Disaster Planning — prepare for the unexpected!

All Things Financial

Volume 15 No. 11
By Charles P. Jones, CFP®

You might think it can never happen to you, and maybe it won’t but — here is my personal example… a tornado in Oregon! Not likely… that is until Nov. 6th, 2009 at 9:39 PM in Lincoln City. I can personally testify that it happened. My Lincoln City property, a vacation rental that sleeps 20, was smack in the middle of the 40 foot wide, 200-yard path of the tornado that only lasted for about 2 minutes. Of the 11 homes damaged, two were total losses, mine was not as bad. Fortunately, it was only “stuff”, no one was hurt and my good business insurance covered the damage inside and out, the replacement of all the furniture, drapes and carpets, my time for inspections and lost rental income. So take that little bit of extra time to PREPARE FOR THE UNEXPECTED! – Chuck

Prepare for the Unexpected

It’s not marked on the calendar, but 2009 hurricane season is officially underway. The season, which runs from June 1 to November 30, typically strikes fear in the hearts and souls of the 35 million Americans who live in regions most threatened by hurricanes. No matter whether it’s a normal season or not, financial planners and others say hurricane season is a time to prepare for the worst and hope for the best. Of course, you can use these tips to prepare for most any disaster as well.

Pack a ‘Grab and Go’ Case

You should have a ‘grab and go’ case. That case should contain key items that will help you rebuild in the event of a disaster. See list below to get an idea of what should be included in your case. The ‘grab and go’ case should also contain a list of prescriptions and some emergency cash. It’s also a good idea to keep some of that stuff with a friend or relative in an unaffected area just in case you’re unable to get out with your case.The Financial Planning Association suggests that you document and store credit card information (account number, expiration, security code) just in case your cards are lost in a storm. As part of documenting valuables, we also recommend taking photographs or video of valuable items and the home, particularly specific rooms (bathrooms, kitchen, etc.) where you may have made a considerable investment.

Safeguard Tax Records

The Internal Revenue Service (IRS) issued a release outlining what you should do to prepare for the upcoming season. The IRS suggests that you:

  • Create a backup set of records electronically
  • Update emergency plans
  • Check on fiduciary bonds

The IRS noted in its release that if disaster does strike, affected taxpayers can call 866.562.5227 to speak with an IRS specialist trained to handle disaster-related issues. Learn more tips from the IRS on how to prepare for a disaster.

Review Your Insurance Policies and Estate Planning Documents

Hurricane season is also a good time to review and update your beneficiary designations on all accounts and insurance policies. It’s also a good idea to make sure you have all your estate planning documents in order — wills, power of attorney, and living will. The National Association of Insurance Commissioners (NAIC) notes that hurricane season is a good time to make sure your insurance needs are in order, especially your homeowner’s or renter’s policies. According to the NAIC, now is a good time to:

  • Review and update your property and casualty insurance policies with your financial planner, insurance agent and/or insurance company. For instance, check whether your policy includes coverage for replacement cost or actual cash value in case of a loss. Actual cash value (ACV) is the amount it would take to repair damage to your home or to replace its contents after allowing for depreciation. Replacement cost is the amount it would take to rebuild or replace your home and its contents with similar quality materials or goods, without deducting for depreciation.
  • Store copies of your life, automobile, homeowner’s or renter’s, and other types of insurance policies with your home inventory in a safe location away from your home, so that these records can be easily retrieved in the event of a loss.
  • Keep a list of contact details for your insurance agent and/or company with your policies. Include office phone numbers, mailing addresses, website addresses and all of your policy numbers for quick reference.
  • Learn what to do before and after a disaster. For instance, the NAIC suggest that you can mitigate — or lessen — your exposure to some types of disasters. In a hurricane-prone area, this might mean installing storm shutters, covering windows or checking the siding and roof of your home prior to the storm. Learn more tips on how to prepare for a disaster from the NAIC.
  • Most homeowner policies don’t cover flooding. Check out www.floodsmart.gov to get more information on obtaining that type of coverage if you live in a flood-prone area.

Keep Track of the Weather

The NOAA’s National Weather Service Climate Prediction Center for the 2009 Atlantic hurricane season called for a 50 percent probability of a near-normal season, a 25 percent probability of an above-normal season and a 25 percent probability of a below-normal season. And forecasters said there is a 70 percent chance of having nine to 14 named storms, of which four to seven could become hurricanes, including one to three major hurricanes (Category 3, 4 or 5).

Check Out Other Resources

AARP offers step-by-step guides on how to prepare for hurricanes in both English and Spanish. Learn more tips on how to prepare for a disaster from AARP.

Items to Include in the ‘Grab and Go’ case

Below is a list of items you should include in your ‘grab and go’ case:
Estate Planning Documents
• Wills
• Trust documents
• Durable power of attorney for health care
• Durable power of attorney for finance

Identity Documents
• Social Security cards
• Birth certificates
• Citizenship papers
• Adoption papers
• Military discharge papers
• Marriage certificate
• Divorce/Separation papers
• Passports

Insurance Documents
• Life insurance policies
• Health insurance policies
• Disability insurance policies
• Long-term care insurance policies
• Homeowner’s insurance policies
• Renter’s insurance policies
• Auto insurance policies
• Dental insurance policies
• Umbrella insurance policies

Financial Documents
• Checking/Savings records
• Investment accounts
• Titles and deeds to real estate
• Time share agreements
• Stock/Bond certificates
• Employee benefit documents
• Auto ownership records
• Boat ownership records
• Loan agreements
• Credit card information
• Student loan information
• Personal/Business lines of credit

• Employment contracts
• Business agreements
• Tax returns
• Safe combination
• Computer passwords
• Safe-deposit box keys
• Cash (ATM’s & credit cards may not work)

Of course, if you are a client of the Chuck Jones Team at The H Group, you already have been provided with this case! The documents contained in the “Grab and Go Case” should be copies only and all your originals should be stored in a safe place outside the home, such as a safety deposit box.

July 2009 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Chuck Jones, CFP® , a local member of FPA.


Prepare Now for Moves on the Estate Tax

The nonstop discussion this year of health care reform and the economy crowded out discussion on the estate tax, which was scheduled to expire December 31. But as of this writing it appears that the estate tax will be continued at 2009 levels through 2010, which means that the 2010 top rate will likely be 45 percent and the exemption will be $3.5 million per person.

For now, the Republican dream of killing the estate tax seems to be dead, at least through 2012 as federal spending continues to expand. That means it’s a good time to talk to tax and financial experts about the best ways to pass your holdings to the next generation no matter what happens with the future of the “death tax.”

If you suspect your estate or the estate of relatives you might inherit from may fall prey to the estate tax, it makes sense right now to enlist the help of experts. Assets may be expected to grow over time, and your estate may turn out to be larger than you may think. You should be talking to estate and tax specialists as well as financial advisors such as Chuck Jones, CFP®.

Here are some things to keep in mind as you prepare for those conversations:

Give during your lifetime: You can now give $13,000 per calendar year per recipient without paying gift tax or affecting your 1 million dollar lifetime exemption. You can also pay someone’s tuition or medical bills directly, or give to a charity, without paying gift tax on the amount, thereby reducing the size of your estate and your eventual estate tax bill after you die.

Check whether your state charges an estate tax: Roughly half of all states charge estate tax, and that’s a recent thing. States previously received a slice of the federal estate tax, which no longer happens, so it’s important to consider the state’s impact when making an estate plan.

Think about a life insurance trust: Whether you need it for estate liquidity or for other purposes, an irrevocable life insurance trust can be created to keep the proceeds of the insurance out of your taxable estate. An added benefit is that such trusts may permit spousal access to the cash value of the policy. Yet note the word “irrevocable” – it means a decision that cannot be changed.

Know if your assets are expected to increase: A grantor-retained annuity trust, or GRAT, is an irrevocable trust that is popular among families with assets that are expected to increase, because such appreciation can be passed on to heirs with minimal tax consequences.

November 2009 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Chuck Jones, CFP® , a local member of FPA.

Protection Parcel

Economy Impacts Women’s Ability to Plan for Long-Term Care

The economic downturn has affected women’s ability to plan and prepare for the risk of needing long-term care according to a report from the American Association for Long-Term Care Insurance, the industry’s trade organization.

Various studies compiled by the organization reveal that women have especially been affected by the recent economic conditions and loss of employment.

Most women realize their risk of needing long-term care services, but many are not taking steps to protect themselves. Three out of four women surveyed by America’s Health Insurance Plans said they have at least a 40 percent chance of needing some type of long-term care during their lifetimes, such as care in a nursing home, assisted-living facility, or by a home health care provider. However, only 35 percent of women said they have actively thought about or planned for how they will cover those costs, and just 38 percent of women said they were at least somewhat prepared to cover long-term care expenses should they need it.

In addition, many women have a false sense of protection against the high cost of long-term care. Nearly 20 percent of women participating in a national survey believe they already have long-term care coverage. In reality, only about 5 percent of U.S. adults over the age of 45 have actually purchased long-term care insurance, suggesting that many of the women surveyed incorrectly believe they have long-term care coverage.

For those who said they do not have long-term care insurance, 42 percent said they would rely on government programs, such as Medicaid, to cover long-term care costs. Other said they would sell assets (31 percent), use their retirement savings (31 percent), or rely on family and friends (12 percent) to help with these costs. Twenty-three percent incorrectly believe that other insurance would provide assistance for long-term care costs.

According to the Woman’s Guide To Long-Term Care Insurance Protection, women have both a greater need for long-term care insurance coverage and are far more likely to receive benefit from an insurance policy. The book reports that two-thirds of all long-term care insurance claims are paid to women. Nearly half (41 percent) are paid to single women and some 25 percent to married women.

Contact the Chuck Jones Team at (503) 291-1313 to review your coverage and make sure that you have what you need.

Article written by Jesse Slome from the American Association for Long Term Care Insurance www.aaltci.org

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