Financial author: Estate planning requires facing tough questions

SAN RAFAEL -- Jean Chatzky, a financial journalist brought by Redwood Credit Union to speak about money at Dominican University on Sept. 18, sees estate planning as an essential ingredient of personal finance.

A basic estate plan, what Ms. Chatzky calls, “protecting the financial life you have built,” might include a will, assigning durable power of attorney, a medical power of attorney or health care proxy, and sometimes a trust. All these instruments can help accomplish your financial objectives after you die.

“You put a lot of effort into saving for emergencies, retirement, making sure you protect your credit, don’t take on too much debt,” Ms. Chatzky said. “You structure a life to protect your family. If you don’t protect it and something were to happen to you, your family could be left in the lurch.”

Protection could entail health insurance, and disability and life insurance if financial assets are modest.

“Make sure the people and assets you care about are handled correctly” after death, she said.

Financial planners estimate that about 70 percent of adults in the United States do not have wills, according to Ms. Chatzky. “That number includes a good number of parents,” she said. “Considering that the will is the only document that allows you to name guardians for a minor child, it’s unconscionable.”

“If you are going to take the step to have a child, then it’s your responsibility that your child is cared for by somebody of your choosing if something happens to you,” Ms. Chatzky said. “Stuff is stuff,” she noted, and can be assigned lower priority in estate planning.

“Whether or not your belongings make it into the hands of the person you want” to have them “is one thing,” she said, “but not caring for your children is a different matter entirely.”

The period following the death of a parent is inevitably difficult, and people tend to avoid thinking about their own demise. But Ms. Chatzky encourages people to act now. “Why anybody would want to make it more complicated by not having the correct documentation is beyond me,” Ms. Chatzky said.

For people with dependents who rely on their income, Ms. Chatzky suggests life insurance if loss of that income would result in hardship, such as paying for a mortgage or college. “Because term insurance is so much less expensive than permanent insurance,” term insurance allows them to purchase as much as they actually need, she said. People with a special-needs child may want to consider permanent insurance, according to Ms. Chatzky.

Each person should look at his or her “own family needs when it comes to an estate,” Ms. Chatzky said. “Some small business owners have a very predictable income. Others don’t. Look at your family, what you are looking to provide for the people you are leaving behind.”

Small business owners, in particular, must create a plan for getting their assets into the hands of the family members they want to receive those assets. “What happens to that business if something happens to you?” she said.

People ought to worry about outliving their assets in retirement, Ms. Chatzky said. “Longevity is a huge issue, one that we don’t understand very well in this country. You need to plan to accumulate for retirement and to produce income that will last you as long as you live.”

Such income can come from investments or an annuity, she said, and about 17 percent of people have pensions.

“You need a strategy for when and how to take Social Security,” she said. That strategy depends on whether you are married, on age differences between spouses and other factors.

Show Comment