August 28, 2012
When it comes to estate planning, there is plenty of room for confusion. That’s one reason why it’s smart to work with a Fair Oaks estate planning attorney who is familiar with local, state, and federal laws vs. doing it yourself. He or she can help remove much of the anxiety and frustration, while guiding clients in ways that benefit them the most.
But, a Fair Oaks estate planning attorney isn’t the only person involved in helping set up your overall plan for the future. For example, if life insurance is an integral part of your plan, your attorney may also collaborate with insurance agents and brokers in order to make the best possible choices.
Life insurance agents perform a very important job when it comes to protecting your assets and your beneficiaries. They are able to offer a variety of products for individuals to choose from to set up a plan that will keep them on the right path. Unfortunately, the availability of such a range of products can add to the overall confusion of estate planning. One of the major questions estate planning attorneys in Fair Oaks can help address (along with your life insurance agent, of course), is whether whole life or term insurance is the right choice for you.
There are many arguments to be made for both options. For example, whole life (a policy where you can build up “cash value” inside along with the death benefit or “face value”) can be very appealing because it has sort of a “forced savings” plan involved. In addition to paying for your regular insurance premiums, you are also having money invested on your behalf. The idea is that the fund can grow, giving you access to the cash value as time goes by.
Term insurance, on the other hand, only pays out the face value of the policy, with no option for an investment portion. This also has its benefits, however, as the premium you pay is considerably lower than for whole life insurance. Term insurance is typically not available to those over about 65 years of age, however.
Since both types of insurance have benefits, it can be difficult to choose which is right for your circumstance. Again, a good estate planning attorney in Fair Oaks can help you go through the pros and cons of each. And, both do have their cons…
For example, the investment part of the whole life insurance often isn’t all that lucrative. You may find that it’s actually much more beneficial to purchase the term insurance at the lower rate and find a better way to invest the difference between that and what the whole life would have cost. In many, many cases, the overall value of this approach is much better than that of just buying the whole life outright. Smart Money offers a nice example of the numbers in a recent article called “Whole Life Insurance or Term?”
Even though the article does lean toward purchasing term over whole life, it does admit that there are times when the other is preferable. For example, if you are planning to hold onto the policy for a very long time, it can pay off for you. If you already have a whole life policy, it may also not be a good financial decision to switch at this point. Go over your policy with your estate planning attorney in Fair Oaks to help uncover what makes the most sense for meeting your long-term goals.