There are a lot of misconceptions about insurance in general and life insurance specifically. To put it simply, insurance is meant to protect us from the risks that we run into during the course of our lives.
Insurance planning is concerned with determining the right level of coverage against insurable risks, which encompass risks on our lives, our incomes, our health and our assets. Proper insurance planning ensures that you are getting the best deal for your unique situation – either the right level of coverage or wider coverage for the same premium or a reduced premium.
The financial professionals at Bunch & Brock can help you assess your needs to determine the kinds and amounts of insurance that are right for you and your family. To discuss and create the most appropriate strategy for your situation, contact the KY insurance plan attorneys at Bunch & Brock. We have over 35 years of experience helping people navigate the complexities of insurance. We are committed to providing each of our clients with a high level of personal service, and we will walk you through each of the steps that must be taken.
To schedule an initial consultation, please call 859-254-5522 or fill out this online form.
Insurance Planning
Of all the potential risks, arguably the most important to guard against are the ones to the life of a family’s breadwinner. Life insurance protects those people who depend on that earner’s paycheck by providing them with ongoing income to replace what’s gone until they can live comfortably without it. It can also provide emergency funding for medical, legal and funeral costs that arise due to the breadwinner’s untimely passing. The amount of life insurance needed depends on your situation, taking into account variables such as income, age, family size, mortgage and debt. Value-accumulating whole life or universal insurance is often offered as death benefit protection with a cash value component that you can borrow against or eventually cash in by surrendering the policy. Term insurance costs less, but may remain in effect only for a specified term of years. For many families, the best bet is a combination of whole life and term insurance.
Auto and homeowners’ insurance helps protect two of your most important investments. State-required minimum auto liability coverage is often not enough to provide adequate protection, and, since the cost varies greatly, there are deals to be had. The general rule of thumb for homeowners’ insurance is that you should have enough coverage to rebuild and refurnish your home after a catastrophe and help cover the costs of lawsuits if someone is injured on your property. Coverage of at least 80 percent of your home’s replacement value, minus the value of land and foundation, is usually what’s necessary to cover the cost of repairs. As far as your health goes, you should also have total disability coverage equal to two-thirds of your current pre-tax income, medical insurance as now required by law, and long-term care insurance as you age, due to the inadequacies of Medicaid and Medicare.
Life Insurance Trusts
To have more control over your insurance policies and the money that is paid from them, you should consider establishing an irrevocable life insurance trust. These trusts can also be quite valuable in letting you reduce or even eliminate estate taxes, so more of your estate can go to your beneficiaries. Insurance policies in which you have any “incidents of ownership” are included in your taxable net estate. In the case of an insurance trust, the trust technically owns your policies for you and, because they are not included in your estate, the taxes are reduced. Currently, there is a three-year rule for existing policies, which means that if you die within three years of the date of the transfer, it is invalidated and the insurance is included in your taxable estate.
When you create a trust, you become the “grantor.”
You designate a “trustee” to manage the trust and its assets, but you can’t choose yourself if you want the tax advantages. Instead, select a spouse, adult child, bank, or trust company for proper administration. The trustee purchases an insurance policy, with you as the insured and the trust as the owner. When the insurance benefit is paid after your death, the trustee collects the funds, pays the expenses and then distributes them according to your instructions. Remember that proceeds that stay in the trust can be protected from courts, creditors and irresponsible spending.
We Can Help
If you think an irrevocable life insurance trust would be of value to you and your family, give us a call. The Lexington, KY trust attorneys at Bunch & Brock are here to help. We understand that each client has goals unique to them, and we work hard to be sure that the finished product offers maximum peace of mind. Our attorneys have extensive experience preparing life insurance trusts to serve the intentions and best interests of clients, while providing asset protection and minimizing tax impact. Contact us at 859-254-5522 or fill out this online form to find out more.
Attorney Matthew Bunch
Matt handles complicated bankruptcies and debt restructuring in Chapters 11 and 13 for both individuals and companies. He has also negotiated with multiple creditors on behalf of his clients to avoid bankruptcy. Matt is the firm’s lead litigator and handles contract disputes, certain personal injury claims and general litigation. [ attorney bio ]
