Whether it is by time, tragedy, illness, or accident, every family faces the loss of a loved one. Too often people don’t ensure their financial affairs are in order before they die. Consequentially this can cause even more frustration and heartache for the surviving family members. Are you wondering what can you do to make sure your family will be financially secure if the worst happens to you? Read on to find out more.
Life Insurance
Basically, there are two different types of life insurance. The first type, term life insurance, works simply. You buy coverage for a certain amount of time, and as long as you pay the premium, if anything happens to you during the term of coverage, your designated beneficiary receives a predetermined amount of money. Premiums generally cost more for older people than for young people.
The other type of life insurance is whole life insurance. The insurance company uses part of your premium as an investment, which builds cash value. This has certain tax benefits, and you are able to borrow from the cash accumulated via the investments. Before you buy an insurance policy of this type, make sure you understand what sort of investments your money goes toward and exactly how the policy works.
Investments
If you don’t want an insurance policy to take care of investing for you, or you just want to do some of your own investing with your family in mind, take the time to build a solid portfolio. Research different types of investments along with their risks and rewards, and how you can make sure that the money goes to the right people if something happens to you. Consulting with an investment professional is a good place to get started.
To keep things super simple, you could choose something as basic as a high yield savings account. The risks associated with such accounts are next to nothing. Depending on your preferences on the type of account, you can arrange for automatic deposits into an account or maintain control over exactly when and how much money goes into it.
Managing your own investments and savings to take care of your family’s finances is a great option; it’s even better if you choose to start while you’re young. However, if you’re starting later in life, you should also have a life insurance policy.
Wills and Trusts
A jumbled legal mess is the last thing you want your family to have to deal with after you’re gone. You can arrange a will and/or trust to make sure that the right people receive what you want them to have.
Wills
According to Investopedia.com, “A will is a legal document that sets forth your wishes regarding the distribution of your property and the care of any minor children.” Arranging a will is a relatively simple legal procedure, and having one will give you some peace of mind.
Trusts
A trust is another, though somewhat more complex, option. A revocable living trust involves three parties. Firstly there is the creator, you, whose role is self-explanatory. There are also the trustees, whom you name to care for your property within the rules set out in the trust. Thirdly, there are the beneficiaries.
It is more difficult to challenge a trust in court than a will, but there is also much more involved in establishing one. AARP points out, “While trusts serve a purpose in some circumstances, for most people wills are quite adequate.”
Speaking to an attorney can help you decide whether a trust or a will is right for you. From the beginning of the process to the end, a Tailored Legal Attorney will gladly help you.
Take Care of Your Finances Now
Tragedy can sneak up anytime, so it will behoove you to stay on top of your finances now. Avoid leaving your family with a heap of unpaid bills or other unpleasant surprises by staying organized and sticking to a budget. Communicate with your family about your financial situation and the arrangements that you have in place to help them if something happens to you.
Every day is fraught with uncertainty, but you can put safeguards in place to protect your family financially should the unthinkable happen. If you have not started planning already, now is the best time to start.
Also Read: Roth 401(k) vs Roth IRA
