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How to Protect Your Dependents in 10 Steps

Financial Planning, financial advisor San Antonio, estate planning Sep 2nd, 2019 by: Darryl Lyons

Planning for your death can be uncomfortable, but it’s something you should really do, especially if you have children. You may think that estate planning concerns are just elderly financial planning questions, but imagine what would happen if you passed away without a plan. No one would know how to sort out your affairs. Your assets would pass through probate. Your loved ones – or worse, the courts – would decide what happens to your children. It can be a long, lengthy process, and can add unnecessary stress on your family as they grieve your passing.

Regardless of your age, putting a plan in place now can help protect your dependents and give your family peace of mind.

Here are 10 critical steps you can take today to protect your dependents if you pass away.

 

1. Buy Life Insurance

Most people buy their first life insurance policy after they have a child or get married, but they don’t update the coverage as their family grows.

There’s a good chance you already have life insurance, but do you have enough? According to a recent study, 40 percent of people are under-insured.

Make sure you talk with a financial advisor about insurance plans. Beware of insurance agents who simply want to sell you something for commission and may prey on your emotions.

 

Ready to talk with a fiduciary financial advisor who is legally responsible to put your best interests first? Contact PAX Financial Group to see how we can help.

 

2. Create a Will

According to AARP, 60 percent of Americans lack a will or estate planning documents. But without these documents, you don’t have a final say in what happens to your children. It’s left up to the courts to decide. A simple way to remain in control after you’re gone is through a will.

Some dependent-related items to state in your will include:

  • Guardianship – Even if you’re married, it’s best to appoint a guardian in the event you and your spouse pass away at the same time. You’ll also need to appoint a back-up guardian in case your first choice is not able to care for your children.
  • Education – What type of education do you want your children to have? Do you want them to continue homeschooling or private school? Do you want part of your estate to cover college tuition?
  • Special Needs – If you have a dependent with special needs, be sure to establish a Special Needs Trust. This type of trust sets aside money for their day-to-day care and protects their government benefits. Your will can list out any special care they’ll need after you’re gone.
  • Inheritance – What assets do you want your dependents to have? How do you want to distribute their inheritance?

Detail all of this (and more) in your will, so it’s publicly known how you want things to play out after your death.

 

3. Write a Letter of Intent

A letter of intent goes to the executor of your estate. It isn’t legally binding like a will, but it does help your loved ones cope with your passing.

A letter of intent is a bit more personal, and often includes items like:

  • Your funeral arrangements – What do you want your funeral to look like? You can even include the type of food you want served and the music you want played.
  • The location of your legal documents – State where you keep your personal and financial documents. This list may include your will, birth certificate, titles, deeds, financial account information and more.
  • Any last words – A letter of intent preserves your voice and can help your family move on, so tell them anything you want them to hear.

 

4. Establish a Revocable Living Trust

There are several different types of trusts, but a revocable living trust can help you:

  • Avoid the probate process
  • Change your trust document while you’re alive
  • Keep your assets private
  • Prevent family members from challenging your estate
  • Use provisions to cut your tax burden

Once you’ve established the trust, begin moving your investments, bank accounts and real estate into it.

 

5. Appoint a Trustee or Custodian

Besides a guardian, you’ll also need to name a custodian or trustee. This person manages your children’s money until they’re old enough to manage it themselves.

The trustee or custodian doesn’t have to be the same person as the guardian. For example, the person best capable of raising your children may not be good at managing money. In this case, you may want to appoint someone else to be the trustee or custodian.

If you do appoint two separate people, make sure they’re willing to work with each other, because they’ll most likely have to do so over the course of your child’s life.

 

6. Name Beneficiaries

Make sure you’ve named primary and secondary beneficiaries for your accounts. You may think secondary beneficiaries aren’t necessary, but they are. If your spouse is the primary beneficiary, for example, and you both pass away at the same time, your assets would have to pass through probate before going to your loved ones unless you’ve named a secondary beneficiary. These are common elderly financial planning questions but are also important steps regardless of your age.

You can list your trust as the beneficiary of your assets, but some other common types include:

  • Spouse
  • Child
  • Charity
  • Non-family member

You may need to establish a Transfer On Death (TOD) designation for your certificates of deposits, bank accounts and brokerage accounts. This designation states who becomes the owner of the account upon the primary account holder’s death.

 

7. Draft a List of Financial Accounts

Create one document that lists all your financial accounts and account numbers. Tell your loved ones where to find this document (or share a copy with them) in case they ever need it. Some important items to list in this document include:

  • Financial information – Bank accounts, investment accounts, mortgage information, insurance, credit cards and debts
  • Income information – Regular income, side hustles, child support and rental income
  • Monthly expenses – Utilities, insurance premiums, mortgages and loans

This is sensitive information, so make sure it’s in a safe place where no one can find it by accident. If your document is digital, make sure it’s password protected.

 

8. Make Your Wishes Known

After you’ve created a will, established a trust and made a list of your financial documents, what do you do with them? There are actually several options:

  • Keep them in a fireproof, waterproof safe at your house.
  • Keep them with your estate attorney or financial advisor.
  • Keep them password protected online.
  • Keep them in a safety deposit box at a bank.

Whichever you choose to do, make sure your loved ones, attorney and financial advisor know where you’re keeping the documents.

 

9. Update Your Estate Plan

You should review your estate plan once a year or when any big life events happen, such as:

  • Getting married or divorced
  • Having a child
  • Experiencing a death in the family
  • Moving out of state

 

10. Talk With a Professional

No matter where you are in the estate planning process, consider bringing a financial advisor on board. A financial advisor can be a great addition to your estate planning team because an advisor can bring a holistic view to protecting your family.

Do you want to make sure your dependents have enough money to go to college? Do you want to leave an inheritance to a niece who’s always been like a daughter to you? Do you have an adult child who may always need the financial guidance of a trustee? A financial advisor can help you address these concerns in your estate plan.

At PAX Financial Group, we take your personal situation into account and then help you create an estate plan that reflects your wishes. We can also work in tandem with your estate planning attorney to help ensure you have a plan that’s financially sound.

To learn more about our services, contact us today.

 

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This material is provided by PAX Financial Group, LLC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note: Investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.

Darryl Lyons

Darryl Lyons

CEO and co-founder of the PAX Financial Group, Darryl Lyons has been a licensed professional in the financial services industry since 1999. A lifelong Texan, Darryl began his career in the financial sector just one day removed from earning his bachelor’s degree in corporate financial management and accounting at St. Mary’s University. Throughout his career, he has won awards for recruiting and development from Fortune 100 companies. In January 2007, he chose to begin and develop his independent practice. He joined Andres Gutierrez and Joseph Schuetze to form the PAX Financial Group. Darryl also served as the Chairman for Brooks Development Authority. Shortly after his service, Mayor Julian Castro, named a park “The Darryl W Lyons Park” in honor of his service. He was named to the 2010 San Antonio Business Journal’s “40 Under 40 Rising Stars,” which honors people making a difference in business and in the community.