Maryland Bar Bulletin
Publications : Bar Bulletin : October 2005

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Financial Stability for Your Family
~Planning is a key ingredient~

By Kelby Gelston

There is an old saw that says, “Failing to plan is planning to fail.” And when it comes to planning for your family’s future financial stability, nothing could be more accurate. Protecting the future of our loved ones is usually at the top of our priority list, yet actually doing the planning and implementing the plan often fall to the bottom of our “to do” list.

Each family’s lifestyle, dependent needs, budget and personal preferences are different and therefore require an individualized plan. However, having adequate life insurance protection in place and doing proper estate planning can help create a solid financial foundation for your family. According to certified financial planner Thomas Haunty, “having adequate life insurance is the cornerstone of the foundation.”

Term Life Insurance, as the name implies, provides coverage for a specified period of time and is usually the least-expensive type of coverage, providing a death benefit and no savings component. The premiums usually increase as the insured ages. Permanent insurance, including whole life, universal and variable life products, is designed to last for the entire life of the insured and usually have level premiums and a savings component such as the cash values in whole life insurance.

Term insurance that is convertible to a permanent product allows one to have a high level of death benefit for today at affordable rates and the ability to convert necessary amounts to permanent insurance to provide for insurance coverage and savings for the future.

Life insurance is quite unique as an asset. Its tax-favored benefits can help solve many family financial issues. On the personal side, there are many uses for the death benefit, including:

Creation of an immediate estate. Your first premium payment creates an immediate estate, regardless of how soon death occurs.

Pay off of a home mortgage or personal loans

Payment of estate taxes and estate settlement costs

Funding of current and future education costs

Additionally, if you have a named beneficiary there are generally no probate or administration costs in settling an insurance claim.

Once you have an adequate amount of life insurance in place you can begin saving more aggressively for retirement and future expenditures. While having an appropriate amount of death benefit is the most important issue, there are many other features and benefits that life insurance can provide.

A “rider” can be added to a policy, at an additional cost, to provide the option to purchase additional coverage without having to take a medical exam or having to furnish evidence of insurability.

With whole life insurance, policy loans are available to you, if the cash value is adequate, and can be used to pay for children’s college expenses, wedding expenses and other needs for which you may not want to take money from other financial sources. Loans and withdrawals from life insurance policies, which are classified as modified endowment contracts, may be subject to tax at the time the loan or withdrawal is made. Withdrawals have the effect of reducing the death benefit and cash surrender value.

Cash values grow, tax deferred, during your life and can be used to supplement your retirement income as well.

Upon death, life insurance proceeds are usually passed, income tax-free, to your beneficiaries.

With adequate life insurance coverage as the cornerstone of your family’s financial foundation, you can plan for and build the other aspects of your family’s financial security knowing that they will be taken care of in the event of your untimely death.

Kelby Gelston is an associate of FranklinMorris, Coordinating Broker for the Bar Associations Insurance Agency, Inc. For more information on the insurance benefits available to MSBA members, visit

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Publications : Bar Bulletin: October 2005

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