How to plan now for the surprises ahead

The financial plan you’ve developed with your Truist Wealth advisor should include flexibility. When your goals change, you may need to make adjustments. But there’s also value in doing some advanced planning for some of the opportunities and challenges that may come up. From health and estate planning to diversification, here are steps you can take with your advisor now to be better prepared for what’s to come.

Strengthen your legacy

Proactive estate planning can help take care of your loved ones in the event of divorce, disability, or a death in the family. While no one enjoys imagining such difficult life events, consider working with your advisory team to take these actions.

• Set up a trust. Trusts can give you more control over how your assets are distributed when you pass, making it easier to keep those assets in the family while at the same time reducing your taxable estate. If you ever become seriously ill or mentally or physically incapacitated, a trustee can help manage your estate and provide for your long-term care. And setting up a trust before marrying (or remarrying) can be an effective way to safeguard your assets in the event the marriage ends.
  “There are many different types of trusts, each designed for specific purposes,” says Jacqueline Parks, a regional director of advice and planning for Truist Wealth. “The particular trusts that will work best for you will depend on your assets, your tax attributes, and the goals you’re trying to achieve.” Your advisors can talk you through these choices and help you administer them properly once they are funded.
• Get covered. You may already have life insurance, but is the amount and type of coverage appropriate for where you are in life? Some people get a policy before having children or going through other significant life events. It’s worth reviewing your coverage options at least every few years to ensure your loved ones are covered if something were to happen to you. Disability and long-term care insurance also can provide financial benefits for your loved ones in the event of a serious illness or disability and may help cover costs for medical treatments.
• Update your will and consider creating a revocable trust. This is your chance to shape the legacy you leave for your loved ones. Assets passing to your heirs via your will go through the legal probate process. Funding a revocable trust can avoid probate, and the trust will be effective not just upon your death, but also during your lifetime if you become incapacitated. Regularly reviewing and updating both your will and your revocable trust will ensure the terms are consistent with your wishes as they evolve over time.
• Take an inventory. Your financial life may be complex, with different types of accounts and assets being held through various institutions that all work together as part of your overall financial picture. Review your beneficiary designations, especially for life insurance and retirement accounts. Keeping a list of all your bank accounts, real estate holdings, automobiles, and other property can help with the distribution of your assets in the event of a divorce, incapacity, or your death.
• Make a durable power of attorney and healthcare directive. A power of attorney gives a person you choose the legal authority to make decisions, such as depositing or withdrawing money or buying or selling property, on your behalf. A durable power of attorney similarly empowers an agent to act on your behalf, even if you become physically or mentally incapacitated. A durable power of attorney can be an important part of safeguarding your financial interests if you ever become seriously ill or disabled. Similarly, your healthcare directive is a document where you can nominate someone to make medical decisions on your behalf if you are incapacitated. It can also describe your wishes for end-of-life treatment.

Diversify your savings and investments

You’ve likely already talked with your advisor about the importance of diversification, but when it comes to being prepared for the unexpected, diversification is critical because it may provide some areas of steadiness or even growth when other types of investments are losing value. A truly diversified portfolio may include not just stocks and bonds, but also real estate and other types of assets, and also takes into consideration tax efficiency.

“Advisors often look for a mix of assets that aren’t correlated, meaning you own a wide variety of investments in your portfolio with different characteristics to help reduce volatility and risk,” says Suzanne Kim, managing director and wealth advisor at Truist Wealth. “Having a well-diversified, strategically and tactically allocated portfolio can help you achieve long-term investment objectives that are built on your goals-based financial plan.” Choose a strategy that meets your risk tolerance and return objectives.

If you’re maxing out your 401(k) retirement savings plan and looking for other avenues of tax-advantaged savings and investments, consider contributing to a health savings account (HSA). To enroll in an HSA, you must be insured under a qualifying high-deductible health insurance plan. The contributions you make to an HSA are tax-free, and you can enjoy tax-free capital gains as well as tax-free withdrawals when they’re used to pay for healthcare expenses. As of 2024, you can contribute up to $4,150 annually for self-only coverage or $8,300 for family coverage, with an additional $1,000 catch-up contribution allowed for people age 55 and older.

Taking advantage of various tax-advantaged investment vehicles can help you build a long-term buffer against unexpected events, as well as put you in a better position for your retirement years. Consider opening a Roth IRA or converting a traditional IRA to a Roth. Another option may be a life insurance retirement plan (LIRP), which uses the cash value of permanent life insurance as a source of additional cash flow in retirement.

When it comes to savings, don’t forget to pass the message of preparation on to your children. Teach them about the value of an emergency savings fund as they start to cover more of their own expenses. Having that buffer can be helpful for them in the case of a job loss, medical crisis, or other financial hardship. Encourage your young adult children to participate in company benefits like retirement plans (with or without match) and employee stock purchase plans. Starting to invest and save for retirement early allows them the opportunity for additional compounding growth on the funds they set aside.

Make the most of a windfall

Not every unexpected event is unwelcome. A large inheritance or selling your stake in a business can be a positive unexpected financial change. Increased wealth or income does come with additional responsibilities and complexities, however.

“Managing significant wealth involves working with a lot of professionals that perhaps you didn’t even know existed before,” Parks says. “It may require learning a new language around taxes, portfolios, and planning strategies.” Be prepared to consult with your advisor for help managing a financial windfall or a sudden boost in income. Your best options will depend on your unique situation, and a trusted team can help you make the most of it.

Business owners who sell their companies can similarly be surprised by the financial impact, Parks says. If you’re selling your business, you’ll likely want to bring your wealth team and business team together long before the transition to discuss what comes next and implement strategies that will help you achieve your personal goals and objectives.^{Disclosure 1}

Review your risk

A down or volatile market can be unnerving for investors, especially if you’re nearing retirement or preparing to withdraw money for a major expense, like funding a college education.

“There are many considerations when taking income or withdrawals from your investments to fund your goals such as timing, taxes, portfolio asset allocation, account requirements if in retirement accounts or trusts, and more,” Kim says. Work with your wealth and financial advisors to manage your upcoming cash flow needs. Your advisor can help you reallocate regularly to reduce risk.^{Disclosure 2}

Your advisor can also assist you when it comes to avoiding the potential pitfalls of emotional investing—selling investments out of fear instead of relying on your long-term strategy. Changing market conditions could also be looked at as an opportunity—a time to make adjustments to your portfolio to take advantage of sectors that may outperform others during these times.

When you plan for the unexpected, you’ll be ready to handle the surprises—good or bad—that may come your way.

Comments regarding tax implications are informational only. Truist and its representatives do not provide tax or legal advice. You should consult your individual tax or legal professional before taking any action that may have tax or legal consequences.