Sailing and Financial Planning – Part 2

by David D. Holland


I recently used a sailing analogy to describe the positive impact that a knowledgeable guide can have on your finances. My wife, Toni, has informed me that I left out the most important part of my sailing story: the impact on family members. While I was sitting on the sailboat’s hull waiting for rescue, she and the kids were waiting on the beach wondering what had happened to me. What if I had been hurt? The risks you take can financially impact your dependents, but good planning can help shield your heirs from the collateral damage associated with injury or loss of life:


Cash Reserves – If you lose your job, get hurt, become ill or die, there will be a need for cash. I recommend at least three months’ living expenses. Make sure to account for anything unusual about your circumstances that would require more money. Deductibles and other expenses related to the event could also cause you to need cash. One of my key employees was injured on vacation while horseback riding; in addition to the medical insurance deductibles, he had the added expense of being airlifted by helicopter! When the unexpected occurs, having too much cash is rarely a problem.

Insurances - Individual or employer-based health insurance could absorb the brunt of medical costs. If you are injured for an extended period, disability insurance could provide crucial income until you can go back to work. If you die, the appropriate amount of life insurance would be essential to the financial well-being of your dependents.


Estate Planning – A Financial Durable Power of Attorney will give someone you trust the ability to make decisions on your behalf, while a Health Care Surrogate document (also considered a power of attorney) will let someone make medical decisions for you when you can’t make them yourself. A Last Will and Testament is important for directing your assets to your heirs. Make sure your choice of an executor and successor executors (called personal representatives in Florida) have, at least, some basic financial knowledge and are comfortable working with attorneys, accountants and financial professionals.


Beyond the Basics – In the event of your death, legal documents can specify custody for your minor children. You can also establish a trust to hold financial assets to be received by your children at a future date. For example, you can specify that your child gets a certain amount of money for college, when he or she buys a first car or house, at marriage, or at a certain age, etc. You can also split the duties by having someone responsible for the children’s upbringing, while someone else (a trustee) could handle the money in the trust.


Business Owner Planning –You’ll need a clear succession plan for your business if you get hurt or die. Who will run it if you’re not around? Who will own it? Do you have key employees who depend on you and the business? Do you want them to have the business? Would the new owners have enough cash to make it work? Does the business own life insurance on you? These are all questions to think about. Work with an attorney and the appropriate financial professionals to make sure the business remains intact if something were to happen to you.


Introductions – If you’re married and you take care of your family’s finances, please make sure your spouse has met your attorney, accountant or financial adviser. Not long ago, a retired couple became clients of mine specifically because the husband’s health had declined. He wanted to ensure that his wife would get the advice she would need after he died. Six months later, the husband did die and I am now guiding his widow on important financial decisions.


Money Talk – Some folks die with multiple heirs who need financial support. Example #1: Suppose you are a man divorced from your first wife. You have an adult daughter from the first marriage. You get remarried. If you’ve planned ahead, a trust can be established to hold your assets after your death and to provide financial support to both your daughter and your second wife. Example #2: You are a successful businesswoman with considerable assets. You are divorced with two adult sons. You are going to get re-married. Besides consulting with an attorney about pre-nuptial agreements, you would be very wise to speak with your children about your money and estate plans. Who will get your assets when you die . . . and when? If you predecease your spouse, you don’t want a lawsuit between your husband and sons because of misunderstandings or unfulfilled expectations.


Andre' Gide said, “Man cannot discover new oceans unless he has the courage to lose sight of the shore.” True, but consider the risks. Take the initiative to do proper planning before you set sail and explore. With a little foresight, your dependents and beneficiaries won’t be left waiting and wondering on the beach.