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Reprinted with permission of Investment Representative Celine Richardson of EdwardJones
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Friday, 21 September 2007 |
 To protect your family, you need
more than the best intentions - you need the right "paperwork."
And you're going to need it during two distinct phases of your life
- your working years and your retirement.
Let's take a look at these time
periods, along with some of the key documents you may need.
Working Years
While you're working, your most valuable asset is your income. Without
it, your family might not be able to pay off the mortgage or send
the kids to college - and that's why you need to put the appropriate
insurance and protection policies to work.
You can typically purchase a surprising
amount of term insurance - which, as the name suggests, covers you
for a specified number of years - for relatively modest premiums.
In fact, due to longer life expectancies and other factors, term
insurance premiums, in general, have actually gone down in recent
years.
Most term insurance policies offer
only a death benefit with no cash value. So, if you don't die before
your policy expires, you will get nothing back from the premiums
you paid in.. However, when you buy "permanent" insurance - such
as whole life, universal life or variable universal life - your
premiums pay for both a death benefit and an investment component,
and any earnings have the potential to grow on a tax-deferred basis.
Apart from life insurance, you
may need another important document - a disability insurance policy.
An injury or illness that prevents you from working can seriously
erode your savings and investments, so you'll want to protect your
income. Your employer may offer some type of group disability plan.
But if this plan doesn't pay at least 60 percent of your income,
doesn't pay benefits to age 65 and has a waiting period longer than
your savings can last, you may need to look at supplemental private
disability insurance.
Retirement Years
When you retire, you'll still need to protect your family, but at
this stage of your life, your focus may be on leaving a legacy.
Toward that goal, you will have some estate planning considerations.
And estate plans can be complex, so you will need to work with an
attorney.
Of course, everyone's situation
is unique, but here are two of the most common documents associated
with estate planning:
- Will - If you don't have a will, your wishes may never be
fully honored, because state law will dictate how your assets
are divided. And if you have no living relatives, and you die
intestate (without a will), your estate will go to the state.
- Living Trust - If you only have a will, your assets may have
to pass through probate - which can be time-consuming and expensive.
But with a properly established living trust, your assets can
pass directly to your beneficiaries, without court interference,
legal fees, lengthy delays and public disclosure. Also, a living
trust can give you more precise control over how - and when
- you want your assets distributed. You could, for example,
have money distributed to your children or grandchildren in
installments, over a period of years.
As you can see, you need to have
your "papers" in order to properly take care of your family - no
matter where you are on life's journey.
* Edward Jones, its employees and
Financial Advisors are not Estate Planners and cannot provide tax
or legal advice.
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