Worse Than A Stock Market Correction?

Bill Parrott |

Investors are constantly scanning the horizon, looking for a stock market correction. While watching the front door, anticipating a stock market correction, they leave the back door wide open. Stock market crashes are painful but temporary, while a poor estate plan can cause permanent damage to your family's wealth.      

Individuals spend most of their time reviewing their stocks, bonds, and funds without considering their estate plans. It's hard to ponder your mortality, but it is necessary if you want to protect and preserve your assets for your family.  

Here are a few areas where you can fortify your estate plan.

  1. Will or trust. If you die without a will or trust, you can potentially lose 40% of your estate to state and federal estate taxes. In addition to paying taxes, your estate may end up in the wrong hands. A former client inherited $4 million from his uncle, who died without an estate plan, and he had to write a $2 million check to the IRS for estate taxes. A proper plan may eliminate your estate taxes and ensure a smooth transfer to your beneficiaries.
  2. Life insurance. Individuals who own little or no life insurance risk losing their assets to creditors in the untimely event of a death. How much life insurance is enough? At a minimum, you should own enough life insurance to pay off your debts, provide for your spouse's lifetime income, and fund your children's college education. In addition, it's imperative to insure a stay-at-home spouse.
  3. Long-term care insurance. Long-term care insurance is becoming essential. The average monthly cost for LTC insurance is approximately $7,100, and the typical stay in a facility is about three years. If you and your spouse enter a LTC facility simultaneously, you may spend $511,000 or more for care. A long-term care policy can provide the necessary care for you and preserve your assets for your beneficiaries.
  4. Beneficiary Forms. Updating your beneficiary information on your retirement accounts and insurance policies takes about two minutes. A beneficiary designation overrides all your estate documents, including your family's will or trust.   
  5. Umbrella Policy. An umbrella policy is a cost-effective way to protect you and your property, especially if you own a pool, trampoline, or outdoor playset. The cost of adding a few extra million of insurance coverage to your property and casualty policy is minimal.

A sound financial and estate foundation can protect your assets while living and long after you're gone. I recommend spending time updating your insurance and estate planning documents. 

An ounce of provision is worth a pound of cure. ~ Proverb

February 7, 2024

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren't suitable for every investor. Prices and yields are for today only and are subject to change without notice. Past performance is not a guarantee of future performance.