Life is unpredictable, and often, it presents us with unexpected changes that can bring both emotional and financial challenges. Whether it’s a divorce, the loss of a loved one, the birth or adoption of a child, marriage, or sending a child off to college, these events require careful financial planning. In times of transition, having a trusted wealth advisor by your side can ease the stress and help ensure that your finances remain intact. Here’s a guide to managing your wealth during life-changing events.

Surround Yourself with the Right Support

When facing a major life change, the first step is to assess your financial situation. Your wealth advisor can work alongside tax, estate planning, insurance, and trust professionals to review and adjust your financial plan as necessary. This collaborative approach will help safeguard your income, assets, and loved ones during challenging times.

Wealth Planning Considerations After a Loss

Losing a loved one, whether a spouse or a child, can be one of the most devastating experiences. After such a loss, it’s essential to review key documents and accounts to make sure everything is properly updated.

1. Estate Planning Documents
   If your spouse has passed away, locate their estate planning documents, including the will and trust, and schedule a meeting with your estate planning attorney. They can explain the details of the documents and help update beneficiaries and property distribution as needed. If you’ve lost a child, it’s important to review your will and accounts, such as your IRA, to ensure your beneficiaries are current.
2. Death Certificate
   To update financial accounts, file claims, and collect insurance benefits, you will need to provide a death certificate. It’s recommended to request several certified copies (10-15) from the funeral home to cover all necessary claims and legal procedures. Certified copies are typically required for various legal and financial transactions, including claiming life insurance proceeds or initiating probate.
3. Investment Accounts
   Create an inventory of all accounts that were jointly owned or set up for your child. If you have online access, be sure to note your username and password. For accounts with joint ownership, such as those with a spouse, the surviving person will become the sole owner. Consider adding a Transfer on Death (TOD) designation to avoid probate and ensure a smooth transfer of assets upon your death.
4. Insurance Policies
   Review and update the beneficiary information for life, disability, health, long-term care, auto, homeowners, and umbrella insurance policies. You may need to change the policy ownership as well, depending on the situation.
5. Taxes
   Gather the last two to three years of tax returns and schedule a meeting with your CPA. If you filed jointly with your spouse, you will need to file taxes for the year they passed, which may require additional adjustments.
6. Ongoing Bills
   Review all current bills, including loans, to understand your cash flow needs. Set up automatic payments for recurring expenses and ensure your checking account is sufficient to cover them. You may also want to change account ownership to your name going forward.

Wealth Planning for Life’s Changes

Events such as the birth or adoption of a child, marriage, or sending a child to college all require updates to your wealth plan. Ensuring that your estate planning documents and beneficiary designations are current is crucial.

1. Estate Planning Documents
   If you’ve had a child or adopted, you should update your estate planning documents, including your will and trusts. Proper planning ensures that your assets are passed to your heirs in the most tax-efficient way possible and protects loved ones from creditors.
2. Education Savings Accounts
   A 529 plan is a popular choice for saving for education costs, as it allows you to gift up to the annual gift tax exclusion amount, reducing your taxable estate. Additionally, you can front-load up to five years’ worth of annual exclusions in one year, significantly boosting your savings for education.
3. Insurance Policies
   Life insurance and disability insurance are essential for income replacement if something happens to you. If you’ve had a child or are expanding your family, it’s important to update your beneficiaries and consider increasing coverage to reflect your new family needs. At Mariner, our in-house insurance team can help evaluate your current policies and suggest any necessary updates.
4. Tax Considerations
   Several tax benefits apply to major life events, such as adoption or child care:
   • Adoption Credit: If you’ve adopted a child, you may be eligible for a tax credit for qualified adoption expenses. This credit is nonrefundable and limited to your tax liability for the year.
   • Dependent Care Assistance: In 2024, you can contribute up to $5,000 to a dependent care flexible spending account, helping to cover qualifying child care expenses.
   • Kiddie Tax: In 2024, children’s unearned income above $2,600 is taxed at the parents’ tax rate. However, the first $1,300 is tax-free, and the next $1,300 is taxed at the child’s tax rate.

Conclusion

Life changes can be financially overwhelming, but with the right support and planning, you can protect your wealth and ensure your loved ones are taken care of. By revisiting your estate planning documents, updating insurance policies, and making smart tax decisions, you can maintain financial stability in the face of life’s challenges. Consulting with a wealth advisor during these times is essential to making the best decisions for your family’s future.