they’ll be one child born in this world to carry on”
-Laura Nyro (Blood, Sweat and Tears)
Like most people, I recognize that I am going to die someday. Unlike most people, I have a lot of life insurance.
I started my financial planning career with a company that focused on life insurance, and ever since then, I’ve been a believer.
I have purchased a number of life insurance policies to achieve different goals.
I have a policy that will help endow a law school scholarship named for Peter Perlman at the University of Kentucky. Pete is a former president of the American Trial Lawyers Association, and he was instrumental in launching my career.
I also have a policy that will pay to a charity and another that will support the scholarship fund named for my mother and sister’s scholarship at Eastern Kentucky University.
Few people think to purchase life insurance policies for their charitable donations, even though the concept has tremendous tax and planning benefits.
The concept of buying life insurance unnerves most people.
Life insurance forces people to deal with the idea that death may come and come in an untimely fashion. Although I was very good at it, selling life insurance was the hardest thing I ever did.
It was impossible for some people to get their arms around dying. I had a medical professional spend hours explaining how he was sure he was going to live to 90.
He died at age 50. I hope someone convinced him to get insurance, but I suspect they never did.
Although I am going to help charities and do other things, the bulk of my insurance is designed to assist my family. Most people buy life insurance with their family in mind.
I don’t think that as many think about the next step.
What will the family do with the money?
When you hear that 90% of people who receive a lump sum will blow it in five years, some people conclude that life insurance is futile.
Why give your family a lump sum and have them blow it?
Most insurance policies have options to pay out over time, but few people use them. It limits them to the terms, rates and restrictions of the insurance company.
Thus, I came up with a simple system. My life insurance is owned by a trust.
When I die, the trustee will buy annuities for the beneficiaries. The annuities will pay monthly for the rest of the beneficiaries’ lives and increase at 3% a year.
When I die, I want to assure those people will have money for the rest of their lives. They won’t be susceptible to quick-buck artists and outside pressures.
A lot of hasty decisions are made when a family member dies. Many of them are bad. There seems to be an army of vultures waiting to prey on the vulnerable.
It almost happened to me.
When my mother died, a “friend” who I had not seen since the 8th grade started calling. When I didn’t immediately call back, he had his elderly mother call.
He wanted to buy my mom’s house. He wanted to make sure “that someone from the neighborhood” lived there.
I almost bought the story. It is a wonderful neighborhood and many of the neighbors have lived there for 30 or 40 years. One of them painted my mother’s garage (for free) and it has a real sense of community.
I thought he wanted to move back. It turns out he wanted to get “a deal” so he could turn the house into cheap rental property.
It would have been tough for a person off the street to con me, but it is a lot easier for a “friend” to do so.
As Glenn Frey once said, “The lure of easy money has a very strong appeal.”
I don’t want my family to be in a position where a “friend” can burn them after my death.
That is why the combination of life insurance, a trust and lifetime annuities works for me.
I know that when I die and when I am gone, money will be in the hands of my loved ones to help them carry on.
Story Behind the Song
Four years ago, I was stuck in Plano, Texas and went into a small bookstore. I had five dollars in my wallet and the store did not take credit cards. Thus, I wound up selecting a biography of Laura Nyro in the $3.99 discount bin.
It was a great choice. The book was an interesting glimpse at one of the greatest songwriters of the 1960's. She "retired" from the music business at age 24 and died at 49 (in 1997) but her brief career was peppered with hits.
Media mogul David Geffen started his career as her manager.
Here a link to the biography I enjoyed so much:
Soul Picnic: The Music and Passion of Laura Nyro
The late Gene Snyder was my congressman for most of my early life. He would frequently send out polls with questions like "are you in favor of giving away the Panama Canal?". He would later send out a note that 98% of his constituents did not want the Canal given away.
I am afraid that my polls last week were out of the Gene Snyder model. 96.6% of the people who responded think that Pike County, Kentucky should sue the makers of OxyContin while 96.3% think that Ralph Nader was a factor in George Bush becoming President.
This week, I ask a simpler question.
Do you have life insurance, other than insurance offered by your employer?
My second question is part of another project.
Do you think state lotteries should be outlawed?
To vote in this week's poll follow the link below. The poll will be on the left hand side of the web page.
I hit all of the topics from this week's column in an article I wrote several years ago for Best's Review, a magazine published by the A.M. Best Company. You can read a copy of the article by following the link below.
Advice for Injury Victims
Life Insurance Trust
This week's column makes a reference to a life insurance trust that I used. I think it is a simple but excellent way to assure that my family is taken care of. If you want a prototype of what I did, email firstname.lastname@example.org and let me know. I will have to make it very generic so that I don't disclose any personal information but it will give you an idea.
Don McNay is the Chairman of the Board for McNay Settlement Group in Richmond, Ky. He is the author of The Unbridled World of Ernie Fletcher. His award-winning syndicated column appears in over 200 publications.