Some people adopt a random, haphazard approach to the subject of estate planning. They create a will or a trust as a pie slicing mechanism, and they are done. They do not take proactive steps to shape their legacies in any particular way.
The other approach is intentional and holistic. You envision the legacy you wish to leave to your loved ones and do what it takes to actualize that vision.
Life Insurance Coverage
Life insurance can help you bolster the resources you are able to pass along. It can serve other purposes, as well.
One of the most commonly used types of life insurance is whole life. This is insurance that accumulates cash value with a guaranteed rate of return when you pay your premiums. You can withdraw the cash value or borrow against it. It can also be viewed as an investment vehicle. Finally, the insurance death benefit will be available to your family members when you pass away.
The premiums ensure you will receive something in return. A healthy, non-smoking male between 35 and 45 years old can expect to pay between $280 and $430 a month for $250,000 of coverage. Part of the premium is retained in the cash value account.
Term life insurance does not have a cash value. It is typically used by younger adults to protect their families for a prescribed period of time. Simply put, if you do not die before the term expires, you are out the money and do not receive anything tangible in return.
This being stated, the intangible piece of mind is a commodity in and of itself. The average monthly cost for a 20 year, $500,000 term life policy for a 35-year-old Oklahoma City man is in the $20-$34 range.
Life insurance can be used to balance inheritances. Let’s say Bill owns a popular restaurant. He has two children. His son Doug has worked in the business all of his life, and he will inherit it. Bill has another child, a daughter named Lisa who has never had an interest in the restaurant business. Bill wants to leave equal inheritances to both children, but his restaurant is his most valuable piece of property by a significant margin. He can purchase a life insurance policy and name Lisa as the beneficiary. The payout will approximate the value of the business and the inheritances will be equal.
Small business partners are faced with an estate planning challenge. What happens to the share owned by a partner who passes away?
A buy-sell agreement can be used to provide a solution. With a cross purchase plan, the partners determine the value of the business and take out life insurance policies on one another equal to the value of a share. The proceeds are collected when a partner dies and are used to buy the deceased partner’s share. These agreements can be used to allow for retirement or exit for any reason, and the funding can come from another source.
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Are You Ready to Take Action?
If you are going through life without an estate plan, you have to take action at some point, and there is no time like the present.
You can schedule an appointment with our Oklahoma City estate planning lawyers if you call us at 405-843-6100. We also have a contact form you can use to send us a message and you will receive a prompt response.