We have conducted 100s of educational workshops on financial topics that matter most to pre- and post-retirees.
Through this experience, we’ve found that often people feel that estate planning or “estate preservation” is reserved for only the wealthiest among us where estate tax at one’s passing is an issue. This is simply not true. Regardless of your level of wealth, you must be a good steward over what you have.
There are many reasons for this. Consider the following:
- First, Americans are living longer.
The notion that one retires at age 65 and passes by 72 is no longer a reality for most. The average mortality for men is 83; for women, it’s 86 (National Center for Health Statistics, 2015). That’s average! Meaning, many are above these ages! Many Americans are living years into retirement – even 25 to 30 years. Living this long in retirement requires a different perspective on the concept of estate planning and preservation. In short, your retirement horizon is likely much longer that originally anticipated.
- Second, consider the threats facing our estates today.
An economy that continues to struggle, an historic low interest rate environment, the potential for runaway inflation, increasing healthcare costs, crushing government debt of nearly $20 trillion, fewer younger workers to fund our current Social Security and Medicare programs and an increased sense that our nation is simply not headed in the right direction are all factors that create economic pressure on our estates. The result of this environment could produce increased taxation, higher inflation and/or a decrease in government benefits or entitlements. This creates additional economic stress on our estates.
As a result, estate planning is more than just intelligent asset transfer, the potential need for a trust, estate tax exposure, charitable giving and survivorship risk among many other topics. For the vast majority of Americans, the objective of estate planning is to stretch out the value of your assets and to “keep them in the family.” This can be difficult when battling seemingly uncontrollable factors like taxation, inflation, planned obsolescence, changes in technology and others. If not prepared, Americans often move from the accumulation to the distribution phase of life and get unpleasantly surprised when exposed to these eroding factors.
This is why we introduce the concept of Estate Preservation in additional to traditional Estate Planning.
Consider the following risks Americans face in their golden years:
- Inflation Risk – A potential decline in purchasing power if the value of the dollar declines.
- Longevity Risk – The risk of outliving one’s money.
- Long-Term Care Risk – Seeking protection from the potential wave of expenses associated with long-term care expenses as well as a catastrophic illness.
- Survivorship Risk – Preparing for the loss of income at a spouse’s passing.
- Market Risk – Controlling the effects of volatility on assets positioned in the market.
- Withdrawal Rate Risk – Controlling the amount withdrawn from an asset in a fluctuating interest-rate environment.
- Legacy Risk – Minimizing tax exposure and other fees and costs to heirs upon asset transfer.
To effectively address these risks, McKell Partners has developed a very effective estate preservation educational and diagnostic tool called, The Estate Preservation Wellness Check Up™. The Estate Preservation Wellness Check Up asks participants 10 important economic preparedness questions. Attendees respond privately with a 1, 2, or 3 on their individual check sheets. When answering each question, 1 means the attendee is “absolutely confident”, 2 means “somewhat confident” and 3 means “not very confident.” At our educational workshops, sufficient time is spent discussing the importance of each preparedness question and how to increase one’s vigilance by executing a variety of effective financial strategies.
At the conclusion of the event, attendees add up their scores to determine if their “estate is healthy” (Score: 10), “needs a doctor” (Score: 11-20) or if their estate “needs to be rushed to the emergency room!” (Score: 21-30). The levity generates some smiles and is a powerful motivator to move forward with what matters most. Again, take the Estate Preservation Wellness Check-Up online at McKellPartners.com. Test your level of preparedness by answering the questions below:
- Protection From Unwanted Litigation
– Do you have sufficient liability protection from unwanted litigation or a frivolous lawsuit? An auto accident, house fire, or lawsuit can all cause problems if the moat around your castle is insufficient. Are you sure you have proper coverage?
- Protection From Long Term Care Expenses
– Are your assets protected from long-term expenses and/or a catastrophic illness? Let’s face it, not everyone passes in his or her sleep. Some experience a prolonged illness. This can be financially devastating for a family. Have you explored an asset-based approach?
- Combat Increased Taxes & Inflation
– Will your assets and income withstand the potential wave of increased taxes & inflation? Pre- and post-retirees must have a strategy to combat these two terrible eroding factors.
- Secure Guaranteed Lifetime Income
– Do you have a guaranteed flow of income that cannot be outlived? A 2013 Merrill Lynch Retirement Study noted, “When asked what might be their biggest worry about living a long life, 70% of men and 68% of women said serious health problems and 47% of men and 61% of women said running out of money.”
- Preserve Investment Capital / Earn Competitive Returns
– Are your assets protected with effective capital preservation strategies while still earning a competitive rate of return? Having a hard time stepping away from the slot machine? Too much market risk can take a bite out of one’s golden years.
- Advanced Planning to Combat Survivorship Risk
– Are you positioned to replace lost income when a spouse passes? Too many put off having a game plan for survivorship risk. Not thinking about it won’t make it go away!
- Prepare for Entitlement Erosion
– Are you guarding yourself against the erosion of Social Security, Medicare and Medi-Cal benefits? Having a Plan B is important!
- Intelligent Asset Transfer at Passing
– Have you provided for an intelligent transfer of your assets at death? This is the number one question at my educational events. Are you structured properly?
- Minimize Tax Liability to Heirs
– Will your heirs pay an excessive tax liability due to your IRA, Annuity and/or Estate Taxes at your passing? There are strategies to turn this around. Do you know them?
- Enhance Personal Legacy
– Have you thought about and/or provided for your personal legacy? This can be as simple as a desire to set up an education fund for a great-grandchild.
Add up your score! Do you need an estate doctor? Several by-products result from taking the check up. The most important is an awareness benchmark as to your own level of preparedness. Once a current snapshot is taken, a meaningful game plan can be formulated to address deficiencies and potential remedies.
Being an active learner and participant in one’s financial life is essential for success. Abdication is not an option! Yes, our financial world is complicated, but it’s not too complicated if one has a teachable spirit. Take ownership and acquire a better understanding of your financial life. Taking the Estate Preservation Wellness Check-Up is a great start. Doing so will give you a more credible claim on financial peace.
We make this important tool available to our clients and friends. Take it and check your score. To meet with us where we can give you some observations and present potential strategies, call (888) 704-1337 to arrange a complimentary consultation.