Part 2: The “Softer Side” of Protection Planning
July 22, 2022
Protection planning isn’t just about formulating sound insurance strategies. It’s about establishing a comprehensive game plan for unexpected emergencies that safeguards your wealth, family, business, and goals. In a previous blog, we discussed the importance of establishing disability and life insurance to protect your wealth, and in this blog, we’re discussing the “softer side” of protection planning and sharing four more ways you can safeguard your future.
1. Establish an Emergency Fund
Some insurance policies don’t kick in immediately after an accident, so even if you have short or long-term disability insurance, you might need funds to cover your expenses until your policy kicks in. For example, suppose your long-term disability policy doesn’t provide benefits for the first three months after you file a claim. In that case, a well-established emergency fund (between three to six months of your expenses) could help cover your expenses during the waiting period. Following this approach could also allow you to purchase a less expensive policy and save money on premiums.
And of course, emergency funds can be used for a number of unexpected expenses, whether that’s a home repair your insurance doesn’t cover, temporary job loss, vehicle repairs, or something else.
2. Prepare for Your Death
This may sound grim, but it’s an essential step if you want your wishes carried out according to your plans. Even if you have a will that clearly lays out your desires, your assets will still go through a probate process, which is timely and usually expensive. However, doing quick and easy tasks like ensuring bank accounts are titled correctly and having appropriate beneficiary designations can protect your family, assets, and wishes.
Start by reviewing your estate plan to ensure your ducks are in a row. Make sure your beneficiaries are up to date and that they reflect your current situation and relationships. (You may not want your assets going to someone you listed as a beneficiary 20 years ago on an old 401(k) plan.)
You should also consider filing a “transfer on death” deed for investments or a “payable on death” form for bank accounts. These documents will facilitate the distribution of your assets after you pass away so your executor and heirs can avoid probate.
Irrevocable trusts are another way to ensure your wishes are carried out according to plan after you pass. By establishing a trust with specific beneficiaries, you can help your family avoid probate and safeguard your young children by stipulating guardianships. You can designate specific people to watch over your children, as well as your children’s money (if you decide those two should be separate).
3. Prepare for Potential Disability
Planning for potential disability is similar to preparing for your death. You have to make important financial preparations, but you also have to decide who will make important life decisions in the event that you no longer can. Get the ball rolling by answering these questions:
- Who will take care of me if I can’t take care of myself physically?
- Who’s going to have power of attorney to manage my finances?
- Who will have medical directives to make choices on my behalf that reflect my wishes?
Not all of these decisions will necessarily affect your money, but they will protect your wishes and quality of life.
4. Talk About It
Many people have a “plan,” but they don’t share their intentions with the key players involved in that plan… You can have everything squared away on paper, but if you don’t tell the people who will be receiving your assets or managing your healthcare… how will they know? Those conversations need to be had.
Tell your spouse where the bank accounts are. Tell your children how you want to be taken care of in your old age. Talk about who gets which family heirlooms. Let your executor know how to find important documents like your will, life insurance policies, and deeds to your property. These conversations don’t directly protect your money, but they’re one of the most important ways to protect your wishes, reduce unnecessary stress during painful times, and keep the peace.
Initiate these conversations early so there are no surprises or ambiguity. Then, revisit your plan often in case your circumstances or desires change.
These are all fairly simple—yet extremely important—ways to protect your wealth, your family, and your wishes. If you want help developing your protection plan, give us a call! You can schedule a consultation with one of our advisors here.