No one really wants to think about life insurance. But if someone depends on you financially, it’s a topic you shouldn’t avoid. Are any of these reasons stopping you from getting the life insurance coverage you need? If so, read on!
1. My family can rely on loans or other family members.
We know we can rely on our families for support as we navigate life. However, if you were to die, your family’s world would shift on its axis—emotionally and financially. A time of grief is not the time to crowdsource funeral funds or make phone calls for money every month when bills come due. Life insurance means there can be an affordable solution in place so that doesn’t need to happen.
2. Money is tight. I just can’t afford life insurance.
Bills, rent or mortgage, car payments, childcare, food, gas … and the list grows as your family does. So what would happen to them financially if you died? If you’re gone, so is your income, but their bills and expenses will stay the same. If money is tight, you can’t afford not to have life insurance. It picks up the financial burden for your family when you are no longer there to do it.
3. Life insurance will be a free ride for my kids.
Your parents taught you hard work, and it’s what you’re teaching your children. But life insurance isn’t about leaving your kids a financial windfall. It’s about practicing—and teaching—the principles of personal financial responsibility. Preparing for the future with life insurance is a lesson in goal-setting, budgeting and discipline that ensures your loved ones will be OK financially, which is a valuable lesson to pass on.
Don’t let these myths stand in the way of getting life insurance—or more of it.
Estate planning is an essential step to help protect the wealth that you've spent your life building. Meeting with an estate planner will help to create a comprehensive plan that will allow your assets to effectively pass to your assigned beneficiaries. Creating this initial plan can feel overwhelming, and we are here to help you prepare.
Here are five important questions you can expect to discuss with your estate advisor as you start to plan for your future.
How Would You Like Your Wealth to Pass to Your Heirs or Elsewhere?
The basis of your estate plan is where you want to direct your wealth and how you'd like that to happen. No matter how large or small your estate is, you'll need to decide how it should be distributed among children, grandchildren, other family members or favorite charity organizations. For example, this could mean leaving different parties a percentage of your total assets, or leaving one child your business and another child your vacation home.
It’s important to also think about whether you want your beneficiaries to receive their inheritance all at once or not. If you have a disabled child requiring lifelong care on your list, or someone who needs a little extra help managing their money, you may want a trust or annuity structure in place to pay out the inheritance in increments.
What Can Be Done to Prevent Costs and Conflicts for Your Heirs?
Costs for your beneficiaries are most likely to come up if your estate needs to go through probate, which is the process by which a court distributes your assets. In addition to financial costs, there are other reasons to avoid probate. Probate can be a long and exhausting process – meaning, your heirs will not be able to access your estate right away. If you have dependents who will rely on the money in your estate, this can be an especially serious concern. In addition, probate adds your estate information to the public record, which you may want to avoid. There are several strategies your financial advisor might recommend to avoid probate. These include placing assets in a trust and moving funds into joint accounts with your beneficiaries.
Conflict among heirs is another common concern, especially in families where conflict already exists. While the legal documents included in your estate should help minimize disagreements and make it more difficult for someone to contest your wishes, communication during your lifetime is important as well. Disagreements often surround specific items like jewelry or sentimental pieces rather than your financial assets. Labeling these items, writing a letter of instruction and starting to pass on these things during your lifetime can all help make your intentions clear.
How Can You Reduce Your Tax Burden?
After a lifetime of working to earn your money, you likely want to direct your wealth to your loved ones rather than the government. In 2023, only estates valued at $12.92 million (or $25.84 million for some married couples) or more may be subject to the federal estate tax. If, upon your death, the total value of your estate is less than the applicable exclusion amount, no federal estate taxes will be due.
Depending on the state you live in, your heirs or your estate might also be subject to state estate or inheritance taxes. If taxes are a concern for your estate, there are several ways to reduce your tax burden.
One simple option is to start passing money along during your lifetime. Based on the 2022 gift tax exemption limit, individuals can give up to $16,000 per recipient per year. This lets you give money directly to your children or grandchildren while reducing the value of your estate, which will reduce your tax bill. Other options include a marital trust, which allows one spouse to place assets in trust for the other spouse, and an irrevocable life insurance trust, which can pay for life insurance premiums with tax-deductible funds and then avoid estate taxes later on.
Are You Already Working with Financial Professionals?
If you're already working with an estate attorney, a financial planner or a tax professional, it's important for your estate planner to understand the strategies your existing financial team has recommended. You'll want to make sure that all of these members of your team are working together so you aren't paying for duplicated efforts or conflicting suggestions.
If you aren't already working with a financial team, your estate planner may recommend that you do so depending on the details of your estate plan. If you have complex tax concerns, you might need to talk to a tax expert. Depending on the type of trust that you wish to establish, you may need an estate attorney to set it up.
How Will Changes in Your Life Change Your Estate Plan?
Your estate plan should have the flexibility to adapt to changes in your lifestyle, family structure or life expectancy. Your initial plan will be based on your current circumstances, but you should consider potential future concerns and possible solutions.
Divorce and Remarriage
Divorce and remarriage are common life changes that can affect your estate plan. If you remarry, you may not want your new spouse to manage the inheritance of your children from the first marriage. This can create the need for a new trust to be established. In addition, if you have more children in later marriages, you will again need to update your estate plan.
Life Expectancy and Medical Issues
There are other lifestyle considerations that might change as well. For example, if based on your family history you expect to live into your 90s, you might not want to start giving away assets to avoid estate taxes. And if medical issues arise and your life expectancy changes, you will likely need to adjust your plan.
While you won't need to make any decisions based on hypotheticals, it's a good idea to discuss the possibilities.
How to Get Started?
Your estate plan is a key component of your Life Plan. To create an estate plan that addresses the above questions and any other concerns you may have, you'll need to start by finding the right estate advisor. Talk to the Trilogy Financial team to take control of your finances today while maximizing your future opportunities.
A generation or so ago, the path to financial freedom was pretty direct for most. You found a job and saved for a home and a rainy day. When it was time to retire, you collected from a pension and enjoyed your remaining twilight years. Over time, things have drifted away from womb-to-tomb employment and gotten a lot more complicated. Today’s Americans have to be much more proactive with their finances. In this day and age, saving isn’t enough. Make sure your money is working as hard as you work for it.
There are a lot of concerns for the future. Buying a home. Sending kids to college. Making sure that your current career will be around to see you to retirement. People are living longer, so their retirement money has to go farther. Many high costs associated with medical care aren’t covered by Medicare, such as many prescriptions and long-term care. Pensions are no longer viable option for most Americans, and Social Security, a program that was never intended to replace income, no longer provides the level of security people need for their future. There’s a lot to prepare for.
Due to these concerns on the path to financial independence, people need to be mindful of their money. Even the most conservative Americans need to do more than contribute to a standard savings account, which can’t keep up with the rate of inflation. Investing your money will grow it exponentially faster than simply saving due to the power of compound interest. Yet, preparing for the future can be very emotional work. Today’s retirement planning relies far more on the decisions made by an individual rather than a company or organization, which can be a lot of pressure. Fears of not having enough money, a very common concern, can cloud decisions and can prompt people to react rather than plan. This is why an objective third party is necessary. Financial advisors can see past the emotions and help you plan your path to your financial freedom.
In this day and age, there are real and unique concerns that can derail you from the path to your financial independence. Trilogy Financial is here to help you establish your goals and invest your money to help get you where you want to go. It is our mission to ensure that every American, from Main Street to Wall Street, has access to great planning and the tools to establish their financial independence.
