The Financial Planning Effects of Covid: A MyLife Financial Series (Part 2)




I was a man on a mission. It didn't take me long before I sat down with my wife to review our estate plan. We kept most things the same. She is still my executor and power of attorney and I am hers. We kept our alternates the same as well. We have a close circle that we entrust decisions to if we couldn't make them on our own so this part was easy.


The New Wrinkle, Our daughter

Our daughter was the new wrinkle in updating our plan. We had to decide, who were the people we would trust to raise our daughter if we both caught Covid and didn't survive? While we had a long back and forth on who this may be, I feel like we chose the right people to guide our daughter through the ups and downs of life if we weren't able to. I will say this. Naming guardians for your children isn't easy. Here's my piece of advice, name guardians for your children that share the same values you and your spouse have, people that know you and your spouse well enough to make decisions as you would, and people that can get along with either side of your and your spouse's families (no one wants their child to grow up missing one side of their family).


So what next? We named people to take care of our daughter, but do they have the money to take care of her? If I only passed away, will my wife be able to pay our home off and still be able to save for her retirement? What about our daughter's college, wedding, etc..? Enter the need to review your life insurance.


Life Insurance, The Not So Easy Answer

No one likes to think of their final days here on earth which is why a lot of clients I talk to are underinsured. I am no different. Again, it took me this long to review my life insurance needs. So how much life insurance do you need? That answer varies. According to the United States Department of Agriculture, the average cost to raise a child in the U.S. to age 17 is $233,610 (you can click here for the interesting Bankrate article I took this figure from). But if you are a parent, as I am, your child is not average, at least not to you. This number can vary due to things like what kind of college you want your child to attend. Do you want your spouse to have enough to pay off the house and any other debts if you pass or do you just want to replace your income for a certain number of years?


The answer was not simple for me. I want the world for my family as anyone else wants for theirs but I also wouldn't want to incentivize my daughter to not work hard later in life. I reflected on my life events after my father's passing and recalled giving up scholarships to prestigious schools to stay home and help my mother financially. I remembered how we almost lost our home because we couldn't keep up with mortgage payments. And I recalled the hardship of balancing full-time employment and college (disclosure: it took me 8 years to finish my Bachelor's degree). These are things that I wouldn't wish on my wife or daughter so my wife and I made sure to increase our respective life insurance policies by an amount we felt comfortable with. We chose an amount that would help her or me get through the difficulty of losing each other, funding some of the life goals we have, as giving my daughter "skin in the game" for her own education.


Death is a difficult conversation to start and have. But when you are open and honest with yourself that it will eventually happen, it gets a little easier to plan for.


Have you found yourself wondering, what will happen if you predecease someone? Need some guidance on where to start? Download my Estate Planning Checklist and see if it helps you avoid the potential financial pitfalls of Covid or any unexpected terminal event. No, I promise you don't have to enter your email address or any contact information. Just click and download.



 

MyLife Financial is a fee-only financial advisory firm providing objective and independent advice virtually. Our clients are busy professionals that face daunting questions of how today's financial decisions will affect their long-term financial success. Everything written is strictly for informational use only. Please seek the advice of your CPA, Attorney, or financial professional before implementing any strategies.


Want to know more about how a financial plan could help you? Click on the envelope below and e-mail me to set up your next meeting!





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