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Is It Time for a Financial Checkup?

by E. Christopher Caravette

Many of us, especially as we get older, are good about going to the doctor for an annual physical.  But how many of us take the time to get our financial house in order?

We got to the edge of the “fiscal cliff”, but did not fall over.  The real estate market has softened, and obtaining credit requires more patience and determination.

We recommend that our clients do a financial checkup every year as well.  It doesn’t take long, and can go a long way toward building on the future.

Here’s a list of the issues you might want to review:

Review Your Mortgage

  • Take a look at whether your current mortgage might be refinanced into a new mortgage with lower rates.  Interest rates are at an all-time low, so you might be able to save some real money over the long run.
  • Does your mortgage include PMI (or private mortgage insurance)?  If so, you should be aware that if the outstanding principal amount on your mortgage drops below 80% of the fair market value of the home, you may be able to avoid paying PMI, particularly if you’ve made substantial improvements to your home since you took out the mortgage.

Review Your Insurances

  • Review all of your insurance policies to make sure they afford you adequate coverage and that the premiums are competitively priced.  This includes automobile insurance, homeowner’s insurance, health insurance, disability insurance, long-term care insurance, and life insurance.
  • Check and update the beneficiary designations on any life insurance policies and retirement plans.
  • List and photograph possessions for insurance purposes and put the list and photos in a safety deposit box.
  • Consider the future and whether long-term care insurance might work for you.  Premiums and insurability on these types of polices go up as you get older, making it much more difficult to obtain coverage when you may need it most.
  • Consider the need for disability insurance and additional life insurance benefits. Keep in mind that long-term illness, loss of employment or other unexpected events can really impact your lifestyle and standard of living.  As a general rule, three to six months of living expenses should be kept in safe liquid assets to protect against such events.
  • Take an inventory of your personal property.  This is a good idea for insurance purposes, as well as for estate planning purposes.  With today’s technology, you might consider just spending an hour taking photographs or a video of your home and its content, including art, china and silver, and other valuables.

Do Your Estate Planning!

  • If you haven’t done so already, do your estate planning.  Whether you are young or old, married or single, everyone needs to have an estate plan.  At the very minimum, everyone should have a simple will.
  • We always recommend to our clients that they execute the statutory powers of attorney, one for health care, the other for property.  These documents allow you to appoint an agent to make health care and financial decisions during your lifetime if you are unable to do so.
  • If you have an estate plan in place, review it now to make sure it still meets your needs and is up to date.  Check to determine if the executor and guardian of minor children are people whom you trust and determine whether those people you have designated are still willing and able to handle financial and legal decisions.
  • Review and update the way assets are titled, particularly bank accounts and real estate.  Consider a revocable trust, or putting your real estate in a land trust to avoid probate, which can be very costly and time-consuming.  If assets are titled solely in your name, consider whether your family and loved ones will be able to access them in the event of your death.
  • Don’t procrastinate!  It’s very easy to draft at least a simple estate plan, which can save your estate time and money.

Our firm has been assisting our clients with their estate planning needs for more than twenty-five years, and would be happy to help you as well.

(Note: The information in this article is intended to be general in nature. Plan to discuss your particular circumstances with an attorney for how this might apply to you.)