Life Insurance Estate Planning Tool
Life insurance is a good safety net, but not all
Dollars and Sense
By Denice Gierach
As published in the Naperville Sun – May 21, 2006
The old adage is true that life insurance is not so much of life as death. The only time you or your benefit family life insurance is death. The problem with life insurance is often confusing for consumers in general on two basic questions such as when buy and when to skip the more complicated or questions about the amount of coverage and that is the best policy for you.
The first question is when you need life insurance? You need a life insurance under the following conditions (if you do not belong to one of the following categories, you probably do not need insurance of life at the moment, but remember to review your situation again from time to time, as circumstances may change):
- You have dependent children. The loss of his income will definitely affect the ability of your spouse to remain in the family home with children or provide the level of education you have provided for if the children were still alive and working.
- You are married to a not working. In this situation, your spouse's death affect your ability to continue in the same style of life, like going to work for the first time or returning to work after to be out of the workplace will result in a lower paying job with a much diminished standard of living.
- You have a spouse works with an income far less than their income. Life insurance is appropriate in this case as higher incomes has been given a lifestyle that your spouse could not afford alone.
- You have parents or siblings need special care and support.
- You still have a lot mortgages remaining at home. Having a life insurance policy in this circumstance will allow your spouse to use the life insurance benefits to pay the mortgage, relieve financial burden of her husband after his death.
- You are using life insurance as an estate planning tool and want to establish your family with life insurance product that return the amount of your wealth was diminished by the death taxes.
Another question to ask is how insurance is enough? The appropriate amount of life insurance enable beneficiaries and their dependents to invest the insurance product Life and draw down about capital gains and some time to live to compensate for loss of income that the deceased spouse would have provided. There are several basic methods for determining the amount of insurance you may need:
• The standard rule of thumb for estimating the amount of their needs life insurance is to estimate you need life insurance between five and ten times your annual salary net of tax. If your net salary is $ 50,000 per year, you have a need minimum life insurance of $ 250,000 and a maximum of $ 500,000. This method is quite simplistic and does not take into account the specific needs you may have such as the price of the education of their children or the amount needed for a child with special needs.
• The second method is to replace the your income for several years. For example, if you earned $ 50,000 per year, and wanted to ensure that the revenue was available to your spouse for the next fifteen years, would need $ 750,000 of life insurance. This method is fine, as long as there are no special needs to address and have little in the way of financial assets now.
• The third and most detailed approach is to review the financial need. In this approach, you would take into account the various expenses that your income in another form of payment, such as living expenses of the family per year, pay college tuition and education graduate, mortgage or debt and future retirement needs and special needs. This approach requires further thought and effort on your part to determine what expenses will be covered and what expenses are covered by financial assets such as college costs have already addressed through Section plans 529 and the like.
Life insurance is not for everyone, but many times it is a necessary part of his economic plan for the future of your family.
About the Author
Denice Gierach is a lawyer and owner of The Gierach Law Firm in Naperville. She is a certified public accountant and has a master’s degree in management. She may be reached at deniceg@gierachlawfirm.com. For more information on Denice and The Gierach Law Firm visit Gierach Law Firm
MyLegalReview: Life Insurance as an Estate Planning Tool
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