Sandra Reed: Life care planning for your 40s

Lordy, Lordy, Guess Who’s 40?

It’s your 40th birthday. No reason to be depressed. Forty is the new 20. Right? Got to be if 60 is the new 40, doesn’t it?

Not quite.

Attorney Sandra W. Reed answers your life planning questions.

Attorney Sandra W. Reed answers your life planning questions.

The realities of aging crowd in at 40, even if “middle-age” has effectively been pushed forward a decade by an expanded actuarial table. There’s a reason Sarah Brokaw (Tom’s daughter) called her book about making the most of 40 and beyond “Fortytude.”

According to Brokaw, society is telling 40-somethings that time is running out. Like many of her peers, Brokaw confesses that she did begin to panic upon reaching the fourth decade. While panic is counter-productive to Life Care Planning at any time, and no less so in the 40s, action taken in these years is crucial to formulating a flourishing future.

Finances in the 40s

The money-matters arbiter, Forbes, says that by age 45 a worker should have three times his or her salary socked away for retirement. But do formulas like this really work? A better approach is to: (1) figure how much money is needed for your current life-style; (2) subtract the expenses that won’t be carried into retirement; and (3) estimate the additional costs that will be incurred during retirement. This offers a more realistic gauge of how much money will be needed to live comfortably when no longer bringing in a salary.

The 40s are the time to put away more savings than ever. Making up for what hasn’t been put away becomes harder and harder in the dwindling years before retirement.

While entering peak earning years, 40-somethings should avoid the temptation to ratchet up expenses, but instead freeze outlay and put away all increases in income. They should force themselves to set aside 15 percent or more of money earned. And savings priorities need to turn selfish here. Save for yourselves first and let the kids get scholarships or loans for college, if necessary.

Wills and Trusts for the 40s

Neglected to make a will up to now? Get it done. It is time to consider estate planning in earnest.

The emphasis here has changed for many. In the 20s and 30s, naming a guardian for minor children was a major concern. In the 40s, the children may be grown or nearly so.

Concerns of the 40-somethings should center on where assets are to go after death. A will is recommended for almost everyone because the expense of probate is often no more, and frequently is less, than that of clearing title to assets through other methods. For a fortunate few, reducing federal or state estate taxes is an issue, as well.

In any state that follows the federal exemptions, estate taxation is not a concern unless the assets of one spouse are more than five million dollars. Even if an individual’s estate is more than the exemption, the first to die can avoid tax to that estate by leaving all to the spouse.

However, at this level of asset accumulation, a more complex will may be advisable for reasons other than tax. Fit in that category?  As soon as possible make an appointment with a qualified lawyer and discuss a plan.

Further Forms for Funds Transfer

If they haven’t already done so, folks in their 40s should consider adding rights of survivorship or pay-on-death provisions to their bank accounts. This allows the funds in the accounts to pass automatically upon death without the necessity of probate.  Similarly, investment accounts can be set up to pass with rights or survivorship.

Be aware that Texas has specific requirements for establishing a right of survivorship.Many believe that survivorship is inferred from the mere establishment of a joint account. That is not the case. To assure that a joint account will pass to the surviving party, any form establishing survivorship must contain language which states substantially that “on the death of one party to a joint account, all sums in the account on the date of the death vest in and belong to the surviving party as his or her separate property and estate” (Texas Estates Code §113.151).

By that 40th birthday a substantial retirement account should have been established in one of the qualified forms. Again, if a beneficiary form has not been completed allowing these investments to pass to a survivor, take care of that task as soon as possible.

By allowing these assets to pass to a spouse or another individual instead of coming into the decedent’s estate – as will happen in the absence of a beneficiary designation – income tax on the assets may be deferred.

The 40s Checklist

  • Review the checklists for the 20s and the 30s. If anything has been neglected, do it now. It’s not optimal to have waited this long, but it is never too late.
  • Update these legal documents once again: (1) Medical Power of Attorney; (2) Statutory Durable Power of Attorney; (3) Medical Directive; and (4) will. Tell your executor where to locate the will and give doctors a copy of the Medical Directive.
  • Prepare an updated list of all bank accounts, investments, annuities, retirement accounts and insurance policies.  Provide the executor named in the will with a copy of these, omitting amounts for privacy, if desired.
  • Get rid of paper clutter. During the past two decades of adulthood many persons will have bought and sold houses, changed mortgage companies and dealt with multiple financial institutions. If paper related to closed bank or brokerage accounts, lapsed insurance policies or annuities, real estate no longer owned, released liens and paid-off mortgages are still in the files, get rid of them. Those who worry they just might need these someday should scan them into the computer in a file labeled to make clear the assets are not current.

Sandra W. Reed is an attorney practicing in Glen Rose. She is of counsel with the elder law firm of Katten & Benson in Fort Worth. Contact her at 254-797-0211 or at




Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>