The real difference between permanent life insurance and term life insurance is that permanent life insurance should be thought of more of an investment than just an insurance policy. The significant difference between term life insurance and permanent life insurance is that permanent life insurance has cash value. That is to say you have a cash account with your policy that acts like an investment. Based on the nature of your policy you can take out a loan against it.

Permanent life insurance comes in two forms called whole life insurance and universal life insurance and each type has its own pros and cons. You will want to sit down with an insurance or financial adviser to determine which program is best for you.

Perhaps the most interesting aspect of universal life insurance is that it is traditionally less expensive in terms of premium than whole life insurance and has a great deal more flexibility for the policyholder.

With the universal life the cash value account is an interest-bearing account. You can use the cash in the cash value account to pay your premium and even walk away with some cash if you cancel the policy.

Remember during our term life insurance discussions we talked about the policy being to be in force. Meaning the payments of the policy premium must be current. With the universal life policy is always and in force because there is no mandate to make a monthly semiannual or annual premium payment. The premiums can be paid out of your cash account.

So now it’s back to you and you need to digest all this information. We have talked about (1) how much life insurance do you need and (2) some of the types of life insurance policies available. Well it’s homework time again and now that you know some of the vocabulary, it’s time to get to work.

Make an appointment with a knowledgeable insurance adviser or financial planner as you begin to answer your own questions of what is the right life insurance strategy for me. The answer may be easier than you think, but you need to do your homework and plug into a professional.

Do it now!

The short answer is that there are two basic types of life insurance: Term life insurance and permanent life insurance. In this session we will talk about term life and in the next article I will share information on permanent life insurance policies.

One of the nice things about term life insurance is that it is the simplest to understand and very often the least expensive form of life insurance.

As the name implies, term life insurance is valid for a specific period of time. Usually for 1, 5, 10, 15 or 20 years.

With term life insurance there is a fixed amount of money that will be paid out to the designated beneficiary should your death occur at any time within the term of the policy.

One of the favorable aspects of term life insurance is that it is relatively inexpensive based upon your age and health history.

Some aspects to look for in a term life insurance policy include having a fixed premium throughout the life of the policy, having the ability to convert to a permanent life insurance policy without any additional underwriting, and that the policy must remain in force through the duration of the policy.

In force is a very important concept to recognize with a term policy. In force means that you are making all the policy premium payments on time. One of the ways to cancel a term policy is to simply stop paying the premium. Don’t let a payment timing error on your part void your term policy prematurely.

People often ask is a term life policy a good deal if you make all the premium payments and never collect. I would suggest that it is because you’re still alive and that in my mind is a pretty good deal. Remember that life insurance is not about you, it’s about your family and protecting their financial needs after you are gone.

Your executor is the person who will manage all your affairs once you have passed away. These duties include working through the Probate Court process, the settlement of all your debts, the payment of any estate taxes, and managing the distribution of your assets to each of your beneficiaries.

As you can see, you need to pick your executor very carefully. Some attributes to look for is someone that:

• You trust implicitly
• Is well organized
• Understands commitment
• Appreciates deadlines
• And has the patience of a mother and the tenacity of a master sergeant

Should I pick a family member?

Great question. There are pros and cons on both sides. A family member may know your wishes better than anyone. That said, appointing a family member may also create a conflict of interest. The family member executor has complete control over your assets and could conceivably manipulate the distribution of assets to his /her benefit. There are lots of horror stories were the executor either misappropriated or ran off with the money.

Does the executor get paid?

The laws vary from state to state and some states set a cap on fees.

Hot tip: In my case, I have identified two executors to my estate. One is my business partner and one is a close family friend. They both know the spirit, intent, and goals I have outlined in my will. Also they (and their spouse) are the beneficiary of a 10-day cruise of their choice anywhere in the world as my way of thanking them for taking care of my affairs once I am gone.

Can the executor ask for help?

Absolutely. The attorney that helped draw up your will would be a good place to start. As an example, there have been recent changes to the estate tax code that can greatly benefit the surviving spouse, but (there always a ‘but’) the executor must file the needed paperwork within nine months of your death. Rather than having the executor trying to figure that all out, go find an estate lawyer you trust.

The Take-Away

Picking an executor is extremely important and there are several parameters to consider when selecting yours. Family members may or may not be the best qualified. At the end of the day is comes down to one simple word-integrity. Don’t pick with your heart, go with your gut. You will be pleased when you do.

Tim Pelton

When you write out your own will on a piece of paper it is called a holographic will. And the rules to keep it in force are very strict. All the handwriting must be in your handwriting with no other notations made on the paper.

1.   If you make a mistake, don’t cross it out. It will void the will. You need to start over.

2.   Do not have a witness sign your holographic will, it will make the will null and void.

3.   If you need to make a change, you need to write the whole thing over again.

4.   Once you are deceased, just who is available to verify that the handwriting is yours?

5.   States that either do not recognize a holographic will or may challenge it include: Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Massachusetts, Minnesota, Missouri, Nevada, New Hampshire, New Mexico, Ohio, Oregon, South Carolina, Vermont, Washington, West Virginia, and Wisconsin.

Writing your will yourself is a bad financial return on investment. The money you save by not using an attorney to draft your will, will be spent many time over on others lawyers by your surviving family as they try to straighten out the mess you created.

The biggest problem with most holographic wills is that they often don’t tell the whole story of the wishes of the person that died. My previous blogs talked about the importance of naming an executor, clearly identifying all your beneficiaries, and using a lawyer to create a last will and testament that is as specific as possible.

Some typical examples of problems found in holographic wills include statements like “I want to leave everything to my favorite teacher.” Who, what school, what grade? Or the will may bequeath the house, the life insurance, and savings account to someone but fails to indentify the beneficiary for the stock certificates or pension plan benefits of the decdent.

Lastly, let’s say you are specific about who your beneficiaries are in your holographic will, and they die before you. Then what?

Long story short, when it comes to making your will, you get what you pay for. Do your homework and create an outline if what you would like to have happen to your assets when you die. Do consult with an attorney that specializes in drafting wills. Do it now.

Now that you have started to give more thought to preparing or updating your will, let me give you some more helpful hints.

Give some thought to who you want to witness your will. Most importantly the witness should be a person who derives no benefit from your will. It is advised that the witness to your will also not be a relative because it may create some issues if your will is contested. Lastly, the witness needs to be an adult which is defined as 18 years or older in most states.

Now let’s talk about how and why wills are contested. Again, please note that I am not an attorney and that I am simply sharing with you what I have learned through personal experience.

Right or wrong, we live in a very litigious society where anyone can pretty much file a law suit against anyone, for any reason, for anything. That’s why it is mission critical that you make your will as specific as possible. That said, anyone contesting a will must “have standing” in the eyes of the court. To have standing, the person must have a clearly defined prior relationship with the deceased for the contested will process to move forward.

The most common source of contested wills come from people who feel they were left out of the will ‘by mistake’. Often it may be a beneficiary listed in a prior will but this person or organization is no longer in your current will. Or it may be a relative, business partner, or good friend who feels he or she “deserves” something.

Hot Tip: When you elect to change your will and make a new one for whatever reason, be sure to add verbiage that indicates that all previous wills are null and void. This will reduce the likelihood that a previous (but removed) benefactor will be able to make a case to contest your will. If multiple wills are disclosed, the will with the most recent date will be upheld.

As mentioned in a previous blog, you really want to use an attorney to help you finalize your will. So just how do you pick an attorney?

Let me start be answering that question be stating that you probably don’t want to use your Uncle Harry who is a tax attorney. Pick a lawyer whose practice specializes in will and/or estate planning. Go ahead and interview several candidates.

Forget for a moment that you are dealing with well educated professionals. Imagine that you are interviewing a contractor to paint your house. The type of questions are same:

1. How long have you been practicing law?
2. How many wills do you draw up every year?
3. What are your standard fees?
4. Will you provide me with a free estimate of what my will may cost?
5. How often do you recommend I review my will?
6. How much does it cost to re-write my will?

By interviewing a few attorneys you will begin to get a feel for different responses. In the final analysis go with your gut feeling for who the best attorney is to meet your needs. You need to be both comfortable and confident in your choice. Chances are you will make the right choice.

Again, take the time to compile your thoughts and your wishes and do it now!

Let’s take a minute to talk about the cast of characters that need to get involved in your will. The first and most important is for you to appoint an executor. This is the person you want to settle your estate after you are gone. Note: it does not have to be a family member and sometimes you may be better off picking someone outside of the family.

Appoint your executor wisely! This person is responsible to deal with the Probate Court, paying off your bills, and making sure your final wishes are carried out. Bottom Line: Your executor needs to be someone you trust implicitly.

Your beneficiaries are people or organizations to whom you want your assets distributed to after you die. I recommend that you outline in your will exactly who gets what. The following is a poor example of a stipulation. “I bequeath that my coin collection goes to Aunt Susan and Cousin Joe.” The devil is in the details. You need to be much more specific regarding which portions of the coin collection goes to what beneficiary.

Hot Tip: You really want to use a lawyer to help you finalize and prepare your will. Your lawyer will also be able to identify potential minefields where clarity may be needed. You can save yourself some time and money by preparing a rough outline for your attorney regarding what your desires are beforehand, but use a lawyer to write up your will.

Your will administrator… trust me; you do not want one of these. An administrator is appointed by the Probate Court to manage the distribution of your assets if you die without a will. It is also called dying intestate. Many people falsely believe that if they die without a will that their assets will simply go to the spouse or the kids. It’s not true. The laws vary from state to state, but the short answer is that some of your assets may go to your spouse, parents, children, or brothers and sisters as determined by the state. DO NOT give up that control over the distribution of your assets that you have worked so hard to accumulate.

Take the time to compile your thoughts and your wishes and do it now!

Since I am down to a quarter of a tank on my “gas gauge of life,” I too have created my own bucket list. I have always been a goal-oriented guy, and this is no different.

My Bucket List:

- To walk my beautiful daughter down the aisle on the day she gets married

- To walk hand-in-hand with my wonderful wife on the Great Wall of China

- To make love with her on a beach in Tahiti as the sun slowly sets in the west

- To snorkel on the Great Barrier Reef in Australia

- To see the Northern Lights

- To go on a round-the-world cruise

- To shake hands with the President of the U.S. to thank him/her for being the leader of the greatest nation on the planet

Let me now leave you with a gift.

This gift has a very unique history.

We all have very special people in our lives. For me, one friend in particular, is named Guy. Through the 1980’s and 1990’s, Guy and I were key members of a critical incident stress management (CISM) team that responded to serious incidents that occurred throughout the northeastern United States. We were called out whenever emergency service personnel became too overwhelmed with the trauma, tragedy, and horrific events they observed. We proudly called ourselves Batman and Robin.

A critical incident stress debriefing is a highly structured process where emergency responders are asked to participate in group discussion regarding what they have seen, heard, smelled, felt, etc. during and immediately after ‘the event’. It is important that each discussion be lead by an experienced peer (Me) and observed by a mental health professional (Guy). We usually concluded the discussions with the comment that the tragedy that each attendee had just experienced had given each one of them a gift.

The immediate verbal and non-verbal communication from each participant was always the same. “What the hell are you two guys talking about?!” or “I don’t get it. I have just been through the most horrific incident of my career, and you two whackos think I got a gift out of it!”

We would calmly then respond that they all now had a homework assignment to fulfill. Their assignment was to seek out and discover ‘their’ gift. It might take them a week, a month, or even a year. But the gift is out there…go find it!

I share this story with you to simply illustrate that the assignment to find one’s gift has merit. I have had numerous people who I hadn’t seen in 1, 5, or even 10 years, come up to me and thank me for challenging them to find their gift.  They found their ‘gift’ and it changed their life.

Life is too short not to have a good time.