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Lane Keeter, CPA

Partner: Tax Consulting, Estate Planning, and Heber Springs Managing Partner

Financial Planning in an Ever-Changing Environment

The past couple of years of dealing with Covid-19 has in many ways resulted in a new mode of living - new ways of working, playing, and reflecting on priorities.

Many of us have planned carefully, but today's rapidly changing circumstances may give us an opportunity to re-evaluate those plans in certain specific areas. Here are some musings on various areas of financial planning in light of this new mode:

Tax Planning. Multiple major changes in federal tax law have occurred in response to the pandemic. If you haven't re-addressed tax planning as a result, now may be a good time to do so.

Estate Planning. When was the last time you read your trust or will? Has anything changed? Deaths, births, marriages or divorces, special needs or new disabilities? Are you still satisfied with how your beneficiaries are treated? Are there any controls or conditions for certain situations? Do you have durable powers of attorney in place? Durable health care powers of attorney? Beneficiary Deeds?

Emergency Funds. Not to sound trite, but we all need that "cash cushion" of liquidity. Some planners say six months to one year's expenses will suffice. If you are retired, two years of expenses are even better. Where should you keep your cash? Your local bank may be the best choice for immediate availability. Rates are historically low, but these funds are for safety, not growth. 

Life Insurance: Have you reviewed your life insurance? Depending on your age and family composition, determine your purpose for this insurance. Your age and the presence of spouse and children will determine your need and death benefit amount. What type of life insurance do you own? Whole life, universal, or term?

Buy/Sell Insurance: If you own a business with partners or shareholders, a buy/sell insurance policy can provide much needed liquidity in the event one of the partners or shareholders dies. The policy can provide the cash needed to acquire the decedent's share of the business. As time goes by, the value of the business can change and partners or shareholders can change so it is important to review these policies to make sure they meet your current needs.

Disability Insurance: This is offered by many employers and usually pays 60% of your most recent salary to age 65. If you are self-employed, you should consider buying your own stand-alone policy or procure one through a professional association.

Long Term Care Insurance (LTC): Long term care insurance is different from disability insurance. It protects you if you need assistance with the activities of daily living (ADLs), such as feeding yourself, bathing, transferring from bed to chair, dressing, toileting, and continence. The usual rule is that if you are unable to perform two of six ADLs, you will qualify for Long Term Care benefits. Senile dementia and Alzheimer's Disease is also included and do not require the other ADL triggers. 

The LTC industry has changed in the past five years as more people are going on claim. If you would like to include this important facet to your financial plan, a qualified financial advisor can assist you in assessing how large a benefit, length of benefit period, cost of care inflation, and other metrics you might need.

Asset Allocation of Investment Portfolio. In the rude wake up call of COVID-19, we are all experiencing some self-doubt about our true risk tolerance. Now is the perfect time to re-evaluate and question the purpose and need of every security you own. Does your portfolio allocation reflect your current needs and objectives? Maybe now is the time for a comprehensive review of your situation by a financial planner. Remember, knowledge is power. Go find you someone who can who can lay that on you!

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