Financial Fitness: Estate is a Frame of Mind

The following article appears in the Canton Citizen’s 2015 Financial Fitness Guide. See this week’s edition for information and tips from local professionals on a wide range of financial topics, including asset protection, real estate, tax preparation, and much more.

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As director of estate planning and asset protection at Bank of Canton, I talk to a lot of people about their future plans and provisions. And often, at the start of our conversation, I hear the following:

Peter Fredericksen

But I don’t have an estate.

Some of the folks who’ve attended my seminars tell a similar story: At first, they didn’t think they had enough of an estate worth planning for.

I can understand where this misperception comes from. The term “estate” can conjure up thoughts of a huge mansion, a Rolls Royce, and the like. If this image were true, I wouldn’t have an estate either. But the truth is, practically everyone has an estate.

Your “estate” refers to your money and your possessions. Start with your bank accounts and investments. If you have a 401k or pension plan, that’s part of your estate as well.

Next consider your material goods. If you’re a homeowner, include the equity in your house or condo. You might remember what you paid for your house, or what you refinanced for a few years ago, but have you had an appraisal recently? Real estate values across much of greater Boston have risen over the past couple of years, possibly leading to more equity in your home.

You should also include your valuables — such as jewelry, antiques, and collectibles.

My seminar attendees are sometimes surprised (and very pleased) once they realize the extent of their estate. And that’s why the concept of “asset protection” is so important. Unless you have an estate plan with legally enforceable documents, it’s very easy to lose your new-found estate when you become incapacitated or enter a nursing home.

How big are the risks? Well, Genworth Financial recently reported that in 2014, the average annual cost of a private room in a Massachusetts nursing home was $134,320.* This could deplete a lifetime of savings in just a few years, or less. But a properly structured plan with a Medicaid Planning Trust can help protect you from that expense.

Likewise, an estate plan can help your loved ones avoid the costs, delays and uncertainties of probate court. The probate process can take a full year’s worth of attorney fees and court costs, which might cost them anywhere from $5,000 to $20,000 or more.

So how do you view your estate? You can be young and just starting out, or a 30- or 40-year career veteran with a sizeable nest egg. If you’re reading this Financial Fitness section of the Citizen, odds are that you do have an estate — with real value worth protecting.

*Source: Genworth Financial. “Long Term Care Costs – Cost of Care Survey 2014.” Genworth.com. https://www.genworth.com/corporate/about-genworth/industry-expertise/cost-of-care.html (accessed February 16, 2015)

Peter J. Fredericksen specializes in asset protection and estate planning for the Bank of Canton. For more information, visit www.thebankofcanton.com.

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Posted by Canton Citizen on Feb 26 2015. Filed under Featured Content, Opinion. Both comments and pings are currently closed.