In spite of the best guidance and advice there are times when life insurance just doesn’t get the job done. I know I’ve probably said it a few thousand times, that some life insurance is better than nothing, but in the absence of a well thought out plan it’s kind of like clothes that don’t fit. Some may be be better than none, but it doesn’t necessarily make it pretty.
I need look no further than my own family to see what kind of mess can be created when wealth is left in the absence of a plan. My grown daughters were the recipients of, in estate terms, a relatively small amount of money when their grandmother died. They got some in life insurance, some in investments and a monthly check until no more gas comes out of the ground for one of the biggest natural gas producers in Colorado.
It could be argued that adults and adults and if they screw it up, well, they’ll learn from it. But that’s where the disconnect seems to be happening. There doesn’t seem to be any learning from lessons because if there were then with each mistake made there would be some improvement. So, rather than just throwing life insurance proceeds at untrained adults, why not use a life insurance trust as a buffer and trainer to allow your heirs to receive your gift to them at a sane pace and possibly with some guidance and wisdom (take it of leave it). Does it make sense for a 25 or 30 year old to receive a check for $250,000 from a life insurance policy or $25,000 a year for 10 years to show them the value of working and building wealth through the creative use of the life insurance trust proceeds?
Anyway, just some thoughts. Retrospect went a long ways in our family and the next generation will not see the same kind of disregard for their lack of training. There still doesn’t seem to be that generational value passing that used to be the glue that held it all together, but as we get into generation skipping wealth transfer the savior might just well be the trust and the trustee.
Bottom line. Mistakes are made but they don’t have to be repeated. If you have any questions about the different types of life insurance trusts and how they can be used, call or email me directly. My name is Ed Hinerman. Let’s talk.