If I Get Hit By A Bus...
Well, this financial planner did, and here's what it made me think about.
I Was Hit By The Proverbial Bus
In my work as a financial planner, I often tell my clients, "If I get hit by a bus, here's how the firm would continue to serve you."
I say this to my wife, too. "If I get hit by a bus, here's what we have in place, who to contact, and where the documents are held."
Well, last week, I got hit by the proverbial bus, and though I thankfully walked out unscathed, it offered an opportunity for reflection.
Last week, I was driving east on Highway 62 after dropping off my kids at daycare and school. I had a coffee next to me and was listening to The Advisor Success Podcast by Michael Kitces, one of my favorite podcasts.
I exited the highway to take a left on Lyndale Avenue, a main drag in Minneapolis. I had a green light, so I entered the intersection. Cars traveling south on Lyndale come from under an overpass, making visibility low.
A cargo van was doing just this and, not seeing the red light, also entered the intersection. I saw him and thought, 'Oh crap! This is going to be bad.” I braced for impact.
I remember being jostled around and a sharp push into my leg. All the airbags went off, including a backseat airbag that pummeled my 2-year-old's empty car seat.
As I came to my senses, I did a body scan. I didn't seem to be hurt. More, I seemed to be thinking straight, so I didn't feel concussed or remember excessive head movement or hitting my head against anything. I couldn't see out my windows. The car smelled like airbag fumes and coffee.
I drive an electric car, and the windows had automatically cracked to let out the fumes. I heard the phone ringing and all of a sudden I was speaking with a woman. "Hi, how can I help you?" she asked. I was in an accident, I said. She called the police immediately. The car had called her automatically.
I called my wife quickly, too, to tell her what happened. I said I was okay. She left work to rush over.
After gathering my wits, I crawled out the passenger door. My door was completely crushed. It was cold out, and I slipped on coffee-covered gloves and a hat.
Here's what I saw:
Ouch! I had been t-boned right in my door. But my brand new car (R.I.P.) blunted the impact and quite literally saved me from the worst of it.1
It is at this time that I'd like to mention three gratitudes (mostly in order):
I'm grateful my kids weren't in the car.
I’m grateful the car protected me from worse harm. I can't believe I walked out of there without injury.
I'm grateful the other driver was similarly okay.
I'm also aware that it didn't have to go like that. I could have been hit by a drunk driver going 90 mph. My kids could have been in the car. Minneapolis winters are notorious for spinouts and hard-hitting fender benders on icy roads. I could have easily been hurt or worse.
So, this is a reminder to do the risk planning that we all avoid.
Risk Management
I'm a financial planner and try to take my own advice. Every day, I help clients build and implement comprehensive financial plans. That includes all the fun stuff - investing, buying homes, financial independence, legacy, and achieving goals. It also involves thinking through the tough stuff: mortality, health risks, and risk management, especially if the worst happens.
As I thought about my accident, how it went, and how it could have gone, I reflected on my own insurance and estate plans.
I thought it would be helpful to detail what I have in place.
For context, I’m a business owner, a father of two young children, and I’m married. My wife is a non-profit executive, and I am not the sole earner in our household.
Home and Auto Policies with Umbrella Insurance:
I have a comprehensive and bundled home and auto policy. If personal liability comes into play above and beyond $500,000, I have an umbrella policy to cover the difference. We advise clients to maintain an umbrella policy that is at least 1-2x their net worth.
Disability Insurance:
Disability insurance is hard to come by as a business owner, but I was able to secure a disability policy via a trade group I'm a member of. If I had been long-term disabled, this policy would have offered a monthly income for my family until I could work again or until I reached age 65. Also, since I pay the premiums out of pocket (with after-tax dollars), any benefits received would be tax-free.
If you have the option to do so and can afford it, paying long-term disability premiums with after-tax dollars is the smart choice. In a disability event, the tax-free benefit would be the equivalent of a much higher pre-tax income.
Life Insurance
I have three term-life insurance policies in place. I bought the first one after I married my wife. The second I put in place when my first child was born. I bought the third one after my second child was born.
They are essentially laddered as my life insurance needs are highest right now while I am building assets, and my kids are young. My life insurance needs may decline as we build wealth and my kids get older. As this occurs, the policies will expire, one by one, decreasing my life insurance.
Wills and Estate Plan
Do you have a will? If so, is it up to date? Who are the important persons in your estate plan - the personal representative, executor, trustee, or, if you have dependents, the named guardians? Do you have a power of attorney? A health care proxy?
Does your spouse know? Do the individuals named know? Where are the documents kept? Who has access?
My estate plan is in place. We have wills and a testamentary trust that would 'spring' into creation should both my wife and I pass. The trust would be managed on behalf of my children, and it would be managed by persons we trust to act as fiduciaries. We have guardians named.
In this instance, my wife wasn't in the car with me, so everything in my estate, including all responsibilities for managing and distributing it, would have been passed to her.
We have a physical copy of our estate plan stowed away in our home. I also have digital copies that my partners and colleagues have easy access to. In a worst-case scenario, they would work with my wife to handle the administrative burden of retitling accounts, transferring money, and other tasks.
Where is your estate plan held? Does your financial advisor or another trusted contact have a copy? Do you know how to contact your attorney?
In my case, my estate attorney left the industry. Ultimately, I'd like to update my estate plan with an attorney and a firm that will be around over the next few decades. One thing I've realized is that when it comes to estate attorneys or more complicated tax work, an institutional presence is something I look for.
If a member of my professional team can't show up, is someone waiting in the wings?
Beneficiary Updates and Asset Titling
This is the part where I know I have to make some updates. My wife is the primary beneficiary on everything, but I have an account or two where my firstborn is noted as a secondary beneficiary, but not my secondborn. It should probably be the estate itself. I’ve been procrastinating, and I need to review this.
All the estate planning in the world is worthless if you don't update beneficiaries or title your assets effectively. If you are setting up a trust, for example, make sure you fund the trust if that is the plan!
You don't just sign the estate documents documents; you implement the plan. There is administrative work that must be done. This is hard but crucial!
Succession Plan
I am a business owner. Are you? What's your succession plan? Have you talked to your spouse and heirs about this? What will happen to your business if you pass away or are permanently disabled?
In my case, I have two partners who will buy my shares in the practice. We have a set price, and they will pay my wife or my estate an annual installment toward the total price. They have the option to pay this off quickly if they like. If my clients leave, the 'purchase price' declines by a per-client adjustment.
We are currently putting 'key-person' life policies in place to offer the business liquidity in case the remaining partners need to buy a deceased partner’s shares. The business would likely use the proceeds to pay a healthy portion of the installment loan to the spouse/estate and then use the rest to hire necessary support.
Reflection
My crash made me reflect on my estate and insurance plan. Above, I’ve detailed the key policies and documents I have in place.
If you don’t have your estate plan in place or haven’t reviewed your insurance policies in a while, now is a good time. Also, please note that you may be in a different stage of life than me and have different needs. Your plan must be custom to you.
I’d suggest starting with a fee-only financial planner. Fee-only means the advisor doesn’t sell insurance or receive any kickbacks. Having your insurance and estate plan reviewed by an unbiased professional can be extremely helpful.
And the cost of procrastination? It’s too high. Get on it.
As you can see, it wasn’t a bus. But it was a good-sized work van. I’m sticking to the bus thing. There is no ‘getting hit by the proverbial work van.’