Making career changes mid-life can have exciting but unexpected financial outcomes.
The Background
Ben and Jennifer are in their mid-40’s. Both are thriving and earning substantially more than in their prior lives as employees. Read More…
Ben and Jennifer are in their mid-40’s. Until about a year ago, they both worked full-time – Jennifer at a large asset manager, and Ben at a large consulting firm. At that time, Jennifer left her job at the asset manager, and Ben started his own consulting business. Both are thriving and earning substantially more than in their prior lives as employees.
They own their primary home (with a mortgage) and own a second rental property outright. They had a couple of investment accounts with well-known large companies and they each had old 401K plans (standard and Roth) at different companies.
Ben’s business was immediately profitable with low overhead, so managing the surplus cash flow became a challenge. The couple had questions about income tax planning and what strategic moves to make. They felt that while their investments had done well, they were not getting the advice they needed with respect to taxes, wills, trusts, and their former 401K plans.
Ben and Jennifer have two elementary school-aged children. They have started college savings accounts for both children, but not enough to pay for a four-year private education.
We reviewed their entire financial picture – assets, liabilities, debt, insurance coverage, simple wills, and tax returns. Read More…
We met with Ben and Jennifer every other week over the course of a few months. We reviewed their entire financial picture – assets, liabilities, debt, insurance coverage, simple wills, and tax returns. We discussed their family tree – parents, siblings, children – in order to get to know them and to get a good picture of future expenses or inheritances.
It was at this moment that we learned about Jennifer’s Parents’ estate plan. Jennifer has a special needs brother, Jimmy 10 years younger than her where Jennifer becomes the guardian upon the passing of her parents. The Parents left a disproportionate amount of their estate to Jennifer so she could safeguard the funds for her brother via their simple will which hadn’t been updated in years.
We also reviewed their insurance coverage – life, home, vehicle, umbrella, and corporate policies – and worked with them and their agents to ensure the right coverage. In addition, we made recommendations regarding establishing a full estate plan, including the creation of a trust for their minor children.
Results
The couple established a solid estate plan, including wills, trusts, powers of attorney, health care proxies, with protection for their minor children.
Jennifer’s parents, against their desires, took a call with the team where we explained why her plan for Jimmy was flawed. They had no idea and wondered why their attorney did not mention this. WE architected a trust plan for them to include a special needs trust for Jimmy and provisions for Jennier to care for Jimmy in the event of the Parents inability to do so from a health care perspective.
Their investments are no longer scattered and more accurately reflect their risk tolerance, with better transparency and management.
Insurance policies were reviewed and increased by their agent under our direction to ensure proper coverage.
We reduced their income tax bill by establishing a retirement plan for Ben’s business and had a conversation about the accounting for the rental property.
We implemented a contingent succession plan in conjunction with an attorney that we recommended for Ben and one of his key employees in the event of Ben’s premature death or disability.
The hardest part of this process was making the time to find someone who could act as a fiduciary and assist on all fronts.
Their biggest take-away was the peace of mind that their minor children will be protected and that they now understand the complexity and inter-dependencies of all the moving parts of their financial life.
A close second, however, was the realization that her parents’ old plan was a disaster waiting to happen, with most of those unnecessary problems falling on her lap as the former executor of their old wills.
This page presents hypothetical scenarios intended for illustrative purposes only. These scenarios illustrate Napier Financial’s process and methodology, but all individuals mentioned are fictional and do not represent an actual client or an actual client’s experience. An individual’s experience may vary based on his or her circumstances. The information contained herein should not be construed as personal investment advice, legal advice, or tax advice, and the reader is urged to discuss their individual situation in a one-on-one setting with a qualified professional.
