This document is a presentation about life insurance from Jody Patterson of Patterson Financial Group. It discusses developing a contingency plan to protect your family financially in the event of your or your spouse's unexpected death. It covers considerations like replacing income, paying debts and expenses, college funding, and ensuring your existing assets and life insurance are sufficient to meet your goals. The presentation provides a framework to prioritize financial goals and review needs as they change over time.
1. L ife I nsurance R eview VLCM-154A / VLNYCM-154A September 2007 Presented by Jody Patterson Patterson Financial Group 843-412-6571 [email_address]
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8. Developing a Contingency Plan of 11 Debts to Pay Off Emergency Funds College Expenses Funeral Expenses Home Mortgage Estate Administration Expenses Immediate Cash Needs
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of 11 VLCM-154A / VLNYCM-154A
of 11 This presentation is designed to provide introductory information in regard to the subject matter covered. Neither Pacific Life, Pacific Life & Annuity, nor their representatives offer legal or tax advice. Consult your attorney or tax advisor for complete up-to-date information concerning federal and state tax laws in this area. Variable insurance products issued by Pacific Life Insurance Company and Pacific Life & Annuity Company are distributed by Pacific Select Distributors, Inc. (member FINRA & SIPC), a subsidiary of Pacific Life and an affiliate of Pacific Life & Annuity, and are available through licensed third party broker-dealers. Investors should carefully consider the underlying fund investment objectives, risks, charges, and limitations and expenses of a variable universal life insurance policy. This and other information about Pacific Life and Pacific Life & Annuity is in prospectuses available from your registered representative or by calling (800) 800-7681. Read them carefully before investing or sending money. This material is not intended to be used, nor can it be used by any taxpayer, for the purpose of avoiding U.S. federal, state or local tax penalties. This material is written to support the promotion or marketing of the transaction(s) or matter(s) addressed by this material. Pacific Life and Pacific Life & Annuity, their distributors and their respective representatives do not provide tax, accounting or legal advice. Any taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor. Pacific Life Insurance Company is licensed to issue individual life insurance and annuity products in all states except New York. Product availability and features vary by state. Individual life insurance and annuity products are available in New York through Pacific Life & Annuity Company. Each company is solely responsible for the financial obligations accruing under the policies it issues, and its product and rider guarantees are backed by that company’s financial strength and claims-paying ability. Pacific Life insurance Company's and Pacific Life & Annuity Company's individual life insurance products are marketed exclusively through independent third-party producers, which may include bank affiliated entities. Investment and Insurance Products: Not a Deposit – Not FDIC Insured – Not Insured by any Federal Government Agency – No Bank Guarantee – May Lose Value
of 11 Do you have enough life insurance coverage to meet your family’s financial goals? Each family’s situation is different and can change over time. Changes in employment, purchasing a new home, planning for your children’s education and planning for an earlier retirement can have a significant impact on your family’s financial planning goals. It is important to review your situation from time to time and evaluate your life insurance policy to see if it is meeting your current financial needs. This presentation will guide you through the review process.
of 11 As you get older your salary may have increased providing a better standard of living. Sometimes an increase in salary can lead to an increase in debts (higher mortgage, increased credit card and automobile debt). If you or your spouse dies unexpectedly, will the death benefit proceeds from your current life insurance coverage provide enough to meet your financial needs? In addition, you may be planning on sending your children to college. It is important to have realistic expectations of college expenses and how those expenses can change from year to year. Has your personal financial plan kept up with college inflation? If you or your spouse should die unexpectedly, will there be enough money to send your child to college? The same is true for your house. If you or your spouse should die unexpectedly, will the death benefit proceeds based on your current life insurance coverage be sufficient enough to help pay the mortgage?
of 11 These can be difficult questions to address because the answer can change over time. It is a good idea to talk to your financial advisor about your ongoing concerns. You and your financial advisor can decide what is important to you, analyze if anything has changed, and develop a plan to help meet your goals.
of 11 There are many benefits to developing a contingency plan. You and your spouse can prioritize the financial goals and objectives you have for your family in the event of an unexpected death. A contingency plan allows you to review your current assets and sources of income to determine if they are sufficient. In addition, discussing a contingency plan will provide a framework to review as your needs change over time.
of 11 If a spouse dies unexpectedly, there may be expenses that need immediate attention (outstanding debts, home or automobile repairs, funeral). Do you have the assets & cash flow to cover these expenses? Another major concern is replacing current income. If a spouse dies unexpectedly, will the survivor be able to pay the bills? Will the survivor be able to continue their current lifestyle? The loss of your spouse’s income could also affect your retirement plans. Will the survivor be able to generate enough savings to retire when they would like at the standard of living they would like? The same is true for college expenses. If your spouse dies, will the survivor be able to pay for college? If you have doubts about the answers to any of these questions, it is a good idea to discuss your concerns with your financial advisor. Let’s take a look at some of the topics you may wish to discuss.
of 11 The following topics are typical concerns for many families. Ask yourself: "How much money do I need to set aside for emergencies?" An emergency fund is cash or savings set aside for large unexpected expenses such as: · Major home repairs (roof repairs, appliance replacement, car repairs, etc.) · Medical expenses from a prolonged illness · Savings cushion to allow surviving spouse time to return to work A general rule of thumb is to have an amount equal to 3 – 6 months of living expenses. If you’ve paid off your mortgage, then the mortgage payment should be deducted from the calculation for 3 – 6 months of living expenses. Debts to Pay Off – Total the debts that you would like to pay off in the event of you or your spouse’s death. Debts that would be considered here are things such as: ·Credit Cards ·Auto Loans ·Line of Credit ·Student Loans ·Private Notes Funeral Expenses – Funeral expenses, final hospital expenses, and other miscellaneous expenses related to the death of a spouse. Nationally, funeral expenses range from $5,000 to $10,000 but vary based on location and family preferences. Estate Administration Expenses – Estate Administrative Expenses are transfer costs involved with "transferring" an estate to the heirs. Items that may be considered in this field would be: ·Estate Taxes ·State Death Taxes ·Probate Fees ·Legal & Administrative Fees ·Income and Excise Taxes Home Mortgage – What amount of the home mortgage do you want to "pay-off" in the event of your or your spouse's death? Do you want to continue to pay the mortgage each month even after the death of a spouse? Would you like to pay off a percentage of the mortgage to reduce the monthly payment? Education – Do you plan on funding your children’s college expenses? How much will it cost? Have you saved for college expenses?
of 11 The next major area of concern is income replacement. If either spouse dies, how will you replace the lost income? First determine how much each spouse contributes to the annual family income. Next decide how much of that income will be needed if either spouse dies. General guidelines are from 60% – 80% of income depending on the family’s goals. If a mortgage and other debt is to be paid off, the percentage of income needed may be around 60%. If a mortgage will continue even after the death of a spouse, the percentage of income needed may be 80% or higher. Some of the lost income may be provided by a Social Security benefit: In general, the following may be eligible for annual Social Security survivor benefits at the death of a worker: · Spouses age 60 or older (or 50 or older, if disabled) may be eligible for widow or widower benefits · Children under age 18 (or 19 if in high school) may be eligible for child's benefit · Disabled children, if disabled before age 22, may also be eligible for child's benefit · Spouses caring for children younger than age 16 may be eligible for a mother's or father's benefit College students are no longer eligible for benefits. Three children are the maximum that Social Security benefits consider in calculation of the maximum benefit.
of 11 The next step in developing a contingency plan is to identify existing assets that can be used to generate income and/or provide cash in the event of an unexpected death. Normally the family residence is not considered here since it is assumed that the family would want to continue to live in their home. Liquid Assets: Cash/Savings – Determine the cash and savings that would be available if either of you dies. Marketable Securities: Determine the market value of any stocks, bonds, mutual funds, etc. that would be available at the death of either you or your spouse. Retirement Plans – Determine the value of retirement plan assets. Retirement plans may include 401ks, IRA, Deferred Annuities, Deferred Compensation and 403Bs. Do you have Non-Cash Assets to liquidate? Non-cash assets (real estate, business interest, and other) are assets that may have outstanding loans or may need to be sold at a discount from their market value. You and your spouse may identify these as assets that would be sold or liquidated at death. Real Estate – Real estate such as a second home may be sold or liquidated at the death to generate income. Business Interest –Interest in a business may also be sold or liquidated at the death to generate income. Existing Life Insurance – Consider the death benefit amounts of all life insurance that would be payable at the death. Will this be enough to meet the financial planning goals of your family?
of 11 As you can see, there are many things to consider. If you already own a life insurance policy it is important to compare its benefits with your contingency plan. Your financial situation may have changed and it is possible that your current policy is no longer meeting your financial needs. Make sure you also discuss your goals with your financial advisor.
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![[object Object],[object Object],Investment and Insurance Products: Not a Deposit – Not FDIC Insured – Not Insured by any Federal Government Agency – No Bank Guarantee – May Lose Value Important – Please Read Pacific Life Insurance Company is licensed to issue individual life insurance and annuity products in all states except New York. Product availability and features vary by state. Individual life insurance and annuity products are available in New York through Pacific Life & Annuity Company. Each company is solely responsible for the financial obligations accruing under the policies it issues, and its product and rider guarantees are backed by that company’s financial strength and claims-paying ability. of 11 Address: 700 Newport Center Drive, Newport Beach, CA 92660 (800) 800-7681 Visit us at our Web Site: www.PacificLife.com Mailing Address: 700 Newport Center Drive, Newport Beach, CA 92660 (888) 595-6996 Visit us at our Web Site: www.PacificLifeandAnnuity.com](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)