#8 - The Importance of Financial Advisors
Reluctant Executor News
Financial Advisors are usually one of the first professionals that families call when things settle down after a funeral. Some people don't know what assets their family owned, what debts they have, or what their cash flow and budget will look like. Financial Advisors can help you get your current financial picture, as well as help you develop a financial plan moving forward.
Why is it important to work with a Financial Advisor? Rules can be more complex, or just plain different when inheritance is involved. The posts below cover two financial scenarios that are common, but can have different outcomes if you're not prepared.
LinkedIn post from August 3, 2023
Did you know you can take life insurance out on someone else?
Before you run to your nearest senior center to sign up strangers, there are some nuances to be aware of.
The most common scenario is to purchase a life insurance policy for yourself. When you die, the benefit is there to support your surviving family.
But there are scenarios where you may take out a policy on someone else.
You may want to insure your newborn child in case the unthinkable happens. This will provide some help in covering funeral costs. The same scenario applies for aging parents, although this policy likely will be much more expensive.
You also can insure a business partner. Whether you started a business together, or co-signed a loan, if your partner passes, you will have the funds to cover their portion of the business or loan.
However, you must have an insurable interest in the person you're covering. And the person must give their permission by signing the documents.
So unfortunately you can't sign up just anyone from your local nursing home.
Why is this important for estate handoffs?
If the owner of the policy dies before the insured, and a successor owner was not named, then the policy becomes part of the owner's estate. It is considered an asset and will go through the normal probate process.
This can cause unintended consequences in terms of taxes or ownership.
So when you're talking with your parents about their estate handoff, be sure to ask about life insurance policies they may own for someone else.
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LinkedIn post from August 8, 2023
With mortgage interest rates around 7%, wouldn't it be great to take over the mortgage from the sellers of your next home? Unfortunately, most conventional mortgages have a "due-on-sale" clause.
What if you inherit a house with a great mortgage rate?
Enter the Garn-St Germain Depository Institutions Act of 1982.
You may know this act by it's full name, "An Act to revitalize the housing industry by strengthening the financial stability of home mortgage lending institutions and ensuring the availability of home mortgage loans."
I don't think they had any marketing professionals naming these acts back in 1982.
Anyway, the act's intent was to fight the high inflation from the 1970s. A specific part of the act states that the due-on-sale clause in a mortgage can be waived for inherited property.
So if you end up inheriting a property with a great interest rate, make sure you know your options. Better yet, talk with your family about their estate before it becomes a hassle.
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Legacy Planning
While Financial Advisors can help your family get organized after a loss, they may have limited insight into only the accounts they manage. A way to prevent this is to complete a broad inventory of your assets on your own, then share this with your Financial Advisor. If you need help getting started, Reluctant Executor provides a coaching service to assist and motivate you. In addition to helping you brainstorm important assets to consider, we also explain why each area is critical to document, and we listen to your unique story to help make sure you find any blind spots.
If you or someone you know needs this type of support, contact me at Bill@ReluctantExecutor.com.