By John W. Ferguson, Jr., CLU,CFS, AIF®, Strategic Financial Partners
Some people think managing money is fun. They read the Wall Street Journal every day, track financial news online, create and follow household budgets and even enjoy paying the bills. Others don’t get all that excited when the Dow hits a new high, a favorite stock splits, or all the credit card bills are paid off. They simply don’t enjoy money management, and they never will.
The problem: It can be a disaster if you are the one who handles all your household’s financial decisions and your spouse has limited knowledge or interest in money. What will happen to your spouse if something happens to you—if you pass away or become disabled? In such situations, financial mismanagement can lead to the loss of assets you have spent a lifetime accumulating, leaving your spouse at financial risk.
The good news: You can structure your estate to protect your spouse and family. Here are some suggestions to get started:
Step one: Make sure your spouse has an estate that includes cash, investments and insurance. Keep saving money for retirement and be sure you own adequate life insurance. Life insurance can provide liquidity and additional assets to your estate. Life insurance products contain fees, such as mortality and expense charges, and may contain restrictions, such as surrender periods.
Step two: Prepare yourself. Start by keeping accurate records. That way, even if your spouse has difficulty, your advisors can make sense of your files. Map out your estate plan, and make sure your advisors understand your instructions if you predecease your spouse or become incapacitated.
Step three: Educate and inform your spouse. At the bare minimum, introduce your spouse to your attorney, accountant and other professionals, including your primary financial advisor. Explain where documents are located and go over the general concept of your plan. If appropriate, suggest attending financial seminars or mini-classes together.
Step four: Build in safeguards. Trusts are a popular tool for spouses who would prefer a financial overview, leaving the details to professionals. Trusts offer possible savings on estate taxes and can help your spouse manage assets. Another safeguard can be created when life insurance policies are settled. Proceeds can be paid in a number of ways, including through annuities that can create a lifetime income.
An annuity is a long-term, tax-deferred investment vehicle designed for retirement. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59 ½, may be subject to a 10% federal tax penalty. If the annuity will fund an IRA or other tax qualified plan, the tax-deferral feature offers no additional value. Not FDIC/NCUA insured, not bank guaranteed and not insured by any Federal Government Agency. There are charges and expenses associated with annuities, such as deferred sales charges for early withdrawals.
Protecting your loved ones is a labor of love. This is the reason most of us build estates—to provide for our families after we are gone. By taking steps to prepare your assets and your spouse, you can put a strategy in place to help you accomplish this goal. If you would like more information on any of these topics, please contact John at 719-388-0211 or jferguson@sfp.us
Securities offered through Securian Financial Services, Inc., member FINRA/SIPC. Strategic Financial Partners is independently owned and operated. Copyright Custom Communications 2009. Material in this article cannot be reprinted without permission.
