Planning for what happens after you are no longer living is not a topic many people like to think about, but doing so can reduce emotional and financial stress for the loved ones you leave behind. If you’re ready to get things in order, figuring out where to start can be overwhelming. But don’t let the perceived complexity of planning stop you!
Get started by focusing on these two topics: life insurance and estate planning documents. Understanding the various types of life insurance coverage and the important legal documents you may need will help you develop a plan that works best for you and your family.
Life Insurance Options
There are two major types of life insurance policies* – term and whole life. Understanding the key differences between them is important to determine which coverage is best for you.
- Term Life Insurance – Term life insurance is the simplest type of life insurance. A term life policy covers the policyholder for a specific amount time, known as a term. Terms typically range from 10 to 30 years. If the policyholder dies while the policy is in effect, a death benefit is paid out to the beneficiary. Typically speaking, term life insurance is less expensive than whole life insurance.
- Whole Life Insurance – Whole life insurance, which is more complicated, is an investment-like product that earns interest at a pre-determined fixed rate. It is a more expensive option than term insurance. Each month, a certain portion of the premium goes into the cash value of the policy which grows over time.
Tip: Use this calculator to determine how much life insurance you need
- Universal Life Insurance – Universal life insurance is a type of cash value life insurance where the excess of premium payments above the current cost of insurance gets credited to the cash value of the policy. It is designed to offer more flexibility than whole life insurance and the cash value grows at a variable interest rate, which could yield higher returns. Depending on the policy, the payment may be the death benefit or a specified dollar amount, usually equal to the policy’s cash value.
- Variable Universal Life Insurance – Variable universal life insurance offers flexible premiums, a flexible death benefit and features a built-in investment savings component. It’s designed to offer life-long protection and stays in place as long as you live and premiums are paid. The cash value of the policy can be invested in a wide variety of accounts.
To help better understand life insurance and make an informed decision about whether it’s time to consider a policy, check out the answers to some frequently asked questions in our What You Need to Know About Life Insurance blog.
Important Estate Planning Documents
In addition to having life insurance, you may need to have some important estate planning documents in place. Regardless of your age, health or wealth, these documents will make the process of dealing with your estate much easier.
- Will (or Testament) – A will or testament is a legal document that defines a person’s wishes about how their property is to be distributed after their death. It is a very important document to have because it ensures that your exact wishes will be carried out.
- Letter of Instruction – Unlike a will, a letter of instruction is an informal document that is not legally binding. These documents typically accompany your will and offer personal thoughts and directions to your family members and chosen executor.
- Power of Attorney (POA) –A Power of Attorney is a legal document giving another person the power to act for you, make legal decisions about your property, finances, or medical care, and sign legal documents on your behalf. A Power of Attorney is important to have for when you can no longer do these things yourself.
- Healthcare proxy – A healthcare proxy is a legal document that enables you to appoint someone to act as your agent and make healthcare decisions for you in the event you cannot make them for yourself. It will ensure your medical treatment instructions will be carried out if you are not able to make those decisions for yourself.
- Medical Directives – You can augment your POA with specific medical directives such as a “do not resuscitate” (DNR) order. DNRs instruct doctors and other medical personnel to forgo CPR if you go into cardiac arrest.
Thinking about how your death will impact loved ones may be difficult, but it can help you decide to develop a plan that leaves them with some financial independence and instructions for handling your estate. Start your plan by breaking it down into smaller parts like just focusing on life insurance coverage and then important legal documents.
Lakeland Financial Services** can help you get on the path to establishing a personalized and comprehensive plan with a free estate planning guide. Our Financial Advisors work with you to develop an understanding of your personal needs, risk tolerance and life goals to create a financial strategy that evolves as you move through life’s many stages.
For more tips and resources, check out our comprehensive retirement and wealth management blogs.
Lakeland Financial Services is a division of Lakeland Bank.
*These policies have exclusions and/or limitations. The cost and availability of life insurance depend on factors such as age, health and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Guarantees are based on the claims paying ability of the insurance company. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected.
**Securities offered through Raymond James Financial Services, Inc., Member FINRA/SIPC, and are not insured by bank insurance, the FDIC or any other government agency, are not deposits or obligations of the bank, are not guaranteed by the bank, and are subject to risks, including the possible loss of principal. Lakeland Bank and Lakeland Financial Services are not registered broker/dealers and are independent of Raymond James Financial Services. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.
Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.
Raymond James financial advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered. Therefore, a response to a request for information may be delayed. Please note that not all of the investments and services mentioned are available in every state. Investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site.
Any opinions are those of Lakeland Bank Financial Services and not necessarily those of RJFS or Raymond James.