By Megan Cooney, Marketing Assistant
“For tomorrow belongs to the people who prepare for it today,” goes an African Proverb. And in a world full of uncertainties, it is best to plan for the future of our loved ones today. Estate planning is the process by which an individual or family arranges the transfer of assets in anticipation of death.
Essentially everyone owns estate, regardless of being single or married, young or old. One’s estate can typically be identified into one of five categories, according to the 2014 Field Guide to Estate Planning, Business Planning, & Employee Benefits:
- Personal property: Such as furniture, cars, jewelry, cash, bonds, savings, and other personal effects.
- Real estate: Such as a home, vacation house, land, and rental property such as apartments or office buildings.
- Business interests: In the form of closely held corporations, partnerships, or sole proprietorships.
- Life insurance: Either group insurance or individual policies.
- Government benefits: Such as social security, disability, retirement, and survivor income benefits.
“When planning for the future, you want to make sure any debt you may have acquired over the years is covered,” said Jennifer Krog, Life & Related Account Executive at McGrath Insurance. “Investing in life insurance helps the estate planning process by providing a sense of security that your beneficiaries will be protected in the event of your death.” The key to life insurance is to buy it when you are young, Jennifer said.
There are two types of life insurance: term life insurance and permanent life insurance. Although the premiums may be initially lower for term life insurance, it only provides coverage for a designated period of time. This coverage works best for something that will disappear over time, like a mortgage or car loan. Permanent life insurance is protection guaranteed for life, as long as premiums are paid. It also accumulates a cash value, whereas term life insurance doesn’t.
The most important document to secure for estate planning is a will. This document ensures that “property goes to whom we want, and in the same amounts we want, rather than as provided under a state’s intestacy laws,” (2014 Field Guide). In Massachusetts, the estate of those who have died without a will is allocated as follows:
- If all issue are children of the surviving spouse, the spouse takes the entire estate.
- If all issue are not children of the surviving spouse, or the surviving spouse has a child/children not issue of the decedent, the spouse takes the first $100,000, then half of the balance with the remainder going to the child/children.
A simple will can cover (1) the payment of just debts and expenses; (2) appointment of an executor or executrix; (3) specific bequests; (4) transfer of the entire estate to the surviving spouse; (5) if there is no surviving spouse, then transfer of the estate to the children or other heirs; and (6) appointment of a guardian or guardians for minor children and their property, according to the 2014 Field Guide.
Regardless of when you begin the estate planning process, be sure to review your beneficiaries. Beneficiaries listed on a life insurance policy will overrule those named in your will.
If you would like more information on estate planning or life insurance, contact McGrath Insurance at 508-347-6850.
*This article is written for informational purposes only and should not be construed as providing legal advice.