What you should know about Life Insurance

Part of protecting your loved ones when you pass away is making sure that you have a proper estate plan in place. Another aspect is making sure that the right amount of money is available to carry out your goals for their futures. Life insurance has helped many people provide for their loved ones in the way they had envisioned.

Who can benefit from life insurance?

Many different types of people can benefit from having adequate life insurance coverage. Here are a few of the most common groups:

• Business owners. If you own a business and want to leave it to some but not all of your children, a life insurance policy can provide cash to the children who are not receiving an interest in the business, equalizing the value of each child’s inheritance. A surviving business partner can also use life insurance proceeds to buy the deceased partner’s interest from their family. That way, the deceased partner’s loved ones get the money without the surviving partner having to spend money from the business or their own pocket, and the business can continue uninterrupted.

• Parents with young children. A life insurance policy can help pay for the expenses of raising children after their parents are deceased, reducing their guardian’s financial burden. Life insurance can also provide for a surviving parent if the deceased parent was the family’s primary source of income.

• Anyone caring for a disabled family member. A life insurance policy can provide money for continuing care for family members with long-term disabling health conditions. However, if they are currently receiving or eligible for government assistance, you must exercise additional caution when providing them with funds from life insurance so the family member is not disqualified from receiving those benefits.

Importance of the Beneficiary Designation

If you have a life insurance policy, it is crucial that you complete the beneficiary designation in a way that matches your overall wishes. Below are some examples of what results when you list certain classes of beneficiaries.

• A minor as beneficiary. Depending on your family situation, you may be inclined to leave the money from a life insurance policy to your minor child or grandchild. However, because a minor cannot legally own or control their money, a court would have to select someone to hold the money on the minor’s behalf until they reach the age of majority (eighteen or twenty-one, depending on your state). At that time, the money would be turned over in full to the beneficiary, who would be able to spend it however they choose with no protections.

• An adult as beneficiary. While an adult can receive the money from the life insurance policy immediately, this solution may still not be ideal. After the beneficiary receives the money, they can spend it on whatever they choose; it could also be taken by a divorcing spouse or become subject to collection for an outstanding debt or judgment. Depending on the individual, the money may not last long.

• A trust as beneficiary. This option allows the money from the life insurance to be paid to the trustee of the trust along with instructions for how and for whom the trustee is to use the money. Additional provisions can be added to the trust to increase protections against creditors, divorcing spouses, and predators, and to ensure that the trust beneficiary benefits from the money.

Next Steps

Call us today to schedule an appointment to discuss your estate plan. If you already have life insurance, we can review the beneficiary designation to make sure that it fits your ultimate goals. If you do not have life insurance or think you need more, we are happy to provide you with some referrals.  If you are interested in learning more about the , call our office at (805) 518-9633 or click here to schedule a {Free} 15-Minute Phone Call.  As an added convenience for our clients, we are available to hold our meetings through video conferencing or by phone.