Using Life Insurance To Build An Estate
by
Herbert D. Hinkle, Esq. and Ira Fingles, Esq.
Hinkle & Fingles, Attorneys at Law
2651 Main Street
Lawrenceville, New Jersey 08648
(609) 896-4200 or (215) 860-2100
Life insurance has many uses for the family of a person with a
significant disability. Consider Howard and Snow White, both in their
30's. They have two children, ages 8 and 12, one of whom (John) is
disabled.
Howard earns $75,000 a year, and Snow supplements this with another
$20,000 from a part-time job. Howard has life insurance through his
employer worth $100,000. Snow has no life insurance. The Whites have
some equity in their home and modest savings, most of which are in
Howard's 401(K). After monthly expenses, there is little left for
additional life insurance, but if something happens to either parent,
there will be serious economic problems: How will Howard's salary be
replaced? Who will take care of the children while the remaining
parent works?
Obviously, the Whites must find room in their budget for more life
insurance. But maybe the problem should be looked at differently. Both
sets of grandparents have been asking since John was born what they
can do to help. The Whites suggested depositing money in John's bank
account in lieu of toys and other gifts at holidays. However, this
will accomplish nothing, and eventually the bank account will make
John ineligible for key services when he turns 18. Instead, why not
encourage the grandparents to pay for term life insurance on the lives
of the parents? This will protect both a surviving parent and the
children. Thus through the generosity of the grandparents, the family
is protected now and for years to come.
Consider another example, suppose Howard and Snow are now 61 and 57
respectively. Joint survivor life insurance can be used to increase
the portion of the estate passing to John. Unlike traditional life
insurance, joint survivor life insurance would be on the life of two
people, not one. It would pay out only after both Howard and Snow have
died, and it is considerably cheaper than insurance on the life of one
person. In order to avoid estate taxes, and to protect their son, the
life insurance could be placed into an irrevocable trust for John.
______
Herbert D.
Hinkle, his partner, Ira M. Fingles and their colleague, S. Paul
Prior, maintain a statewide
law practice with offices in Lawrenceville, Marlton, and Florham Park,
New Jersey, and Yardley, Pennsylvania. They lecture and write frequently
on topics of law, aging, disability and estate planning and are available
to speak to groups in New Jersey and Pennsylvania
at no charge.
Comments and suggestions
for future articles should be mailed to: Hinkle & Fingles, 2651 Main Street, Suite A, Lawrenceville, New Jersey 08648-1012.
Copyright 2004
Herbert D. Hinkle. All rights reserved.
