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Estate Planning 101 for Couples

Whether you’re young or old, whether you have been married for 20 days or 20 years, we know talking about the possibility of dying and leaving your loved one isn’t a welcome subject, but it’s an extremely important one.  Taking some basic estate planning steps now can save time, money, and additional heartache in the event of the premature death of a spouse.

The following are basic estate planning steps you can take now.  Work with a financial planner to determine if you have more in-depth estate planning needs.

1. Determine your family’s life insurance needs.

Married couples, especially if you have or plan on having children, have the greatest need for life insurance.  Many of us know someone whose spouse passed away unexpectedly without life insurance.  The death of a loved one is emotionally draining, but to add financial devastation on top is overwhelming.

Many people assume that only the primary breadwinner in a family needs life insurance.  In most cases, both parents need life insurance even if one is a stay-at-home parent.  If the stay-at-home parent were to die, the life insurance death benefit would cover the costs to replace the responsibilities that parent did in and outside the home each day, such as child care.

To estimate how much life insurance you should have add together the following amounts:

  • Long-term financial obligations (such as your mortgage)
  • All child-related expenses (include college tuition if you wish to provide for this)
  • Your annual income, multiplied by the number of years you wish to replace it for.

Next subtract any assets such as savings and any current life insurance coverage you may have.  This final number is how much life insurance you need.  Keep in mind this is only how much you should be insured for; your spouse should also do this calculation.

Example:

$
137,000

($125,000 mortgage + $10,000 car loan + $2,000 credit card debt)

+ $
98,000

($50,000 for child expenses + $48,000 for college)

+ $
500,000

(annual salary of $50,000 multiplied by 10 years of replacement)

—————–

= $
735,000

$
735,000

– $
150,000

(checking, savings, and retirement accounts)

—————–

= $585,000

In regards to the example above, a $600,000 term life insurance policy with a term length of 20 years (long enough to put your child through college!) can be as little as $25 per month for a healthy 30-year old male.  Term life insurance is very affordable and can be a life saver.  Without needing to enter any contact information, get a

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