Washington Post Reporter Jonnelle Marte recently interviewed McManus & Associates Founding Principal John O. McManus on financial goals that people should aim to achieve in their 40s. Jonnelle’s piece, “5 Money Milestones to Hit While You’re in Your 40s,” was published last week and re-published by Tulsa World on Sunday.
McManus’ insight informs two milestones from the article: one related to wills & estate planning and the other life insurance. From the story, here’s Milestone #4:
4. Update your will and estate plan: A few things may have changed since you last reviewed your will. You might have had another child, gotten divorced or been newly married. These changes would make it time to update your will to make sure your home, savings and other assets will go to the appropriate people after you die, Turner says. “If your ex-spouse is the beneficiary for your retirement plan you want to change that,” Turner says, adding that people should double check the beneficiaries for your 401(k) and life insurance policies.
The rules for how a person’s estate will be broken up after death vary from state to state, says Peter Creedon, a financial adviser in Mount Sinai, N.Y. For instance, some states may pass assets on to a domestic partner while other states will not, Creedon says, making the will the best method for explaining who should inherit assets. Talk to a lawyer or financial adviser about getting the documents in order. People with simple situations may get by using online services such as LegalZoom, which will create a will for prices starting at $69.
Parents should name guardians and put together a plan for what should happen to their children if they died, says John O. McManus, a trusts and estates lawyer in New York City. Those instructions can include guidelines for medical treatment and preferences on what type of school they would like their child to attend, he says. Parents who have amassed a sizeable amount of savings — think millions — may want to create a trust that would help them pass the money on to their children in a tax efficient way, he says.
And here’s Milestone #5:
5. Review your life insurance: At this age, buying life insurance can be about more than just protecting your children and your spouse. Business owners — especially those who have had some success — may want to buy a life insurance policy to help protect their businesses, McManus says. A spouse or a child inheriting a business worth more than $5 million may need to pay taxes on that transfer and the bill may be due in less than a year, he says. If they don’t have the cash on hand to cover the tax bill, they may be forced to liquidate the company to cover the tax bill, he says.
A life insurance policy could provide the funds to cover that tax bill and allow the family to keep the business intact, McManus says. Single people with small businesses may not have to worry about this, he adds, since smaller estates may not be subject to federal taxes.
If you don’t own a business, a life insurance policy is still good for protecting your family and your assets. If one spouse dies, the coverage could help the other spouse financially when it comes to paying the mortgage and supporting the children. And it isn’t just the working spouse who needs to be covered, advisers say. A life insurance policy can help pay for child care and other costs if a stay-at-home parent dies.
Head on over to The Washington Post to read Marte’s full article. For help with updating your will, reviewing your life insurance policy and other money milestones throughout your life, reach out to McManus & Associates at 908-898-0100.