ColumnistsFinancial Literacy

September is Life Insurance Awareness Month

September is Life Insurance Awareness Month. As an estate planning attorney, I am quick to share the connection to insurance and estate planning. The consistent theme is vision, direction and purpose.

A true tragedy is when someone has passed away and there are no resources to celebrate the life. The people who love him or her the most are not given the space to adequately grieve. The focus is immediately on gathering the necessary resources to manage the immediate crisis.

The crisis plan may be to reach out to family members to access the resources or the community or, worse yet, have to depend on strangers through GoFundMe pages to be able to pay for the services necessary to lay someone to rest.

Insurance can be a great tool if used strategically with a vision. I believe that it is a tool that should be used thoughtfully and in conjunction with other tools. I rarely suggest that anyone should haphazardly distribute large amounts of money without a plan for the recipient and the distribution. Statistics show that one-third of lottery winners file for bankruptcy within 3-5 years of receiving winnings. A significant inheritance can have the same result as a lottery winning.  The significant change in financial status can create disorientation and destabilization for the recipient.  

I often encourage grandparents to purchase a $1 million whole life insurance policy for each grandchild upon birth as a strategic investment for their education and legacy. I was introduced to the concept of Million Dollar Baby by George Fraser, the leader of the empowerment movement. He explained the concept to provide the child a policy that would provide lifetime resources for college and also for the down payment for a home that would provide a platform of economic support and fuel future while also seeding future generations with the death benefit. While we are often buying gifts that have no term return on the investment, we can provide appreciable assets that can be transformative for multiple generations. The vision for the recipient of the gift is an opportunity to enhance the quality of life and reduce the burden in the future.

Often employers provide insurance.  If the employer owns the policy, it often ends when the employment ends. There is often a policy that will decrease after retirement. The goal the employer sees is to solely replace the income that was being earned. The diminishing death benefit eventually provides resources to provide end of life or burial support. That is indeed a resource and will avoid the GoFundMe pages. However, it does not leave loved ones in a greater position. I believe that most people endeavor to leave a legacy that positions our loved ones in the best position possible. We can provide a platform that lifts our loved ones to greater heights.

I am an advocate for providing as much direction as possible. I am not an insurance professional but I am always encouraging people who have a trust to make the insurance beneficiary the trust.  The trust provides a safe haven withdirections for the insurance benefits.  Given specific instructions on how the insurance proceeds are distributed limits the haphazard or disorientation that the recipient may experience. The directions provide opportunity to create a legacy of economic empowerment for multiple generations.

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