Are you between ages 40 and 55? If yes, then congratulations! Research has shown that you are in your peak earning years. And that is a very good thing. Chances are good that you have some expensive life events going on right now, unlike when you were among the Married Couples without children. Do you have children who are college-bound or already there? Do you have a wedding scheduled (or one or more down the road)? Perhaps you are beginning to help aging parents with personal, health care and financial responsibilities.
Can you say Sandwich Generation?
I know you may be busy and are likely tired, very tired. Nevertheless, this would be a good time to create (or revisit) your estate plan, let alone make sure your adult children and parents have their legal ducks-in-a-row, too. [For some background reading on fundamental estate planning for newly-minted adults, read our blog article, Responsibilities, as Well as Rights Come With Turning 18.
Unfortunately, many married couples mistakenly believe they can make personal, health care, and financial decisions for one another should either spouse become legally incapacitated due to a serious injury or illness. Nothing could be further from reality!
Without proper estate planning in advance to appoint your spouse as the incapacity decision-maker, he or she will not have the legal authority to make even fundamental decisions for you (or affecting both of you). For example, medical privacy laws will bar access to your medical records and the ability to consult with your attending physician, financial laws limit control over your finances, and IRS regulations will prohibit filing a “legal” joint income tax return … for starters.
Unless you legally appoint the decision-maker of your own selection in advance through proper estate planning, then a probate judge will select one for you. While the judge will likely appoint your spouse, the probate court process to accomplish this is expensive (it employs at least three attorneys), discloses your private personal and financial information to the public record, and is a real hassle for your spouse.
While the formal name for this probate process is guardianship or conservatorship, we affectionately refer to it as the lawyer full-employment program.
Did you know that, in the absence of proper estate planning, your assets may be distributed after death based on “one-size-fits-all” state laws written for people who do not have their own estate plan? Of course, this impersonal estate plan written by state lawmakers may not reflect your own unique circumstances and objectives for your spouse and assets.
In fact, depending on how you titled your assets and how your beneficiary designations are arranged, you may disinherit your own spouse and force your spouse to sue your estate!
When it comes to your children, great care should be given to protect any inheritance both for them and from them. For starters, wealth representing a lifetime of your hard work and thrift can be squandered in very short order. Dollars earned just spend differently than dollars inherited. In addition to good, old-fashioned squandering, an inheritance can quickly vanish through divorces, lawsuits, and bankruptcies.
Fortunately, with proper (and very careful) estate planning during your peak earning years, you can provide an inheritance that is protected for and even from your own children. Remember, two things you cannot choose in life are your own folks and the spouses of your children.
Are your parents already in or considering a transition to some form of long-term care? If yes, have you noticed how expensive the continuum of care is? From in-home assistance to assisted living to skilled nursing the expenses can destroy savings and investments created over a lifetime of hard work and thrift.
Your peak earning years are the perfect time to lock-in a long-term care insurance policy while you are still able to qualify physically and mentally. Some versions of coverage only pay if you need long-term care assistance, but others can now do double-duty and turn into life insurance if you do not need such assistance. That is a popular alternative to traditional long-term care insurance.
To preserve assets, because there is a 70% risk of needing long-term care once you reach age 65. Curiously, 70% of people think they will not be among those 70% needing care (i.e., denial) and 70% of people think Medicare will pay for it (i.e., ignorance)! You do not want to be in that 70% who are in denial, ignorant, or both.
If you need assistance with the activities of daily living (e.g., eating, bathing, dressing, toileting, and transferring), then you may want to hire a professional to take care of you instead of your children.
When you are ready for help with your long-term care planning through appropriate insurance, then we can help you find that, as well.
Fortunately, we can help you avoid the lawyer full-employment program and replace that impersonal, state-written, one-size-fits-all estate plan with one we design together for your unique circumstances and objectives. We even help you coordinate the beneficiary designations on your life insurance and retirement plans with your estate plan to avoid unpleasant, unintended consequences.