Estate & Insurance Tips from a Financial Advisor in Birmingham, AL

As the New Year begins, it’s the perfect time to evaluate your estate and insurance plans. Protecting your loved ones and the assets you’ve worked so hard to build requires more than just a quick review. A thorough examination of your current documents, policies, and beneficiary designations—along with guidance from a trusted financial advisor in Birmingham, AL—can go a long way to ensuring you have the right plan and insurance strategy based on your current financial circumstances. 

Here’s how you can take a proactive approach to estate and insurance planning in 2025.

 

Assess Your Current Estate Documents and Insurance Coverage

Early in the new year is the perfect time to revisit these details and adjust for any changes that may have occurred. The first step in a comprehensive estate plan is to evaluate what will happen to your assets if you become disabled or pass away prematurely:

  • Will and Trust Documents:
    • Are they current and reflective of your wishes?
    • Do they align with your state’s current laws and your family’s needs?
    • Do they reflect life’s changes, such as marriage, divorce, childbirth, illness, or financial status (these often mean your estate plan needs updates)?
    • If applicable, have you named someone to care for minor children or dependents?
    • Does your plan reflect your desired asset allocation among beneficiaries?
    • Should you create a trust to protect or manage assets for your heirs?
  • Insurance Policies:
    • Do you have adequate coverage to replace your income or protect your assets?
    • Is your life insurance policy sufficient to cover funeral costs, debts, and other financial responsibilities?

Consider working with a financial advisor in Birmingham, AL, to update your estate plan and insurance needs, as appropriate.

 

Address Potential Estate Tax Impacts

Estate taxes can significantly affect what your loved ones receive after you and your spouse are gone. Reviewing the potential tax implications of your current setup is a critically important step.

  • Federal Estate Taxes: The federal estate tax exemption in 2025 is $13.99 million per individual ($27.98 million for married couples). If your estate exceeds this threshold, the excess is taxed up to 40%.
  • Unless the government intervenes, this exemption will be sunset in 2026, reducing the amount to approximately $5 million (adjusted for inflation).
  • State-Level Estate and Inheritance Taxes: While Alabama doesn’t have an estate or inheritance tax, other states do. If you own property or assets in a state with these taxes, your estate could be subject to additional levies.

 

Are you considering creating a charitable giving strategy in 2025? If so, watch our video on enhancing your charitable giving. 

 

  • Gift Taxes: You can gift up to $19,000 per recipient (2025) to reduce your lifetime estate tax exemption.
  • Capital Gains at Death: When people pass away, their assets (such as stocks, real estate, or other investments) are typically transferred to their heirs. For tax purposes, the capital gains at death are impacted by a rule called the step-up in basis (or step-down if the asset value has decreased). Here’s how it works:
  • The original basis is the price the deceased paid for the asset plus any adjustments (e.g., capital improvements for real estate).
  • At the time of the owner’s death, the cost basis of the inherited asset is adjusted to its fair market value (FMV) as of the date of death. For example, if you purchased a stock for $50,000 and its value grew to $150,000 at your death, the basis for the heirs becomes $150,000.
  • If the heir sells the asset immediately at its stepped-up value, there would be no capital gains tax because the sale price would be equal to or close to the new basis.
  • If the asset continues to appreciate after the transfer, the heir is only taxed on the gains above the stepped-up basis. For example, If the heir sells the $150,000 stock for $200,000, they will owe capital gains taxes on the $50,000 gain, not the appreciation that occurred during the original owner’s lifetime. 
  • Family-owned businesses or real estate in your estate may require valuation adjustments to reflect fair market value, potentially increasing the tax consequences.
  • Generation-Skipping Transfer Tax (GSTT): If exemptions are exceeded, transferring assets to grandchildren or beyond may trigger GSTT.

Given the complexities presented here, it’s always suggested that you partner with a financial advisor in Birmingham who has a tax background



Five Insurance Tips for 2025 to Protect Your Assets

These steps in 2025 will ensure your insurance portfolio is comprehensive, cost-effective, and aligned with your long-term goals. Regular reviews with your financial advisor or insurance agent can help identify areas for improvement and keep your assets protected from various risks.

  1. Review and Update Your Coverage 

Similar to your estate plan review, you should ensure your insurance policies are updated if you’ve already experienced or plan on any of the following events to occur: 

  • Marriage, divorce, a new child, or property purchases often require insurance adjustments. 
  • Reassess coverages for home, auto, life, and liability policies to ensure they meet current needs.
  • Update your life insurance policy to reflect new beneficiaries or financial responsibilities. 
  • Consider umbrella insurance for additional liability protection if your net worth has grown.

 

  1. Check for Gaps in Coverage

Insurance gaps can leave you exposed to unexpected financial losses. Key areas to evaluate include:

  • Homeowners Insurance: Ensure your policy covers replacement costs and market appreciation, not just a historical market value.
  • Auto Insurance: Confirm you have adequate coverage for liability, uninsured motorists, and personal injury.
  • Health Insurance: Evaluate whether your plan meets your anticipated medical needs for the year.

 

  1. Evaluate the Cost and Longevity of Your Life Insurance Policy

Life insurance policies, especially term life, may need reassessment if circumstances have changed. Consider:

  • Converting term policies to permanent ones if you want lifetime coverage.
  • Shopping for competitive premiums if your policy is nearing renewal or no longer suits your goals.
  • Ensuring policies provide sufficient coverage to replace your income, cover debts, and meet family needs.

 

  1. Add Long-Term Care Insurance to Your Portfolio

Long-term care insurance can protect your retirement savings and provide quality care as healthcare costs continue to rise. Evaluate options such as:

  • Hybrid policies that combine life insurance with long-term care benefits.
  • Standalone long-term care insurance for more robust coverage.
  • Plans with inflation protection to account for rising care costs.

 

  1. Reassess Deductibles and Premiums

Adjusting deductibles and premiums can help align your policies with your financial goals. For example:

  • Opt for higher deductibles to lower premiums if you have an emergency fund to cover out-of-pocket costs.
  • Compare premiums across providers to ensure you’re not overpaying.
  • Bundle policies, like auto and home insurance, to take advantage of discounts.



Why Select BCR Wealth Strategies?

Choosing the right financial advisor to assist you in managing your financial future is crucial. The implications if you select the wrong advisor can be devastating, requiring you to adjust your standard of living later in life.

At BCR Wealth Strategies, we take a personalized approach to protecting your assets, optimizing your estate plan, and ensuring the care of your loved ones.

Our experienced team can provide financial strategies for achieving your goals, offering guidance on insurance policies, beneficiary updates, and tax-efficient estate planning. 


With BCR Wealth, you have a dedicated partner committed to clarity, confidence, and comprehensive wealth management. Contact us today to take the first step in securing your legacy.

Marshall Rathmell

Marshall Rathmell

Marshall Rathmell CFP®, CPA/PFS is the CEO, Shareholder and Financial Planner with BCR Wealth Strategies.