10 Tips for Covering Your Assets

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Look at the front page of any newspaper on any day, and you'll see stories about events (often unexpected) that changed peoples' lives. Some of these are happy events -- for example, winning a lottery, winning the national spelling bee, or being reunited with your long-lost quadruplet.

But many of life's surprises aren't so happy: death, disability, and job loss, just to name a few. But whether a life change is good or bad -- expected or not -- you can do something now to lessen the fallout and enhance the benefits.

1. We can't stress enough the importance of keeping your beneficiary and emergency contacts up-to-date. You don't want your employer to call you ex-boyfriend when you break your arm on the photocopy machine. And in case of your untimely demise in the aforementioned Xerox machine mishap, you sure as heck don't want your lemonade stand fortunes to go to your ex-husband, leaving your current Shmoopy with only your loving memory and 93 nylon bags of lemons in the garage. To make sure you do it right, avoid these "Top 5 Beneficiary Form Boo-Boos."

2. Which brings us to getting -- and regularly updating -- your will. If you don't spell out who you want to get what, someone else will decide how your possessions will be dispersed -- at great cost and anguish to your family. Hiring an attorney to write a will, staying on top of changing tax rules, and letting a few special people know where you keep your important paperwork are three estate must-dos. (Here are the 10 must-have documents, while you're at it.)

3. When you add to your family -- through marriage, babies, or live-in parents -- remember to adjust your life and disability insurance. After all, you want to protect everyone who depends on your income and your annual karaoke concert.

4. Do not buy life insurance for your kids. Unless Junior contributes significantly to the family income with his movie career as a midget stand-in, there's no reason for him to be insured. Instead, invest that money you would have spent on a policy in his college fund.

5. When you leave a place of employment, roll over and play Buffett. The assets in your 401(k), 403(b), 457, SARSEP, or SIMPLE plan no longer have to be handled by your company's plan administrator. Have your dough transferred directly from your old company plan to an IRA (here's how). Then start making your own investment decisions!

6. It's worth a separate tip to note that to avoid hefty taxes on your old employer-sponsored retirement funds, do not cash out your plan or take even temporary possession of the money. Your new broker (ideally, a discount broker) can take care of all the paperwork for a swift and simple rollover.

7. If you need some cash in a crunch, try to avoid tapping into your retirement funds. Some employers let you borrow against your 401(k) and pay it back on a regular schedule. But should you lose or leave your job, you'll owe all the money back in one lump sum.

8. There are some life events you can see coming a mile away. If you're nearing retirement, prepare your finances for that banner day by moving some of your assets into investments that will preserve your principal. If you know you're expecting a child (and we hope it's kind of obvious), ready your revised paperwork before rushing to the delivery room.

9. At some point in your life, you may become unable to run your domestic (and perhaps professional) empire. That's why you need to create a durable power of attorney, giving someone the power to pay your bills and manage your assets if you become incapacitated. And a living will is a good idea as well, letting the world know how long you'd like to be kept on life support -- and other such un-pleasant yet real-life dilemmas. In other words, don't die before reading this.

10. Getting hitched has its obvious perks. Take advantage of the insurance company's offer of getting lower rates for being paired up. While you're at it, see if your insurer offers other kinds of policies such as renter's or homeowner's insurance. Combining your policies can shave dollars off the bottom line. Our 60-Second Guide to Cashing In on Coupledom will show you ways to save some extra dough.