RJG Legal

Should I Get Disability Insurance?

“Disability insurance can help protect your salary, if you are sidelined from work because of a health issue. Many individuals tend to skim over the details of this coverage during open enrollment, leaving them and their loved ones vulnerable.”

One in four adults will become disabled before reaching retirement age, according to the Social Security Administration.

CNBC’s recent article, “1 in 4 workers run into this career derailment, but you can protect yourself,” notes that about 20.1 million adults of employment age have suffered a work disability. Research published by the National Institutes of Health found the common causes to include back or neck problems, depression, anxiety or other emotional issues and arthritis or rheumatism.

When you're suffering from these issues and can’t work, disability insurance can help you bridge the pay funding gap. When going through open enrollment, some people’s patience also runs out after choosing their 401(k) solution, their health-care solution, or their health savings account and they forget about disability insurance.

You may also purposely avoid disability coverage, because of the cost. Disability insurance is frequently more expensive than term life insurance. However, think of it this way: the chances of missing six to nine months of work because of a car accident or other mishap are exponentially higher than dying prematurely, if you’re younger.

Long-term disability usually starts after three to six months and costs around 1-3% of a worker's annual salary. For most people who are covered through their employer, that policy typically replaces about 60% of their income. That may not be enough coverage, and you may consider purchasing another disability policy.

To see if you have enough disability coverage, look at your income, particularly the cash coming in and the cash going out. If you do become disabled, your costs could go up with additional child-care or medical expenses.

If you’re disabled, you don’t want to tap into your emergency or retirement savings. Look at how much you’re saving toward retirement, when estimating how much income you will need. Also keep in mind the number of people who’ll be affected, if your cash flow takes a dive.

If you decide you want more income protection, your employer may let you buy more coverage. If you’re self-employed, you may be able to get coverage through a professional association. You could also buy a policy on your own, but doing this on your own can be more expensive because group plans can spread the risk out among employees.

Don’t Make These Common Estate Planning Mistakes

“As if dying isn't bad enough, imagine your ex (your no-good, lying, cheating ex!) rolling in all the money that you left behind. Even worse, your beloved family is fighting it out in court to get what they can. Time to update your estate plan, right?”

Kiplinger’s gives us some real life miscues from the world of entertainment in its article, “6 Estate-Planning Mistakes Celebrities Made.” Out-of-date documents, beneficiary miscues and other estate-planning errors can keep your assets tied up in probate court for years. It can also mean that taxes and legal fees will take up a sizeable part of your estate and give inheritances to people you didn't like or hardly knew.

A person with a simple estate or someone with substantial net worth, numerous assets and a team of advisers can make estate planning missteps that have far-reaching consequences. You’ve read that Aretha Franklin is the latest celebrity in a long line to die without a will. Let’s look at some other well-known people who made estate-planning mistakes that affected their intended heirs.

No Estate Plan Whatsoever. Right after Prince's 2016 death, we found out that he didn't have a will. If you die without a will (known as dying “intestate”), the task of dividing your assets is left to the state court. A Minnesota judge was left to distribute Prince's $200 million in assets, among his six siblings and half-siblings. Now two years after the singer’s death, bankers, lawyers and consultants have earned millions (so far) and his heirs haven't received a dime. Instead of letting a judge make the decisions on who gets your property, draw up a will. Work with a qualified estate planning attorney.

Not Removing Beneficiaries From Your Estate Plans. When singer Barry White died in 2003, he was separated, but not yet divorced from his second wife. She inherited everything. His live-in girlfriend of several years and nine children received nothing. White's girlfriend, his daughter, and son filed lawsuits. During the divorce, your options for limiting your soon-to-be ex's inheritance are limited. For example, if your spouse is the beneficiary of your 401(k) plan, federal law won't allow you to disinherit him or her, without his or her signature. Any other changes can also complicate divorce proceedings. Check with both your estate planning attorney and divorce attorney. You can update your financial and your health care power of attorney to make certain that your soon-to-be ex won't be the person making financial or medical decisions on your behalf, if you're unable to do so. Make sure to update the rest of your estate plans after the divorce.

Failing to Add Beneficiaries to Your Estate Plans. When Heath Ledger died at age 28 in 2008, his will left everything to his parents and three sisters. That is O.K., but his will was written before his daughter, Matilda, was born. As a result, the then 2-year-old and her mother, actress Michelle Williams, got nothing (Ledger's family gave all the money from the estate to Ledger's daughter). A life-changing event should make you act to review and update your estate-planning documents and the beneficiaries who are named on your financial accounts. Work with an estate planning attorney to help avoid these pitfalls.

Hiding the Whereabouts of Your Estate Plan. Even if your estate plans have the details covered, it won’t help anyone if no one can find the originals. Olympic sprinter Florence Griffith-Joyner was thought to have had a will, when she died in 1998. However, her family couldn't find it! Years of legal battles followed, as Joyner's husband and her mother couldn't agree on whether or not she said her mother could continue to live rent-free in the couple's condominium for the rest of her life. Most estate planning lawyers will keep a copy of your will or trust on file. However, you should also have the original documents in a safe, accessible location. Let at least two people know where to find the documents. One of these people may be the executor of your estate or a trusted family member.

Failing to Put Promises in Writing. When actor Marlon Brando died in 2004, he left most of his $26 million estate to his producer and other friends. His longtime housekeeper said that he’d promised her that she’d inherit his home, when he died. However, the actor either never promised her the home or never put the promise in writing. She later sued Brando's estate for the value of the home, plus $2 million in damages (the case was settled in 2007 for $125,000). Put each of your wishes in writing and update your estate planning documents to include new promises or beneficiaries.

Not Funding a Trust. Michael Jackson's 2009 death created numerous legal battles over his $500 million estate. One issue was that, to protect his estate, he’d created a revocable living trust that was supposed to transfer his wealth to his children and his mother when he passed. However, Michael forgot to fund the trust. As a result, his entire estate was left outside the trust. The estate had to go through the probate process, while his children and his mother lived off an allowance (of $8 million a year) managed by the estate's executor and a judge for several years. During the probate process, the estate saw legal challenges from creditors and other members of Jackson's family. A trust can be an excellent tool to streamline the process of transferring assets to your heirs and avoiding probate. It also keeps the details of your estate private. However, if you don't retitle your assets in the name of that trust, it's practically worthless.

Don’t let these and other mistakes derail your estate plan, schedule a consultation with an experienced estate planning attorney. The estate planning attorneys Gregorek and Associates, PLLC can guide you through the estate planning process.

Reference: Kiplinger (August 31, 2018) “6 Estate-Planning Mistakes Celebrities Made”

Are There Any Holes in Your Bulletproof Estate Plan?

“Many people think estate planning means deciding what happens to your things when you die. For that reason, many young families do not consider estate planning to be a priority. However, it may be one of the most important things that young parents can do!”

A will or last will and testament is the document in which parents can name who they want to assume care of their children if they should both die, as well as who should manage the money available to care for those children.

Wealth Advisor’s recent article, “What's missing from your estate plan?” advises that it’s not wise to assume that the same people should perform both of these tasks. Separating the people who care for your kids from those with free access to the money left behind, is often a very smart choice. If the parents’ estate plans don’t include instructions concerning the children, those left behind can have drastically different opinions about where the children should live and how they should be cared for.

When families feel strongly about those issues it also creates difficulties for the children. They’re not only mourning the loss of the parents, but now their loved ones may be at each other’s throats, in a legal attempt to gain custody that will drain resources and divide the family. However, there are some simple steps that can avoid this additional cost and emotional trauma.

Don’t leave a hole in your estate plan by omitting a document that addresses what happens to you, if you become incapacitated. A living will, also known as an advance directive, is an essential component of a complete estate plan. This document answers "end of life" questions, particularly whether a person should be kept alive by artificial means. Most of us don’t want our families making those difficult choices, so have your estate planning attorney draft an advance directive, so they won’t have to.

One other document an estate plan should have is a medical durable power of attorney, which concerns almost all medical decisions other than those dealing with end of life. If you haven’t signed a medical power of attorney and if you’re not near death but unable to make your own medical decisions, you put your family and your medical providers in a tough spot. However, if you have a designated an agent to make medical decisions, you can spare your family additional pain and emotional distress.

Reference: Wealth Advisor (August 27, 2018) “What's missing from your estate plan?”