Assure Family Peace Using Life Insurance
Traditionally, we think of life insurance as a way to ensure our loved ones are cared for after our death.
But life insurance can also be used to solve a host of other financial headaches – and some of the most interesting uses can come when the house is paid off and the children are out on their own.
Consider this situation: You have a beach house worth $500,000, and it constitutes half of your wealth. Your two sons don’t use it, but your daughter regularly spends her vacations there. You want your daughter to have the beach house, but you aren’t able to leave an equivalent amount to your sons.
The solution: You purchase a life insurance policy for the value of the beach house. When you and your spouse die, your daughter will inherit the beach house that she loves, one son will get your $500,000 in savings, and the other son will get all of your life-insurance payout.
Once you start thinking of life insurance as way to turn a non-liquid asset into a liquid asset, it’s easy to see other ways it can be used to address liquidity problems, often faced by individuals with family businesses or considerable (illiquid) assets.
For example, the owner of a family business could insure himself in order to distribute the worth of the business to his children, who don’t want to join the company.
Or two business partners could use life-insurance policies to allow one partners’ heirs to buy themselves out of their half the business.
This alternative use of life insurance may look tricky, but it’s actually simple.
It essentially relies on life insurance’s intended purpose – providing your heirs with liquidity when they need it most.
Instead of replacing a salary, however, the policy replaces the value of an asset.
Your advisor can help you decide if a life insurance purchase will solve a liquidity – or family – problem for you.
Walkies can be fun … for Fido and you
If you like to sleep in, it can be hard to get up and take Fido for a walk. But there are ways to inject fun into morning walks (a.k.a. walkies) for you and your furry friend:
- Go to a dog park. Not only will your dog get to socialize with other pets, but you can socialize with their humans, as well.
- Take a new route and let your dog lead. Who knows what new and exciting adventures you’ll discover together?
- Find a dog-walking buddy. Both Fido and you will enjoy the company.
- Turn your walk into a jog. You’ll get a great workout, and so will your dog.
- Work on training. Use your walks to work on obedience commands or tricks (but don’t forget the treats!)
Singletons are Living Alone … and Liking it
It used to be a stigma: bachelors and spinsters sadly missing the pitter-patter of tiny feet and the companionship of a spouse. But that was then; this is now.
Singletons – as those who live alone have been described – are now choosing this lifestyle, and “going solo” has become statistically significant in North America, according to Eric Klinenberg.
Klinenberg, sociologist and author of Going Solo: The Extraordinary Rise and Surprising Appeal of Living Alone, says that almost half the current population in the US is unmarried, representing 28 percent of American households. And many of the singletons he interviewed for his book highly value this lifestyle: “It allows us to do what we want, when we want on our own terms,” Klinenberg commented in a recent Globe and Mail interview.
For the most part, his singletons are alone, not lonely: “Many people … said there was nothing more lonely than living with the wrong person,” he noted. And they’re not bored. Single people populate gyms, clubs and coffee shops, where they can mingle with a purpose.
However, there are downsides: Living alone may be fulfilling, but it can also be frustrating. There’s only one income to pay the bills, and statistics show that solos are at higher risk of accidents or crime. As well, the majority of Klinenberg’s singletons are young.
What will happen as they age?
Ah, says Klinenberg, living alone is a “cyclical condition, not a permanent one.” So chances are his young singletons will follow the traditional path – eventually.
Popular FSAs May be Less so with ACA Changes
This year brings changes to flexible spending accounts (FSAs) – the workplace arrangement that allows employees to save, pre-tax, for expected medical expenses. You contribute to an FSA through a monthly paycheck deduction by your employer, then the account is available to you for medical expenses, and you are not taxed on it.
As a result, FSAs have been popular, but changes to the Affordable Care Act (ACA) could make them less attractive:
Under previous rules, your employer could deduct any amount, usually $3,000 to $5,000 a year. Now FSA contributions are limited to $2,500 a year, adjusted annually for inflation.
You may recall that FSA dollars could be used for over-the-counter medications up to 2011; since then, FSA dollars can only be used for prescription medications.
Use it or lose it
You must use your FSA dollars by the end of the year, or they revert back to company control.
Who should contribute
Flexible spending accounts may make sense for families with steady, recurring and/or predictable health spending needs that aren’t covered by their medical insurance policies – including deductibles.
If you or a family member has regular health expenditures or needs orthodontic care, you may want to consider contributing to an FSA. But don’t over-contribute. You’ll run into the use-it-or-lose-it provisions.
If you’re not sure about FSA changes and how they affect you, your advisor can help you understand your options.
Accident Insurance Can Give You Peace of Mind
Accidents can happen anytime to anyone. Whether it’s a broken bone or a bee sting, sometimes the unexpected medical costs can be more shocking than the actual accident. That’s why it’s important to be prepared. While major medical insurance will cover most accident treatments, every insurance policy has exclusions.
How can you fill the gaps caused by those exclusions? Through accident insurance – an affordable policy that can assist you with excluded expenses and unexpected costs during recovery.
But accident insurance has other benefits. These include:
If you’re hurt and can’t work, you won’t receive a paycheck unless the accident happened on the job. Even if you have savings, this can create significant problems.
Accident insurance can replace your income if you’re injured, or if you must take time off work to care for an injured family member.
You can use this money just like your regular paycheck, but here’s the real bonus: it’s tax free!
Coverage for non-medical expenses
Your medical insurance will help with most major medical costs, but when you’re injured, every aspect of your life is affected.
With accident insurance, you can get cash to cover non-medical expenses like extra childcare and/or educational expenses, hospital parking and meals.
Your plan can be tailored to your needs. For example, children are covered under family plans and most policies don’t have age or claim penalties. Individual plans are also available, and depending on your occupation and risk level, coverage can be extended to cover additional medical and non-medical expenses.
Priceless peace of mind
There are many accident insurance policies available – all with different benefits. Discuss your needs with your advisor, who will be able to help you select the policy for you. And, while accident insurance has all the benefits noted above, it’s most important benefit is peace of mind – which is priceless.