When a life insurance death benefit comes in handy

I sell quite a bit of life insurance, but rarely for death benefit purposes.  Which may sound strange to some of you because isn’t that what life insurance is for—when someone dies?  Well, yes.  I just happen to use other features of the product to create “life benefits” as well.

In presenting my “life benefit” plan to use life insurance, I often say, “and the death benefit just comes along for the ride.”  Ultimately, clients are paying for the death benefit even if that’s not their focus.  Sometimes it’s nice to have that passenger on bus.  Because when the unexpected or the untimely happens, the death benefit is nice to have.  It’s the difference between scrambling for donations from family and friends and knowing that you have money to take time off to grieve, to support your loved ones and business partners once you’re gone.

As many of you  know, I’m adamant about my clients getting their estate planning done.  It is a great act of love to make sure your affairs are handled and your family and friends know what your wishes are after your death.  I come from a long line of dead people, so trust me when I say that there is no worse combination on this place than death, family and money.  The second thing you need to do is get your life insurance in place early and often.  Get it when you’re young and healthy.  It’s one of those things that you’d rather have and not need than to need and not have.

For whatever it’s worth, I’m not a big fan of life insurance on kids, but if you can get a cheap rider on your own policy, it might be worth having.  I can’t imagine anything worse than the loss of a child.  Having time to take off work potentially without pay and grieve is huge.

Here’s what I do think is important:  Tell your family and friends when you’re alive how much you love them and what you respect and appreciate about them.  Record it, at least your voice, so they can hear it in the future.  Those of us left behind often forget the sound of our loved ones’ voices, and to have them for hard times is a beautiful gift.

What will this mean?  Most likely, nothing. Congress has been way too busy with healthcare to deal with this issue, especially since the tax generates relatively little revenue. But this issue is a mess for the estate planning of those high net worth folks who tend to contribute to political campaigns and issues.  While the estate tax goes away, the carry-over basis rules step in.  Congress has tried that before. It doesn’t work.  In the spring, Congress will likely reinstate the estate tax to 2010 levels and make it retroactive to January 1, 2010.  We’ll have to see where Congress goes from there.

What should you do?  Bay Area residents will likely have a net worth of over $1 million when they die, so you need to pay attention to what happens and be in contact with your estate planning attorney.  Those folks with parents on life support with estates greater than $5 million might have some opportunities here, but for most of us, no need to kill off those aging relatives next year and no need to panic about your estate plan.