These major financial decisions shouldn’t be DIY projects. Talk to an expert!

Dear Liz: I anticipate being dead soon (cancer). I have established an irrevocable trust for my 8-year-old child, with my 47-year-old wife as the trustee. With respect to taxes and other issues and naming beneficiaries, what is the optimal strategy regarding my child for life insurance and traditional and Roth IRAs? My wife will get the 401(k).

Answer: The best person to answer those questions is the estate planning attorney you (presumably) used to create the irrevocable trust. Estate planning should not be a do-it-yourself activity, particularly when minor children are involved. The wrong plan could give too much too soon to your child, or tie up the money too long. You also don’t want to unreasonably stint your wife in your efforts to preserve money for your child. Also, the optimal strategies for tax purposes may not be the best for your family’s situation.

For example, the best way to minimize taxes may be to leave all the retirement money to your wife. Spouses who inherit retirement funds have the option of treating the accounts as their own. That means your wife wouldn’t have to begin required minimum distributions from the 401(k) or the traditional IRA until she’s 75. (The current RMD age is 73, but it rises to 75 for people born in 1960 and later.) She would not have to take distributions from a Roth IRA she inherits from you.

Non-spouse heirs generally have to drain retirement accounts within 10 years. Minors who inherit retirement funds don’t have to take the first distribution until they turn 21, but then the accounts must be emptied within 10 years.

Life insurance proceeds typically aren’t taxable, or payable to a minor child. But you can create a trust to receive and dole out the proceeds to your child. Your estate planning attorney can help you set this up.

My house grew, but not my insurance policy

Dear Liz: My home insurer has outdated specifications for my home that seem to come from public records (the house has more bedrooms and is larger now). So the estimated replacement cost can’t be anywhere near accurate. What’s the best way to provide them with authoritative information that would leave no doubt what we need to rebuild if that becomes necessary? An appraisal?

Answer: An appraisal may be overkill, but you’re long overdue for a conversation with your insurance agent.

Ask the agent to calculate the cost to rebuild your home given the actual square footage and other features. Insurers use proprietary systems to calculate these costs, so you may also want to check with two or three other companies. Also consider talking to a local contractor or two to find out the average cost to rebuild in your area.

Going forward, you should be checking to make sure your coverage is adequate every two or three years and after any major improvements.

Your premiums are likely to rise, perhaps substantially, once your insurer has the correct information. But your policy will do what it was designed to do, which is to protect you from a catastrophic loss. Otherwise, you could be left without enough money to rebuild.

Looking to Medicaid to pay for assisted living

Dear Liz: I am going to sell my house, pay back my reverse mortgage, spend down and go on Medicaid in order to pay for assisted living that I need. What are some good resources I can contact to help me navigate all this? I have done a lot but am still needing more help.

Answer: Medicaid, the government health insurance program for the poor, typically doesn’t cover the room and board costs of assisted living, but many states offer Medicaid waivers that pay some assisted living expenses. Even if you qualify, though, there are typically a limited number of waivers available and you may be put on a wait list.

You definitely shouldn’t sell your home or spend down your resources before consulting with an expert. You can contact the National Academy of Elder Law Attorneys (NAELA) for a referral to a lawyer who specializes in this complex area or use the American Council on Aging’s free locator tool to find a Medicaid planner.

Liz Weston, Certified Financial Planner, is a personal finance columnist. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact� form at asklizweston.com.