If your assets are insufficient to provide financial support to your family in the case of your death, then you should consider a life insurance policy. There are a few important decisions to make, such as how much life insurance to purchase and who to designate as the beneficiary of your policy. Here are some tips that will help with life insurance and estate planning in Massachusetts.
How Much Life Insurance to Purchase
The amount of your life insurance policy should depend on your personal circumstances and finances. Some things you should consider are:
- Sum of Your Debts
- Family’s Living Expenses
- Savings Goals (i.e. for future college expenses for your children)
By paying off your debts, such as credit cards and car loans, you eliminate the burden of those debts on your family. However, that’s just one piece of the puzzle. Your family will need to live without the benefit of your income. Paying off family debts will certainly help, but they will still need some recurring income to survive. Make sure your policy includes enough remaining funds to generate interest income for your family. For instance, $1 million dollars at 4% interest would give your family $40,000 of annual income.
Life Insurance Beneficiaries
One of the most critical aspects of life insurance and estate planning in Massachusetts is the designation of beneficiaries. You must declare beneficiaries directly in your life insurance policies. Beneficiaries may be individuals or legal entities, such as trusts. Those noted in your life insurance policy may be the same or different than those that appear in other areas of your estate plan, such as your will. Although the value of insurance policies contribute to the overall value of your estate (i.e. for tax purposes), they are not included in the normal probate process. Insurance companies will make payment directly to the beneficiary. Therefore, it is extremely important to keep beneficiary designations up to date.
More on Life Insurance and Estate Planning in Massachusetts
For additional guidance on life insurance and estate planning in Massachusetts, schedule a consultation with our Estate Planning attorneys. Our team can review your assets, debts, and family’s needs. We can then make recommendations on how to best protect your assets and provide ongoing financial support to your beneficiaries.