The Importance of Life Insurance in NJ Estate Planning

nj estate planning

If you have people relying on you, no doubt you have spent some time thinking about how to protect them in the event that something happens to you. In order to create a solid estate plan, life insurance should be a component of providing security for your loved ones even after you’re gone. Most life insurance policies fall into two categories: term life insurance and whole life insurance. How do you know which life insurance plan is best for you?

  • Term life insurance is only in effect for a specified period of time.
  • Whole life insurance covers you until death no matter when that is.

You’ll pay lower premiums for term life insurance than for whole life insurance. Other things to consider when selecting a life insurance policy include:

1. How much coverage do you need?

The end goal of term life insurance is to substitute the income you would have provided your family with. If you live past the coverage period of the policy, you receive nothing. Most policies cover for 10, 20, or 30 years. The premium (payment) for a term life policy is static throughout the life of the policy and is based on your age, health conditions, and lifestyle. Regarding term life insurance, the insurance company is betting that you will outlive the policy and they will not have to pay anything to your beneficiaries. Hence the lower premiums.

2. What kind of payments can you afford?

Whole life policies, on the other hand, are more complex. Because there is an absolute value and guaranteed payout for every policy, premiums are much more expensive. Insurance companies cannot gamble on whether or not they will have to pay out for your policy—they know they will have to.

3. How is your general health?

4. Do you make relatively smart lifestyle choices?

5. Do you want the option to borrow from your insurance policy?

Often, a complete health and wellness exam is required before an insurance company will issue a whole life policy. With whole life policies, part of the money you pay in premiums will go directly toward the value of the policy itself. This is your money. If you cancel the policy, you would still get some money back. While it will diminish the death payout of the policy, you can even borrow against a whole life policy.

6. What is your relationship status?

7. How much debt do you have?

If you are single, debt-free, and dependent-free, you probably don’t need life insurance at all. For most of us, this isn’t the case. Ask yourself what problems may arise if you were to die today. For instance, if you still have 20 years left on your mortgage, you might want to consider a term life insurance policy for 20 years so you know your mortgage will always be covered. On the other hand, if you have a lifelong dependent who requires constant care, setting up a whole life policy to cover their long-term care is probably the better choice.

8. How old are you?

Some people decide to invest in both a life and a term life insurance policy. When you’re younger, you may not be in the financial position (or have the need) to pay the premiums for whole life insurance. Many life insurance companies allow you to convert your policy from term to whole life as your circumstances change and as you age. Your new premiums would be based on your age when you convert. You may have to submit to a new medical exam, but by converting, you can benefit from lower premiums when you are younger while still putting money toward (what will become) a whole life policy to cover you later in life.

Estate planning, and life insurance in particular, can seem like intimidating tasks, but they don’t have to me. Veitengruber Law offers long-term planning guidance for all stages of life. We believe in utilizing personalized strategies to help our clients protect themselves and their loved ones. Schedule your free consultation to discuss all of your estate planning concerns.

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Avoid Inheritance Conflict with a Proper NJ Estate Plan

NJ estate plan

After a lifetime of hard work, it is only natural for parents to want to use their savings and investments to benefit their children and grandchildren after they are gone. Estate planning is a great way to secure your legacy and establish a plan for distributing your assets among your family members. It is important to note, however, that the execution of an estate plan also has the potential to create inheritance conflict between your loved ones. Even the most tight-knit families may experience some conflict, and for troubled families, the struggle is even worse. Anticipating inheritance conflict and taking proactive steps to defend against it are part of creating a great NJ estate plan. Here are some ways you can squash inheritance conflict before it even starts.

Pre-Plan Funeral Arrangements

Funerals are times of charged emotions and can often bring buried feelings to the surface. Take some of the pressure off of your children by planning your funeral details in advance. Determine if and where you want the services to be held and your preferred form of internment. Especially for re-married widows and widowers, determining in advance where (and with whom) you want to be interred can prevent controversy and hurt feelings.

Name an Executor

Naming an executor of your will establishes a certain order to the process of exacting your estate plan. Instead of leaving it to your family to figure out, name an attorney or unbiased third-party as the executor. If you would prefer to have a family member act as the executor, be sure you have a good reason for making this choice. You may choose to name your oldest child, or a child that has specific legal or financial knowledge. Keep in mind that being an executor is a lot of hard work and this is something you should discuss with them beforehand.

Divide Your Assets Equally

You know your children better than anyone. Some children may have historically relied more on your resources than others. It can be tempting for parents to leave more to these children than to their more self-sufficient or successful children. Resist this temptation. Unequal allocation of assets can open old wounds and create resentment. It can be seen by those who receive less as a final and unforgivable show of favoritism. Treat your children equally. The exceptions to this are if a child or dependent has a significant handicap (and therefore may need more of your resources to get by after you’re gone) or if you know a child would use their inheritance to further an unhealthy lifestyle. In the latter case, you should be certain before you disinherit, which will leave a lasting impact of hurt and rejection with your loved one.

Give Careful Thought to Personal Items and Family Heirlooms

Make sure you have a plan in place for how to divvy up your personal items and family heirlooms. Creating a plan for any valuable family jewels or other pricey objects is important to preventing fighting later. Who gets to keep your ring or the china you received as a wedding gift? Keep in mind that people can be very sentimental over even the smallest of objects. Your watch may not seem important to you, but it may hold immense sentimental value for your son. Do not discount these attachments or the conflict that can arise over dividing these sentimental tokens. Have a family conversation and come up with a plan that everyone can agree on for the selection process.

Explain the Basics, Not the Details

One you have your estate plan prepared, tell your children and loved ones the basics. Call a family meeting so you can all discuss the plans and what impact these plans will have on the children. This is a good time to set realistic expectations of your children’s inheritance. But be cautious about what you choose to share. Estate planning is an ever changing process and you may choose to make changes that differ from the details you shared with your loved ones earlier on. You do not want your children to view these potential changes as a punishment or as though you have “taken away” something from them. Instead, give your children enough information so that they will know what to expect without providing any specific numbers or inheritance details.

IMPORTANT NOTE: Inheritance conflicts ARE NOT inevitable!

Careful and thoughtful planning with an experienced estate planning attorney can save your family a lot of heartache. At Veitengruber Law, we know your most important legacy lies with the loved ones you leave behind. We know every estate plan is different because every family is different. Our compassionate and experienced legal team will work with you to create a thoughtful estate plan that will bring peace and comfort to you and your loved ones.