Preparing for the Unexpected Q&A

Women typically live longer, make less money, work less, and take less risk than men. To amplify these challenges, women can also add additional vulnerability by not participating in their own financial future, delegating their financial decisions and control to someone else, not seeking to increase financial knowledge and financial self-efficacy, inability to negotiate, and not maintaining skills and experience to provide economic value in the workplace.

Exhale! We know it sounds scary when we list all of these. The good news is that you are here at StrongHER Money! Addressing financial vulnerability is one of the many reasons we created this community. By recognizing where we may fall short, we can find the strength to overcome these obstacles through education and community support!

The first question to ask is what exactly are you insuring? Is it income replacement for the primary income earner? Debt payoff? Is it the cost of childcare that would be incurred if the stay-at-home parent passed away? Once your concerns are addressed, a calculation can be performed to determine what’s needed for YOU.

An emergency fund can provide for unexpected financial events like job loss, short-term disability or medical costs. Three to six months of cash or other liquid assets is a rule of thumb for providing for emergencies. An emergency fund can be set up at one time or can grow over time through monthly saving.

The main reasons include privacy and control. A trust does not go through probate court so there’s no public record of what you have when you die and who gets what. A trust also allows you to control your assets when you’re no longer here since you can stipulate the timing of who inherits what in a trust. A trust can be expensive, though.

In most cases, your assets can go where you’d like them to go through the use of a will or a beneficiary form. You should know that a beneficiary form supersedes a will. Also, most insurance policies and retirement accounts have a beneficiary form on file. This means that the beneficiary form dictates who that account goes to regardless of what your will or trust says.

Insuring this cost does take age and health history into consideration – which may or may not be that expensive based on your specific situation. Another solution that we can explore for you is a hybrid life insurance/long-term care policy. These policies allow you to use some or all of the death benefit for long-term care expenses if that need arises.

If long-term care is not needed, the policy still pays the death benefit. These hybrid policies can be less expensive than traditional long-term care insurance in some cases. Get in touch with us to see what solution would be best for you.

“Which one of your children would be the best at bathing you?” asks Jim Sumpter, certified financial planner and wealth manager with RFG Advisory in Birmingham, Alabama.

It’s a somewhat shocking question, but Sumpter has learned that posing provocative questions helps clients face the realities of potential future scenarios.

In the above case, he wants clients to understand what could happen if they fail to plan for their own eldercare and let the responsibility fall on their adult children.

“As a neutral professional, I can facilitate asking those difficult and emotional questions. I can translate abstract questions into real-life scenarios,” Sumpter said.

Here are some other tough subjects he tackles:
· Taxation and philanthropy issues: “I ask clients, ‘Who would you rather get your money when you pass away – your children or the government?’ People don’t realize that after they pass, their children may be hit with huge tax bills on inherited income or assets.”
· Delicate estate planning questions. “People have been asking me recently, ‘How do I protect my assets from going to my son-in-law or daughter-in-law?”
· Reality checks for new grads.
Sumpter counsels clients’ adult children, advising high school grads about credit and college budgeting, and college grads about benefits and taxes related to their first jobs.
“They won’t listen to their parents, but they’ll listen to me. They take it seriously – they get dressed up, come in for a meeting,” he said.

Sumpter has experienced his share of life’s ups and downs, including a divorce and the loss of an adult child. Over the years, he has guided clients in thinking about uncomfortable but necessary topics.

“It’s important to live life and enjoy it,” he said. “We don’t want to overspend, but we need to plan – including for the unexpected. It’s difficult, because it’s so emotional.”
He added, “And it can be even more impactful for women clients, because, as men are statistically more prone to die sooner, widows often have to make these planning decisions on their own. I want them to know that I’m here to help them.”