life planning 2011

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Po pQuiz:Test yourfinancials av v y

Page 5

Saving: doing a 5K is more difficult than it looks .................................... pg. 4Retirement living: should you stay or go .................................................. pg. 5How to live within your means .................................................................. pg. 8Saving for college education: here are your options............................. pg. 13An estate plan: why you need one ........................................................ pg. 14

Life Planning Guide is apublication produced by theLoveland Reporter-Herald.

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advertising director:970-635-3614

For editorialinformation, contact:

Jade Cody,special sections editor:

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Jump-start your savings:10 tips to save what you

need to

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fe a t u r e sLife Planning

Plan of Action:A financial plan forevery stage of life

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4 Sunday LOVELAND REPORTER-HERALD/Life Planning Guide 2011 Februar y 20, 2011

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5 67

8

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HOW DO YOUR AT E ?

10 correct:Warren Buffet isyour new best

friend.9 correct:

Close ... but we arenot playing horse-

shoes.8 or less correct:

It's time to dosome homework.

A

pop quiz: test yourfinancial

s av v yProcrastination is one of the main waysthe average Joe and Jane get in troublewith their finances. Break the bad habit— starting now. Answer these basicquestions and see how you rate.

Ac c o rd i n gto actuarialcharts, howmany yearscan you ex-pect to live?

At what age is a workerborn between 1943and 1954 eligiblefor full social securitybenefits?a. 62b. 64c. 66d. 68

What percent of aretiree’s incomewill be spent onhealthcare, onaverage?a. 5 percentb. 10 percentc. 15 percentd. 20 percent

Income taxes go away after aworker retires. True or false?

How many years,on average,will a U.S.citizen spend inretirement?a. 10b. 15c. 20d. 25

True or False: If you die without awill, your surviving spouse will begranted all or most of your assets.

What percent of early baby boomers, age56 to 62, are expected to run out of moneyto cover basic retirement living expenses?

a. 17 percentb. 23 percent

c. 42 percentd. 47 percent

Insurance isa way of:a. saving for arainy dayb. preventingunplanned eventsc. handling riskd. all of the above

Your credit score is:a. a snapshot of your credit riskb. an objective measurementused by lendersc. available to you on requestd. all of the above

You can improve your credit rating by:a. correcting inaccurate information assoon as possibleb. disputing negative informationc. correcting only the worst reportd. asking that negative information notbe included in your credit report

1. The U.S. Social Security Administrationestimates that a man reaching age 65 todaycan expect to live, on average, until age 83.A woman turning age 65 today can expect tolive until age 85. To calculate your expectedlifespan, go to: www.ssa.gov/planners/lifeexpectancy.htm. 2. C: 66 years old.3. D: 20 percent. 4. False. Pre-tax money aworker contributed to a retirement plan issubject to income taxes when it’s withdrawnduring retirement years. 5. C: 20 years.6. False. Every U.S. state has unique lawsgoverning who will own the property. Tocalculate the outcome in your state, go towww.mystatewill.com. 7. D: 47 percent.8. C: Handling risk. 9. D: All of the above.10. A: Correcting inaccurate information assoon as possible.

ThinkStock photo


retirement living:s t ayor

goAs they nearretirement, it'sthe questionall boomersare asking

BA R BA R A BALLINGECTW FE AT U R E S

As more baby boomersreach their 60s and startto ponder retirement,

many begin to debate wherethey should spend their goldenyears.

Highly educated and active,boomers aren’t following in thefootsteps of their parents,

many of whom migrated towarm-weather destinations.Stories of older relatives andfriends who fell ill far awayfrom loved ones or becomelonely after the excitement of anew destination dimmed thatdream of retirement. In addi-tion, the boomer generation —those born between 1946 and1964 — is highly diverse andno single solution appeals tothem all, said Carol Orsborn,author and co-founder ofF l e i s h m a n - H i l l a rd ’s boomer-fo-cused practice, FH Boom.

The prime destinations seemto be communities close to

home with residents whovary in age — whereboomers can continue tofeel young and maintainfriendships — and downtownurban centers, where theycan make do with lessspace and fewer cars,all while staying closeto hospitals, a host ofrestaurants, shopsand cultural events.

Here are ninequestions expertssuggest boomersask themselves tomake the smartest, happiestmove:

1. WHAT ARE YOURG OA L S ?

Before you focus on the typeof house you seek, think aboutyour big-picture goal, whetherit’s to be closer to your chil-dren and grandchildren or evenfarther away.

2. ARE YOU UP FOR THEU P H E AVA L ?

Redecorating, remodelingand moving all require time,money and patience, and typi-cally add to stress levels.

3. ARE YOU READY TO CUTTHE UMBILICAL CORD?

People become attached to

� See BOOMER/Page 6

ThinkStockphoto

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BOOMERFrom Page 5

their homes, Meyer said. “Are you reallyready to leave?” she asked.

4. WILL YOU CONTINUE TO HAVE AGOOD SUPPORT SYSTEM WHERE YOUARE OR WHERE YOU GO?

It may be your children or a good net-work of friends, but you need to know thatyou have people you can rely on, said AnnA. Fishman, president of Generational-Tar-geted Marketing Corp. Even if you moveto be closer to children, realize they maynot always stay there.

5. WILL YOU BE WITHLIKE-MINDED FOLKS?

Boomers are social and like to be sur-rounded by a people of varied ages, saidFishman. One solution for some boomersis to share a condo or house. Smart devel-opment companies are building communi-ties targeted at homeowners with like-

minded interests, Overly said.

6. WHAT TYPE OF HOUSEAND COMMUNITYMAKES THE MOSTSENSE?

Boomers need to care-fully weigh their housingchoice and what level ofservices they want, basedon realistic factors such as

health and not just pipe dreams, Somerssaid. They also need to be sure their set-ting offers the right amenities. For thosenot sure, Somers has them answer ques-tions, talk about possibilities, and putdown responses on paper.

7. WHEN IS YOUR DECISIONGOING TO BE MADE?

Determine a timetable rather than putit off indefinitely.

8. CAN YOU AFFORDYOUR DECISION?

Too many boomers don’t know howmuch money they need to age, Fishmansaid. They need to take into account stateand estate taxes and the cost of daily liv-ing, including housing, health care andentertainment costs, she said. You alsohave to take into account any possible in-come changes.

9. HAVE YOU TRIED OUTYOUR DECISION?

It’s hard to test-drive a decision withoutowning a home, but The North CarolinaCenter for Creative Retirement, part ofthe University of North Carolina atAsheville, offers seminars and a CreativeRetirement Exploration Weekend pro-gram. Many communities may offer simi-lar programs.


ThinkStockphotos10tips to jump-start

your savingsThere doesn’t seem to be

any bailout money forregular folks.

Are you saving enough?

Rule of thumb: Everyone should have sixmonths’ worth of living expenses tuckedaway in savings. Reality: Few folks do, andthe proverbial “rainy day” looms. Remedy:Start setting aside money today. Here are10 ways to save before you get soaked.

STICK TO A BUDGET

“Budgeting is the No. 1 surefire way to savem o n e y, ” said Ethan Ewing, president of Bills.com,San Mateo, Calif. Set specific goals, such aslowering grocery bills, and budget accordingly.

CARRY CASH

People who count out billsinstead of paying with debit orcredit tend to spend less andmake fewer unplanned purchases.

1Tip No.

2Tip No.

OPTIMIZEYOUR CELLPHONE PLAN

“I likeBillshrink.com,where you canfind better creditcards and cellphone plans tosuit your individ-ual needs,” saidRamit Sethi, au-thor and founderof iwillteachyoutoberich.com,San Francisco.

3Tip No.

BUY A LA CARTE

It may be cheaper to cancel subscriptionsand memberships and pay as you go instead.In a study of three fitness clubs, people over-estimate how much they’ll use their gymmembership by over 70 percent, Sethi said.Members who chose a monthly fee of around$70 attended an average of 4.3 times permonth. That comes out to more than $17per visit, whereas a day pass only cost $10.

4Tip No.

REDEEM REWARD POINTS

If your credit card offers them, checkyour statement to see how many youhave and then go to the rewards websiteto convert them into cash or gift cards.

5Tip No.

FIND SPECIAL OFFERS

Any time you make a purchase from amajor retailer, check out your credit cardand car insurance websites for deals.

6Tip No.

NEGOTIATE CAR INSURANCE

Once a year, compare differentp ro v i d e r s ’ rates. Even if you stay withthe same company, you likely can savemoney by adjusting your deductible;unloading unnecessary services.

7Tip No.

SELL STUFF

Auction or sell unneededitems or hold a yard sale.

8Tip No.

SOCK AWAYCASH

When you receive ex-tra cash — such as a taxreturn, bonus, birthdaygift or proceeds fromyour yard sale — save it.

9Tip No.

E L I M I N AT ET E M P TAT I O N

If you’re easily tempt-ed to buy on impulse,click on the “unsub -scribe” link at the bot-tom of retailer e-mails.

10Tip No.

CTW FE AT U R E S


livingwithin your

meansJENNIFER LEHMANSPECIAL SECTIONS RE P O RT E R

Your credit cards are maxed out orclose to it. Available cash is used topay the credit card bill so you can

purchase groceries or other necessities.Credit cards are the only way to pay forthe unexpected, like major car repairs.After expenses, there is no extra cash.

This circle of debt, relying on creditcards and having nothing to add to aslush fund, let alone retirement savings,are the more obvious signs that an indi-

vidual or family is living beyond their fi-nancial means, said Darla Schmidt, finan-cial counselor at the Loveland office ofthe Credit Consumer Counseling Serviceof Northern Colorado and SouthernWy o m i n g .

Schmidt offers some tips and insight onliving affordably:

THE BARE BONES

Establish the minimum flow of incomeexpected each month, the bare bones,Schmidt said. Do not include overtimehours or any other variable income inthose calculations.

This base income will be the startingpoint for understanding what you can af-f o rd .

TRACK EXPENSES

“If you don’t know what’s going out,

“It’s not aboutd e p rava t i o n ,

it’s about takingcontrol.

— Darla Schmidt, financial counselor

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you can’t make adjustments,”Schmidt said. You don’t have todo it for the rest of your life,but tracking every dollar spent— whether credit, debit orcash — for a month or twoputs accurate numbers to ex-penses guessed on in the past,like gas and groceries. “Thoseare the things you assume youknow, but maybe you don’t,”she said.

Schmidt recommends break-ing up expenditures into cate-gories like entertainment, gas,utilities and groceries.

START CUTTING

From minimum monthly in-come and expense numbersyou can make informed spend-ing adjustments. Prioritize thenecessities like mortgage pay-ments, utilities, insurance,food, car payments, etc.

Look at extras you can re-duce or cut completely andother ways to save.

For example:•Downgrade the cable plan• Consider getting rid of the

telephone land line• Set the thermostat for 65

degrees and dress up and downas needed

• Choose a hairstyle that iseasy to care for reducing ex-penses on hair products and sa-lon visits

• Find inexpensive leisureand entertainment like nearbyhikes, free concerts, museumexhibits and literary events

• Bring your lunch to work.• Combine errands to save

on time and gas• Have friends over for

potlucks instead of eating atrestaurants

• Cut the coupons. Look forthe Reporter-Herald couponbook on the first Wednesday ofevery month. Coupons to na-tional and local establishmentsare interspersed in the paperw e e k l y.

• Buy used items instead ofnew when possible

BIG ITEM CUTS

Each situation is differentbut individuals or families maydecide more dramatic lifestyleadjustments are necessary likefinding a cheaper place to live,renting out a room or getting aroommate, or getting a secondjob, Schmidt said.

“Easier said than done inthese days and times,” she said.

SMART CUTS AND STAYINGH A P PY

Some expenses, like internet,can be at least $30 a month,but may be essential if a familymember is looking for a job,Schmidt said. The web is alsoan additional resource forcoupons and discounts — aslong as coupons are used effec-tively and not for items youwouldn’t buy otherwise. Howev-er, if that is a necessary cut, pa-trons can access the internet atpublic libraries.

Don’t deprive yourself of ev-erything because it will makeyou cranky and you still have tolive, Schmidt said. Eat out lessor consider cutting back on ex-tras like drinks or appetizers,and see a matinee instead of anevening film and pay half theprice.

“It’s not about depravation,it’s about taking control,Schmidt said, “And you reallyhave to look around and seewhat is important to you andthat sometimes means youhave to make difficult choices.”

Savings are important be-cause you cannot always de-pend on credit cards to get youthrough, Schmidt said.

If possible, cut down on cred-it card use and when the tax re-fund comes around, try andadd some of it to savings,Schmidt said.

Consider getting advice andassistance from a non-profit onsaving money and creating adebt-management plan to tack-le credit card and other debt,Schmidt said.

RESOURCES

Credit Consumer Counseling Service of Northern Col-orado and Southern Wyoming: Services include financialcounseling, financial workshops and debt managementassistance. 970-229-0695 or go to www.cccsnc.org

Habitat for Humanity of Loveland: Hosts a calendar ofevents including classes on dealing with credit, financialhealth and money management. 970-669-9769 or go tow w w. l o v e l a n d h a b i t a t f o r h u m a n i t y. o rg

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CHILDREN TEENS COLLEGE STUDENTS N E W LY W E D S

Good financial habits start early. Thevery best last well into old age. For thosesomewhere in the middle and still trying tofigure it all out, there’s help. No matterwhat stage of life, a person can alwaystake steps to improve his or her finances.

Here are tips on what family members needto think about and plan for at all stages oflife, from childhood to retirement.

TANIESHA ROBINSONCTW FE AT U R E S

Encourage ateen to find apart-time job,and share yourviews on moneymatters andwhat you’velearned aboutsaving andspending.

Used r e s p o n s i bl y,a credit card can helpyoung adults build a

strong creditp r o f i l e.

PLANof action

If little ones start tolearn the basics ofmoney managementas they grow, perhapsthey can avoid thedebt and exuberantspending habits thatplague many adults.It’s important toteach children that ev-ery dollar they receiveis not a dollar they canspend, said ManishaThakor, personal fi-nance expert for wom-en and author of “GetFinancially Naked,”(Adams Media, 2009).Kids should learn todivide allowances intothree buckets: one forsavings, one for chari-ty and one for spend-ing. Thakor recom-mends parents helpchildren allocate 10percent for savings, 10percent for charityand 80 percent forspending.

Help kids learn tosave: Fiddle with theonline allowance cal-culator at www.three-jars.com to come upwith a weekly sumthat’s reasonable,based on the age ofthe child and the par-ent’s own experience.

As kids approachtheir teenage years,they can start to graspthe truth in the oldadage “money doesn’tgrow on trees.” T h a ko rtells teens to thinkabout how many hoursthey would have towork to earn enough tobuy an item they want.This way, they begin tounderstand how muchlabor really goes intoan iPod or Xbox pur-chase. Encourage ateen to find a part-timejob, and share yourviews on money mat-ters and what you’velearned about savingand spending.

Required reading:Jean Chatzky, award-winning financial jour-nalist, wrote “Not YourPa r e n t s ’ Money Book:Making, Saving andSpending Your OwnM o n e y, ” (Simon &Schuster, 2010) to helpstart teens on a path tofinancial success.

The average college-age credit card holdercarries a balance ofmore than $3,000, ac-cording to Sallie Mae.Fortunately for frisky,young credit users,credit card reform mea-sures that startedrolling out in 2010make it more difficultto overload on creditand debt, requiringanyone under age 21 toshow proof of incomeor get parents to co-sign in order to get acredit card. Collegestudents shouldn’tavoid credit cards com-pletely, however. A stu-dent should get onecredit card in his or hername; monitor hiscredit record at thethree major agencies;and pay off the bill ev-ery month. Used re-sponsibly, a credit cardcan help young adultsbuild a strong creditp ro f i l e .

A new couple’s mainfinancial goal shouldbe to build a solidfoundation that in-cludes an emergencyfund to cover three tosix months of living ex-penses, Thakor said.However, this shouldhappen only after eachpartner pays down anydebts they may haveaccumulated beforemarriage. Thakorurges newlyweds toconduct financialcheck-ins on all assetsat least semi-annually.Couples should save 20percent of their in-come, Thakor said.

Investment smarts:If your employer offersa tax sheltered savingsplan, such as a 401(k),sign up and contributeall you can. Your taxeswill be lower, yourcompany may kick inmore, and automaticdeductions make ite a s y.


MARRIEDWITH A FAMILY

IN YOUR 30sAND EARLY 40s IN YOUR 50s IN YOUR 60s IN YOUR 70s, 80s AND BEYOND

“It’s veryeasy tostart livingb eyo n dyour means.The moreyou earn,sometimesthe moreyou spend.”— Manisha Thakor,personal finance expert forwomen and author of“Get Financially Naked”

“At a certainpoint youhave to bringin yourspouse andsee if you’rein sync witheach other.”

— Julie Jason,author of “TheAARP Retire-ment SurvivalGuide: How to

Make Smart Fi-nancial Decisions

in Good Timesand Bad”

Once the storksstart dropping ba-by bundles at thedoorstep, it’s timeto think about lifeinsurance. Wholelife insurance is ex-pensive and unnec-essary in Thakor’sopinion. She sug-gests acquiringterm life insuranceinstead, which pro-vides coverage fora set time period— usually five to30 years — at afixed rate.

Keep retirementsaving in mind, de-spite the focus onchildren. You canput $5,000 a yearinto an IndividualRetirement Ac-count (IRA) anddelay paying taxeson investmentearnings until re-tirement age. Ifyou don’t have aretirement plan(or are in a planand earn less thana certain amount),you can also take atax deduction foryour IRA contribu-tions.

College plan-ning: The CollegeSavings Plan calcu-lator at the finan-cial education web-site www.mindyourfinances.com,can help familiesdevelop or fine-tune a college sav-ings plan, factoringin number andages of children inthe family. Click on“Financial Tools.”

“The challenge asyou enter into theseyears is to avoidlifestyle creep,”Thakor said. “It’svery easy to startliving beyond yourmeans. The moreyou earn, some-times the more youspend.” This pre-sents a big problemfor savings for acouple’s retirementand their children’scollege education.Thakor has notedanother dangeroustrend in this agebracket: risky in-vestments. An in-vestment portfolioat this age shouldbe a low-cost, high-quality mix ofstocks, bonds andmutual funds thatgrows conservative-ly over time, shesaid.

Start early. M a keretirement saving apriority. Devise aplan, stick to it andset goals. Grab aquick estimate ofyour retirementneeds using the“Ballpark Estimate”tool at www.chooset o s a v e . o rg .

“Fifty is the timeof preparation anda time of opportuni-t y, ” said Julie Jason,author of “TheAARP RetirementSurvival Guide: Howto Make Smart Fi-nancial Decisions inGood Times andBad,” (Sterling,2009). Make catch-up contributions,an extra amountthose over 50 canadd to 401(k) andother retirementaccounts. At age 591/2 you will nolonger be hit withtax penalties onwithdrawals fromretirement ac-counts, but leavingmoney means moretime for it to grow.

Imagine you’reretiring on Mondayand need to calcu-late how long yourfunds will last. Ja-son said this sce-nario forces peopleto look at their ex-penses, savings andincome sourcesoutside of work. “Ifyou do the analysis,you can adjust yoursavings and invest-ing,” she said.

Get Going. Areyou on track finan-cially for a comfort-able retirement?The Financial Plan-ning Assoc. offersan interactive Fi-nancial Roadmaptool to help high-light areas whereyou need to im-p ro v e :

Go to www.fpaforfinancialplanning.org and clickon “FinancialRo a d m a p ” underTools & Resources.

The minimumage to receive So-cial Security bene-fits is age is 62, butdelaying to a lateryear will mean abigger monthly ben-efit. Generally, gov-ernment-sponsoredMedicare health in-surance is availableto those age 65 andolder. At 66, thoseborn between 1943and 1954 are eligi-ble for full SocialSecurity benefits.

Jason said thatthose at age 65must realize thatthey’re targets forevery ambitious fi-nancial advisor.“Put on a skepticshat,” she said. Re-tirees should inter-view professionalsto make sure theyhave prior experi-ence with retire-ment accounts andclients in similarfinancial situations.Making decisionsfor a $100,000 ac-count is very differ-ent from makingdecisions for a mil-lion-dollar account,Jason said.

Learn what yourestimated social se-curity benefit willbe at retirement byusing the retire-ment estimator atwww.ssa.gov/esti -mator or call 1-800-772-1213.

“Now is the time to review assumptionsand make adjustments to your cash flowand to your investments,” Jason said. Atthe outset of retirement, people assumethat healthcare will be their greatest ex-pense. It turns out that the largest ex-pense is most often taxes. Plan to begintaking minimum withdrawals from mostretirement accounts by 701/2 or you maybe charged a penalty.

Healthcare and legacy planning shouldcome into the picture around age 85, Ja-son said. Long-term care for husbandsand wives should be determined. “At acertain point you have to bring in yourspouse and see if you’re in sync with eacho t h e r, ” Jason said. She reminds retireesto include the desire to leave an inheri-tance in their planning.

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A 529 PLAN

A 529 plan is an educationsavings fund designed to en-courage people to save moneyfor college with it’s tax advan-tages.

Benefits:• In Colorado, contributions

are tax deductible• Withdrawals for qualified

expenses are free from federaltax

• Funds qualify for commu-nity college, undergrad, gradu-ate school, professional andtechnical training expenses

• No income limitations• No age deadline for use• Owner maintains control

of funds• Owner can change benefi-

ciar yLimitations:•Contribution for any one

beneficiary caps at $350,000•Use for non-qualifying edu-

cational expenses results in 10percent tax penalty on with-drawn amount

JENNIFER LEHMANSPECIAL SECTIONS RE P O RT E R

College tuition is contin-ually on the rise makingplanning and saving for

college expenses early in achild’s life more importantthan ever.

“Usually after you have kids,you want to get started as soonas you can so you have lots oftime for the funds to grow be-fore they need it, said NatalieShamley, Registered Represen-tative with Investors of Americaat Home State Bank in Love-land.

“College is expensive and on-ly going to get more expen-sive,” she said.

“It’s almost inevitable in to-day’s society that you wantyour kids to go to school,” saidTyler Rusch, financial advisor,also with Investors of Americaat Home State Bank, addingthat statistics show collegegraduates make significantlyhigher earnings than highschool graduates in their life-times.

EDUCATION INVESTMENTPLANS

If families start saving forcollege early, investment plansgeared towards education orthe benefit of a minor, likelymake the most sense and cer-tain plans offer significant taxbenefits.

Other ways to save for col-lege include putting money ina CD or taxable savings ac-count.

Here is a basic run-down onthe most common educationinvestment strategies providedby Shamley and Rusch, to getyou started:

THE COVERDELL EDUCA-TION SAVINGS ACCOUNT

Formally known as the Edu-cation IRA, this plan has simi-larities to a 529 and may be agood choice for families want-ing to save for private elemen-tary and high school educationin addition to college.

Benefits:•Funds grow tax free• Withdrawals for qualified

expenses free from federal tax•Funds qualify for education

expenses from kindergartenthrough graduate school

• Owner can change benefi-ciary before previous beneficia-ry hits majority age of 18

Limitations:•Contributions cap at

$2,000 a year• Contribution limits for

high-income earners• Funds need to be used by

age 30• Penalties if used for non-

qualifying expenses and if notused by age limit

UGMA/UTMA (AKA THETRUST FUND)

Unlike the previous twoplans, UGMA/UTMAs are notfocused exclusively on educa-tion, offering far less in taxbenefits but greater flexibilityin asset use and contributionamounts.

Benefits:• No contribution caps• No income limitations• Can be used for any ex-

pense benefiting the childLimitations:• Federal tax benefits on as-

set growth depend on earningamounts and age of the benefi-ciar y

• No state tax deduction• No beneficiary changes

permitted

THINGS TO KEEP IN MIND

It can be easy to get over-whelmed at the cost of college,especially for parents who areworking to invest for morethan one child, Shamley said,but saving anything is betterthan saving nothing.

Getting a college savingsplan rolling doesn’t require alot of cash.

While investment plans varywidely, minimums are generallylow when you start, Rusch said.Typically, account owners havean option of beginning with alump sum of $250 or commit-ting to an investment of $50 amonth.

As with all investments,there is some level of risk inmutual funds used in educationinvesting plans.

The key to dealing with po-tential investment losses is tomake investments more con-servative as the withdrawaldate nears, Rusch said.

“The closer we are getting tousing it, the less risk we wantto take with it,” Rusch said.

Some 529s automaticallymove towards more conserva-tive investments as the closerthe beneficiary is to using it forschool, Rusch said.

fo r CollegeS av i n g

ThinkStock photo

Popular plansfor building

college funds

“College is ex p e n s i veand only going to get

more expensive.”— Natalie Shamley, Investors of America

at Home State Bank in Loveland.


DAW N KLINGENSMITHCTW FE AT U R E S

People tend to delay oravoid estate planning asthough drafting a will

might somehow hasten theirdemise. But thought of anoth-er way, estate planning actuallyprolongs one’s presenceamong the living. An estateplan allows for calling shotsfrom the grave.

The value of property at thetime of its owner’s death is anestate. Estate planning beginsby taking inventory of assets,including investments, retire-ment savings, insurance poli-cies, real estate and businessinterests, and then deciding towhom these assets should go.Individuals also must decidewho should handle financialand medical affairs if they areincapacitated and ask if they’ll

serve as financial and healthcare powers of attorney, re-spectively. It’s smart to workwith a qualified lawyer to cre-ate the legal documents thatgovern the process of protect-ing the estate and passingalong assets as planned.

A WILL

The centerpiece of a com-prehensive estate plan is a will.The reason a will is important,regardless of net worth, is soassets go to the right people,says Alexandra Armstrong, cer-tified financial planner. Diewithout one, and in most caseseach state applies its standardformula to decide who getswhat, without regard to wishesor the needs of heirs.

A will is also the best placeto name guardians of children.

Standard forms are availablefor the simplest of situations.

A LETTER OF INSTRUCTION

A letter of instruction to sur-vivors includes bequests notspecified in the will, includingsentimentally valuable posses-sions. Here’s where to commu-nicate to family members thetype of memorial service want-ed, including “in lieu of flow-ers” specifications and wishesto be cremated or buried.

A LIVING WILL

A living will or advance med-ical directive spells out wishesregarding life support or medi-cal intervention and care. Forsomeone in a coma who doesnot want to be kept alive onlife support, a living will spellsthat out. A health care proxynames a person to carry outthose wishes. A lawyer can cre-ate this document.

POWER OF ATTORNEY

A durable power of attorneynames a person to act on an in-dividual’s behalf in all financialmatters: investing money, sign-ing checks, selling real estate.Keep a signed copy at homeand give a copy to the persondesignated.

A TRUST

In some cases, individualsdecide to create a trust, whichputs conditions on how andwhen assets will be distributed.Trusts are designed to achievedifferent goals. Often, they al-low the wealthier among us toreduce estate taxes. They canalso be used to hold money forunderage children; providecare for disabled children; orequalize inheritances.

Keep in mind that retire-ment accounts such as IRA and

401k plans, have designatedbeneficiaries apart from what itsays in someone’s will. Reviewand amend these accounts pe-riodically — along with a will,pension plans and life insur-ance policies — especially ifmarital status changes.

who, me?

GetO r g a n i ze d

Assemble and store thesedocuments in a bank safedeposit box and/or a fire-proof safe to which a trustedindividual besides yourspouse has access.• Will, trust agreements andletter of instruction• Contact information foradvisers including attorney,accountant, financial plan-ner and stockbroker• Powers of attorney (finan-cial, health care)• List of retirement, bankand brokerage accountswith PINs• Investment documents• Life insurance policies• Health and long-term careinsurance policies• Social security and pen-sion information, and mili-tary discharge papers (ifbenefits transfer to sur-vivors)• Marriage certificate• Funeral prearrangementsand cemetery plot deed• Real property documents,such as deeds• Titles and extended war-ranties to cars, boats, etc.• Safe combinations• List of stored or loanedvaluables

an estate planThinkStock photo

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