You are still living in the home in which you raised the kids. It is the family homestead. You have lots of memories in that home. The kids moved out decades ago. You do not use or need the other two or three bedrooms anymore. It sure is a lot of work maintaining over 2,000 square feet of home and the accompanying yard.
You thought you were retired. Taking care of the home is almost a full-time job. There’s the vacuuming, dusting, bathrooms and other regular cleaning. And there always seems that there is something that needs fixing, the roof, electrical, plumbing, furnace or other things. And then there’s the yardwork, the lawn and the flower beds.
You can’t do it all anymore. You are longer steady on a ladder. You have to hire the work to be done. The taxes, insurance and utilities keep on going up. Not only is taking care of the home almost a full-time job, it has been getting more and more costly, and eating into your savings. What to do?
In the last several months, I’ve had quite a number of clients in this very situation. Almost all of them have decided that it is time to move. Downsize the home and downsize the expense. Some have decided to buy a much smaller home or condominium with much smaller expenses.
Others have decided to cut the home ownership cord completely and rent. With renting, there’s no more taxes or home insurance. You can have renters’ insurance insuring just your stuff, at a much lower cost. Oftentimes, utilities are included in the rent. And if you are a renter, you do not have to worry about having to sell or maintain the home or condominium when you are no longer able to live there.
Also, many of the senior apartment facilities have shuttle busses that can take you shopping and other places. Most of these places have a spot to park your car. However, the less you use your car, the less wear and tear there is on it and the less cost to maintain it. You may not even need a car and its accompanying expense any more, so you can sell it, or give it to one of the kids or grandkids.
If you need help with day to day chores in the future, most of these facilities either provide assistance or have arrangements with independent homecare agencies to provide it. There is usually a menu of assistance items from which you can choose, if and when you need it.
Not only do you have to take care of your home or other living situation, you have to keep your financial house in order. Do you have to have a proper estate plan in place? Preparing for your estate plan can be a lot of work. Not only do you have to decide who is going to do what when, you have to organize your affairs, so they can. To properly prepare your estate plan, especially a trust based estate plan, you need to gather asset information and make a list of everything you own.
Every bank account, investment account, IRA and retirement account should be itemized. Also noted should be all life insurance policies, annuities and every vehicle and parcel of real estate owned. If there are any stocks, bonds or mutual funds held directly and not in a brokerage account, they too have to be listed. Not only do the assets have to be listed, you need to gather documentation of them.
If you have a trust, all of this information is necessary to fully fund your trust. Trust funding is completely and correctly designating your trust and individuals as owners, beneficiaries and insured parties of your assets. Basically, it’s putting your stuff in your trust.
The proper funding of your trust is critical in making your estate plan work and having the results you plan. Failure to properly fund your trust may cause unintended results. These may include probate during your lifetime or after death; distributions not in accordance with your goals and objectives; additional taxes; and additional administrative, legal and other expenses.
Gathering this information for all your assets is a lot of work and it’s your stuff. However, all of this information will have to be gathered eventually. You can do it now when you are alive and well, or it can be done by someone else later after your mental disability or death at much greater time and expense. It’s like the old Fram oil filter commercial, “You can pay me now, or you can pay me a lot more later.”
When we review asset information for our estate planning clients, it is not uncommon for checking and saving accounts to be at three, four or more banks, credit unions or other financial institutions. We often see investment accounts, annuities, IRAs and life insurance policies spread out among different financial advisors. Financial assets can be spread out among a dozen or more advisors or companies.
Keeping track of bank accounts, mutual funds and other investments now can be a real chore. But it may not have seemed this difficult in years past. Keeping things organized so you can find things again when you need them was so much easier before and took a lot less time.
Now may be the time to simplify your financial life. How many checking or saving accounts do you really need? It may make sense to just have a few accounts at one bank or credit union. Is there any reason to still hold on to that $500 or $1,000 life insurance policy your parents bought for you when you were little? It might be less hassle to just cash it in, especially when there is not a lot of taxable income to recognize on the surrender of the policy.
Consolidating your stocks, bonds, mutual funds and investment accounts with one trusted adviser will likely not only be easier for you, it will be easier for your successors in the event of your mental disability or death. Managing your rentals and other investment properties is becoming a real pain. Maybe it’s time to start selling them or having them professionally managed.
Downsizing your home and simplifying and consolidating your financial assets will assist you with staying in control while you are alive and well, providing for you and your loved ones in the event of your mental disability and giving what you have to whom you want when you want the way you want.
By: Matthew M. Wallace, CPA, JD
Published edited June 14, 2015 in The Times Herald newspaper, Port Huron, Michigan as: Take time to downsize and simplify life