SLO LIFE Jun/Jul 2017

SPONSORED
BEYOND
FINANCIAL
PLANNING
101
Five
simple things you
should do to help improve
your wealth building TODAY
Erika D. Bylund, CRPS®
Most people know they should do three things: save early and consistently for retirement, diversify their
investments, and have an emergency stash of cash. Let’s go beyond the basics of financial planning 101. Here
are five simple things that can make or break your financial success and lifestyle—at any age.
1. Get a living trust—and update it.
Living trusts can be relatively inexpensive, efficient, and a flexible
way to control and protect your assets. If your assets exceed
$150,000 and are not in an IRA, retirement, or pension plan, you
need a trust. Some people try to get around it by listing some
accounts as payable or transfer on death, or they title assets jointly
with an heir. These methods can be effective in many situations,
but you have to be mindful of the tax ramifications which can be
more expensive than the cost of a trust. If you own real estate in
multiple states, you should have a trust to avoid multiple probates
in each state. In California, statutory fees of the probate process
can easily run into the five figures vs. the cost of a trust which runs
about $2,500 for a couple. A trust can also give you the flexibility
to build in contingencies and dictate how assets are divided. For
example, what happens if little Billy never paid back the loan mom
and dad gave him 15 years ago—does he still get the full amount
of the inheritance? You can also protect your bequests from being
contested by family members and others, not to mention the
distribution processing time is significantly shorter than probate.
The list goes on and on—this is a no brainer. Once you have a
trust drafted, make sure to update it when major things change—
birth of a child or grandchild, divorce or re-marriage, or acquisition
of a new asset. I can’t tell you how many times I see an ex-spouse
listed as a successor trustee on separate property assets. Also,
make sure to add your Trust as “additional insured” on your
homeowner’s policy.
2. Get umbrella insurance.
If you know what this is, then I’m impressed. Umbrella insurance
is excess liability coverage in the event you’re sued for a negligent
act. Your homeowner’s or renter’s policy usually covers an amount
up to $300,000 or $500,000. If your net worth exceeds this
amount, you need umbrella coverage. Umbrella is typically sold
in increments of $1MM, and can be relatively inexpensive (couple
$100 a year per $1MM). Because negligence is common and easy
to demonstrate, it only makes sense to get this, especially if you
answer yes to any of these: Do you have a pool or hot tub? Do you
have teen drivers? Do you have ATV’s or ORV’s? Here’s where
you get the bang for your buck—if you are sued, the insurance
company will typically provide and cover the cost for an attorney
and your defense (because they want to minimize the claim). You
can get umbrella insurance online or call your current home or
auto carriers. Going through your existing carrier can sometimes
be expensive, so you may need to shop around and contact a
surplus lines broker. There are several good ones in SLO County.
3. Keep your money working for you.
Do you have cash sitting in your 401(k) account or your IRA that
you rolled over from a former employer? Go fix that right now!
If you’re 10 years or more away from needing the money, at
least consider putting it in a Target Date fund so the money is
working for you while you’re not thinking about it. Idle cash is an
opportunity wasted, and you are losing money to inflation over
time, even though the balance stays relatively constant. There
will always be political changes, pending wars, and economic
uncertainties, but time has a way of neutralizing the side effects—
just don’t let fear keep you on the sidelines.
4. Get life insurance while you’re young and healthy.
Life insurance is a greatly underestimated and inexpensive
tool. Sometimes I run into people who think that the $50,000 life
insurance policy they got through their employer is sufficient. Is that
enough to pay your mortgage and feed your family? Some wait to
get life insurance until after they’ve had a major medical issue or
after they’ve smoked for 10 years. You can sometimes get it, but
it’s expensive. There are several ways to figure out how much life
62 | SLO LIFE MAGAZINE | JUN/JUL 2017