Safeguard Your Legacy

Safeguard Your Legacy

May 22, 2024

How do you avoid the risks that can interrupt the best laid plans and negate the most competitive investment returns?  We focus on risk management before we focus on investments.   Investments are opportunities but these risks pose serious threats to their success.


What are the hidden dangers in your financial plan?


Interruption to the income you depend on to support your lifestyle.  


If your or your spouse are still working, your family is probably relying on your income to support their lifestyle. 


  • If you die prematurely, life insurance is needed to replace income or to hire the help required to replace the support of a stay-at-home spouse.   A quick rule of thumb is your annual salary divided by an assumed rate of return. If your salary is $100k and you can assume a 5% annual return, you will need $2mm of life insurance to replace your income.


  • What happens if you become disabled?  Most employees have some form of disability insurance through their employers.  But you may want to consider a supplemental policy to increase your benefit, especially if you are the sole breadwinner.  If you are a business owner, you may not have sufficient coverage which is a risk to both your family and your business.


If you are already retired, consider having this insurance conversation with your adult children.  If something happens to them and they are not appropriately covered, will their family need to rely on you for income?


If you are retired or planning to retire soon, carefully consider your income sources. 


  • When should I take my Social Security is a common question.  The answer is not the same for everyone and you should do a social security optimization analysis before you make that choice. Remember that the longer you wait to start collecting, the higher your benefit will be and upon the first death, the surviving spouse gets the higher of the two benefits for the rest of their lives.


  • If you are lucky enough to have a pension, you will need to do a similar analysis before deciding how to take that as well.  Many pensions give different options for distributions: lump sum, survivor benefits, etc. Also, if you are relying on that pension for a good portion of your lifestyle needs, be sure it is well funded.



Risks to the assets that you are counting on to fund your retirement. 


We spend our working lives accumulating wealth and investing to provide us with the retirement that we dream about.  But what are some of the risks to our nest egg and how do we protect ourselves and our assets from liability.


  • Do you have children or grandchildren who drive your car? Young drivers can be a huge risk.  Look into the possibility of buying them insurance in their own names and have their car titled to them as well once they turn 18.


  • Do you own rental property?  Whether it’s an investment property or a second home that you rent seasonally, you should consider owning this type of real estate in the name of a separate entity such as an LLC.


  • Do you own planes, boats, RVs, jet skis, etc?  These create enormous potential liability.  They can also be owned by a separate entity and should be properly insured.


  • An umbrella policy is a simple way to provide additional protection against these types of liability. Be sure to take into consideration the total value of your assets when determining how much total liability coverage that you need.  You should be insured for at least the amount of your net worth.


  • Have an insurance professional review your homeowners and auto policies to ensure that you are properly covered.


Long Term Care expenses can be a significant risk to your retirement. It is a common misconception that these costs are covered by Medicare, they are not.


  • The Administration on Aging estimates that close to 70% of Americans 65 and over will need some form of long-term care services in their lifetime. While the level of care varies from person to person, the current annual cost of home health care in New Jersey is about $66k per year and about $177k per year for nursing home care.


  • An extended illness can quickly derail a retirement plan, especially for the surviving spouse. You should have a long-term care analysis run to compare different types of insurance policies and options that might be right for you.


Risk to the legacy you wish to leave behind for your family.


  • If you have not seen an estate planning attorney or reviewed your documents in at least 5 years, this should be a priority for you. All your legal documents; wills, trusts, powers of attorney, health care directives and living wills need to be reviewed for potential updates every 5 years.



  • Account titling supersedes anything written in a will. Most joint financial accounts are open as Joint with rights of survivorship.  This means that the full value of the account goes to the joint survivor.


  • Another possibility is using the title joint tenants in common, which splits the value of the account upon the first death 50% to the survivor and 50% to the deceased’s estate.


  • If a revocable trust is right for you, your accounts and potentially your property must be titled in the name of that trust.


  • Beneficiaries are assigned to specific account types like life insurance, annuities, or retirement accounts.   It is essential to remember that beneficiary designations supersede all else.

  • If no beneficiary is assigned, the probate court will decide who gets your assets. For that reason, be sure to name both primary and contingent beneficiaries.

  • Keep beneficiary and TOD designations up to date and review them periodically.

Remember to consider the age and financial abilities of your beneficiaries. There are lots of ways to leave money in your will or a trust to protect your family from bad decisions, divorces, and legal issues. What is right for one of your family members, may not be right for all.  Don’t be afraid to discuss your concerns with an estate attorney who will help structure you plan.