Life insurance can be an excellent tool if you don't have a lot of money in your estate and you want to be able to provide for your loved ones. Term life insurance policies are not terribly expensive, and you can obtain a great deal of protection for a relatively small monthly payment. For example, if you don't have a lot of money saved, and you are concerned about providing for your family, you might entertain obtaining a life insurance policy that will provide for your family not only in the short-term but also in the long term. It's one of the easiest things you can do to infuse a whole bunch of cash into your estate upon your death so your family isn't struggling to make ends meet a few weeks after you pass away.
Raising children can be expensive. College costs and other issues can weigh heavily on the surviving spouse. When I do planning with younger couples who don't have a great deal of savings (even older couples who may not have a great deal of money set aside), I explain to them that life insurance is an excellent way to infuse a whole bunch of money into the estate. The younger you are the better because the premiums are usually less expensive. With every decade that passes, monthly premiums rise, so you want to act sooner than latter.
In most cases, I advise my clients to have their life insurance policies payable to their living trust. In other words, the trust is the beneficiary of the policy instead of naming a human being. When the money is payable to the trust, it can be protected for the surviving spouse and, in most case,s for the children if properly drafted. The living trust should have protective language preventing outright distributions to your children (or other beneficiaries). For example, $500,000 could be payable upon the death of a parent and that $500,000 could be made payable to their living trust. The money flowing to the trust can sit there and be managed for the benefit of the children. If there is a surviving spouse, he or she could also benefit from such a cash infusion.
The important thing is to obtain life insurance while you are young and relatively healthy. It might be a good idea to get a fixed premium over the course of 20 or 30 years. I don't sell life insurance, but I do understand that it is an important component when it comes to a estate planning. If you have more than enough in savings and investments, you may not need life insurance. However, as an income replacement, your family will certainly appreciate it. Also, by naming your living trust as the beneficiary of the life insurance proceeds, you can design a trust that can protect your children and other beneficiaries.
If you want to talk about your estate plan, please call our office and ask about a consultation. Call (661) 414-7100.