Why We Have Life Insurance and a Living Trust

posted by Andrea | 04/24/2014

Living Trust

Back in January, I shared my “to-do before baby list” as motivation AND accountability for me to cross all those items off before Simon arrived.

Side Note: I’m happy to say that I was able to cross off every single item (except making his baptism outfit out of my wedding dress). I have the pattern all cut out, I just need to get my butt in gear and actually sew the outfit before his baptism on Mother’s Day!)

If you read my list, you’ll see that one of the items still listed as “in progress” at the time was setting up our Living Trust. At the time of the post we had started the process with a local attorney, but hadn’t fully completed everything yet.

I’m happy to report that we finalized all the details and signed all the paperwork a couple weeks before Simon arrived. Then I breathed a sigh of relief knowing that all our “ducks” were in a row and that if anything ever happens to Dave and/or to me, our kids, our finances, our house, and all our other assets will be “protected” by the terms and conditions of our Living Trust.

If something should happen to Dave and/or to me, it will be VERY easy for our immediate family members to get access to all our finances, our home, our vehicles, our life insurance, any of our other assets… and most importantly, our children. They won’t have to go to court to get custody of Simon and Nora, they won’t have to jump through hoops to have access to our financial accounts or to be able to sell our house, and they won’t have to wonder what we might have wanted — it’s all there, written up in black and white.

living trust table of contents

After I shared this to-do list here on the blog, I got several emails asking for more details about how/why we set up the Living Trust, when/why we got Life Insurance, etc. etc. — and while I’m clearly not an expert in any of this legal business, I thought it would make a good blog post topic.

So today, I’m simply going to share what WE did and why. I am in no way implying that you should do exactly what we did… because these types of legal business should definitely be handled on a “per-case” basis and (in my opinion) by professionals.

Life Insurance:

Many of you asked if we had life insurance… and what my thoughts are on this topic.

Dave and I both purchased a $250,000 life insurance policy shortly before Nora was born. Since Dave and I both made about the same income, we each purchased the same policy and we feel confident it will be more than enough if something were to happen to either Dave or me.

We pay approximately $250 per year total for BOTH of our policies combined — and although we can cancel at any time, they will automatically expire after 30 years.

The thought process behind this is that in 30 years, we won’t have dependent children anymore so if something happened to us, we wouldn’t need that money to support a family anymore. Also, our mortgage will certainly be paid off by then, and we hopefully won’t have any other debt to pay off. Plus, this money is just to SUPPLEMENT our income. For example, if something happened to me, Dave would keep working and the Life Insurance money would just be extra to cover funeral costs and then invest to help cover the lack of income from me.

That’s what WE do… here are a couple more things to think about if you’re considering life insurance:

The younger and healthier you are, the less expensive the policy will be — so I definitely don’t think it would be a bad idea to get life insurance before you had kids — however, I feel it’s absolutely necessary after you have children. I know I greatly appreciate the peace of mind it gives me.

If you’re a stay at home parent or someone else who doesn’t necessarily get a paycheck every week, I would still highly recommend some type of life insurance for yourself. Even though you don’t technically bring home a paycheck, the cost of all the work you do each day could potentially break your budget if something happened to you and your spouse had to either quit their job or hire someone to do everything you do :)

It might be smart to get a larger policy if you have a very large family, if you’re the main/only income, if you have a lot of debt, or if you’re living paycheck to paycheck.

I would definitely suggest working with someone face-to-face to set up your life insurance — and of course, working with a reputable company. I’m not sure I’d trust an online company or someone I didn’t know well.

Personally, I feel it’s smarter to set up a policy with a yearly payment versus a large lump-sum policy. Not only does it defray the costs a bit, it also gives you the ability to cancel at any time without losing out or being penalized.

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Living Trust:

 Before we even get started here, I just want to note that I honestly don’t know a lot about Wills or Living Trusts — which is why we paid a professional to set ours up for us (definitely money well spent!)

Some of you might be wondering if a Living Trust is the same thing as a Will — and the answer is ‘no’. They both have similar aspects — as in they both dictate where your assets will go in the event of your death. A Living Trust basically does everything a Will does… it just does it a lot faster and easier.

A Living Trust is somewhat expensive to set up (usually over $1,000) and there’s more paperwork involved up-front, BUT a Living Trust avoids the expense and delay of probate court, which could take up to 3 years to reconcile. So, in the event that something happens to Dave and I, our family members will IMMEDIATELY have access to our kids and our other assets without fighting for them in court and with our kiddos potentially going into foster care for up to 3 years (seriously, I can’t even imagine that!)

This is the main reason we chose to spend the extra time and money setting up a Living Trust. For us, it was honestly a no-brainer — if something does happen to us, we don’t want to put any extra stress on our family members or our children — and going to foster care, hiring lawyers, and going to court to get access to our assets certainly sounds stressful to me!

Like I mentioned above, I’m not an expert (we just paid an expert) so if you want to see an “at-a-glance” chart on the advantages and disadvantages of both a Will and a Living Trust, this article does just that.

That’s what WE do… here are a couple more things to think about if you’re considering a Living Trust:

If you have children and can afford it, I would HIGHLY recommend going with a Living Trust versus a Will.

I would most definitely want to work with a person face-to-face — not over the internet.

I would suggest “shopping around” and asking for recommendations from friends and family for good attorneys in your area.

Don’t be afraid to ask lots of questions if you don’t understand something or if you’re confused. If the attorney makes you feel dumb for asking questions or tries to beat around the bush, he/she is probably not the right attorney for you.

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Obviously, we hope the time and money spent on all this legal business is totally wasted as we certainly don’t want anything to happen to Dave or to me… but it’s definitely nice knowing everything is in order “just in case”.

I breathed a sigh of relief after we signed the final paperwork for our Living Trust. I felt like we did as much as we possibly could to make it super easy for our parents and siblings to “take control” if we’re not around anymore.

I realize it’s not a fun thing to think about — but Dave and I both feel it was/is important to have these things squared away and systems in place “just in case”.

What are your thoughts on Life Insurance, Wills, Living Trusts, etc.?

Oh, an along the same lines, here’s a post I wrote about how we organized all our important documents like our Living Trust.

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34 comments

  1. Katie Richards

    04/24/2014

    We also live in the Grand Rapids area and are expecting our second child in September. Setting up a living trust or a will has been on my to do list for the past two or more years. Are you willing to share who you hired to help you with this process? No one we know has hired an attorney for anything like this so I have no idea where to start!

    [Reply]

    Andrea Reply:

    Wesseling and Brackmann PC — I went to school with their kids and both our parents have worked with them too :)
    Congrats on the new baby-to-come!

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  2. Janet

    04/24/2014

    My parents had a trust and everything was so easy when they passed away. I could sell their car, truck, etc. I could access their accounts and divide the money between the 3 of us “kids”. Glad you wrote about it since my husband need to do this. We have a will now but I really think a trust would be easier for our sons. Will put this on my to do list!

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  3. Jen W.

    04/24/2014

    So glad you wrote on this….my husband is an estate planning attorney, and so often people just don’t think a will or living trust is really “that” important and/or don’t want to spend the money! Thanks for laying things out….it really does make a difference and it is money well spent!

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  4. Shelly

    04/24/2014

    I’m curious as to how you were able to finalize the trust before Simon was born? We weren’t able to make finalization to ours until after our son was born.

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    Suzi Reply:

    Just a guess, but I think that since they already had Nora, that the trust probably carries the legal name of “Dekker Children Living Trust” or something similar, that way if/when a new family member arrive that the trust and final will and testament does not need amended.

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    Andrea Reply:

    exactly :)

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  5. jaime

    04/24/2014

    Thanks for this! Quick question what types of documents should I gather for a living trust? We havent started looking for an attorney- but I could start getting all the paperwork lined up.

    Thanks!

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    Andrea Reply:

    You’d want to find an attorney first — then THEY will tell you what specific paperwork you need. It all depends on what type of will or living trust you’re setting up :)

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  6. Nora

    04/24/2014

    Generally speaking, I think a will makes sense if you are single or married with no dependents.

    We got a will, financial power of attorney and health care power of attorney, shortly after getting married. We were 24/26 and are only big asset was our home. In our will we were able to provide a lump sum for someone to care for our dog, The rest of the money went to charity. I would not have felt comfortable with just a will, if we had children or had complicated financial dealings.

    I know many people who won’t invest in estate planning because of the expense, if you can’t afford to do a trust- you should have your will and health care power of attorney done.

    [Reply]

    Andrea Reply:

    I agree… with everything :)

    also, I think it’s great that you even have money set aside for someone to care for your dog — now THAT’S planning ahead!

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    Nora Reply:

    LOL!

    The person runs a pet rescue and she would take our dog for free. However, i wouldn’t want our pet(s) to be a burden, so we decided on an amount that would cover food and normal medical costs…

    Although, I guess I am a pit of a planner as I already picked out my casket (http://mariancaskets.com/).No, not planning to go, anytime soon:)

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  7. Meredith

    04/24/2014

    I am a lawyer; almost everything you wrote here is accurate, but your kids would (in all likelihood) NOT go to foster care. You are correct that it can take many years to establish guardianship and it is definitely beneficial to have the trust which outlines your wishes, but foster care only takes children who don’t have any family members to take them. The living trust allows you to dictate your first and second choices for guardianship for your children, but if you did not have that the default placement would be with grandparents, an aunt or uncle, etc. Where the trust comes in handy is that if, hypothetically, both Dave’s parents and your parents wanted guardianship of the children, a protracted court battle would be avoided because you have already made that decision. Just wanted to clear that up.

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    Andrea Reply:

    Thanks Meredith! I’m glad to know that even without the Will or Living Trust that kids would get to go to grandparents first!

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  8. Bev @ The Make Your Own Zone

    04/24/2014

    Thanks for sharing this Andrea. I work as a legal assistant and I would say 90% of the folks who come in our office to get their trust and estate planning documents set up are elderly people. It’s great that you have been proactive and have gotten your affairs in order already at this stage in your life. I would add that I think it’s always important to seek legal counsel when setting up your estate planning documents. Even though there may be free document templates available, an attorney has a much wider scope of knowledge and at a consultation will almost always bring up things you may not have even thought about (that you should be thinking about!) Again, kudos to you for taking care of this important step.

    Make sure your power of attorney docs or medical directive documents can be easily found by family members in case of an emergency – but of course I don’t need to tell you that ! :)

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    Andrea Reply:

    Thanks Bev… and yes, we have extra copies of our documents specifically for a couple family members — plus we have the originals (and they know where to find them)

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  9. Sherry

    04/24/2014

    I highly recommend getting life insurance when you are younger. We just went through the process of trying to get new life insurance (my husband and I are in our 40′s). A new broker noticed that we were paying too much for our old policies and he could get the same coverage for us for about half the cost. We both applied for the new policies but because hubby has been diabetic for the past 5 years he was denied. Fortunately we still have his old policy so we are fine.

    However, when my husband was diagnosed he was not overweight nor was there any history of diabetes in the family. His blood sugar is under control and he only takes a pill in the morning and evening but they still denied him and stated that they would never approved him even in the future. Because of this denial other insurance companies will not even look at him either.

    Thank goodness we got life insurance while we were young and healthy!

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  10. Debbie

    04/24/2014

    My parents also did a will, financial and healthcare power of attorney. Since we don’t have children this is probably the best for us too. My husband and I are fortunate enough to both have life insurance through our jobs. Guess we’ll need to work on the other ones.

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    Andrea Reply:

    Hey Debbie, One thing to think about is what happens if you ever lose your job or quit?

    Dave also has life insurance through his work — and I had life insurance through a previous job when we set up our policies. However, we both wanted to have a separate life insurance policy set up in case we lost our job or wanted to quit. In my case, that was a really good decision because I did end up quitting that job soon after Nora was born and as my blog continued to grow.

    If I hadn’t purchased my “extra” life insurance policy when I did, I would have had to pay more for a policy later on because I had moved up to the next age bracket by that time.

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    Debbie Reply:

    That’s a very good point, Andrea. My life insurance is portable so if I do leave my job I can make it a personal life insurance and it would be in the same low rate as it is now. I’m not sure about my husband’s. I’ll have to ask him on that one. Thanks for all this info.

    [Reply]

    Andrea Reply:

    wow, that’s awesome! Our insurance policies weren’t like that (bummer) but that’s a sweet deal for you!

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  11. Terry

    04/24/2014

    This is a wonderful post about a topic that is probably difficult at best and completely taboo at worst in many families. Death and dying can be too frightening to think about, but arrangements such as you have made are truly a gift to the ones left behind. I strongly encourage anyone considering life insurance to take out more than you think you will need. While many of the financial components of life after a terrible loss can be tallied, the emotional toll simply cannot–and the costs of such a toll could be higher than one can imagine. It may be extremely difficult to continue working at the same level for quite a while following a death, or counseling (particularly for children) for an extended period–maybe years–may be necessary. After a devastating loss, it can be much easier to chose the easiest way to deal with life for a while, such as going out to eat rather than facing the grocery store and/or kitchen or feeling the need to get away for a while rather than face the empty side of the bed. And because the cost is not terribly expensive for younger policy holders, my guess is that if tragedy does strike, no one will ever think “I wish I didn’t have this ‘extra’ cushion,” but MANY may think, “oh I wish I had more.” Just food for thought for anyone considering this option.

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  12. Mel

    04/24/2014

    I’m an attorney and do work in family law, estate planning, and business planning. I think your advice is spot on. Of course, it will not work for everyone, but you did a great job of laying out the basic pros of getting life insurance and a living trust. I especially appreciate that you recommend being picky about the attorney – there is such a thing as someone who is not the right fit and so often people just blindly trust their attorney because of the degree behind their name. Scrutinize your choice just like your doctor or your beautician or your plumber. Don’t just settle for the first one who offers the service! Great advice!

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  13. Laura

    04/24/2014

    Hi Andrea, thank you for this info. Its really helpful. What company did you purchase your life insurance policies through?

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  14. Amanda

    04/24/2014

    This is a great reminder. My husband and I have been meaning to set this up since our son was born (a few months after Nora). We just need to sit down with someone and hammer it all out. Our biggest struggle is who do we leave our kids to. We’ve talked about it multiple times, and it’s hard to come to a decision – since our parents are beginning to get older, it will likely have a contingency clause in our documents.

    I will say that my parents did a great job setting up their documents. Because I’m the executor of the estate, and the secondary decision maker (they are each others primary, so I only come into play if something happens to both of them), I have all of the documents, and the spell out their wishes, etc. Since we don’t see eye to eye on all end of life decisions, I feel like the documents can remove any guilt I might have over having to make decisions (if that time comes), because truly they’ve already made decisions, and I’m just carrying out their wishes.

    Also, if you haven’t yet, make sure that the people who will be in charge of your trust and children have copies of your documents, just in case.

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  15. Leanne

    04/24/2014

    this was such a wise post! we set up our will and power of attorney and an advanced health care directive shortly after our oldest was born…. especially because we did not have siblings to take our children in the event of our untimely death… we also, picked a person that we both trusted… to be our “decision” maker in the event we were in the hospital and the “worst” had happened. I am always so surprised at the number of people who do not do this… it can be a little costly, but nothing compared to the burden your children and relatives would have to bear without these documents…

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  16. Melinda

    04/24/2014

    Great post Andrea!

    Since a few attorneys have chimed in here, I’d like to ask a question. We’re often told that getting a Will and other important papers together are a must, but we aren’t always told the reasons why we need them.

    Can any of you tell us what difference it makes if you die without a Will compared to dying with one? I need to convince a few people around me, what the family will have to go through if they don’t have a Will or these other documents, even if they are a single person. It is my understanding that you don’t do a Will for yourself, you do it for anyone you leave behind.

    Thanks for any examples you can offer to us!

    [Reply]

    Andrea Reply:

    Well I’m not an attorney, but from what I understand, the reason you make a Will or Living Trust is to make life MUCH MUCH easier for your family in the event you die. They will know what you want and won’t have the burden of making those decisions for you (plus it will save them tons of time, energy, stress, and money)

    So basically, if you die without a will, life will be more difficult and more stressful for the family members you leave behind. And if you have small children in the mix, your family members could end up in court if they are “fighting” over who should get custody.

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  17. Kelly || Old Blue Silo

    04/24/2014

    Andrea, this is wonderful. I am glad you took responsiblity and did this for your family! I am not a parent but I think about this topic a lot and hope/pray that my friends have done the same as you.

    My husband and I do not plan on having kids anytime soon if at all. However, we have a nice home, nice vehicles, farm ground (4th generation) and tractors. We’d like those things to go to certain family members over others. We aren’t quite sure which route to go. We keep putting it off and dragging our feet.

    Definitely not fun to think about but it needs done.

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  18. Anonymous

    04/24/2014

    I would like to anonymously make another point. When our child was young, we did a trust also. Part of this reason was so when he became 18, he wouldn’t spend all the money at once. It sets parameters in place for when he gets the money. However, several years later, he got involved in drugs. So this way, there will be a trustee to take care of that – also another reason for him not to get a bunch of money.

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    Amanda Reply:

    My parents set up the trust similarly, because my younger brother has some questionable judgement and is a horrible money manager. Their thought was to try to protect him from himself (and they knew that it wouldn’t bother me at all, because I’m wiser about financial things anyway). The way it was set is that if they died, we got $X/yr until we turned 25, at 25 it increased to $Y, and then at 30 (or maybe its 35? I’d have to look), we’d get a lump some payout. My parents figured that if he wasn’t mature enough at that point, then he was never going to be mature enough.

    However, once he’s 18, if he’s listed as the beneficiary of the trust, whomever was the guardian of the trust would no longer get the money – it would go straight to him. That’s why we have the stair stepping payouts. If we had been minors (my brother is entering his late 20s at this point), my uncle, who would have been our guardian would have been in charge of the trust. At this point, because we’re both adults, my uncle wouldn’t see any of it, because we’re the beneficiaries of the trust.

    [Reply]

    Andrea Reply:

    Great point — thanks for the information. We have something similar set in place so our children will get a small portion of the money/estate at 18 an then some at 25, and then the rest at 30.

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  19. Stacey

    04/25/2014

    Great post!
    Could you share who you used for your life insurance?

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  20. Elyse @ The Benefits of Balance

    04/25/2014

    That’s a really interesting bit of information to sink my teeth into. My fiance and I don’t have kids yet and had never even considered life insurance or a living trust at this point in our lives but it does make sense seeing as how we both have student loan debt, a mortgage, etc. I may have to add this onto my “to do” list! Thanks for sharing, I’m all for having my “ducks” in a row as well!

    [Reply]

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