Estate Planning Trends in 2024

Presented by Marc Aarons

With 2024 in full swing, I am reaching out today with some key estate planning considerations for the year ahead. I encourage you to take a look below and do not hesitate to reach out with any questions.

Tax Changes in 2026

As you may know, the current tax exemption amount of $13.61 million is scheduled to revert to its previous $5 million threshold in 2026 (likely adjusted for inflation to $7 million). The Biden Administration has proposed further lowering the current lifetime estate and gift tax exemption amount to $3.5 million and increasing the estate tax rate from 40 to 45%.

Under current law, if someone’s estate is valued at $10 million at time of death, there would be no federal tax owed since the estate falls below the $13.61 million exception. However, this same person would likely owe taxes on $3 million of the $10 million estate if the current exemption level is sunsetted in 2026 as expected, with the $3 million taxed at 40% (or 45% if the Biden Administration’s proposal becomes law).

Depending on your goals and current financial situation, strategic planning before the exemption reduction can help maximize the current higher exemption levels, as demonstrated in the example above. Below, I’ve outlined just a few strategies to consider before 2026:

• Spousal Lifetime Access Trust (SLAT): This irrevocable trust allows one spouse to transfer wealth to the other while excluding future appreciation from estate taxes. The beneficiary spouse retains limited access to the assets, offering flexibility. However, the donor spouse cannot benefit directly from the assets in the SLAT and must have sufficient other assets for their needs. It’s important for the donor spouse to have enough funds outside of the SLAT to meet all of their financial obligations and needs.
• Credit Shelter Trust (CST): Upon the death of one spouse, a portion of their assets goes into this trust and is passed to beneficiaries after the surviving spouse’s death. The trust shields the assets from estate taxes upon the second spouse’s death. A possible downside is the potential for higher income taxes for beneficiaries, as assets in the trust receive only one step-up in basis. As a result, when beneficiaries sell these assets, they might face higher capital gains taxes due to the increased difference between the asset’s original basis and its sale price.
• Permanent Life Insurance: This type of insurance provides lifetime coverage as long as premiums are paid. Unlike term life insurance, which covers a specific period, permanent insurance not only assures a death benefit but also builds cash value over time. Policy owners can borrow against this cash value or make direct withdrawals to cover various expenses like medical bills or education costs. Including permanent life insurance in an estate plan can be beneficial as life insurance proceeds are usually exempt from estate taxes. It provides liquidity for paying any estate taxes or compensating for wealth lost to taxes. This strategy is particularly relevant for estates that might exceed the potential new exemption amount in future years due to appreciation.

Especially given the potential changes, it’s crucial to regularly review and update your estate plan to ensure it aligns with the current laws and your personal goals.

I hope this overview was helpful for you, and, as always, know that I’m here as a resource as you plan for your family’s future. Feel free to give me a call or reach out via email anytime with questions or concerns.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com

www.ocmoneymanagers.com

This communication is from Money Managers, Inc.; a Securities and Exchange Commission registered investment advisor.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results.  Investments involve risk and are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.

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Estate Management Checklist

Presented by Marc Aarons

Do you have a will?

A will enables you to specify who you want to inherit your property and other assets. A will also enables you to name a guardian for your minor children.

Do you have healthcare documents in place?

Healthcare documents spell out your wishes for health care if you become unable to make medical decisions for yourself. They also authorize a person to make decisions on your behalf if that should prove necessary. These documents may include a living will, a power of attorney agreement, and a durable power of attorney agreement for healthcare.

Do you have financial documents in place?

Certain financial documents can outline your financial wishes. If you become unable to make decisions for yourself, these financial documents can be structured to empower a person to make decisions on your behalf. These documents may include joint ownership, durable power of attorney, and living trusts.

Have you filed beneficiary forms?

In some cases, naming a beneficiary for bank accounts and retirement plans makes these accounts “payable on death” to your beneficiaries. In other cases, you will need to fill out a “Payable on Death” form.

Do you have the right amount and type of life insurance?

When was the last time you assessed your life insurance coverage? Have you compared the life insurance benefit with your financial obligations? Keep in mind that several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Have you taken steps to manage your federal estate tax?

If you and your spouse have more than $25.84 million in assets (for 2023), you may want to consider taking steps to manage federal estate taxes, which will be due at the second spouse’s death.¹

Have you taken steps to protect your business?

Do you have a succession plan? If you own a business with others, you may also want to consider a buyout agreement.

Have you created a letter of instruction?

A letter of instruction is a non-legal document that outlines your wishes. A strong, well-written letter may save your heirs time, effort, and expense as they administer your estate.

Will your heirs be able to locate your critical documents?

Your heirs may need access to the specific documents you have created to manage your estate. These documents may include:

• Your will
• Trust documents
• Life insurance policies
• Deeds to any real estate, and certificates for stocks, bonds, annuities
• Information on your financial accounts and safe deposit boxes
• Information on your retirement plans
• Information on any debts you have: credit cards, mortgages, and loans.

Note: Power of attorney laws can vary from state to state. An estate strategy that includes trusts may involve a complex web of tax rules and regulations. Consider working with a knowledgeable estate management professional before implementing such strategies.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com.

www.ocmoneymanagers.com

MMI Disclosure: The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

1. ^{IRS.gov, 2023}

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Life Insurance Awareness Month

Presented by Marc Aarons

September is Life Insurance Awareness Month. If you haven’t reviewed your insurance profile in a while, you may be surprised that what made sense in the past no longer fits your life.

Here are some ways to quickly evaluate your needs.

*Stop on a DIME – To use the DIME method, add up your Debt, ten years of Income, your Mortgage payoff amount, and the cost of your children’s college Education. This can provide a starting point for how much insurance coverage you may require.

*Look at Your Options – Do you need term life insurance (coverage for a fixed amount of time) or whole life insurance (a policy structured to last until you pass away)?

*Evaluate Costs – The price of a policy depends on your age, health, and the amount of coverage in the policy.

These methods can help give you a rough idea of where to start. But there’s no substitute for speaking with a financial professional, insurance agent, and estate planning specialist about the right approach for you.

After all, life doesn’t stand still, and neither should your life insurance policy.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com

ocmoneymanagers.com

MMI Disclosure: This material was prepared by MarketingPro, Inc. for use by Marc Aarons.  Money Managers, Inc.; is a Securities and Exchange Commission registered investment advisor.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results.  Investments involve risk and are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.  

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What Happens When There Are No Beneficiaries
Where do those accounts and policies end up?

Provided by Marc Aarons

Some accounts have no designated beneficiary. Rarely, the same thing occurs with insurance policies. This is usually an oversight. In exceptional circumstances, it is a choice. What happens to these accounts and policies when the original owner dies?

The investment or insurance firm gets the first chance to determine what happens. On many retirement plans, for example, a spouse is often the default beneficiary, even if not named on a beneficiary form. If the deceased has no spouse, then the plan assets may just become part of that person’s estate. Brokerage accounts without any designated beneficiaries are also poised to become part of the estate of the decedent. The next stop for these assets could be probate.¹

The state may end up deciding where the assets go when beneficiary forms are blank. If the deceased failed to name account or policy beneficiaries but had a valid will or other valid estate documents, this will influence the path from here – but it may not exempt the assets from probate court.  

If no legally valid estate documents exist, then the deceased party dies intestate, and the state determines the destiny for the assets. Most states go by the same ladder of potential inheritors – surviving spouse at the top, then kids, then grandkids, then parents, grandparents, siblings, nephews or nieces. If absolutely no legitimate heir can be found, then the assets become property of the deceased’s state of residence.²

What about life insurance policies? A life insurance policy usually has at least two levels of designated beneficiaries, and it is rare when a policyholder outlives them and even rarer when a policy has none. In such a circumstance, the proceeds of the life insurance policy become part of the estate of the policyholder upon the policyholder’s death.³

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

What if a person simply lacks possible heirs, or sees no worthy heirs? Occasionally, this happens. Some people remain single for life, and others are estranged from relatives or heirs who would otherwise be beneficiaries.

A person in this situation has a choice: charity. Perhaps a charitable or non-profit organization deserves the assets. Perhaps a college or university would be a worthwhile destination for them. Choices exist, and those who are single can explore them as they consider their estate.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com.

ocmoneymanagers.com

MMI Disclosure: This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

^Citations

1. ^{Kiplinger, June 6, 2022}
2. ^{Schwab.com, September 24, 2021}
3. ^{SmartAsset, April 28, 2022}

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A look at the different choices & strategies.

Provided by Marc Aarons

 If you have a child with special needs, a trust may be a financial priority. There are many crucial goods and services that Medicaid and Supplemental Security Income might not pay for, and a special needs trust may be used to address those financial challenges. Most importantly, a special needs trust may help provide for your disabled child in case you’re no longer able to care for them.

Remember, using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.

In preparing for a special needs trust, one of the most pressing questions is: when it comes to funding the trust, what are the choices?

There are four basic ways to build up a third-party special needs trust. One method is simply to pour in personal assets, perhaps from immediate or extended family members. Another possibility is to fund the trust with life insurance. Proceeds from a settlement or lawsuit can also serve as the core of the trust assets. Lastly, an inheritance can provide the financial footing to start and fund this kind of trust.

Families choosing the personal asset route may put a few thousand dollars of cash or other assets into the trust to start, with the intention that the initial investment will be augmented by later contributions from grandparents, siblings, or other relatives. Those subsequent contributions can be willed to the trust, or the trust may be named as a beneficiary of a retirement or investment account.^1,2,3

When life insurance is used, the trustor makes the trust the beneficiary of the policy. When the trustor dies, the policy’s death benefit is left to the trust.^1,2,4

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

A lump-sum settlement or inheritance can be invested while within the trust. With a worthy trustee in place, there is less likelihood of mismanagement, and funds may come out of the trust to support the beneficiary in a measured way that does not risk threatening government benefits.

Care must be taken not only in the setup of a special needs trust, but in the management of it as well. This should be a team effort. The family members involved should seek out legal and financial professionals who are well versed in this field, and the resulting trust should be a product of close collaboration.

Marc Aarons may be reached at (714) 887-8000 or marc@ocmoneymanagers.com

^{MMI Disclosure This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment}

^{This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.}

^Citations

1. ^{WSJ.com, June 3, 2021}
2. ^{SpecialNeedsAnswers.com April 12, 2021}
3. ^{SpecialNeedsAnswers.com July 3, 2019}

^{4. SpecialNeedsAnswers.com October 2, 2019}

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As conventional extended-care policies grow costlier, alternatives have emerged.

Provided by Marc Aarons 

The COVID-19 pandemic has changed extended-care policies. While the specific policy information varies from company to company, in general, the pandemic has made it more difficult to qualify for extended-care policies. This can be particularly challenging if you’re in a high-risk group.

Around 7 out of every 10 seniors are projected to need extended care during their lifetime, and many of these medical needs aren’t covered by Medicare, Medicaid, or standard health insurance. Unless you have made arrangements for extended care, you are choosing to self insure should you require this type of assistance.¹

With the added restrictions that make it more difficult to qualify for a stand-alone policy, hybrid policies that combine life insurance and extended-care policies have gained traction. Some people are choosing to go this route over traditional extended-care policies. In 2019, over 250,000 hybrid policies were sold, compared to just 55,000 in stand-alone extended-care policies.^2,3

Several factors will affect the cost and availability of life insurance and extended-care insurance, including age, health, and the type and amount of insurance purchased.

Life insurance policies have expenses, including mortality and other charges. If a life insurance policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications.

You should consider determining whether you are insurable before implementing a strategy involving life insurance or extended-care insurance. Any guarantees associated with the policies are dependent on the ability of the issuing insurance company to continue making claim payments.

What is a hybrid policy? Hybrid extended-care policies combine life insurance with extended-care coverage. As with a standard extended-care policy, the earlier you start paying premiums for one of these hybrid insurance products, the more manageable the premiums may be. You may need to pass medical underwriting to qualify for coverage. The encouraging news here is that some people who are not healthy enough to qualify for a stand-alone extended-care policy may qualify for a hybrid policy. Under one of these hybrid policies, if you never spend down the extended-care benefits the policy may be structured to transition to a life insurance policy with a death benefit payout. Some traditional extended-care policies operate on a “use it or lose it” basis, so if you never touch it, you may not see any money back.^2,3

Many extended-care hybrid policies are funded in one lump sum, which may influence a buyer’s decision. Some extended-care policies sold in the 1990s and early 2000s have seen double-digit premium increases, putting pressure on the owners to manage payments. However, current analysis shows that this was the result of an error of assuming only 30% of people with extended-care policies would use them.^2,3

Are these hybrid policies just mediocre compromises? They have detractors as well as fans, and the detractors cite the fact that a standalone extended-care policy generally can be structured to provide more attractive benefits than a hybrid policy. They also cite their two sets of fees, per their two forms of insurance coverage.^2,3

As always, if you have any questions about how extended-care factors into your estate strategy, I’m always available to discuss it with you.

  Marc Aarons may be reached at (714) 887-8000 or marc@ocmoneymanagers.com

^{MMI Disclosure This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment}

^{This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note—investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting, or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax, or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.}

   ^Citations

1. ^{MarketWatch.com, February 19, 2021}
2. ^{Money.com, October 5, 2020}
3. ^{BusinessInsider.com, February 22, 2021}

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Term insurance is the simplest form of life insurance. Here’s how it works.

Provided by Marc Aarons at Money Managers, Inc.

Term insurance is the simplest form of life insurance. It provides temporary life insurance protection on a limited budget. Here’s how it works:

When policyholders buys term insurance, they buy coverage for a specific period and pay a specific price for that coverage.

If the policyholder dies during that time, their beneficiaries receive the benefit from the policy. If they outlive the term of the policy, it is no longer in effect. The person would have to reapply to receive any future benefit.

Unlike permanent insurance, term insurance only pays a death benefit. That’s one of the reasons term insurance tends to be less expensive than permanent insurance.

Many find term life insurance useful for covering specific financial responsibilities if they were to die unexpectedly. Term life insurance is often used to provide funds to cover:

*Dependent care

*College education for dependents

*Mortgages

Would term life insurance be the best coverage for you and your family? That depends on your unique goals, needs, and circumstances. You may want to carefully examine the pros and cons of each type of life insurance before deciding what type of policy will be the best fit for you.

Another factor to think about: term policies generally become more expensive as you grow older. If your term life insurance expires and you are facing certain health challenges, such as an injury or disease, you may find that a policy with similar coverage may be much more expensive.

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Marc Aarons may be reached at (714)887-8000 or Marc@OCMONEYMANAGERS.com

MMI DISCLOSURE

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – nbcnews.com/better/pop-culture/how-much-life-insurance-do-i-need-ncna935811 [11/24/18]

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Why Life Insurance Matters for New Homeowners
It addresses a significant financial risk.
Provided by Marc Aarons Money Managers, Inc.

If you buy a home and you have no life insurance, there is a financial risk. It may not be immediately evident, but it must be acknowledged – and it should be addressed.

What if you die, and your spouse or partner is left to pay off the mortgage alone? This possibility may seem remote, and it may be hard for you to contemplate. It deserves consideration regardless.

Imagine your loved one having to handle that 15-year or 30-year debt by themselves. (Or the debt on an adjustable-rate loan or jumbo mortgage.) Additionally, how would that heavy financial burden come to impact your children’s lives? These tragedies do occur and do bring these kinds of emotional and financial challenges. A life insurance payout may provide some help for a homeowner in the event of such a crisis.

When you buy life insurance, the coverage amount should reflect your mortgage debt. You will need enough coverage to help your spouse, partner, or heirs deal with the outstanding home loan balance, should you pass away prematurely.^1,2

Term life insurance may meet the need. If you are the typical homeowner, you will stay in your current home for about ten years. (Back in 2006, the average homeowner tenure was just six years.) As you may move up, move to another region with different home values, or even rent in the future, a term policy that lets you renew or modify coverage could suffice.¹

On the other hand, permanent life insurance may be more suitable. The reality is that inflation decreases the value of term life coverage over time. Suppose you buy a 20-year term policy offering $250,000 of coverage today. At just 4% annual inflation, that coverage will be worth 56% less in 2038 – and your home may be worth much more in 2038 than it is now.²

Moreover, the cost of term life insurance rises as you age. A term life policy is cheap when you are young, but if you want a new one after your initial term policy sunsets, you may find the premiums dramatically more expensive. In contrast, premiums on a permanent (whole) life policy are locked in, effectively becoming more manageable as time goes by. You may want permanent life for other financial reasons as well, reasons that have nothing to do with your home. A permanent life policy has the potential to accumulate cash value in the future; a term life policy does not.²

A homeowner should carefully consider life insurance coverage options. If you lack coverage today, talk to a qualified insurance professional about your options, so that you can insure yourself for tomorrow.

Marc Aarons 714-887-8000 or Marc@ocmoneymanagers.com

 MMI Disclosures

_Citations.

_{1 – themortgagereports.com/26307/homebuyer-tenure-how-long-are-people-staying-in-their-houses [3/17/17]}

_{2 – entrepreneur.com/article/310731 [3/22/18]}

^{3. Image Courtesy: https://www.cheapfullcoverageautoinsurance.com/}

_{This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.}

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Life Insurance Before Age 40

Millennials have good reasons to obtain coverage now.

Provided by Marc Aarons

Do you plan to buy life insurance before you turn 40? Maybe you should. You may save money in the long run by doing so.

At first thought, the idea of purchasing a life insurance policy in your thirties may seem silly. After all, young adults are now marrying and starting families later in life than past generations did, and you and your peers are likely in excellent health with a good chance of living past 80.

In fact, LIMRA – a life insurance research and advocacy group – recently surveyed millennials and found that 30% thought saving for a vacation mattered more than buying life insurance coverage. The perception seems to be that insurance is something to purchase when you start a family or when you hit your forties or fifties.¹

Getting a policy before you marry or start a family may be a great idea. The reasons for doing so might be compelling.

Your premiums will be lower. The older you become, the more expensive life insurance becomes. Data compiled last summer by Life Happens, a non-profit life insurance education effort, confirms this.

Life Happens asked several prominent U.S. insurers to supply their preferred premium rates for healthy non-smokers aged 25, 35, 45, and 55 buying a $250,000 whole life policy (the kind designed to build cash value with time). The average preferred premium rates for 25-, 35-, and 45-year-olds fitting this description were:

25-year-old male: annual premium of $1,987

35-year-old male: annual premium of $2,964

45-year-old male: annual premium of $4,747

25-year-old female: annual premium of $1,745

35-year-old female: annual premium of $2,531

45-year-old female: annual premium of $3,947

The numbers starkly express the truth – whole life insurance premiums more than double between age 25 and age 45.²

Premiums on term life policies are even lower. Term life insurance is essentially coverage that you “rent” for 10, 20, or 30 years – it cannot build any cash value, but in some cases, a term policy can be adapted or exchanged for a whole life policy when the term of coverage ends.

If you are young, term coverage is remarkably cheap. NerdWallet recently researched term life premiums for healthy 30-year-olds. It found the following sample rates for 20- and 30-year term policies valued at $250,000:

30-year-old male: annual premium of $156 for a 20-year term policy, $240 for a 30-year term policy

30-year-old female: annual premium of $141 for a 20-year term policy, $206 for a 30-year term policy

The downside of term coverage is that you are “renting” the insurance. Just as you cannot build home equity by renting a house, you cannot build cash value by “renting” a policy.³

A whole life policy may become quite valuable. As Life Happens notes, the average such policy bought at 25, 35, or 45 may have a guaranteed cash value of anywhere from $100,000-200,000 when the policyholder turns 65, assuming the policy is kept in force and no loans are taken from it. Universal life policies permit tax-deferred growth of the cash value.^1,2

Make no mistake, a whole life policy is a lifelong commitment. It must be funded every year or it will lapse. That should not scare you away from the value and utility of these policies – the cash inside the policy can often be borrowed or withdrawn. Sometimes families use cash value to fund college educations or help with medical expenses or retirement. Such withdrawals can lessen the death benefit of the policy, but what is left is often adequate. Cash withdrawals from a whole life policy are usually exempt from taxes, just like the death benefit.¹  

Maybe this is the time to put time on your side. Age-wise, life insurance will never be cheaper than it is for you today. Getting coverage now – even if you are single – may be a money-smart move as well as a great life decision.

Marc Aarons may be reached at (714)887-8000 or marc@ocmoneymanagers.com.

www.ocmoneymanagers.com

_Citations.

_{1 – cnbc.com/2016/10/17/think-about-life-insurance-sooner-rather-than-later.html [10/17/16]}

_{2 – lifehappens.org/product-selector/comparing-the-cost-permanent-and-term-life-insurance/ [1/26/17]}

_{3 – nerdwallet.com/life-insurance#basic [1/26/17]}

_{This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.}

_{«MarcAaronsDisclosure»}

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