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Category: Life Insurance

  • Now is the Time to Talk About Your Estate Plan

    “Making an estate plan is taking action from the heart. Estate planning is a gesture that comes from a place of love and caring for those who depend on you.”

    – Connie Aschenbrenner Estate Planning Attorney in the State of Alaska
    Photo by Mike Bird on Pexels.com

    By Realttorney®

    It is ten days before the end of the year. Typically, you will see on television programs the yearend reviews about the economy, and specific sectors or industries in the Philippines. Sadly, part of this yearend review consists of recalling personalities or celebrities who suddenly and unexpectedly passed away during the year.

    Think about your situation now. If you suddenly die tomorrow, what will happen to your immediate family – your spouse and children or your old parent living with you? How will be taken care of? Who will care for your children when they are not yet of legal age?

    Who will care for your child with special needs or an old relative depending on you for support, if this is applicable in your situation? What will happen to your properties – real and personal? Can your immediate family members continue your business venture?

    There are so many questions to ask. And the answers are very difficult to provide. But the questions can only be answered if you are willing to sit down and commit to talking about your estate plan.

    Talking about estate planning is always very difficult for a vast majority of people because most of us cannot imagine what things would be like after we die. But, I argue, that it is precisely what we should be doing – imagining what and how our loved ones would live after we are gone. We must look at and consider the different scenarios that will affect the quality of life of our loved ones when we pass away or become incapacitated for a long time.

    Every family situation is unique. Hence, every estate plan is very much different from the next. There is no one-size-that-fits-all plan when you want to set up one. Estate Planning is, according to one author, premature death planning. So, what exactly is an estate plan?

    Your estate plan is a tool where you communicate your wishes when you die or become incapacitated permanently or for a long time. It is a set of instructions to your loved ones on how you will be remembered and how they will be provided financially when you are no longer present or unable to dictate your wishes personally. It is also a road map on how your debts and other liabilities will be settled, as well as how the business will go on without you at the helm.

    Several days ago, the husband of a lady lawyer passed away. He was 31 years old. So much of life ahead but cut short. The couple had a two-year-old and a baby several months old, it seems. When I read the news, the first thing that came to my mind was the welfare of the children.

    The second thing was I hope the couple was savvy enough to get life insurance for each spouse and prepare a simple estate plan. Purchasing life insurance is part and parcel of an estate plan because it is one of the basic tools of estate planning.

    It does not matter whether you have a large or small estate, or you are just starting out in life; whether you are single or married; or whether you are separated or estranged from your legal spouse. Every Filipino of legal age, who is gainfully employed and has dependents – young or old – for financial or economic support must have an estate plan in place, as you as possible.

    WHERE DO YOU START? If you are now convinced that you need to take this estate planning seriously, how do you begin the process? Here are my suggestions for you to consider:

    1. Research on the topic exhaustively. The first thing to do is to go to Google, type in the words “estate planning in the Philippines” in the search bar, and press ENTER. There are multitudes of articles for you to start reading. When you read these articles, please take down copious notes so that you can go back to read them after going over the rest of the articles that Google suggested.

    2. Learn about the basic estate planning tools. In your quest for information, you must know what are the basic tools that are available and applicable to the Philippine setting. There are plenty of articles about basic estate planning tools that are written by authors from the United States. Again, you must take down notes so that you know what each tool can do and what are the best tools that are needed for your situation.

    3. Take note of your current family situation. You must take stock of where you are in life when you begin the process of planning for your demise. Are your children still minors? If yes, then you must think about who you will appoint as guardian if you die suddenly.

    This is also very much true if you have a child with special needs, like me. How will your child be cared for? Who will bring your child to therapy – occupational or speech, or both? How will the cost of the therapies be paid for?

    Do you get the picture? Do you get the sense of how to go about meticulously planning for this eventuality in your life? Take notes, make a mind map, or draw a flow chart. Whatever it takes to capture your thoughts on paper, or the computer will be worth it.

    4. Talk to your immediate family or nearest of kin. It is my opinion that an estate plan should not be made or crafted in secret. You must talk to your spouse or immediate family members whom you will rely on to execute your plan to perfection. Pick out the relatives who you can trust and make them involved in the process. Get their input and comments on certain things that you want done when you are gone. Again, take note of what they say positively as well as their objections to certain things.

    Now that you have more than a handful of notes, what do you do will all this information? Learn them by heart. And when you are ready, it’s time to reach out to a professional. Estate planning is a multi-disciplinary approach to crafting your plans after you have passed. These experienced professionals – estate planning attorneys, certified public accountants, life insurance brokers, licensed real estate brokers, registered financial planners, etc. – will guide you in preparing an estate plan that is tailored to fit your needs.

    Once you have made your estate plan, with the able assistance of various professionals, please remember that its contents are not set in stone. It can be changed and revised based on the changes in your family circumstances or life-altering events that affected your health or your business.

    In conclusion, Connie Aschenbrenner said, “Don’t wait until a crisis arises to begin the conversation. In a crisis, you may not have the time to fully consider your options. Or you may be incapacitated and unable to decide on anything at all.”

    Estate Planning is more than just premature death planning. It is a protection plan for the lives of your survivors, according to Ms. Aschenbrenner. Don’t wait before it is too late. Start the process of planning your estate now. The Google search bar awaits you.

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    Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is a Chartered Trust and Estate Planning (CTEPTM) professional who is committed to educating Filipinos about the value and importance of having an estate plan in their lives.

  • Future-Proofing: Why Life Insurance is Crucial for Estate Planning, Even in Your 20s and 30s

    Insurance, in all its varied forms, is simply a method for handling risk. In order to plan an effective insurance program, consider the risks that you and your family are exposed to and how financial loss could affect you.

    – Acord & Fong Wealth Strategies, https://acordandfong.com/insurance.html

    By Realttorney®

    One of the primary reasons why life insurance is crucial for young people as an estate planning tool is to provide financial protection for dependents. Many young individuals have dependents, such as spouses, children, or elderly parents, who rely on their income for financial support.

    If a young individual unexpectedly passes away, it can have severe financial consequences for their dependents. The death benefit from a life insurance policy can provide much-needed financial support to cover living expenses, pay off debts, and ensure that the dependents can maintain their standard of living even in the absence of the insured individual’s income.

    For young parents, life insurance is particularly vital as it can safeguard their children’s financial future. Parents often have significant financial responsibilities, including mortgage payments for their house and vehicle, childcare expenses, and education costs.

    In the event of the untimely death of a parent, the death benefit from a life insurance policy can help cover these expenses and ensure that the children’s financial needs are met. It can provide a safety net for the surviving parent or guardian to continue supporting the children without experiencing financial difficulties moving forward.

    Life insurance can also serve as a valuable estate planning tool for young individuals who have financial responsibilities toward aging parents or other family members. Many young people find themselves in a position where they are financially supporting elderly parents, siblings, or other family members.

    In the event of their death, the financial support may come to an abrupt halt, leaving the dependent family members in a problematic situation. Life insurance can provide the necessary funds to ensure that the financial needs of these family members are met even after the insured individual’s death.

    In addition to protecting dependents, life insurance can also be used as a tool for wealth preservation and transfer. Young individuals who have accumulated assets, such as a business, real estate, or investments, may have concerns about the potential tax implications and liquidity issues upon their death.

    Life insurance can help address these concerns by providing the necessary liquidity to cover estate taxes, debts, and other expenses without having to sell the assets at a potentially unfavorable time. This can help preserve the value of the assets and ensure that they are transferred to the intended beneficiaries in a smooth and efficient manner.

    Furthermore, life insurance can also be used as a means of equalizing inheritances among beneficiaries. In cases where an individual wants to leave different amounts of assets to different beneficiaries, life insurance can be used to provide additional funds to beneficiaries who are receiving smaller inheritances. This can help ensure that each beneficiary receives a fair and equitable share of the estate, even if the assets are not equally distributed among them.

    Still unconvinced? Here are a few more points to entice young people to consider life insurance and estate planning early:

    Lock in Lower Premiums: One significant advantage of obtaining life insurance at a young age is that premiums are generally lower when you are young and healthy. By locking in a life insurance policy early, young individuals can secure lower premiums for the duration of the policy, potentially saving thousands of pesos over the life of the policy. Waiting until later in life to get life insurance may result in higher premiums due to increased risks associated with age and health conditions.

    Financial Protection Against Debts: Young people often carry various debts, such as consumer loans, credit card debts, or mortgages on vehicles and real estate. In the event of the insured individual’s death, these debts could be passed on to their loved ones, creating financial burdens. Having a life insurance policy can provide a financial safety net to cover these debts, preventing them from becoming a financial burden on surviving family members.

    Supplement Employer-Provided Coverage: Many employers (like BPO Companies) offer group life insurance coverage as part of their benefits package. However, these policies may not provide sufficient coverage to meet an individual’s specific needs. Additionally, group coverage typically ends when an individual leaves their job. By obtaining an individual life insurance policy early, young individuals can supplement their employer-provided coverage and ensure that they have adequate protection regardless of their employment status.

    Long-Term Savings and Investment Tool: Some types of life insurance, such as variable life insurance, not only provide a death benefit but also accumulate cash value over time. This cash value can serve as a long-term savings and investment tool that can be accessed during the insured individual’s lifetime. Young individuals – freelancers, solopreneurs, and digital nomads – can leverage this feature to build a source of tax-deferred savings that can be used for various purposes, such as supplementing retirement income or funding future financial goals.

    Protecting Insurability: Life insurance is typically easier to obtain when an individual is young and in good health. However, life circumstances can change, and health issues may arise, making it more difficult to obtain coverage in the future. By obtaining life insurance early, young individuals can lock in coverage and protect their insurability, ensuring that they have financial protection in place regardless of their health status later in life.

    Peace of Mind for Loved Ones: Planning for the unexpected is an act of love for one’s family and dependents. Knowing that loved ones will be financially protected in the event of the insured individual’s untimely death can provide peace of mind. Life insurance can offer a sense of security and comfort, knowing that loved ones will be taken care of financially, even if the insured individual is no longer around.

    In conclusion, life insurance is a crucial estate planning tool for young people that offers financial protection, wealth preservation, and peace of mind. It can provide a safety net for loved ones, protect against debts, and offer long-term savings and investment opportunities.

    Obtaining life insurance early can also result in lower premiums, protect insurability, and supplement employer-provided coverage. It is never too early to start planning for the future and protecting the financial well-being of oneself and loved ones.

    Taking proactive steps now to include life insurance as part of one’s estate planning can help young people build a solid financial foundation for their future and ensure that their loved ones are protected. We encourage consultation with a qualified financial advisor or insurance professional who can help young individuals understand their specific needs and explore the best life insurance options to suit their circumstances.

    Email us [attyjojo@realttorney.com] to get a free 30-minute consultation about your insurance and estate planning needs.

    Image source: http://www.epdv.com/

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    Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is a Chartered Trust and Estate Planning (CTEP®) professional who is committed to educating Filipinos about the value and importance of having an estate plan in their lives.

  • Securing Your Legacy: How Life Insurance Empowers Young People as Estate Planning Rockstars

    “By failing to prepare, you are preparing to fail.”

    – Benjamin Franklin, Writer, Inventor, Statesman and Diplomat

    By Realttorney®

    Estate planning is a critical aspect of financial management that often gets overlooked, especially by young people who may perceive it as something only relevant for older individuals with substantial assets. However, estate planning is not just for the wealthy or elderly.

    It is a crucial process that should be considered by individuals of all ages, including young people. One essential element of estate planning that is often underrated among the younger generation is life insurance. Life insurance can serve as a valuable estate planning tool for young people, providing financial protection and peace of mind for themselves and their loved ones.

    Life insurance is a type of insurance where the insurance company pays out a sum of money after the death of the insured or a benefit on a specified date. It is a contract wherein the individual pays regular premiums in exchange for a death benefit that is paid out to their beneficiaries upon their passing.

    While the primary purpose of life insurance is to provide financial protection for loved ones in the event of the insured’s death, it can also serve as a powerful estate planning tool, particularly for young people who may have dependents or financial responsibilities.

    One of the key reasons why life insurance is important for young people as part of their estate planning strategy is to ensure that their loved ones are financially protected in the event of their untimely death. Young adults may have dependents such as spouses, children, or aging parents who rely on their income to maintain their lifestyle or meet financial obligations.

    In the absence of sufficient savings or investments, life insurance can provide a much-needed financial safety net to cover funeral expenses, outstanding debts, mortgage payments, and ongoing living expenses for loved ones. This can prevent financial hardships and ensure that their beneficiaries are taken care of during a difficult time.

    Moreover, life insurance can also be used as an estate planning tool to address potential estate tax liabilities. While the current estate tax rate has been lowered to six percent (6%) under Rep. Act No. 10963, the value of an individual’s estate normally appreciates over time, especially if they own valuable assets, such as real estate, investments, or a business.

    Young Filipinos who anticipate accumulating significant wealth over their lifetime can use life insurance to provide liquidity to cover potential estate taxes so that their beneficiaries do not have to sell valuable assets to pay taxes, which could lead to financial strain or the loss of assets.

    Another benefit of incorporating life insurance into estate planning for young people is that it can provide opportunities for wealth creation and accumulation. In the Philippines, there are typically two main types of life insurance: traditional life insurance and variable life insurance.

    Traditional life insurance focuses mainly on guaranteed death and/or living benefits. In contrast, variable life insurance is investment-linked, providing the policyholder with death benefits and also accrued cash value over time. The cash value can be invested and grow tax-deferred, providing an additional savings component that can be utilized during the insured’s lifetime. However, the cash values are non-guaranteed because the performance of the investment is affected by current market conditions.

    Still, variable life insurance can be particularly advantageous for young people who have a longer time horizon for investment growth and can benefit from the compounding effect of the cash value over time. The accumulated cash value can be accessed through policy loans or withdrawals, which can provide a source of tax-advantaged funds for various purposes, such as funding education, starting a business, or supplementing retirement income.

    Furthermore, life insurance can also be used as a succession planning tool for young business owners. Many young entrepreneurs may have started their own businesses and have aspirations to pass on their business to the next generation or a chosen successor. Life insurance can be utilized to fund a buy-sell agreement, which is a legally binding contract that outlines the terms and conditions for transferring ownership of a business in the event of an owner’s death.

    By funding a buy-sell agreement with life insurance, young business owners can ensure that there is sufficient liquidity to facilitate a smooth transition of the business and provide financial compensation to the deceased owner’s family for their share of the business.

    In conclusion, life insurance is a valuable estate planning tool that should not be overlooked by young people. It can provide financial protection for loved ones, address potential estate tax liabilities, offer opportunities for wealth creation and accumulation, and serve as a succession planning tool for business owners.

    Hence, incorporating life insurance into an estate plan can provide peace of mind knowing that loved ones will be financially protected in the event of an untimely death, and can help young people achieve their long-term financial goals.

    So, when considering life insurance as part of an estate planning strategy, it’s important for young people to carefully assess their individual needs, financial situation, and long-term goals. Consulting with a qualified financial advisor or estate planning attorney can provide valuable guidance in selecting the appropriate type and amount of life insurance coverage that aligns with their specific circumstances and objectives.

    While it’s easy for young people to underestimate the need for estate planning, including life insurance, it’s a proactive and responsible approach to protecting their loved ones and safeguarding their financial future.

    In the end, by incorporating life insurance into their estate planning strategy, young people can ensure that their financial affairs are in order and provide a solid foundation for their estate plan as they continue to build their wealth and navigate life’s uncertainties. Planning for the unexpected today can help secure a brighter tomorrow for themselves and their loved ones.

    *The image in this post is courtesy of https://www.summitplanners.com/estate_planning/insurance-the-secret-tool-to-a-successful-estate-plan/

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    Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is a Chartered Trust and Estate Planning (CTEP®) professional who is committed to educating Filipinos about the value and importance of having an estate plan in their lives.