InsuranceNewsNet November
5, 2019 By Trey
Reynolds
With
nearly half of all marriages ending in divorce, it’s not uncommon to have
clients who are either going through divorce proceedings, living as a single
parent after a divorce, or have been married more than once – with or without
stepchildren.
Divorce
is emotionally draining, and on top of that, the challenges divorce brings to
estate planning can be an added stress. In many cases, one often overlooked
tactic can provide tangible solutions for divorcees and blended families: life
insurance.
By
using life insurance to address some of these issues head-on, you can help your
clients develop an estate plan that truly fits their needs, goals and unique
family circumstances.
Here
are five ways life insurance can help your clients in the event of a divorce:
1. Provide
funds for divorce-related expenses. If the divorce is
contested or includes child custody issues, the proceedings can stretch from
months to years, with attorney’s fees reaching into the tens of thousands of
dollars. Clients with an established permanent life insurance policy can take
withdrawals or loans from the policy’s cash value to help pay needed expenses.
If the policy is designed effectively, your clients won’t have to liquidate
other assets. or pull money from an estate that would have gone to
beneficiaries.
2. Protect
the client’s income post-divorce. A client’s income can
change dramatically as the result of a divorce, especially if one spouse was a
stay-at-home parent. They may receive alimony payments to help make up the
difference. But if the payor passes away unexpectedly, the lost income can
cause a considerable amount of stress and financial hardship for those left
behind. Permanent life insurance on the life of the paying spouse can help
provide coverage and replace income lost if they die.
3. Preserve
the client’s estate post-divorce. Life insurance can also
provide funds to pay off any existing debt held by the deceased spouse, which
can eliminate the need to liquidate other assets from the estate that would
have gone to the surviving spouse or other heirs. By taking withdrawals or
loans from the policy – tax-free, if the policy is set up correctly – your
clients can effectively plan their legacy, even if their ex-spouse hasn’t been
entirely financially responsible.
4. Ensure
that children receive a fair inheritance. If your
clients have children from a previous marriage, it may make sense to provide
for them through life insurance, instead of passing their assets to a new
spouse first. Or your client may choose to provide for the new spouse through
life insurance and leave the estate to the kids outright or in a trust. Either
way, splitting up the way in which your clients leave assets to biological
children and a new spouse in a blended family can relieve a lot of stress and
bad feelings. This is especially true if the new spouse has children of their
own.
5. Help
fund college or other expenses for the children. By
protecting the lives of both parents with permanent life insurance, your
clients can ensure that the expenses for the children are taken care of. For
example, if the former spouse is responsible for paying medical expenses,
college expenses or other costs for the children, a life insurance benefit can
provide essential funds if that spouse passes away. Permanent life insurance
with cash value can also provide funds during the insured spouse’s lifetime, if
cash is not readily available, to pay tuition while the children are in college
or help adult children repay student loans.
As you
work with clients to create a customized policy that works for them in the
event of a divorce, there are a few other factors to consider. For one,
consider permanent instead of term insurance. While term insurance may be less
expensive, permanent insurance has the potential to accumulate cash value that
can be drawn from the policy while the spouse is still alive, in addition to
providing a death benefit.
You
also may want to consider adding riders to customize your client’s policy. With
a permanent life insurance policy and a long-term care rider, they have the
flexibility to accelerate the policy’s benefit while they’re alive to pay for
long-term care costs such as care in their home or a nursing home – helping
alleviate any concern for divorcees about who will take care of them if they
can’t take care of themselves.
Because
divorce is so common these days, you may want to help your clients plan their
estates with extra protections in mind. A carefully designed permanent life
insurance policy can help your clients protect themselves, their income and
their estate throughout their lifetime, even if they go through a divorce. Not
only does permanent life insurance provide tax-efficient cash value growth and
distributions, it can also be used to replace lost income, alimony or child
support, pay for college or medical expenses for the children, or long-term
care costs for the divorcee.
Trey
Reynolds is head of life distribution for AXA Equitable. Trey may be contacted
at trey.reynolds@innfeedback.com.
©
Entire contents copyright 2019 by InsuranceNewsNet.com Inc. All rights
reserved. No part of this article may be reprinted without the expressed
written consent from InsuranceNewsNet.com.
No comments:
Post a Comment