It's been a wild year, and you've got questions. (Thankfully, we've got answers.)
2020 has been a rollercoaster, stirring many financial inquiries. This week, we’re focusing on essential topics like life insurance, wills, and dependents in this Mailbag episode.
We kick things off with a listener's question about life insurance needs for a couple with grown kids. Then we delve into Dependent Care FSAs and what happens with unspent funds from 2020. Next, we guide a listener interested in setting up a will or living trust, and clarify the often-discussed “5 year lookback” for Medicaid and its implications for trusts. Lastly, we discuss the merits of a will for a 24-year-old listener.
Despite the challenges of the past months, we appreciate our listeners for fostering a sense of community in 2020. Here’s to brighter days ahead. If you have questions, reach out to us at info@savinghunt.com.
Transcript
Jean Chatzky: (00:00)
Welcome! I’m Jean Chatzky. Thanks for joining us. This is our third Mailbag episode recently, as many of you have pressing questions. Even those doing well financially still have concerns. Just yesterday, our producer, Kathryn, and I were discussing mortgage refinancing, reflecting the uncertainty we all face. We truly value the trust you place in us for your financial decisions.
Kathryn Tuggle: (01:29)
Hi Jean! Great to see you.
Jean Chatzky: (01:31)
Excited to connect again. Looking forward to our social distancing dinner next week!
Kathryn Tuggle: (01:44)
Can’t wait!
Jean Chatzky: (01:48)
Let’s jump into your questions.
Kathryn Tuggle: (01:50)
Our first question is from a listener in Charlotte, NC: I've been a fan since the start! We’re reviewing our household expenses, and life insurance has come up. I’m 52 with a policy through work equal to my salary. My husband, 50, has no employer benefits. We pay $180 a month for $500,000 term policies. Our kids are now independent, and our mortgage is paid off. We’re focused on retirement planning and want to know if we should reduce our life insurance to $250,000 each or cancel it altogether.
Jean Chatzky: (03:23)
Thanks for your question! You're on the right track. Life insurance is about providing for living expenses after an income loss. I suggest viewing it as income insurance. You’re in good shape financially, but consider long-term care needs. If your retirement is secure, it may be wise to lower the benefit instead of canceling it entirely.
Kathryn Tuggle: (05:27)
Great insights, Jean. Our next question is from Nicole: Thanks for the great episodes during quarantine! I miss my commute for listening. I have a question about dependent care FSAs. I’m not using all the funds set aside due to no after-school care. Are there new provisions for unspent funds? Will I lose that money? Thanks for your guidance.
Jean Chatzky: (06:12)
Great question! The IRS has issued guidance allowing employers more flexibility with FSAs. You can adjust contributions or extend deadlines for expense submissions. Check with your employer about implementing these changes.
Kathryn Tuggle: (08:17)
Absolutely. Your HR department is the best resource for these questions.
Jean Chatzky: (08:22)
Right, they’re adjusting as well. You can remind them about the IRS updates.
Kathryn Tuggle: (08:37)
Exactly! Our next note is from April: I love the show! After a recent illness, I’m considering setting up a will or living trust. I can’t afford a lawyer and am looking for DIY options. Any recommendations? I’m glad to report I have recovered!
Jean Chatzky: (09:04)
Happy to hear about your recovery, April! A will is a simple document outlining asset distribution. A living trust is more complex and often unnecessary unless avoiding probate is essential. If your situation isn’t complicated, I recommend a will. You can use sites like Nolo.com or LegalZoom.com to create one affordably.
Kathryn Tuggle: (10:51)
Great options!
Jean Chatzky: (10:53)
Absolutely! Now, let’s remind everyone that this segment is sponsored by Fidelity Investments. They’re here to help you through life’s ups and downs. Visit Fidelity.com/HerMoney for more.
Kathryn Tuggle: (11:29)
Next, we have a question from Tammy: My friend is overwhelmed with her aging father’s situation. Can you explain the five-year lookback for Medicaid? Does it vary by state? Should we consult an attorney for guidance on this?
Jean Chatzky: (12:11)
This is complex! Medicaid planning involves legally moving assets to qualify for benefits, and it's crucial to consult an attorney specializing in elder care. Getting it wrong can have lasting consequences. Self-paying for care can also provide more options and flexibility in facilities.
Kathryn Tuggle: (14:28)
Great advice, Jean. We navigated this with my mother-in-law and found an attorney who helped us through the process.
Jean Chatzky: (14:47)
Indeed, it varies by state! Proceed cautiously.
Kathryn Tuggle: (14:59)
Finally, our last question is from Beth: I’m a fan of the podcast! Should I create a will at 24? After losing a friend last year, I've been considering this. I want to ensure my assets are distributed thoughtfully.
Jean Chatzky: (16:01)
This is an excellent question! A will is essential once you have assets to distribute. It’s a straightforward process, and an online service will suffice. Ensure you assign beneficiaries for your life insurance as well. If you pass without a will, the state decides asset distribution, which may not align with your wishes.
Kathryn Tuggle: (18:25)
Absolutely! It’s important to be prepared.
Jean Chatzky: (18:32)
Many people wait until they have kids or get married. It’s wise to handle this early in life.
Kathryn Tuggle: (19:18)
Absolutely! It’s better to be proactive.
Jean Chatzky: (19:30)
Thanks, Kathryn, for curating today’s questions. It’s been great!
Kathryn Tuggle: (19:34)
Thanks, Jean.
Jean Chatzky: (19:35)
Thank you all for joining us. We appreciate your thoughtful questions and stories. Reach out to us at info@savinghunt.com. If you enjoyed this episode, please subscribe and leave a review. Special thanks to our sponsor Fidelity. Our podcast is produced at CDM Sound Studios, with music by Video Helper. Talk soon!
