One of the best Valentine’s gifts you can provide your loved one is financial safety and security. Perhaps you have heard the “Pension Pickle” story. When Bruce Friedman's wife, Anne, died suddenly of a heart attack in 2001, Bruce was placed in a less than admirable position. Bruce was not going to receive Anne’s $900,000 pension because of a technicality. Why? Anne had forgotten about a beneficiary form filed in 1974 naming her sister as beneficiary. The designation was never updated and Bruce lost the ensuing court battle.
With that story in mind, use this checklist to help ensure your financial affairs are in good order.
Life Insurance: Do you know who is listed as primary beneficiary on your employer provided and personal life insurance coverage? Do you have a copy of the beneficiary form? If the answer to either of those questions is “no”, file a new beneficiary form, which should include a contingent beneficiary, and keep a copy of the newly executed form. Also, keep in mind that courts will generally not allow a minor child to receive a lump sum of cash. It is best to name a Guardian for any minor beneficiaries.
Disability: Disability coverage pays a benefit to you, the insured, when you are disabled and there is no beneficiary designation. But, the way the disability coverage is set up can affect the amount of benefit you receive. Whenever possible, pay disability premiums with after-tax dollars. This ensures the disability benefits will be received tax-free. If your employer pays for your disability coverage, inquire as to whether you can include the premium in your W2. This too will provide you with tax-free benefits. Tax-free disability benefits are much more important than saving a few dollars by paying disability premiums with pre-tax dollars.
Long-term Care Insurance: Some long-term care policies have a return of premium at death or when surrendering a policy without claims. Make sure you review this beneficiary designation so the funds flow to the individual(s) or charities you want to benefit. Also, make sure the carrier knows whom to call if the long-term care premiums are late and the carrier is unable to reach you. Perhaps the premium was due while you were on vacation or perhaps you simply forgot to pay the premium. Having a backup contact on file with the insurance carrier will help ensure you policy stays active.
Let Valentine’s Day be a catalyst to review your financial affairs.