FAQ
You Have Questions – We Have Answers
We begin every relationship with an introductory meeting, to learn about each other and to identify if we are a good fit for your needs. If so, we prepare a comprehensive financial plan as part of our Initial Engagement (IE) Service. This process can be completed with 2-5 meetings, depending on the complexity of your situation. At the end of the IE, we provide written recommendations with specific action items to improve your financial situation. We then help implement these recommendations as part of our Full Engagement (FE) Service. We would then work with you on an ongoing basis making adjustments as needed based on changes in your family situation, changes in the tax code and estate laws, changes in your health, changes in employment, changes in goals, and more.
Give us a call and we’ll schedule an introductory meeting. Don’t be shy… your future depends on it.
We have a deeper technical knowledge of the tax and estate laws than most advisors. Our financial planning process monitors your situation on an ongoing basis, and we take the lead in implementing the numerous items need to keep your plan on track.
Our investment process not only leverages four specific factors that have been proven to enhance return and reduce risk, it is also customized to best fit your overall financial goals. Shakespeare combines technical knowledge, with ongoing advice, the ability to implement change on a timely basis, and investing your assets in a manner that meets your specific needs. The result is you win.
We are a Fee-Only Financial Advisor, which means we do not accept any form of commission. This creates a higher level of transparency and eliminates the conflicts of interest present with most financial advisors. Our ongoing fee is determined at the end of our Initial Engagement Process and is based on the level of complexity in your financial situation relative to the work we will do. We charge an asset management fee comparable to most advisors and mutual funds but provide significantly more value to our clients. Our fees range between 0.50% and 1.5%.
A ‘Fee-Based’ advisor is able to charge an advisory fee to manage assets, but also has the ability to sell you financial products that pay commissions (annuities and insurance products). This creates conflicts of interest, with the advisor having the ability to earn higher compensation if they steer you into certain products. We are a Fee-Only Advisor, working only on an agreed upon fee. This creates the transparency necessary for you to receive objective advice and leads to a trusting relationship.
So how do you find out what type of advisor someone is? Ask your advisor what broker-dealer they are registered with. If they are a Fee-Based advisor, a broker dealer will be listed on their website and business cards, and you’ll see words like ‘Securities offered by…..’ and acronyms like SIPC and FINRA, followed by lots of legal disclaimers. Fee-Only advisors like Shakespeare, must register with the SEC and do not have to register with a broker dealer.
Shakespeare always operates as a Fiduciary, which means that we have a legal requirement to put your interests first. If you’ve never worked with a fiduciary adviser, now is the time to find out the difference.
We do not sell any financial products. Given our deep understanding of your financial situation relative to your goals, we will provide insurance advice based on your needs. We will then work with an insurance professional to ensure you get the right product at the right price. Having Shakespeare properly quantify your insurance needs, and then serve as your advocate in this process, ensures you get the best results.
The world is rapidly changing. If you are not actively monitoring your financial plan and making adjustments, you will not achieve optimal results. Many of the changes our clients experience at various times of their lives include changes to tax laws, changes to estate laws, employment, income, family situations, health, and more. You need an adviser who will make necessary adjustments to your plan as things change.
We have seen far too many horror stories of people who haven’t worked with an advisor on an ongoing basis. As a result, we have chosen to work solely on an ongoing basis with our clients.
Shakespeare’s minimum investment is $1,000,000. We implemented this minimum so we can maintain a high level of service to our existing clients.
Our clients have several commonalities, including:
- A more complex financial situation relative to the average investor.
- Several moving parts to a financial plan, including multiple retirement accounts, investment accounts, real estate investments, second homes, businesses, LLC investments, complex family dynamics and more.
- They have saved consistently throughout their lives; and their asset levels now require the guidance of a more sophisticated advisor.
- They are preparing for retirement, needing help navigating Social Security, Medicare, 401k Rollovers, Pension distributions, tax planning, etc.
- They may be experiencing life transitions, such as loss of a loved one, divorce, widowed, business sale, retirement, career change, and more.
- Their number one asset is their family, and they have a strong desire to provide contingency planning for their family. They want to make sure they have a trusted advisor in place to help manage the family’s finances before a sickness or death occurs.
- Many live modest lives but have accumulated significant assets.
We have a robust Investment Management Program that is customized to best meet the needs identified in your financial plan. Our process is built on academic research and focuses on four factors of return that have been proven to enhance return and reduce risk. We have taken the guesswork out of the investment process and instead rely on trusted disciplines to add value. We build and manage portfolios based on your real world needs, such as income replacement and risk management. We have software to help us implement and monitor your portfolio and make changes to keep you moving forward.
We have clients located throughout the country. Based on our sophisticated financial planning software that allows for easy collaboration, we are able to serve clients throughout the United States.
A comprehensive financial plan will help you answer this. Include all current and future income, expenses, and assets. Stress test your plan based on various ‘What If’ scenarios to anticipate future surprises. A skilled financial advisor will assist with this process.
Properly structuring withdrawals from various types of accounts to coincide with your tax situation, both present and future, is critical to helping you maximize your finances. Trying to anticipate your future Required Minimum Distributions (RMDs) and Social Security and Pension payments is needed to best answer this question.
Medicare begins at age 65 and is a relatively cost effective health insurance. Prior to age 65, there are an array of options, including Cobra Insurance and individual health insurance purchased through the Healthcare Exchange/Marketplace. Identify if you can qualify for tax credits for your health insurance and understand the many ways to structure an individual health insurance policy. This is a relatively complex issue with unlimited choices to consider.
The age of your spouse impacts Social Security claiming strategies, pension elections, insurance decisions (life, disability, LTC, health), required minimum distributions, investment allocations, withdrawal strategies, tax planning and more. Your advisor should incorporate your age differential into your financial plan and stress tests various planning strategies and scenarios.
Additional earnings makes every financial plan last longer, even if you earn a modest income. When it comes to earnings, more is almost always better. Running a ‘What If’ scenario to your financial plan will show the impact of the extra earnings on your plan.
Retirement planning is a process that lasts throughout the entirety of your life. You should be constantly reviewing your budget, income plan, tax plan, RMDs, charitable contributions, estate planning, insurance planning, gifting, and more. Surprises in retirement plan are best identified early, to minimize the impact to future years.
The answer to this question is hidden in your financial plan. Understanding your current and future income, assets and expenses will guide you to the best answer. If your employer offers a 401k matching contribution, you should always try to earn this ‘free’ money before considering other options. After that, the answer is truly dependent on your situation.
If you have to choose between the two, we recommend saving for retirement first, and paying tuition next. The old adage is you can borrow money to pay for college, but you can’t borrow money to pay for retirement. If you aren’t able to pay as much of your children’s tuition as you wanted, keep in mind you can help them pay back student loans in the future if your employment and finances allow for it.
The simple answer: If you think you’ll be in a similar or higher tax bracket in the future, relative to today, then you should convert. In addition, if you hope to leave assets to children, the Roth IRA is the ultimate asset to leave them because of its tax free status. For the most accurate answer, a comprehensive financial plan is required, along with consultation between your financial and tax advisors.
A beneficiary form trumps a Will or Trust, and should be coordinated with your overall estate plan. Making sure the beneficiary form is properly worded is imperative to fulfilling your intentions.
Retirement accounts do have asset projection features and are generally exempt from bankruptcy and other judgements, but still subjected to seizure in cases of fraud. If you are facing financial distress and bankruptcy, consult an advisor before making withdrawals.
Most people spend 80-100% of their typical budgets in the first few years of retirement, then settle into a pattern of spending that is closer to 80% of their last years’ expenses. Everyone’s situation is different. The key is quantifying your expenses, making sure you account for all spending, including some unexpected expenses.
Both! We recommend the beach from October through February with a move to the mountains from March through September — but we’ll leave that up to you.
Market timing is a concept that’s proven to fail. When you make short term changes to your asset allocation, you need to be correct twice – when you sell and when you buy back. The markets are designed to win, appreciating 75% of the time since 1926. Pick an appropriate asset allocation for your risk tolerance and stay with it. Along the way, rebalance your portfolio to maintain your target mixture.
It’s been proven that a vast majority of active mutual fund managers don’t beat their benchmark over time. However, be aware of the design flaws present with most passive index funds. No one solution is perfect.
Most index funds are cap weighted, meaning the bigger companies encompass a larger share of the index. As a result, most index funds overweight companies that are overvalued. This results in higher volatility, which is felt the most during market downturns and during periods where asset bubbles persist.
Smart Beta funds operate like an index fund, but they use proven factors of return to determine the weighting of each security in a fund. These funds tend to provide a better risk/return profile than cap weighted index funds like the S&P 500. If employed with an appropriate asset allocation and strict rebalance strategy, your probability of success increases significantly.
A person’s asset allocation is determined by a number of factors, including: current age, time horizon, risk tolerance, income needs, return objectives, legacy goals, and more. It can be appropriate for a retired client to have an aggressive portfolio and a younger client to have a conservative portfolio. The right mix depends on many factors and will change over time. Your advisor should provide a specific recommendation based on the many factors.
The 3 years prior to and into retirement are the years a person should be most conservative with their investment mix. This is the stage of life when you can no longer rebuild your assets from a bear market correction, and when the withdrawal timeline (life expectancy) is the longest. Be sure to meet with your advisor regularly to review your asset mixture.
The financial marketplace is dominated by institutional investors and mutual funds that control trillions of dollars. As an individual investor, you’re competing with these large investors and the deck is stacked against you. The probability of outsmarting larger investors is low, especially over time. It’s imperative that you have a partner who understands the dynamics of the marketplace and uses the best tools on your behalf.
All things being equal, lower is better when it comes to investment fees. However, you tend to get what you pay for. We pay a little extra for safer cars, specialty brands, larger sizes, premium tickets etc. In investing, it’s the same concept. Look for value relative to cost.
Not necessarily. If you own the same types of securities in each account, you’re not diversified. Know what you own, and strive to own asset classes that work differently from each other in order to minimize risk and maximize return. Consolidating your assets into one account or with one advisor can actually provide a more diversified account, which is easier to administer.
It’s imperative to have a strategy that not only provides income and stability, but also provides a hedge against inflation.
Although an advisor (like Shakespeare) has an inherent conflict in this question, there are some points to consider. A Fiduciary Advisor is required to work in your best interest and to stay current with various financial products, laws, rules, research, planning strategies and more. In addition to shifting this responsibility to an advisor, you can also shift the risk to them. Few of us fix our own cars, prescribe ourselves medications, write our own Wills, fill our own cavities, complete our own tax returns or even cook our own meals, recognizing that others are better trained for the job. Having a trusted partner to guide you through unexpected events (market crashes, asset bubbles, a mindful of financial data, the risks of the markets, an appropriate withdrawal strategy, tax & estate issues, etc.), provides Peace of Mind and is a priceless resource. Finally, if you become incapacitated or die pre-maturely, having an advisor to take care of your family is an incredible asset.
It’s important that both spouses have a firm grasp of their family’s financial situation. Start with a conversation and begin attending all financial meetings together. Tell your advisor you’d like to learn more, be involved and included in all correspondence related to your finances. One-on-one discussions with your advisor will help jump start your efforts. There are countless resources available to you. Even if you are lacking in financial knowledge or experience, trust your instincts when dealing with advisors.
This is a common and legitimate concern. The first step to any problem is knowledge. Work with an advisor to learn about your situation and develop a financial plan. Part of this process will include a review of your budget and savings habits to determine any risks and opportunities. In addition, stress test the plan for ‘What If’ scenarios. These may include the pre-mature death of a spouse, divorce, or job loss. Once you understand the financial impacts of these situations, you’re better able to prepare. If your concern still persists, ask your advisor to introduce you to other women who have had similar concerns to learn more. Knowledge is power.
A good advisor represents the interests of both spouses and communicates openly with each of you. Have a conversation with your advisor about your concerns and ask to be included in correspondence and all decisions. If you’re not taken seriously, it’s time to find a new advisor.
Discrimination in the workforce still persists. Legal action is always an option but there are also other solutions. First, document all of your responsibilities and accomplishments at your job. Schedule a meeting with your boss to ask for their feedback on your performance and role. Make your case for having a larger role in the company and higher compensation. With any job, be sure you’re committed to lifetime learning and developing your skill set. If the company can’t provide a clear roadmap for your career, meet with a career counselor or head hunter to consider other options. In the 21st century, the workforce rewards high performers; and employers are always looking for talent. Take control of your career, as your earnings potential is a very significant asset. We should all be fairly compensated for our efforts.
Don’t be embarrassed. It takes a lifetime of experience AND the appropriate investment tools to make sense of all of the investment options typically available to 401k participants. An investment professional will likely take several hours of research to make an informed decision. Talk to your financial advisor and have them assist. The advisor should be coordinating your 401k investment allocation with the entirety of your other assets and financial plan. Review your beneficiary designation, making sure it jives with your estate plan. If you have children under age 18, consider leaving assets to them via a trust. Your advisor can facilitate this.
First, be sure you’re speaking with a marriage counselor to try and keep communication lines open with your partner and see if salvaging the marriage is possible. If necessary, consult with a divorce attorney to learn more about the process of divorce. Although divorce is extremely emotional, the legal process is relatively structured. If you live in a ‘no-fault’ state, it doesn’t matter if there has been infidelity or neglect. Financially, meet with an advisor that specializes in working with divorcing clients. They will assist the attorney in structuring the divorce decree, helping to calculate the division of assets and income. During this process, you will want to get a handle on what your new budget would look like as you transition to single life. This too helps structure the divorce decree. An advisor will assist in determining appropriate amounts to spend on housing, savings, insurance, entertainment, etc. After the divorce, meet frequently with your advisor to review issues that develop and to update your financial plan. After 6-12 months, you’ll have a much clearer picture of how your new life and your finances are working.
Losing a spouse is one of the most difficult things we face. It’s important to have peace of mind related to your finances so you can properly grieve and cope with other components of your life. A skilled advisor will meet with you a few weeks after your husband’s passing to handle a few critical issues. In this meeting, they will lay out a calendar of meetings over the following 6-12 months to deal with other action items. Consider incorporating adult children or a trusted family friend in the conversation to assist, as two sets of ears and eyes are better than one. Don’t hesitate to ask any and all questions or to ask for additional information. It’s important that you feel empowered and listened to as you learn to handle all of the financial decisions.
You should be communicating your concerns both to your husband and to your advisor. Have a meeting to specifically address this issue. The advisor can provide education and feedback that may ease your concerns. If not, the advisor should provide solutions and recommendations to both of you. If you’re still not comfortable with the result, get a second opinion.
There is a wealth of knowledge and many programs available to assist kids in improving their financial literacy. For kids ages 10-14, Junior Achievement is an excellent resource to start with. They will provide resources and come speak at your children’s school if you coordinate with their teacher. For kids 14-18, look into programs available at their high school, as most schools now offer financial literacy classes. Along the way utilize an appropriate allowance to teach them how to handle money, save, and give to charity. Share with them the basics of your finances. Teach them how to write a check, what happens when you withdraw money from an ATM, and how your paystub has deductions for taxes and savings. Have a financial advisor consult with your adult children and teach them the basics related to budgeting, savings, insurance, taxes, etc.
Begin planning at least 5 years prior to selling your business to maximize value… preferably from the first day you’re in business. Every decision you make should bear in mind a potential buyer and how they would value the decision.
There are lots of planning opportunities for business owners, if your assets are not liquid. These include maximizing retirement plan contributions, taking advantage of all available tax deductions and credits, diversifying your assets when possible, and more. Employing your children is a great way for them to learn the business, shift income to a lower tax bracket, and begin saving for their college tuition or even their retirement.
An income replacement plan will utilize the proceeds from your business sale to efficiently create an income stream (synthetic paycheck) to live on.
There are several strategies available to reduce current income taxes. Maximizing retirement accounts with a 401k and Profit Sharing Plan is a nice first step. A Cash Balance Pension Plan can also be utilized with a Profit Sharing Plan to defer up to $250,000+/year. There are several other advanced strategies depending on your entity type, time horizon and business plan. Contact us if you would like to learn more.
Yes. If a majority of your net-worth is invested in a privately held business, your other assets should likely be invested more conservatively. You want to refrain from owning investments that perform similarly to your business. For example, don’t own REITs if you are in a real estate intensive business.
There are several ways to facilitate the transfer of a business to a child. Some advanced techniques allow you to discount the value of the business when selling or gifting to family members, while still maintaining control of the business while you’re alive or until you choose to surrender control.
Losing a loved one is hard enough… having to deal with financial issues can be extremely difficult. We’ve created a checklist to identify key areas to address: Checklist – Death Of A Loved One A few weeks after the funeral get in touch with a trusted financial advisor to sort through the remaining issues.
Taking over the family finances after the death of a loved one can be daunting. Understanding what to do and locating all of your financial information can be overwhelming. We will help you take inventory of your situation, prioritize the pressing needs, and begin sorting through all of the issues. Patience, education and understanding are critical as we walk with you into the future.
When a spouse passes away, the surviving spouse keeps the higher of their two social security benefits, with the lessor benefit being eliminated. Just prior to starting a pension payout, the recipient must elect a survivor option. There are many payout options, with the most restrictive being 100% life only (which goes away when the recipient dies) and the most encompassing being 100% joint and survivor (which lasts for the longer of both spouses).
Some planning issues to consider include a review of all beneficiary designations to retirement accounts, life insurance policies, and bank accounts (POD). Beneficiary designations trump what is written in a will so it’s critical that your designations reflect your intentions. Survivors receive a step-up in basis on any taxable assets; so it’s likely you will NOT want to sell investments that have an investment gain. In addition, taking all losses prior to death can be a good decision. A Roth Conversion may make sense prior to death, especially if there is a surviving spouse. A joint tax return will be filed in the year of death which can create planning opportunities for the surviving spouse. It’s important to consult your advisors when your loved one is terminally ill.
The easy answer is to contact a trusted financial advisor or CPA.
Not surprisingly, the easy answer is to contact an attorney who specializes in estate law to have a discussion. Generally, the estate tax return is due nine months after the date of death.
If you’re the beneficiary to your spouse’s IRA and you are younger than your spouse, you may want to roll the IRA to your own. Their account becomes yours; and you can access it based on the normal distribution rules. You may want to leave the IRA in their name if you’re under age 59 ½ and have (or may have) a need to access their funds prior to your age 59 ½. Be sure to review your own beneficiary designation now that your spouse is gone, remembering that this form trumps what is written in your estate plan.
If you’re the beneficiary on a parent’s IRA, you will likely want to roll this IRA into an Inherited IRA in your name. Distributions must be taken beginning the year after death. Current rules require you to take a minimum distribution each year and to fully distribute the account within 10 years. Of course, you likely have the ability to take the IRA as a lump sum distribution; but this will create a tax liability (potentially large based on the size of the IRA and your income) and eliminate tax deferral into future years.
If you have appreciated securities in a taxable account, it’s more tax efficient to give shares of the security to the charity than to write a check. By giving shares of the security, you (and the charity) avoid paying a capital gain tax when it is sold, and yet receive the full value of the gift as a deduction.
A Donor Advised Fund (DAF) is an account that lets you pre-fund future charitable gifts, but take the deduction in the year it’s funded. For example, if you gifted $10,000 into an account now, you get the deduction this year, but can distribute the gift to any charities over future years.
Teaching children about your values is an incredible gift. Include kids or grandkids in your gifting decisions, allowing them to determine where some of your gifts will be given. If you disagree with their choices, it provides an excellent opportunity to have a discussion.
There are several ways to approach this situation. First, many people name charities in their Will, making a bequest upon their death. There are also charitable gift annuities and charitable trusts that provide you an income stream and a tax deduction for making the gift, with remaining proceeds going to the charity. Consult with your advisor to learn more about these sophisticated techniques.
There are lots of ways to support kids and grandkids while you’re alive and after you’re gone. You are allowed to gift $16,000 (2022) per year to any individual without filing a gift tax return. You’re allowed to pay an unlimited amount of health expenses or educational expenses for another person; and it’s not considered a gift. Gifting money above the annual exemption would require that you file a gift tax return; but it’s a great way to get family and friends assets while you’re alive (giving you an opportunity to impart valuable financial lessons). Within your estate plan, you’re able to set-up various trusts for the benefit of any individual. Trusts can have numerous constraints, if so desired.
Consolidating retirement accounts makes it easier to administer, maintaining a uniform beneficiary designation, asset allocation, and investment holdings. Rolling the old 401ks into an IRA offers unlimited investment holdings with lower administrative expenses than 401k plans. Rolling the assets to a new 401k may be a consideration, especially if you wish to convert non-deductible IRA contributions into a Roth.
The pension benefits from your old company may have a feature that allows you to do a lump sum distribution to an IRA, or continue the pension with the intention of annuitizing when you reach retirement age. A net present value calculation should be done on the pension and compared with the lump sum option as part of the process of determining which option to choose.
When you quit your job, you lose your group benefits of life and disability insurance. Review your individual insurance situation prior to quitting to make sure your family is protected in the event you get sick or pass away while between jobs. Review your cash flow situation to make sure you can withstand a long period without a paycheck. Any unpaid 401k loans become a tax distribution upon termination; so pay those off before leaving.
Your capacity to earn income is an extremely important asset, frequently the biggest asset for those under the age of 50. Before you quit your job, review your financial plan and consider all of your options. Transitioning into a new job that you would enjoy more, even if you made less money, might be a consideration that would allow you to work longer. Taking a few classes and acquiring new skills would help you transition into a new job.
Look before you leap into the world of consulting. You’re far more valuable as a consultant when you are employed than you are when you are unemployed. Make sure your financial plan can tolerate the loss of income and benefits when you transition into consulting; and be ultra-conservative in your revenue estimates. Having a significant cash reserve is important. Establishing a corporation (S-Corp or LLC) is a consideration to mitigate risk, provide the corporate structure to demonstrate you’re a serious business, and allows you to establish benefit plans.
When taking a job transfer, you will want to compare any changes to your income, benefit package, cost of living in a new location, moving expenses, quality of life, services and amenities, cultural activities, schools, state income taxes and more. Sometimes making more money results in having less.
Make sure you hone your computer skills, presentation skills, and wardrobe before beginning interviews. Focus on your strengths, particularly your work ethic and positive attitude. Most employers are willing to train specific skills. Once employed, consider the impact of your income on your family budget, your necessary savings rate, how to best utilize available corporate benefits, and more.
Each person has different goals in funding their children’s education. It’s important to map out potential expenses and how you will pay for them at that point. Have a conversation with your children when they are in high school explaining your funding strategy.
With multiple children attending college, potentially at the same time, mapping out your future cash flow and expenses is vital to your financial plan. It will be far more achievable to save money over time for this expense, than to try paying for it out of pocket.
Typical funding sources for college include: 1. Parent cash flow & savings; 2. Child cash flow & savings; 3. Scholarships from the university and others; and 4. Student Loans. As a parent, keep in mind you may help your child pay off student loans after they graduate, depending on your cash flow.
The Free Application for Student Aid (FAFSA) is the form that is used annually by current and prospective students to determine your eligibility for student financial aid.
While it is possible, it won’t be easy. College tuition costs have increased at a significant rate over the last two decades. As a result, even the best students with a strong work history will have a hard time covering the full cost. Finding a low cost college, scholarships, student jobs and student loans can definitely help. Paying for college has become a family expense, using time and a team effort to pay the bills.
There are scholarships and other incentives a university can offer to make the cost more palatable for your family. Consider applying to comparable universities as means of negotiating a better price. The university system is big business; and creating competition between schools for your child (and checkbook) can lead to cost savings.
If you were disabled or passed away unexpectedly, could your loved ones survive without your income? Would their standard of living decrease as a result? We insure our cars and our homes; yet the single greatest asset for most people is our ability to earn an income. It’s important to insure your family for the potential loss of your income. Ask a parent, grandparent or mentor if they know anyone your age that died or was disabled. Find out how their family survived without them and if they should have done anything differently.
Have an advisor review your financial plan, incorporating current and future income, assets, and expenses. Don’t forget about unexpected expenses like college tuition, health insurance, mortgage payment, travel, weddings, and more. Next, stress test the plan for a disability or premature death. If your plan works, you likely don’t need insurance. If not, you can cover any shortfall by purchasing insurance. If you anticipate support from extended family in the event of your death or disability, be sure to include them in your discussions so everyone has a common understanding.
If you think your budget can’t afford insurance premiums, than your family really can’t afford to live without your future income stream. Prioritize your expenses. It’s not uncommon for people to realize they spend more money on coffee, tobacco, alcohol, gym memberships, cell phones or eating out (each individually) than they would on purchasing proper insurance. Find out how much $50 or $100/month of insurance would buy you. You may be pleasantly surprised at how affordable it is.
Review old insurance policies with an advisor to learn about your options, in the context of your financial plan. You have several options with a permanent life insurance policy: 1. Redeem the cash value and terminate the policy. You will pay income tax on any gain. 2. Determine if the policy can sustain itself in future years if you stop paying the premium. It’s possible the policy allows you to make changes to make the current cash value work more efficiently. 3. Maintain the policy as a safety net for your family. Insurance proceeds at death are always a welcome addition.
If you have a long term disability and don’t have proper LTC or disability coverage, the life insurance cash value could be used to pay bills OR the death benefit could be used to ‘reimburse’ your survivors for money that was spent out of pocket on your end of life care.
Most insurance policies are based on one person’s life. Second to die is based on the lives of two people, and pays to beneficiaries on the death of the second insured. For couples that want to provide a specific benefit to their children, or to charities, upon their death, this is a tool to facilitate those plans. Some families use this type of insurance to provide needed liquidity at their death. If you have substantial assets invested in a business, farm or real estate, then second to die insurance could be used to pay any estate taxes that may be due on the second death, or simply provide liquidity to your heirs. Second to die insurance, because it is based on two lives, allows for easier underwriting, even if one spouse is considered uninsurable.
A thorough financial plan will stress test various LTC scenarios to see how you can manage with a long term illness. Even if your assets can withstand an extended illness, many people choose to shift the risk to an insurance company. Be sure to review non-financial considerations, including whether your children are able to assist in your care, if you spouse will be alive and able to assist with your care, if your spouse could maintain the same standard of living during and after an extended long term care illness, and if you would opt for a higher level of care if you had insurance.
If your children or their spouses are disabled or die pre-maturely, your grandchildren will likely suffer if their parents aren’t properly insured. Inquire about the specifics of their insurance coverage. Suggest they meet with an advisor to review their risks. Offering to pay for appropriate insurance lets your children know how serious you feel about this issue. Insurance makes the ultimate gift. It protects your assets in the event the unexpected happens to your children, as most grandparents feel compelled to support their grandchildren if necessary.
Although rules of thumb are convenient, the amount of life insurance needed is different for every person and changes over time. Completing a financial plan will look at your specific needs today and in the future.
Term insurance provides a large amount of insurance coverage for lower cost than permanent insurance, but obviously doesn’t last forever. One presumption of term insurance is that your financial assets will grow and/or your expenses will decline in the future such that you can self-insure a future loss. If you have term insurance, make sure you’re diligently saving and growing your assets. Permanent insurance is clearly better if you want to guarantee coverage into old age. It also provides cash value that could be used in the future, unlike term insurance. Keep in mind that term insurance policies should have a convertibility feature that lets you convert the policy into a permanent policy in the future. Your specific situation will dictate which one to choose.
Your group insurance at work typically doesn’t cover your entire insurance need. If you switch employment or lose your job you may lose your group insurance. In addition, you may become uninsurable in future years, so obtaining proper individual insurance coverage that you keep regardless of employment protects your family. The younger you buy individual insurance the cheaper it is.
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Shakespeare Wealth Management, LLC
N22 W27847 Edgewater Drive
Suite 101
Pewaukee, WI 53072-5260
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