A 39-year-old married man with two young children has an extremely successful career. One day he started to feel unwell. Eventual checkups led to a diagnosis of cancer. There’s no way to prepare yourself for this kind of devastating news. This mental rehearsal for the worst-case scenario doesn’t make it any easier when we get tragic news; instead, it gets in the way of our truly feeling joyful and present in the moment right now. What can give us a lot of peace of mind is financial preparation — the knowledge that our families will be taken care of if something happens to us. Here are some important elements of that planning.
Life Insurance is extremely important if you have young children who depend on your income. A recent Time article, titled "When Tragedy Strikes a Young Family," suggests a 20- to 30-year level term policy as a good start to help support your family through the children’s school years. Another often overlooked part of this type of planning is Disability Insurance. As many people have discovered, being unable to go to work due to an injury or sickness can be more financially catastrophic than death. Expenses typically increase with treatment and recovery, but your income stops. A disability policy either through your employer or through a private insurer can be a real wise move and offers a good deal of protection—it provides a portion of your income while you are unable to work.
The original article also suggests that you keep an Emergency Fund. This is a readily accessible amount of cash allows you to pay for unexpected financial demands, such as the waiting period before the benefits on a disability insurance policy commence. Finally, Wills, Living Wills, and Powers of Attorney are a must if you have young children. This is because if both you and your spouse die within a short time of each other, your children will inherit the proceeds of life insurance, investments, and other savings. Young children (and any child under age 18) need to have a guardian appointed to look after them and their finances. Your estate planning attorney can assist you with designating this person in your will. A living will lets you describe your end-of-life choices, and powers of attorney will authorize another to act on your behalf if you are disabled or incapacitated.
An individual with a long-term illness has so many things to think about—eliminate the financial planning and take care of it now, so that in the event this situation arises, you have the ability to concentrate on your health.
You can learn more about this topic as well as other strategies on our website under the tab entitled: elder law planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.
Reference: Time (August 27, 2014) "When Tragedy Strikes a Young Family"