Estate Planning

For many, passing along religious beliefs and values to the next generation is just as important as passing along financial wealth and tangible assets. Estate planning creates many opportunities to do this, including:
 
End-of-Life Care. A Medical Power of Attorney lets you name someone to make medical decisions for you in the event you cannot make them yourself. This can be someone who shares your faith and values about end-of-life issues or someone who will honor your wishes. In either case, it is a good idea to provide written instructions about things like organ donation, pain medication, hospice arrangements, even avoiding care in a specific facility. A visit by your minister, priest, rabbi or other member of clergy may be desired.
 
Funeral and Burial Arrangements. Faith can influence views on burial, cremation, autopsy, even embalming. Faith may also influence certain details in a funeral or memorial service. Some people pre-plan their services and include a list of people to notify (which can be helpful for a grieving family). Some even pre-pay for the funeral and burial plots to prevent their loved ones from overspending out of grief or guilt.
 
Charitable Giving. Giving to others who are less fortunate is common among people of all faiths. Making final distributions to a church or synagogue, university, hospital and other favorite causes will convey the value of charitable giving to family members.
 
Distributions to Children and Grandchildren. Taking the time to plan how assets are left to family members is another way to convey faith values. Parents of young children can select someone who shares their religious views to manage the inheritance. A letter of instruction to the guardian can include views on the care and upbringing of young children, which are often influenced by faith.
 
Transferring faith and values to family members is best done over time, by letting them see your faith at work in your life, taking them to religious services, and letting them see you being charitable. But it is never too late. Talk to your family while you can. Explain what your faith means to you and how it has helped you through difficult moments in your life. You can also write personal letters or make a video that they can keep and review long after you are gone.

The main reasons most people have life insurance are to pay final expenses (medical, funeral, burial, etc.), replace an income stream and/or create wealth for our dependents after we die. Life insurance can also play an important role in business, estate planning and charitable giving.
 
When considering whether or not you need life insurance, think about what would happen to your loved ones if you should die today. Most people would agree if you have children (babies through college age) you need life insurance, but those who depend on us financially may also include our spouse, aging parents, siblings, and other family members with special needs.
 
Young Single Adults
If you have no dependents, you may only need enough life insurance to pay your final expenses and debt so your family will not have that burden. However, if you help support an elderly parent or another person, life insurance can replace that financial support.
 
Married with No Children
At this point, both partners are probably working. If one should die unexpectedly, one income may not be enough. Life insurance can provide cash to pay final expenses, pay down credit cards and other loans, and help with mortgage payments and ongoing monthly expenses—at least until the survivor can make lifestyle adjustments. Again, if you are thinking about having children in the future, it’s not too early to buy life insurance.
 
Married with Dependent Children
Adding kids to the scenario multiplies our financial obligations. In addition to final and regular ongoing expenses, life insurance can pay off a mortgage, fund college educations and provide for the surviving spouse’s retirement, easing the financial burden on the surviving parent and even allowing a stay-at-home parent to remain at home with the children. If a stay-at-home spouse should die while the children are young, life insurance can provide the funds to hire someone to help with child care, shopping, cooking, transportation, cleaning, and other household responsibilities. At this stage, it makes sense to have life insurance on both parents.
 
Single Parents
Single parents already have the work and responsibilities of two people. Life insurance can provide the financial protection and security your family would need.
 
Business Owners
Business partners often have buy-sell agreements that are funded with life insurance; when one dies, the proceeds can be used to buy the other’s share of the business from the deceased owner’s family. “Key man” insurance can be purchased on the life of an employee or partner whose role in sales or management is very valuable to the business; if this person dies, money would be available to help keep the business going while a replacement is found. Life insurance can also create an inheritance for all children, including those not working in the family business.
 
Empty Nesters and Retirees
Life insurance can help provide for the surviving spouse’s retirement and potential medical and long-term care expenses. Existing and new life insurance policies can also be used to make charitable gifts, and to fund private foundations and trusts for future generations. Life insurance can also pay estate taxes, preserving the rest of the estate for family members.

Life insurance can be an affordable way to provide for our children, spouse, a sibling, aging parents and others if we should die while they are depending on us. Life insurance proceeds can provide extra income to help pay ongoing household bills and child care; pay off a mortgage, credit cards and other debt; pay for college; and pay funeral costs and other final expenses. (Life insurance also plays a vital role in business succession planning and it has numerous applications in estate planning.)
 
A simple way to determine the amount of life insurance needed for income replacement purposes is to multiply the annual income to be replaced by the number of years it will be needed. If the insured earns an income, use the amount actually contributed to the household (after personal expenses and taxes).
 
Basically, there are two kinds of life insurance: term and permanent.

• Term life insurance provides coverage for a set number of years, or term. It is pure insurance, and is similar to insurance on a car or home. It can be a good choice when coverage is needed for a certain number of years; for example, until the kids are out of college or the mortgage is paid off. It is also less expensive than whole life, and is least expensive when the insured is young and healthy. For these reasons, term life insurance is a popular choice for young families.
• Permanent life insurance, on the other hand, does not expire at the end of a specified term (assuming the premiums are paid). Generally, the coverage stays in effect during the insured’s lifetime and the premium, depending upon the type of policy, can either stay the same or fluctuate based upon the financial performance of the policy. Permanent policies also build cash value over time that can be borrowed from the policy (reducing the proceeds paid at death), can be used to help pay the premiums, or can be refunded if the policy is cancelled.

The amount a family pays for life insurance must be a reasonable and manageable expense. The cost will depend on the amount, kind (term vs. permanent), and the age and health of the person to be insured. If the cost to replace income for 20 or 30 years is too much for the family budget, one option is to cover five to seven years of expenses, which will give the family time to cope and adjust after the loss.

Many young families put off estate planning because they are young and healthy, or because they don’t think they can afford it. But even a healthy, young adult can be taken suddenly by an accident or illness. Estate planning does not have to be expensive; a young family can start with the essential legal documents and term life insurance, then update and upgrade as their financial situation improves. A good estate plan for a young family will include the following:
 
Naming an Administrator
This person will be responsible for handling final financial affairs—locating and valuing assets, locating and paying bills, distributing assets, and hiring an attorney and other advisors. It should be someone who is trustworthy, willing and able to take on the responsibility.
 
Naming a Guardian for Minor Children
Deciding who will raise the children if something happens to both parents is often a difficult decision. But it is very important, because if the parents do not name a guardian, the court will have to appoint someone without knowing their wishes, the children or other family members.
 
Providing Instructions for Distribution of Assets
Most married couples want their assets to go to the surviving spouse if one of them dies. If both parents die and the children are young, they want their assets to be used to care for their children. Some assets will transfer automatically to the surviving spouse by beneficiary designations and how title is held. However, an estate plan is still needed in the event this spouse becomes disabled or dies, so that the assets can be used to provide for the children.
 
Naming Someone to Manage the Children’s Inheritance
Unless this in included in the estate plan, the court will appoint someone to oversee the children’s inheritance. This will likely be a friend of the judge and a stranger to the family. It will cost money (paid from the inheritance) and the children will receive their inheritances in equal shares when they reach legal age, usually age 18. Most parents prefer that their children inherit when they are older, and to keep the money in one “pot” so it can be used to provide for the children’s different needs. Establishing a trust for the children’s inheritance lets the parents accomplish these goals and select someone they know and trust to manage it.
 
Reviewing Insurance Needs
Income earned by one or both parents would need to be replaced, and someone may need to be hired to take over the responsibilities of a stay-at-home parent. Additional coverage may be needed to provide for the children until they are grown; even more if the parents want to pay for college.
 
Planning for Disability
There is the possibility that one or both parents could become disabled due to injury, illness or even a random act of violence. Both parents need medical powers of attorney that give someone legal authority to make health care decisions if they are unable to do so for themselves. (You would probably name your spouse to do this, but one or two others should be named in case your spouse is also unable to act.) HIPPA authorizations will give doctors permission to discuss your medical situation with others (parents, siblings and close friends). Disability income insurance should also be considered, because life insurance does not pay at disability.

If you are part of the baby boomer generation (born between 1946 and 1964), you may also find that you are a member of the sandwich generation, with responsibilities to both your parents (now or in the future) and your children. This should change the way you think about estate planning—instead of the traditional approach of how to leave assets to your children and future generations, you may also need to include providing for the previous generation (your parents).
 
Today, one in four families has a care-giving challenge, with 45 million Americans providing care for one or more family members or friends. Two-thirds of those currently over age 65 will need long-term care at home, adult day care, assisted living or nursing home care. But contrary to popular belief, Medicare does not cover long-term care or assisted living costs.
 
Actions to Consider

• Set up a trust for your parents in your estate plan. Special provisions can be included that would allow them to qualify for Medicaid if needed now or in the future.
• Select someone to oversee physical care. This might be a sibling or one of your adult children. It should be someone who lives nearby and is willing to visit often, observe the care being provided, hire caregivers, select a facility or doctors, etc.
• Select a trustee to manage the funds. This might be the same person who is overseeing the physical care or a different person; not everyone has the aptitude to do both. A professional trustee is also an option.
• Purchase a life insurance policy on your life to provide the funds to pay for this care so that your other assets are not consumed. A term life policy that would extend beyond your parents’ projected life expectancy would be the most affordable.

Too often, we let ourselves slip to the bottom of the priority list. But when you start to think of yourself as your most valuable asset and begin to protect this asset, you will perform at your best and increase your value.

• Keep yourself healthy. You can’t perform at your best if you don’t take care of yourself. Start with the simple things you already know you should do: eat the right foods, drink water, exercise regularly, get enough restful sleep, etc. See your doctor and take care of small issues before they become big problems.
• Have sufficient insurance to manage risk. Coverage usually includes health insurance; long-term care insurance; life insurance; property and casualty insurance; liability insurance; and professional insurance.
• Invest in yourself to stay valuable, both for the short term and long term. Work on ways to be consistently productive in your work. Learn new skills or take training that will help in your current job/career or that will prepare you for a future one. Consider additional education or an advanced degree to help expand your abilities and potential.
• Have contingency plans. Plan for the unexpected. Start paying off debts and building an emergency fund. Keep your resumé updated. Expand your professional contacts in your current industry or one you would like to pursue by attending networking functions and using social media like LinkedIn.

When you take care of yourself, protect yourself and invest in yourself, you will perform better, become more valuable, and will be more prepared if your future takes an unexpected turn.