A World of Stuff

“I’m all taken care of!” An answer I hear all too often in conversations revolving around financial advice. Most times it sounds like a knee jerk reaction, or a generic answer, when speaking to a financial adviser. A defense mechanism of sorts. As I have eluded to in previous articles I understand why you react that way. You don’t want to be sold…again.

The fact is, that if you felt good about what you have, and in fact understood how it all comes together when you actually need it to you may not have to put up a wall. The likelihood is that you don’t have a financial plan in the true sense of the term, but rather a financial soup of products. A world of stuff. Some objectives may be met, but holes remain you may not be aware of and refuse to confront because…you don’t want to be sold…again.

To best demonstrate today’s message, let’s use some common planning objectives just about everyone has. First, retirement. I can picture some of you rolling your eyes and thinking, “Here we go again…”, but I encourage you to read on. I’ve been doing this a long time and find that although it is one of the most popular planning topics discussed with advisors, it is also one of the most error prone and incomplete. Also, since it is a vast topic I’ll use one or two crucial concepts often overlooked.

The first point often overlooked is the actual cost of retirement. So much emphasis is placed on lifestyle preparations that when I bring up the cost of healthcare I get a deer in a headlight stare followed by, “That’s a good point. We haven’t thought of that.” Often, those planning for, or those about to retire believe that Medicare, Medicaid, and their health insurance if any, will cover them in the event of a chronic illness. Unfortunately, that’s not the case. If you have but a few thousand dollars in the bank, or a modest income at retirement, Medicaid will not be available. Medicare doesn’t come for free, and covers short term events under certain conditions. If there is a gap in coverage or a chronic illness you’re responsible. How will your lifestyle and cost thereof be impacted?

Second, estate planning 101. Wills, POAs (power of attorney), and Medical Directives*. It amazes me how many couples with young children don’t have a Will. It is the only legal document that allows one to designate a guardian for minor children should both parents die. It doesn’t matter if they have godparents, loving grandparents, uncles, aunts, friends, etc.. It doesn’t matter how many verbal commitments you have to have your children cared for. If there is no Will in place naming a designated guardian the courts take over whether you like it or not. They decide, and anyone wishing to contest will have to take it up with the courts.

POAs, are usually meant to have someone you trust to take over financial decisions on your behalf in the event you become incapable of making them yourself. There are different levels of responsibility you may give away, but the general premise is the same. In the event that happens, bills still have to be paid, and investments, if any, looked after just for starters. Creditors may be compassionate to a point, but run a business and expect to get paid nonetheless. Investments will not stop doing what they’re doing waiting for you to recover. Having a POA you trust designated to take over in the event of incapacity enables you to focus on your recovery.

Lastly, the medical directives, are similar to POAs in that rather than the trusted designated proxy overlooking financial decisions, he or she helps in making decisions regarding your health when you are not in the position to make them. The medical directive document spells out the decisions you wish made about your health in the event you are not able to make them yourself. The designated proxy makes sure these are carried out on your behalf.

Many of you may be familiar with the Terri Schiavo story. A fifteen year long legal battle. Terri’s husband argued that Terri, who was in a vegetative state due to brain damage, would not have wanted to stay alive. Terri’s parents argued the opposite. Eventually, her feeding tube was removed. The appropriate medical directive would have given Terri a voice and save the family, regardless of which side they were on, this painful journey.

If you have taken care to have these important concepts addressed, then congratulations to both you and your advisor/s for working together to implement these basic yet highly important planning strategies. If not, it’s time to stop procrastinating. These steps may only be legally viable if you implement them while you are of sound body and mind. Literally. If these documents are needed, but are not already established, it’s too late. And if these basic tenants of your financial plan are not air tight what other holes in your “world of stuff” need plugging?

*Registered Representatives of Equity Services, Inc. do not offer tax or legal advice. For advice concerning your own situation, please consult with your appropriate professional advisor.

Joseph Yagar is a Registered Representative and Investment Adviser Representative of and offers securities and investment advisory services solely through Equity Services, Inc. 675 3rd Avenue, Suite 900, New York NY 10017, (212) 986 0400. Member FINRA/SIPC. Legatus Group, LLC is independent of Equity Services, Inc.   TC98318(0218)1