Three Financial Moves to Consider in the Age of Covid
None of us has to be told that 2020 is a year unlike any other – at least since the flu epidemic of 1918. We’ve all had to make adjustments to our work situation and lifestyles, but what about our finances? Are there issues we should be thinking about in this environment that weren’t especially pressing in previous years?
Here are a few ideas to consider:
1. Review Your Life Insurance Coverage
Maybe it sounds a bit morbid, but life insurance takes on more importance than usual in our current environment. The question isn’t simply whether you have ample coverage, it’s whether you’ll continue to be insurable in the eyes of life insurance providers. Many companies have tightened their underwriting requirements this year to make certain you haven’t experienced Covid symptoms or been exposed to possible carriers. Others are delaying applications for anyone who has traveled or plans to travel outside the US. In short, convincing life insurance companies you’re healthy enough to warrant their coverage may be more problematic than it was in pre-pandemic days. In addition, there’s the distinct possibility that some carriers will raise their rates if the pandemic persists. If you’re worried that you don’t have ample coverage, now is the time to do something about it, especially since many public health professionals are calling for a possible spike in Covid cases this fall. Term insurance might be an economical way to provide your loved ones with extra protection until the pandemic is behind us. In addition, you should think about talking to parents and other aging family members about updating their insurance and obtaining sufficient coverage while they’re still healthy enough to be considered insurable.
2. Don’t Neglect Disability Insurance
Boston Red Sox pitcher Eduardo Rodriguez contracted Covid 19 but was expected to rejoin the team in mid-to-late July…until an MRI revealed that the virus had left him with myocarditis, an inflammation of the heart muscle. As the pandemic drags on, increasing numbers of Covid sufferers are finding that even after they recover, they are affected by lingering maladies that include fatigue, shortness of breath and heart issues. In short, even if you contract a mild case of Covid and recover within the anticipated 10-14 days like many patients, you could be left with disabling conditions that affect your lifestyle and ability to work.
That is why in this environment especially, disability insurance becomes an even more critical component of your overall insurance coverage.
If you’re fortunate enough to work for an employer that offers a long-term disability plan, it’s important for you to know the following:
- How much your policy will pay if you’re out of work. Do your disability benefits equal your monthly spending, college savings, and retirement contributions?
- Is your disability insurance portable? If you leave your employer, can you take it with you?
- Are your disability benefits taxable? They are if your employer pays for the insurance premiums on your behalf.
If you’re self-employed, not covered by your employer or inadequately covered, you should think about buying your own long-term disability policy. Your Lenox Advisor will help you sift through the various options available to you, including length of time for which you’ll be covered, amount you’ll receive, elimination periods and, of course, cost. (Related: Disability Facts That May Surprise You)
3. Cross the t’s in Your Estate Plan
Chances are you already have a will, but does it reflect who you are now or who you were when it was created? Have you had children in the interim? What about a healthcare proxy, advance directive and power of attorney in the event that you or your spouse are rendered incapable of making healthcare or legal decisions in the future? In this environment, it becomes even more critical to exercise whatever control you can over uncontrollable events that may or may not affect you and your family.
Covid, however, isn’t the only reason to take a closer look at your current plan. With the lifetime exemption at its current $11.58 million level, federal estate tax is seemingly no longer a concern for many Americans. However, this generous exemption is scheduled to decrease to its previous $5 million level (adjusted for inflation) in 2025. Depending on who wins the election, that date may be moved up, especially in light of this year’s declining tax revenues and trillions of dollars in stimulus expenditures. Rather than leaving your legacy when you’re no longer around to enjoy how much it’s appreciated by your heirs, consider gifting assets out of your estate before the lower lifetime exemption is scheduled to return. Gifting assets while you’re alive not only removes them from your estate, it transfers potential taxable growth to a beneficiary.
One more point – if you haven’t yet created an estate plan or if your plan requires updating, take care of it this year. We can’t all be George Steinbrenner, the late owner of the New York Yankees who passed away in 2010 when there was no estate tax. Had he died a few months earlier or later, his heirs would have been hit with an estate tax bill of at least $500 million, based on a $1.6 billion valuation for the team. Estate tax law, like all tax law, is subject to constant assessment. Administrations leave and take office. Congress focuses on new issues. So-called loopholes close and new opportunities emerge. Currently, there are a number of opportunities available that might not be in 2021. Now is the time to take a close look at them.
Lenox Advisors, Inc. (Lenox) is a wholly owned subsidiary of NFP Corp. (NFP), a financial services holding company, New York, NY. Securities and investment advisory services offered through qualified registered representatives of MML Investors Services, LLC. Member SIPC. 90 Park Ave, 17th Floor, New York, NY 10016, 212.536.6000. Fee based planning services are offered through Lenox Wealth Advisors, LLC (LWA), a registered investment adviser. Services will be referred by qualified representatives of MML Investors Services, LLC (MMLIS). LWA is a subsidiary of NFP and affiliated under common control with Lenox. Lenox, LWA and NFP are not subsidiaries or affiliates of MMLIS, or its affiliated companies CRN202209-270770