Financial Organization – Part 3

How safe is your Wealth?

The proverb goes “A “Picture is worth a thousand words” and the truth of that proverb is very clear once we’ve created the game board or visual picture of our client’s financial model. As explained in our last blog, the model breaks down people’s wealth into three areas, Protection, Savings, and Growth and creates a visual representation of these areas. It’s a very logical process, dividing each area into nine sub-areas, or “drawers”. Once established, we open up and look inside each one of the 27 drawers to see what is in place, and what may need to be updated and/or changed.

In this blog, we are going to list some of the most common shortcomings of the nine Protection drawers.

Car Insurance:

• Liability limits to Low
• Deductibles to low
• Uninsured and Underinsured Level not at same level as the other liability limits on the policy
• Split Limits rather than Combined single limits

Homeowners Insurance:

• Liability Limits to Low
• Deducible to Low
• Policy does not guarantee the replacement costs for the dwelling or the contents
• No or limited coverage for art, furs, and jewelry
• Failure to keep records of contents, by keeping receipts, taking pictures or a video and storing those things in a safe place away from the house

Excess Liability Insurance:

• Failure to have any
• Limits to low

Disability Insurance:

• Failure to own any
• Relying on employee sponsored plans
• Relying on Government benefits such as NY State DBL or Social Security
• Amount of monthly benefits too low to maintain standard of living
• Benefit period to short

Medical Insurance:

• Failure to own properly designed medical and long term care Insurance
• Trying to purchase Long Term Care insurance after you are ill and/or uninsurable
• Not owning Long Term Care Coverage in the proper amount – too small of a daily benefit for your area , and too short of a benefit period
• Not having an inflation adjusted Long Term Care policy

Social Security:

• Not checking your statements to confirm you are being properly credited for the tax you have paid
• Expecting benefits ( especially for younger people) that may not be paid out
• Expecting It to provide the security for your family in the event of a death, disability and retirement

Wills and Trusts:

• Not having one
• Having an outdated one
• Not having the will coordinate and integrate with the titling of assets, beneficiary designations as well as the Life Insurance that the family may own
• Failure to update these legal documents and instruments- as the laws continually change

Ownership Agreements:

• Not strategically thinking of ways to limit liabilities through proper titling
• Keeping everything Jointly
• Setting up legal documents that require assets to be titled specifically to make those legal arrangements work. For instance, to avoid probate , many set up Revocable Living Trusts, however in order to make it effective, all assets need to be titled in the trust

Life Insurance:

• The amount of personal coverage is inadequate for the client’s family financial security or estate planning goals.
• Failure to match the product with the client’s needs/objectives.
• There has been no investigation to see if the client’s employer, business, or practice can provide insurance on a more efficient basis.
• Policies are not going to last the entire lifetime of the insured
• Beneficiary designations are not correct
• The client’s estate is named as beneficiary
• Failure to name at least two “backup” beneficiaries
• The policy proceeds are payable outright to minor children or grandchildren or to handicapped or emotionally immature or financially irresponsible individuals.
• Part, or the entire amount, of business-owned life insurance proceeds is payable to the insured’s personal (individual) beneficiary.
• Ownership is not correct
• Policy, if term, is not convertible to a permanent form
• Policy, if Universal Life, is not funded adequately and will lapse before life expectancy
• Policy is not managed and reviewed at least every three years
• Adequacy and appropriateness of the client’s business insurance policies and/or buy-sell agreement not reviewed at least every three years.
• Policy, if variable, is not reviewed managed and updated , to switch funding and where the policy values are invested
• Spouse coverage is not adequate
• The client owns all the insurance on his or her life.

Do your protection drawers contain any of these problems?? If so, please give me a call to find out how to improve and optimize these areas of your financial plan.