Frank bought life insurance to help ensure that his survivors wouldn’t suffer financially when he died. When Frank died and his paycheck stopped coming in, his family had enough money to maintain their lifestyle and live comfortably for years to come.
And since Frank’s life insurance proceeds were available very quickly, his family had cash to meet their short-term financial needs. Life insurance proceeds left to a named beneficiary don’t pass through the process of probate, so Frank’s family didn’t have to wait until his estate was settled to get the money they needed to pay bills.
But Dave didn’t buy life insurance, so his family wasn’t so lucky. Even though Dave left his assets to his family in his will, those assets couldn’t be distributed until after the probate of his estate was complete. Since probate typically takes six months or longer, Dave’s survivors had none of the financial flexibility that a life insurance policy would have provided in the difficult time following his death.
Frank planned ahead and bought enough life insurance to cover the potential costs of settling his estate, including taxes, fees, and other debts that his estate would have to pay. By comparison, these expenses took a big bite out of Dave’s estate, which had to sell valuable assets to pay the taxes and expenses that arose as a result of his death.
Using life insurance, Frank was able to leave a substantial gift to his favorite charity. Since gifts to charity are estate tax deductible, this gift was not subject to estate taxes when he died. Dave always dreamed of leaving money to his alma mater, but his family couldn’t afford to give any money away when he died.
Before buying life insurance, Frank talked to his attorney about the potential tax consequences. Frank’s attorney told him that if his estate was large enough, it could be subject to federal and state estate taxes, depending on the applicable law at the time of his death. Frank and his attorney put a plan in place that would allow Frank’s survivors to use his life insurance policy to help pay for some of the potential estate taxes that might be owed at his death.
Throughout his life, Dave worked hard to support his family. Frank did, too, but went one step further — he bought life insurance to protect his family after his death. Here’s how you can be like Frank:
You don’t want to pay more in federal income tax than you have to. With that in mind, here are five things to consider when it comes to keeping more of your income.
Investors are routinely warned about allowing emotion to influence their decisions. However, they are less routinely cautioned about their preconceptions and biases that may color their financial choices. In a battle between the facts & biases, our biases may win. If we acknowledge this tendency, we may be able to avoid some unexamined choices when … Continue reading “Do Our Emotion or Biases Affect Our Financial Choice”
Financial generalizations are as old as time. Some have been around for decades, while others have only recently joined their ranks. Let’s examine a few common retirement assumptions. Retirement means I can stop investing. In the past, retirement was viewed as an “end” in many ways. These days though, retirement is often seen as an opportunity … Continue reading “Debunking Common Retirement Assumptions”
Byron Wien recently passed away. He was a true Wall Street icon. I had the good fortune of meeting Mr. Wien once when I was seated behind him at an investment conference during the depths of the Great Financial Crisis (GFC). Mr. Wien was probably best known for his annual top ten list of surprises … Continue reading “How Could the Markets Surprise Us in 2024?”
Stocks are off to a solid start in 2024. January gains are particularly enjoyable because of the old adage from the Stock Trader’s Almanac, “As goes January, so goes the year.” Nearly 75 years of historical data shows that when the S&P 500 has risen in January, the average gain for the remainder of the … Continue reading “Market Update – Solid Start to 2024”
Epic Capital provides the following comprehensive financial planning and investment management services: Learn More >