Your Money

Open enrollment includes estate

Certified financial plannerSeptember 22, 2013 

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Open enrollment season is just around the corner and now is the time to review your estate plan. That’s right, your estate plan. While it may seem odd to think about what will happen after you die when it is time to make health insurance elections, now is the perfect time to review your estate plan. Since your benefits are presumably on your mind, there is no time like the present to ensure they are set up the way you intend. Some questions to consider:

Who gets what? Let’s take life insurance, for instance. Many employers provide a minimum life insurance benefit at no cost to you. Others offer the option to increase the benefit beyond the employer-sponsored amount. Regardless of the amount of insurance that you have through your employer, now is the time to confirm whether the named beneficiaries are still appropriate. The same holds true for your 401(k) or pension benefits. Naming and consistently updating your beneficiaries is the easiest way to transfer assets or benefits to your loved ones when you die. Failing to name beneficiaries can result in your assets passing to the default beneficiary as outlined by the employer or having it go through probate.

One of the most common oversights involves adjusting beneficiaries at life events, like a change in marital status. Even those who are the most excited about getting married or divorced often overlook this detail. While naming your parents or sibling(s) as your beneficiary may be honorable while single, most people prefer for their spouse to inherit their assets once they marry. Conversely, some divorcees would turn in their grave if they knew they forgot to update their beneficiaries and that their former spouse inherited their life insurance proceeds or 401(k). While unfortunate, these types of scenarios sometimes happen to the most well-intentioned people even though they could have been prevented.

Do you have enough? Another milestone that always warrants an estate plan review is the addition of a family member. This can include the birth of a child, a new stepchild or caring for a special needs family member. If any of these events occurred since the last time you reviewed your estate plan, then now is the time to take inventory of your existing assets and life insurance coverage. Simply stated, you need to figure out what type of financial condition you would leave the ones who depend on you if you were to die today. If you question whether your death would create a financial hardship, then you need to seek professional financial counsel and make some changes.

Most employers allow you to increase your life insurance during open enrollment season. If you have health issues that make qualifying for coverage difficult, group plans provide an avenue to increase your coverage. However, if you are young and healthy, then shop around for a good term insurance policy outside of your employer. Term insurance is generally inexpensive and it can be used to take care of your temporary needs like income replacement to care for your minor children, debt elimination, and even college education expenses. Additionally, securing insurance outside of your employer provides flexibility. This way, if you and your employer ever decide to part ways, you will already have an existing life insurance policy.

How can your employer help? Many employers offer employee assistance programs that can provide several benefits to employees. Estate planning legal counsel is often one of those benefits. Many people are intimidated by the cost of seeing an attorney to prepare an estate plan. Some employers, the state of South Carolina included, provide access to will preparation services, free of charge, to eligible employees. Every employer may not be that benevolent, but talk to your human resources benefits specialist and find out what options are available to assist you with this process.

Life is a journey. Plan for it.

Ashleigh Brooker, CFP, is the principal of A.J. Brooker Financial Associates in Columbia. Reach her at info@AJBrooker.com or (803) 724-1235.

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