Executive women have a lot on their plates. In addition to demanding careers, many women are juggling raising children, having a relationship, and trying to provide some semblance of balance in their lives. The challenge for these women is that they focus on taking care of everyone but themselves. Their financial life winds up pretty far down the list of priorities. Case in point: Yesterday I had lunch with two girlfriends, both of whom run successful companies here in Southern California. Coincidentally, both of these women are going through a major life changing event: Divorce. These are emotional times and both women have found themselves in the position of having to deal with financial issues that they did not address prior, because they never expected they’d need to. Having your financial house in order before a major life transition can help you avoid certain financial pain, heartbreak, and drama that happens in these situations. More importantly, it prepares you for life’s unexpected events and helps you push forward instead of finding yourself at an impasse.
To have security in life financially means not only making money and investing it well for your goals, but also protecting your family financially and passing your wealth on as you intended… It means having a plan. I believe that in order to be truly financially secure, you need to look at your entire life. This is a disciplined, holistic approach to wealth management. I’d like to propose that we women stand back for a few minutes to assess our personal lives and then follow some guidelines to help us achieve financial well-being for ourselves and our families.
Let’s talk about the issues you should address, one by one.. I break them down into two main categories: Investment Management and Estate Planning, and there are several sub-topics within these categories. Not all of these issues affect everyone and they may not all affect you. However, if you go through each topic, identify those that affect you and prioritize them, you can then put a plan together.
1. Investments: I’m sure you’re familiar with the saying, “It’s not how much you make, it’s how much you keep.” Investing your money is not only about preserving what you’ve made and kept, but making it grow. Your investments should be invested in a way that is based on your personal risk tolerance, when you need the money, and the specific goal(s) that guided your investment choices. In addition, ALL investments should be considered when you come up with your plan on how best to invest your money. So, Real Estate, stocks, bonds, limited partnerships, you name it – It all figures together when determining a strategy to get you to where you want to be financially. If you have several different accounts, make sure they are all considered when you take a look at your assets to determine how best to invest them. Bottom line: take stock of everything you have, everything you need, and everything you want. This is why you invest and how you’ll make sure your investment strategy reflects your life goals today, tomorrow, and after.
2. Qualified Retirement Plan/IRA Coordination: Even though your employer-sponsored retirement plans must remain, most of the time, in the plan your employer provides, you may have a degree of control over how that money is invested within the plan. You’ll want to make sure your money is invested based on your personal risk tolerance and goals, and diversified among the choices provided. You will also want to be sure that the strategy you employ here is in sync with your overall investment strategy. Make sure to keep beneficiaries up to date. If you have life changing events, be sure to review who you have chosen for your beneficiaries.
3. Stock Options: If you are compensated by stock options, you’ll want to make sure there is plan to help you unwind concentrated stock positions. There may be significant tax implications here to consider.
4. Managing Liabilities: Any debt you have needs to be considered in the big picture of your financial life. Identify all your debt, such as: mortgages, car loans, construction loans, education funding, business loans and credit cards. You will want to address the interest rates of any debt you have as part of your investment strategy.
5. Business Succession Planning: This is a big one that is often overlooked by small business owners. For many business owners, the business is their retirement plan, as well as their largest asset. Depending upon your wishes for your business, you should have a plan in place to transfer ownership of the company down the road when you are ready to retire. If there are several owners of the company, you should have a plan in place to anticipate the issues that might arise should one or several of the owners change.
1. Insurance: This is all about asset protection. If you have children or a non-working spouse, you truly must have life insurance. I usually suggest term life insurance to my clients who are looking to make sure their families are protected should they pass away. Term life insurance tends to be relatively inexpensive. As you approach age 50, I suggest you consider Long Term Care insurance. The premiums will be lower for you if you get a policy when you’re younger, rather than waiting until you think you need the service. Not only that, but you are more likely to be healthy when you’re young, which is an important qualifier for most insurance companies when evaluating potential insureds.
2. Durable Power of Attorney: It became apparent to me how important this and an Advanced Directive was when my husband had a heart attack last year. If you become incapacitated, you will need someone to make decisions that are in line with what you would want.
3. Asset Titling: You want to make sure that all your assets are titled correctly so that they wind up going to whom you intended. I recently heard a very sad story about a widow whose late husband had not updated the title on some key family assets. When he passed away suddenly, there ensued a battle between his family and his widow. I am sure most of us would rather have our assets go directly to those we intend.
4. Trust Executor: Make sure you have someone whom you trust to execute your estate plan when the time comes. This may be a relative or a professional fiduciary, but you’ll want to have the person designated ahead of time. Through your estate planning attorney, it is very easy to conduct a video recording of yourself executing your estate plan. This simple and inexpensive service takes a lot of pressure off your Executor and is an instrument that aids in preserving your wishes.
5. Distribution of Wealth: Not only do you want to make sure that your wealth is distributed according to your wishes, but there will also be tax implications that you will want to have anticipated and planned for. Establishing a trust is key to avoiding probate and passing on your money as you had wished.
6. Gifting to Children and Descendants: There are many different ways for you to assist your children and grandchildren financially. If this is important to you, you’ll want to make sure someone can help you structure this so that you are mindful of gift tax implications.
7. Charitable Giving: Do you have a charity that is close to your heart? This should be spelled out. You may have an organization or charity that you’d like to donate while you’re alive. You’ll want to spell these wishes out in your estate plan.
8. Charitable Inclinations at Death: You may have an organization or charity that you would like to receive a portion of your assets. This can be structured in a number of ways. A charitable remainder trust (CRT), as an example, is often a successful strategy of increasing the legacy you leave behind to both the charity and your loved ones, and also helps mitigate estate taxes.
Once you’ve identified what issues you have, prioritize them. You’ll want to put a comprehensive financial plan together, which includes your estate plan so that you are on track with your goals. Revisit the plan once a year and when a major life event takes place. If you don’t have an estate plan, get referrals from some trusted friends and interview a few estate planning attorneys. Choose someone you feel comfortable with who has a practice that is in line with your needs. If you need a wealth advisor, I would again suggest you get referrals to several people. Interview them until you find someone you trust has your best interests at heart and who can offer you in-depth analysis of your life and help you execute a strategy. Your estate planning attorney and wealth advisor will often be able to refer you to CPAs, business attorneys, insurance brokers, and private bankers to help address other issues on the list. You’ll want to make sure your advisors collaborate with one another so that nothing is missed, and if you can find a financial advisor who is comfortable quarterbacking all your trusted advisers, that is the best case scenario.
As soon as your financial house is in order, you will find that you are in a better, more secure place to withstand life changing events. While you might need to make revisions to some of your decisions along the way, you will have peace of mind knowing that at least this part of your life is taken care of and you’re prepared for life’s unexpected events.