’s okay, they certainly are more interesting! But just because something is not interesting doesn’t mean it’s not very important. The information below is definitely less interesting than the GameStop stock drama, yet it is important to the financial wellness of your family.
Estate planning can get complex very quickly. While it is important to get a professional involved to determine what level of estate planning is appropriate, a basic “Last Will and Testament” document is typically a great start for every adult to have. So why do you, your family members, and friends need a will? A will ensures that property and assets get distributed according to your wishes. This distribution is done by a person of your choosing (the executor of your estate). Additionally, your named guardians will be responsible for your children. Without a written and legal will, a court process governed by state law determines who inherits assets and who raises children. This legal process is usually far more expensive and time consuming than setting up an estate plan. If you are married or have children, you certainly need a will. Even if someone is single and without dependents, they should strongly consider having a will if they have a positive net worth. A will eases the estate transfer process, reduces the potential for conflict among family members, and eliminates “room for error” in court interpretation.
So, what about life insurance – do we need that? Most of us also avoid talking about life insurance (or at least procrastinate on getting it)! According to Business Insider, that leaves more than two-thirds of Americans underinsured, despite a majority having some coverage. The key distinction here is whether merely having some life insurance is fine – and for those that need it, the answer is usually no. Basic coverage through an employer usually does not go very far when replacing an income, paying for childcare, or funding bigger goals like paying off the mortgage or funding a college education. As personal savings grow, children become adults, and retirement nears, life insurance can become less important or even unnecessary. Every situation is unique, but most people with dependents should get professional guidance from an independent financial advisor to ensure they have adequate coverage. The good news is that term life insurance can be very affordable, unlike whole life insurance and other complex policies. Whole life policies remain in place through a policyholder’s lifetime and pay a benefit at death, but these can be very expensive and provide coverage long after it is no longer needed. Term insurance is in place for a set period (such as 20 or 30 years) and only provides a benefit if someone passes away during that time. It is meant to act like true insurance – protecting your loved ones against an untimely death, when lost income during working years and inadequate savings could severely impact their financial wellbeing.
Here are Boardwalk, we believe in financial planning because our choices beyond the portfolio have large impacts – financial and otherwise! Actionable steps in estate planning and personal risk management have controllable outcomes (unlike the markets) and the feedback we have received from our clients demonstrates the peace of mind and financial benefits of proper planning. We encourage everyone to seek out quality, independent advice to ensure they have adequate life insurance coverage and estate planning in place.
