“I don’t need any,” was David M. Cordell’s conclusion after doing some soul-searching combined with financial planning. Cordell, director of finance programs at the University of Texas at Dallas, came to the conclusion that his life insurance policy, with its seven-figure death benefit, would no longer be part of his retirement plan.
Rules of thumb in financial planning aren’t always applicable to everyone’s situation, Cordell explains in an article in the Journal of Financial Planning. One particular rule is that the amount of life insurance a person needs is seven to ten times his annual income. In Cordell’s case, though, there was little reason to continue to fund the policy:
- Cordell’s wife is a retired teacher with a pension
- He has reached full retirement age
- They don’t own either a farm or business, so do not need insurance proceeds for estate equalization
- They aren’t wealthy enough to worry about estate tax
- They live in a state with no inheritance tax
- Their estate plan is structured to avoid probate
- They have prepaid funeral and burial arrangements
- Although Cordell has earning capacity going forward, it generates excess income
- In the event of his death, there would be only a modest decrease in income, but the outflows would shrink even more.
As an estate planning attorney, I couldn’t help admiring Cordell for all the thought he’d obviously put into his decision to drop the life insurance. How I wish all our clients were that organized in their planning! At Geyer Law, we follow Cordell’s line of thinking. Rules of thumb should never be followed blindly, because they are not appropriate for every situation.
As just one example, we help prepare advance directives, which are written instruments that give others advance instructions on how to manage health care and finances should you become incapacitated Although Indiana law grants authority for certain individuals to make health care decisions for you if you cannot speak for yourself, tailor-making advance directives based on your specific, perhaps non-traditional situation, and on your specific concerns helps ensure that your wishes are respected.
There may be areas of estate planning where solutions exist about which you are not aware. In other areas, your response might well be “I don’t need any.” From the arsenal of tools and opportunities available, our process involves helping clients choose only what they do need, and what works for them!
