No one wants to think about their death. But raise your hand if you are immortal? Correct, unless you are a character in an Anne Rice novel or some other fantasy story you are a regular human being with a set amount of days to walk in this physical realm. In other words, you are going to die. It is the only thing we can depend on in this life – that it ends. I know I am all rainbows and sunshine here – but I want to be direct and to the point about this. You are not immortal, life is fragile, and you will die. And if you die without a comprehensive estate plan in place you will leave those who depend on you in a significant lurch.
As a holistic estate planning attorney for Washington residents I believe that a comprehensive estate plan includes life insurance and a good hard look at your financial junk drawer. In other words, I encourage each and every one of my clients to do some sort of financial planning along with setting up their estate plan. This is important because we have to tell ourselves the truth about what would really happen if we were to be gone suddenly from our loved ones life. And this includes not only the emotional aspect of the loss, but the financial loss of you as well. Tough questions you might consider asking yourself include:
- Would there be enough money to pay the mortgage?
- Would there be enough money to pay for child care?
- Will there be enough money to cover long term care if there is a possibility for Alzheimer’s or Parkinson’s or cancer?
- Or would one of you getting cancer bankrupt the family?
As a result of all of these questions and more, a good holistic estate and financial plan includes life insurance (with living benefits) to ensure that if you are gone, the loss of your income does not leave your children, partner, or any dependent in a place of significant hardship.
Don’t Leave Your Children Vulnerable, Fund Your Trust With Life Insurance
I have heard horror stories from my clients about growing up after one parent passed suddenly and the significant financial hardship they had to go through as a result. In one case, the father who died was an estate planning attorney! And he had no life insurance – his business, without him, collapsed and he left the family with nothing but debt and financial ruin. Their standard of living changed from comfortable to poverty – overnight. It was a nightmare, and as a result that client now invests heavily in life insurance because he doesn’t want to see that same result for his family.
Life insurance is essential for families with minor children as a part of their estate plan because of the unlikely but not impossible event of both parents passing in an accident or other tragedy. If you both die you leave your child completely vulnerable and at the mercy and kindness of strangers if you do not have a Living Revocable Trust funded with a life insurance policy. The cash that life insurance policy provides will ensure that your child is supported through the years of struggle they are going to face having lost both of their parents. It is small compensation for the loss, but it is peace of mind for you, as a parent, to know that you ensured you left your child with both a people and financial support system.
Now, the life insurance available for families today is NOT your grandfather’s life insurance.
Without getting into the details of the various different kinds of life insurance out there, and how you can use some of them to invest and plan for a tax free income in you and your children’s retirement (yes its true!), I want to talk about a significant evolution in the life insurance industry that is a huge benefit to every family who can purchase a life insurance policy.
Living Benefits Of Life Insurance
It is life insurance you do not have to die to use. What I’m talking about is called “Living Benefits.” Living Benefits cover you when you have a terminal illness like cancer, an accident that causes short or long term disability, or the need for long term care with a diagnosis of Alzheimer’s for example. Policies with living benefits allow you to access up to 80 or 90% of your death benefit, while you are alive, to cover the costs of your illness or more (because the money is provided with no restriction). For example,say you are diagnosed with stage 4 cancer and given only a short time to live. Do you take the time to travel the world? Or do you double down on your cancer treatment with the best experimental treatment in the world available to you? Well, you will have that option to decide because you have a life insurance policy with living benefits.
A Short Story From My First Career Working In A Children’s Hospital
Now, let’s talk about a tragic scenario I saw when I worked for a children’s hospital. A young child gets a significant cancer diagnosis and the family has to do a “go fund me”, or bankrupt themselves to put the child into cancer treatment. Now, if that family wants to choose an experimental cancer treatment that has great outcomes but isn’t yet determined to be medically necessary by insurance – they cannot make this choice UNLESS they can afford to pay for it out of their own pocket.
This is why foundations like St. Jude’s and Seattle Children’s Hospital Foundation exist – so that families who can’t afford care can possibly have their care paid for by donations. But IF your family had a life insurance policy with living benefits on your child, there would be money to fund the child’s cancer treatment. Moreover, that life insurance policy on the child, if they live a long and healthy life, can become a source of significant prosperity (as a tax free retirement income!) for the child when they reach their retirement years. So it is a win win, instead of a lose lose when there is no life insurance with living benefits in your family’s estate plan and financial plan.