Protecting Your Family

By Richard A. McGrath, CIC, LIA

What would your family do without you?

That’s a question we should all ask ourselves; especially those who serve as the head of a household.  Would your spouse be able to support herself or himself?  Would your children be able to afford college?

No one wants to think about death, but failure to do so can cause financial hardships that can easily be avoided with proper planning.

A good place to begin is with your life insurance policy.  Life insurance can serve many purposes, but its primary intention is to replace income, so the insured’s family will not only be able to support itself, but will still be able to achieve financial goals such as sending children to college or ensuring that a mortgage is paid off.  Life insurance can also serve other purposes, such as helping to transfer wealth from one generation to another

Ideally, you should review all of your insurance policies annually, including your home, auto and life insurance.  You may decide that disability coverage, long-term care insurance or an umbrella policy are worthwhile, as a long-term disability, nursing home care or a liability suit can be financially devastating.  A review with your agent should determine whether there are any gaps in your coverage – and if there is any coverage you don’t need.

A regular review is helpful, because insurance needs change over time.  Initially, term life insurance may be sufficient to cover your needs, as it will provide the protection you need over the term of coverage.  Many people only care about having life insurance protection until their children graduate from college.

As you age, though, and begin to consider leaving a legacy to your children, cash-value life insurance is usually preferable.  Cash value life insurance costs more, but it builds value over time and is permanent, as long as you continue paying premiums.  By transferring ownership of cash-value life insurance to a trust, it can be exempt from estate taxes and can help you pass your assets along to your children.

Wills and Trusts

Like life insurance, a will is essential to protect your family.

Without a will, your property may not be divided according to your intentions after your death.  It will also likely become tied up in Probate Court, perhaps for years.  In the meantime, your survivors will not have access to your assets and may not have the means to continue their current lifestyle.

While there are now online programs and books that can help you create a will, to ensure that your will is legally valid, it’s best to retain an attorney with estate planning experience.

Identify your beneficiaries.  Not all assets are covered by your will.  When you sign a contract to create a retirement account or to purchase a life insurance policy, you are asked to designate beneficiaries.

Those contracts override the provisions of your will.  If time has passed or your life has changed significantly since you purchased life insurance or opened a retirement account, review who your beneficiaries are to ensure that you are designating the people you really want to be your beneficiaries.

Your will may also be used to name guardians for minor children and to express any last wishes you may have.

Prepare a living trust.  A will simplifies the probate process.  A living trust is even better, as it is not subject to Probate Court.

A living trust, which must be established when you are still alive, includes the will, and is used to transfer property to beneficiaries.  Trusts can also be used to minimize estate taxes and to protect your estate from lawsuits and creditors.

A living trust may be costly to establish, but by bypassing Probate Court it can also save you thousands of dollars in legal and court fees.

Appoint an executor.  When creating a will, you will also need to appoint an executor, who will be in charge of administering your estate, including creating an inventory of all assets, collecting and protecting the assets, paying any claims against the estate and distributing assets, based on the will.

The executor should, of course, be trustworthy and financially responsible.  A trusted family member is often chosen to serve as executor or as a co-executor with a professional.

Assign power of attorney.  The person who is granted power of attorney has the legal authority to make decisions for you regarding finances, property and other legal matters.  As when naming an executor, the person who is assigned power of attorney is usually a trusted family member.

Appoint a healthcare proxy.  A healthcare proxy is appointed to make healthcare decisions if you become unable to make your own decisions, such as if you are in a coma and being kept alive with a feeding tube.  Before signing any legal documents, discuss your intentions with your doctor and your family.

Often, whoever is named the healthcare proxy is also assigned power of attorney.

Once you have a valid will and have taken all of the other steps outlined here, it is a good idea to review it every few years to be certain it reflects your current intentions.  Also be sure to review your will, your life insurance and other assets where beneficiaries are named after major life events, such as marriage, divorce and the birth of children.

You can change your will at any time by amending it with a “codicil,” which must be formally executed.

Taking these steps may seem like a significant effort, but it’s the only way you can truly protect your family.  And what can be more important than that?

Richard A. McGrath, CIC, LIA is President and CEO of McGrath Insurance Group, Inc. of Sturbridge, Mass.  He can be reached at

This article is written for informational purposes only and should not be construed as providing legal advice.