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  • Bob Brooks

Will Your Kids Be Ok? Mistakes People Make When Planning for an Untimely Death

Planning for your family in the event of a death is the most critical planning a family can undertake.

Death is a guaranteed event that happens to everyone. It is the timing that we obviously don’t know. The worst possible event is for that timing to occur when you have a family that is financially dependent upon you, and the right plan has not been prepared to at least remove the financial risk. Further, you want to make sure that the kids are protected in the event both spouses die at the same time.

If you have gone through or want to go through the process, make sure you don’t make these mistakes.

  • No Game Plan – Estate and Survivor planning for your family requires a game plan. Yet, most people just purchase life insurance without knowing the objectives. To do it right, you have to know the answers to these questions - How much income needs to be replaced and for how long? Does the mortgage need to be paid off? Do you want to take care of college? Are there are any other debts that need to be paid? Are there any special needs or situations that need to be handled? A qualified advisor can take you through the process.

  • Being fooled by large amounts – $300,000 is a great deal of money, and if you had $300,000 worth of life insurance, it would be easy to assume that could provide for your family in the event of a death. For a surviving family, it probably just scratches the surface. When you run the numbers, you will find that it takes a substantial amount of life insurance.

  • Sacrificing the amount of insurance for extra bells and whistles – Term insurance is the most inexpensive insurance, has no bells/whistles, and lasts for a specific time period. The other types of insurance do more than just provide a death benefit. They have all of the bells and whistles, and you pay much more money for those benefits. If you had all of the money in the world, you could afford to get the amount of insurance you need and the bells and whistles. Since that does not apply to all of us, the term is a great solution. It allows you to get the quantity of insurance without breaking the bank. The overall coverage is the most important aspect of life insurance and not the bells and whistles.

  • Paying too much for term insurance – Many insurance companies are offering a lot of different term insurance programs. What you need to know is that the prices of term can differ significantly. You want a combination of the most affordable and highly rated company. If you are curious, see for yourself. Send us an email and we can check for you. The fifth mistake could prove to be a big one if both spouses end up predeceasing the kids. I feel this is the most important part of the process.

  • Assuming a will takes care of all of your wishes –Think of a will as a wish list. In the will, you outline what you wish to happen. Often, people will attach letters to the will to further describe those wishes. The reality is that wills are easily contestable. They also have to be approved by a court through probate. There is always the possibility that your wishes will not be carried out. A trust is the best way to make sure that everything is taken care of for your kids.

You can determine ahead of time, and have included in your trust document the following:

  • Who oversees the trust and management of the finances

  • Guardians for the kids

  • When, how, at what age, and for what reasons your kids have access to the money (most important)

  • Finally, the trust controls everything and keeps all of your matters private and out of the courts. The last thing you want is the welfare of your children being determined or approved by a court or their financial well-being made public.

This is the one area of planning that you just don’t want to get wrong. If you haven’t done so, make sure that you have all of the right pieces in place. Make sure that you have the bases covered by having a trust in place. Even though it is a low probability that something will happen to you and your spouse at the same time, a low probability is not a good reason to get a trust. In my opinion, it is a must for a family with minor kids to have the security of a trust.

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