Most of us have life insurance - and if we don't, we should certainly think about putting some in place.

As our circumstances change, so do our reasons for needing to be insured. One of the first purposes we have for purchasing life insurance is to begin to create an estate.

It's wise, when making those initial arrangements to sit down with an insurance adviser who can help determine how much coverage you'll need by working through a Capital Needs Analysis.

A CNA is designed to measure how large an estate must be created, so that in the event of the death of a spouse, the survivor can maintain their standard of living.

The CNA has three parts:

Cash needs at death: This includes final expenses; mortgages and other debts; child or home-care costs; education funding; emergency funds; special bequests and charitable funding.

Income needs at death: A calculation is made to determine how much income the survivor needs to maintain their standard of living. Existing sources of income are deducted from this amount to arrive at capital needed to replace the income shortfall.

Cash available at death: You'll need to put plans in place that will contribute to your estate to offset your spouse's needs in the event of your death. You might choose to use your life insurance for this purpose.

Another important element of the insurance question is estate conversion.

If you are part-owner of a business and have built up substantial value in your shares, you'll want to add them to your estate value when you die.

Your spouse may not want to remain a part-owner of the business, however, so it might be wise for you and your business partner to buy life insurance that will allow each of you to convert the value of your shares to cash for a surviving spouse.

Many of us want our entire estates to go to our children when we die, but as we increase the wealth, we'll leave them, we also increase the amount they'll have to pay the taxman.

Some people defer the tax liabilities growing in their registered retirement plans, businesses and even their cottages, and some estate assets can be passed to a surviving spouse without a tax bill, delaying the final expense until the second person dies.

No one, however, can delay the funeral and legal bills that arise. Many people arrange to use the life insurance policies they bought years ago to pay those bills for their children and to handle the tax bill as well.

Not only are they conserving the value of your estate, but by paying with insurance money, they're using dollars that were paid for with pennies.

Think it might be time to review your life insurance plans? Call your insurance adviser and set your mind at ease.

Brad Giroux is an insurance specialist with Credential Financial Strategies at the Grantham branch of Meridian Credit Union.



Category: Economy
Uniform subject(s): Personal investments and finance
Length: Medium, 397 words

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