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Estate Planning and Life Insurance

s24 25 10 January 10, 2016 at 12:05 AM
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Hello SD'ers.

First off, thanks to the whole community for sharing deals and information. I've absolutely benefitted from the collective wisdom of this community.

I apologize if this has been answered in other threads, but I searched and couldn't find quite what I'm looking for.

First, some context.

I'm the head of household in a young family 👪. Now that there are children, I figure it's only wise to have a will, living trust, or other estate planning document drawn up just in case. Obviously, things like who gets custody of the children if both myself and my spouse die, how I'd like to handle being medically unable to make decisions about my own health, etc, would ideally be handled by this document/s. I don't have a complex tax situation. Additionally, if I die I'd want some basic life insurance for both my spouse and I to recover lost income and help the family survive. How money and assets are handled would also be key for this.

So that brings me to two questions:

1) Based on the information I provided, what estate planning vehicle would you recommend? Also, where should I turn and what should I look for when getting it done? I'm not opposed to spending some money if that's what it takes to get the job done.

2) How do I find the most affordable term life insurance from a reputable company? Any ways to achieve lower premiums?

Thank you again for reading my long winded questions. There's lots I don't know so any and all feedback is greatly appreciated.

26 Comments

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#2
I am not sure about #1 but for #2 I used a service with good results might want to take a look at it.


https://www.policygenius.com/
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#3
Quote from vdesai2 View Post :
I am not sure about #1 but for #2 I used a service with good results might want to take a look at it.


https://www.policygenius.com/
Thank you!
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#4
Quote from s24 View Post :
Hello SD'ers.

First off, thanks to the whole community for sharing deals and information. I've absolutely benefitted from the collective wisdom of this community.

I apologize if this has been answered in other threads, but I searched and couldn't find quite what I'm looking for.

First, some context.

I'm the head of household in a young family 👪. Now that there are children, I figure it's only wise to have a will, living trust, or other estate planning document drawn up just in case. Obviously, things like who gets custody of the children if both myself and my spouse die, how I'd like to handle being medically unable to make decisions about my own health, etc, would ideally be handled by this document/s. I don't have a complex tax situation. Additionally, if I die I'd want some basic life insurance for both my spouse and I to recover lost income and help the family survive. How money and assets are handled would also be key for this.

So that brings me to two questions:

1) Based on the information I provided, what estate planning vehicle would you recommend? Also, where should I turn and what should I look for when getting it done? I'm not opposed to spending some money if that's what it takes to get the job done.

2) How do I find the most affordable term life insurance from a reputable company? Any ways to achieve lower premiums?

Thank you again for reading my long winded questions. There's lots I don't know so any and all feedback is greatly appreciated.
Not sure about question 1, but for question 2 I've found that - among reputable insurance companies - premiums are all roughly the same. And just like other insurances, you want to pick your insurance company not on price, but on customer service, longevity, and how much of a hassle the claims process is. I recently purchased life insurance (same situation as you) and went with Amica. They are consistently rated #1 or #2 in terms of satisfaction with the claims process, and they've been around for 100+ years, so you know they'll be around in 15 years if your spouse needs to collect. I had a bit of a hiccup with the application process, but it's getting sorted out.

Make sure to get term life insurance (not whole life), and make sure to not get too much. A lot of people get recommended 10 times their salary, and it winds up being too much for what they want the insurance to cover. For instance, if your spouse doesn't work now, but would if you died, you don't need to completely replace your income forever. As another example, if both you and your spouse work now, your spouse may need money to pay for a nanny or other caregiver for some amount of time, but may not need to replace your full salary. It all depends on what your spouse wants / needs to use the insurance money for.

Another often-overlooked insurance product is disability insurance. You are more likely to need it than life insurance, so definitely look at both short- and long-term disability insurance if you don't already have it.
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#5
First, congrats on your newly expanded family! This was also about the time that I got serious about financial planning.


OP, this also is a very nuanced and personal discussion, so I'll start with the standard disclaimer to speak to a professional adviser - could be anything from local attorney or CPA up to a CFP (certified Financial Planner).

With that ouf of the way:


1) Estate Planning: the solution depends on your definition of Estate Planning and the size of your potential estate. From your post, it sounds like you are mostly concerned with legal documents vs. building a wealth transfer/generational plan.


Drafting a will (and a living will) is the easiest and crucial one. For this, you don't need to engage an attorney given how straightforward your family situation is, but if you do engage one, should not cost more than $100-$250. You will lay out legal guardians for minor children, distribution of assets to avoid probate, etc.


If you expect to have a sizeable estate, good Estate Planning can help with Estate tax avoidance/deferral (e.g. when one spouse dies before the other). This really only matters though if your estate will be $5,000,000 or more.


A good middle ground is setting up a trust to put all your assets into. Does not require high net worth to benefit and also will not require high fees from a CFP or like.


B) For insurance, I echo early poster that Term Life (vs. Whole Life and its variants) is the best vehicle for 99% of us. For me, the point of life insurance is to provide income replacement to my family while the kids don't have their own financial independence - it is not part of my expected Estate proceeds.


That means I chose a term life policy that covers the kids into their late 20s/early 30s. I also then don't have to pay premiums during retirement.


Do get price quotes on as many different contract periods as possible - in many cases, the difference between a 25 and 30 year policy is very small annually, so worth it to get 30 years.


Just remember that the money you put into an annual premium is still an opportunity cost of not investing the premium amount and seeing the gains over a 20-30 year period.


Hope this helps some - in the end, no reason to be intimidated as there are many options and resources available.
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#6
For term life insurance, your first stop should be Term4sale.com . I did use it and bought 30 years fixed, one million covered policy.
Now purchasing for my spouse and for other family members too.

To reduce term premium, I have delayed my medical tests for few weeks and started working out. I had a bit higher triglycerides from my last labs. So, I worked out and got the preferred plus category of premium.
I am very happy with my life coverage.
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#7
Quote from s24 View Post :
1) Based on the information I provided, what estate planning vehicle would you recommend? Also, where should I turn and what should I look for when getting it done? I'm not opposed to spending some money if that's what it takes to get the job done.
In terms of estate planning, here's what I'd make sure you have in place:
  • Will - Quicken's WillMaker is perfect for your relatively simple life situation; follow their instructions on how to make a will and what to do afterwards (as far as who to notify and what to do with the paperwork) and you'll be set
  • Advanced directive (may be called something different in your state); let your healthcare agent (whom you chose and named in your advanced directive) where this paperwork is kept and give them a copy as well
  • Join your local memorial society; visit funerals.org [funerals.org] to join and save about 75% off of your funeral costs
  • Level term life insurance; buy only from companies rated A++ by A.M. Best
  • As mmathis prudently pointed out, consider buying disability insurance as you're three times more likely to become disabled during your active earning years than you are to die during those same years; consider checking out Policy Genius [policygenius.com] to shop for rates and only buy from companies that are rated A+ by A.M. Best; to help make the premiums cheaper, push your elimination period out as far as you can afford (this is where a rainy day fund is taken into account)
  • Consider putting into place PODs (payable on death) on all of your checking/savings accounts - this helps avoid the time and cost of probate at death as the money passes directly to whomever you name as your POD
  • Consider placing power of attorney for finances on all of your financial accounts in the event that you and your wife both become incapacitated or one of you dies and the other is incapacitated
  • Update your beneficiaries and secondary beneficiaries on all of your retirement accounts
  • Consider buying a book called Putting Things in Order [amazon.com] - I own this book and have filled it out; it does an excellent job of putting all of your life's affairs in one, easy-to-read place for your heirs; it also helps make sure you've taken care of all of your end-of-life matters (in case there are some I've left out here that would be relevant to your situation); fill it out, keep in in a safe, and tell your executor where it is and how to access it

Quote from s24 View Post :
2) How do I find the most affordable term life insurance from a reputable company? Any ways to achieve lower premiums?
Since life insurance is a long-term deal, you want to make sure they company is around if and when the policy needs to pay out. To ensure this, only consider companies that are rated A++ by A.M. Best. When considering cost, I would weight Amica and USAA a little more than the other A++ companies as they are two best insurers in the country.

It's not going to be a lot of money to buy level term life insurance. Look for 7 - 10 times your annual gross income. There are calculators out there that can help you be more precise, but for a lot of us, that just becomes too much friction and we end up putting it off and never getting insured. So, to keep it simple and practical, I like 7 - 10 times your income because the price difference between $750,000 and $1,000,000 is not much. The price breaks usually come at $500,000 and $1,000,000. But, you decide what's best for you and your family.

And, regarding your wife, take into consideration her income or childcare costs should she die prematurely. Look for a policy that will cover you for your active earning years. For her, look for a policy that will cover whatever you deem best to cover her for. Ask yourselves: Can you live without her income? If she died, would you need childcare and, if so, how much would it cost until you didn't need it anymore?

Being in good health and having multiple lines with that particular insurer can help lower your premium.

If you need any more help, don't hesitate to ask here.
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Last edited by Brian1 January 18, 2016 at 10:18 PM
#8
Get an estate planning attorney.

While you did provide some key information needed to form an estate plan, there are countless other questions that need to be asked/answered in order to create an effective plan. The good news is, depending on your finances, the common, simple plans are relatively inexpensive. I would never do it myself (and i'm an attorney--I just don't handle estate planning) Each state has very specific will requirements and unless you want to run the risk that you missed a notary, witness or some other formality that could render it completely invalid--call an attorney. In my area of the country, the whole package (Will, living will, Powers of Attorney, etc.), bare bones, without trusts, shouldn't be more than 1k-1.5k.

I don't know what state you live in, but talk to some friends and get a referral for an estate planning attorney. If it's in Ohio, drop me a line. I might be able to help you find someone local. Be careful on life insurance salesman--a good attorney or accountant will be able to guide you on that aspect.
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#9
See what insurance is offered from your employer and you may want to look at accident insurance.
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Quote from politicaljunkie View Post :
Each state has very specific will requirements and unless you want to run the risk that you missed a notary, witness or some other formality that could render it completely invalid--call an attorney.
I'm glad you brought this up. WillMaker actually does address every thing one would need to complete in order to make their will (or trust) legal according to their particular state's requirements.
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#11
ThanksGreat info, Brian! I am currently looking around for term life and you answered many of my questions. Do you know of any good sites to comparison shop? Any other tips? Thank you (apologies if i hijacked the thread).
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#12
Quote from komondor View Post :
See what insurance is offered from your employer and you may want to look at accident insurance.
Insurance offered through one's employer is typically far more expensive than what you can get on the open market, and the face value is usually limited. The benefit is that it's guaranteed issue and there are no medical checks.

From some quotes I saw when shopping around and what my employer offered, I could get $100k through my employer for ~$20 / mo, or $500k through Amica for ~$45 / mo (plus any additional discounts on my home / auto / umbrella policies for having another policy with them). If you are of average or poor health, that $45 quote can climb to $60 or $90 / mo or more, but it's likely still cheaper than what's offered through your employer. It also allows you to get the 7-10x your salary that most people recommend.
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#13
for me it worked out it is just something to check
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#14
Quote from Brian1 View Post :
I'm glad you brought this up. WillMaker actually does address every thing one would need to complete in order to make their will (or trust) legal according to their particular state's requirements.
Well, good luck then! There is absolutely no way i'd ever trust my estate (zing!) to an auto-form generating product. Sorry. There are far too many issues, options, contingencies, etc. that a program cannot cover. You just cannot replace an attorney in these situations.
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Quote from politicaljunkie View Post :
Well, good luck then! There is absolutely no way i'd ever trust my estate (zing!) to an auto-form generating product. Sorry. There are far too many issues, options, contingencies, etc. that a program cannot cover. You just cannot replace an attorney in these situations.

Respectfully disagree as software is is sufficient for many familial configurations and many (relatively) lower valued estates. No kids, no prior marriages and total assets of $200,000? Currently married or not, I'd argue you could handle all your estate documents with software or a good old fashioned book help.


If you are humblebragging about the valuation of your assets, well.... happy for you , but a blanket statement such as yours contributes little except make people's fear and nervousness about financial education even greater.
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