Potential Life Insurance Mistakes and How to Avoid Them

Life insurance is something that provides your loved ones with financial security in the event of your passing. Families with one primary income earner and those with large amounts of financed property are especially likely to benefit from life insurance. While life insurance policies have become a critical part of estate planning, it is possible to make mistakes that could rob your loved ones of the protection you sought to provide. Knowing a few of the most common potential life insurance mistakes and how to avoid them can help you keep your heirs safe while benefiting from one of the most important estate planning assets available.

Not Having Enough Life Insurance

It is possible that you or your spouse are currently underinsured. This happens when you have a life insurance policy that is not enough pay off your debts, replace your income, or keep your family financially afloat while the non-liquid assets of the estate are transferred. Singer and actress Whitney Houston passed unexpectedly in 2012, leaving behind a life insurance policy worth $312,000. While this might seem like a large amount, Houston had two homes worth a total of $7.7 million with balances of $4.3 million remaining, and the Internal Revenue Service (IRS) is now seeking $11 million in estate taxes. Ensuring you have enough life insurance to settle your debts and provide ready cash to your heirs can help them avoid being caught up in a similar situation.

Assuming the Insurance Company Will Contact Your Family

Even though life insurance can be incorporated into an estate plan, some people keep their estate planning and life insurance policies separate for various reasons. Many people want to keep their business private, and others are not comfortable with family members knowing what they stand to inherit if something occurs to them. Unfortunately, if something happens to you and no one knows you have an insurance policy or what company that policy is with, it is possible that no one will receive the benefits. Life insurance companies do not go out of their way to contact beneficiaries, so it is important that you document policy information and leave it in a location that your heirs can access after you pass away.

Incorrect Beneficiaries

Updating your estate plan periodically is something that is highly recommended and the same advice holds true for insurance policies. Make sure you check to see if your beneficiary information is up to date at least once each year.  Failing to do this could mean that the wrong person ( a former friend or spouse) is named as the beneficiary on your policy. Checking your life insurance policies annually allow you to make changes as needed so that you can be sure the funds you have paid for are distributed to the person you intended.

MMZ Law

The compassionate trust and estate planning attorneys at MMZ Law understand how important life insurance policies are when it comes to protecting the future of your heirs. We work on your behalf to ensure that your policy is kept up to date and as secure as the rest of your estate. Contact us to schedule an appointment at our Claremont, California office today so that we can begin discussing your needs.

 

BROUGHT TO YOU BY:

MMZ LAW, A PROFESSIONAL CORPORATION

341 W. 1st St. Suite 100
Claremont, CA 91711

MARIVEL M. ZIALCITA is the founder of MMZ LAW, A Professional Corporation, where she practices in the areas of Elder Law – Medi-Cal Planning Asset Protection, Trust & Estate, Special Needs, Conservatorship, Trust Administration, & Probate. Ms. Zialcita is a frequent speaker on trust and estate matters and holds memberships in the State Bar of California, Trust and Estate Section, The San Bernardino County Bar Association, Wealth Counsel and Elder Counsel. She currently assists in the pro bono legal services program at the James L. Brulte Senior Center in Rancho Cucamonga, California. She is based in Claremont but assists clients throughout Southern California.

This information is educational information only and not legal advice.

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MMZ Law

Taking the right steps now will help you build up your legacy and allow you to live it for many years to come. Here at MMZ Law, we help clients throughout California with a wide range of estate planning services to help you prepare for whatever life throws your way so your assets will be protected.