One of the most convicting verses I’ve ever read is Daniel 6:4
“At this, the administrators and the satraps tried to find grounds for charges against Daniel in his conduct of government affairs, but they were unable to do so. They could find no corruption in him, because he was trustworthy and neither corrupt nor negligent.”
Webster’s Dictionary defines estate planning as: The arranging for the disposition and management of one’s estate at death through the use of wills, trusts, insurance policies, and other devices
The arranging and disposition of one’s estate is a crucial act of love to one’s survivors. As a result, to not be negligent is very convicting to me; especially from a head of household point of view.
There are lots of things to consider involving estate planning that can be overwhelming. However, a key tool that can be used to resolve some of these issues is life insurance.
Here are seven ways you can use insurance to help with estate planning needs:
1. Cover final expense needs. Funeral costs, end of life medical expenses, extra money to help the remaining spouse get up on their feet without having to sell or access retirement accounts needlessly.
2. Pay off debts. Home mortgage, personal loans, credit cards. All these remaining debts will continually drag back our surviving spouse and/or family members. Using life insurance to pay off some of those debts will be a huge relief.
3. Gifting. Whether it’s personal gifts to a family member or charitable gifting, life insurance proceeds are generally received tax free. So, it may be a good way to give to others.
4. Income replacement: During your working years your income is crucial to the financial stability of your family (Even if you are retired and both spouses are collecting social security checks, one of the checks will be lost at the first loss). Using life insurance to replace lost income is a valid solution. Also, don’t make the mistake [as many do] in overlooking Disability Insurance during your working years; since you are more likely to experience a disability during your working years than death.
5. Asset Transfer. Transferring your assets to your children may require the sale of a property but with life insurance you can bequeath some of the monies to your children to offset what they do not receive in terms of property. You could bequeath the property to one child and the life insurance proceeds to the other.
6. Long Term Care needs. Nursing home expenses are skyrocketing but can be covered though long-term care insurance as well as by taking advantage of some of the optional riders a properly constructed life insurance policy can bring.
7. Liquidity needs. If you own a business or other properties, there may be a need for consistent cash flow to pay ongoing expenses like salaries or taxes. This would help the business not experience a cash crisis or the unnecessary sale of properties just to pay the taxes.
Having the right type of insurance at the right time can solve an array of preventable problems for our loved ones. Not being negligent is a high bar but you can overcome it by seeking wise counsel and not procrastinating in what needs to be done. I therefore encourage you to be a Daniel-type steward to your family and business!
Article by: Sal Cadena, CFP®