Investor’s column: Make smart choices when getting financial affairs in order

Life is filled with choices. Those choices bring consequences that you may or may not like.

A friend of mine often talks about the mechanic who builds race engines. The mechanic chose to build a powerful engine that could propel a car at breakneck speed.

When that engine is mounted in a car, it is a sight to behold. The mechanic made great choices.

The engine was mounted in a car sitting on blocks with no tires. The consequences were that he forgot a few parts because no one was there to suggest tires might be a good addition.

The same happens in the investing world. There are those who choose to invest themselves or rely upon a computer program or one provided by a brokerage company.

The transactions are low cost and it’s great to brag about investments that did well. Naturally, it’s customary not to mention those investments that did not work out well.

Performance may be your goal. Since you feel you are a smart investor, what happens if you die or become mentally incapacitated? Can your beneficiaries or significant other continue in your footsteps?

Even if you wrote down the steps, is your beneficiary willing to follow them? Or are they going to trust a stranger or family friend to help?

It’s important to have a plan in place that can be tested and fine-tuned before you’re gone.

If it’s too difficult to think about dying, consider this: Are you interested in what happens to your estate? If not, leave everything to the kids and hope they handle their inheritance well.

Of course, they might not have the same work ethic as you.

As you may know, many who win the lottery later declare bankruptcy – they couldn’t handle the money properly. Are you confident your kids will?

They could send those assets to unscrupulous salespeople who have a great land opportunity in a foreign country. Or they could invest in a new start-up company that is developing the next smartphone.

Many people still try to do-it-yourself. There are forms on the internet to write your own will. It would be a mess to have Plan A thrown out by a judge in probate court. Since you’re gone, what is Plan B?

It’s better to have an attorney draw up legal documents so you have less to worry about. Pay the attorney’s fee. The attorney will then work with your beneficiaries.

Here’s what’s needed: A plan that is written and reviewed by several people to make sure it’s what you want and it can be followed.

If you have special needs, you might need an attorney to draw up a trust and other documents. Do you have an elderly parent or child needing help? Do you have a fear of running out of money in retirement or not being able to take care of yourself or those in need?

You may feel that market performance is your goal, but tell your attorney, tax adviser and financial planner what keeps you up at night. Working together, your team of paid professionals may be able to make you feel more confident.

Along the way are pitfalls and benefits. Do you have a 401(k) or an IRA with lots of money? Who is the beneficiary? Do you have a former spouse or child who is a spendthrift?

You can protect your estate with a Trusteed IRA Trust. It’s a special trust drawn by an attorney and administered after your death by a bank or corporate trust company.

Meanwhile, your living revocable trust could handle non-401(k) or non-IRA situations. The trustee can be a designated person, a bank, or a corporate trust company.

You have to trust somebody to do what’s right for you now and after you’re gone. Plus, you should try your financial plan to make sure it works. Do it wrong and your beneficiaries might suffer.

All of this can be complicated. There is no second chance, so make good choices now.

This story was originally published October 30, 2017 at 11:31 AM with the headline "Investor’s column: Make smart choices when getting financial affairs in order."