As you’re undoubtedly aware (right?!), September is Life Insurance Awareness Month (LIAM). That makes now a good time to stop and consider what life insurance you have and what you might need because, just like your broader estate plan, you should keep your coverage and policies up to date. I’m sure you’re also aware that the spokesperson for LIAM is Boomer Esiason. What’s the connection? His story provides two examples of how you may need more life insurance than you might think:
- You should consider getting life insurance coverage even if you do not work outside the home. Boomer’s mother died of cancer when he was only seven years old. Her husband, the family’s sole bread-winner, struggled to balance caring for three children while working and commuting three hours per day to his job. Although his mother did not earn an income outside the home, the value of her services to the family (the cost of child care, for example) were not replaceable without life insurance.
- You should also consider life insurance coverage if you have a dependent with special needs. Boomer, himself, has a special needs son. In order to continue to provide for a special needs dependent, one option is to set up a special needs trust (you remember those from last week’s blog, right?) funded in part with proceeds from a life insurance policy.
And just as the twice-annual spring forward/fall back time change serves as a reminder to check the batteries in your smoke detector, LIAM serves as a good reminder to think about the life insurance you already have, any you might need, and what you can do with it.
- Make sure beneficiaries on your policies are up to date. Have you gotten married or divorced since you took out or last updated your policies? Have any of your beneficiaries changed their name or passed away?
- Make sure that your coverage is sufficient to cover expenses or loss of income. Have you had children, purchased a house, gotten a promotion, or had a significant change in income or expenses?
- Find your documents. Have you seen your paperwork lately? Make sure you keep your life insurance policy information with your other important paperwork, and make sure it is easy for your loved ones to find in an emergency.
- Consider an Irrevocable Life Insurance Trust (ILIT). Are you concerned that the proceeds from your life insurance would put the value of your estate over the federal estate tax threshold? A properly set-up ILIT can take the proceeds from your life insurance out of your total estate for taxation purposes. This may sound vaguely familiar to loyal blog readers (I’m looking at you, *wink*) who remember that James Gandolfini created an ILIT for the benefit of his 14-year old son.
For basic information and life insurance calculators (or for a video of Boomer working at a coffee house) please see the Life Happens website at the link below. For more information about what life insurance options are best for you, please consult a financial planner or life insurance agent. If you need referrals, Norton Black & Basu know some great ones.
To set up an ILIT, special needs trust, or to set up any other kind of trust funded by your life insurance, please consult an estate planning attorney. If this seems daunting, please also consult a glass of wine.