Marty, 21 years old, Lewis, 15, and Kevin 10, just loss their mother to cancer. Marty now has the responsibility of raising her younger siblings without the assistance of any relatives and a father who whereabouts are unknown. Marty=s only source of income is from her job as a beautician.

The mortgage on the home is due, along with other household bills. Matters that were taken care of by her mother now must  be handled by her. The life insurance policy carried on her mother=s life was just enough to cover the burial and a few miscellaneous expenses.

This scenario is occurring more frequently than one may think. Obtaining the right type of insurance has become an important tool in estate planning. Anyone who is buying a home should invest in purchasing mortgage life insurance especially in connection with the family home.

Mortgage life insurance is different from homeowner=s insurance. Homeowner=s insurance covers loss due to damage from fire, floods or other disasters to the home. Mortgage life insurance covers the amount of the existing mortgage on the home. It protects the family financially by paying off the balance or portion of the mortgage if the mortgage holder dies.

Secondly, the family is not forced out of their home, therefore hasty and desperate decisions can be avoided. The mortgage has been paid in full and the family now has time to decide on what to do next.

 Purchasing adequate life insurance is another great tool to assist in planning one's estate. Too many of us do not have enough life insurance. There are several reasons why it is important to own adequate life insurance.

          
The question here is, if I died last night, would my family have enough money to survive? Would there be enough money to provide for their minimum needs? Could they live a decent life and pay for outstanding debts?

As for our story, Marty and her brothers may lose the family home. Had their mother purchased enough insurance to cover the mortgage upon her death and everyday living expenses for her children, the family would not struggling to survive.

We must resolve to prepare and plan for the unexpected. We must also resolve to do this today. Taking small and consistent steps to organize our family affairs would go a long way to protecting our love ones from facing other tragedies after we are gone. Reviewing our insurance policy and determining whether there a need for additional coverage is a step toward this goal.

By taking steps in advance, you have a greater say in how these questions are answered. And isn’t that how it should be?
 Wills and trusts are two of the most popular estate planning tools. Both allow you to spell out how you would like your property to be distributed, but they also go far beyond that.
Just about everyone needs a will. Besides enabling you to determine the distribution of your property, a will gives you the opportunity to nominate your executor and guardians for your minor children.

If you fail to make such designations through your will, the decisions will probably be left to the courts. Bear in mind that property distributed through your will is subject to probate, which can be a time-consuming and costly process.
Trusts differ from wills in that they are actual legal entities. Like a will, trusts spell out how you want your property distributed. Trusts let you customize the distribution of your estate with the added advantages of property management and probate avoidance.

Wills and trusts are not mutually exclusive. While not everyone with a will needs a trust, all those with trusts should have a will as well. 

Incapacity poses almost as much of a threat to your financial well-being as death does. Fortunately, there are tools that can help you cope with this threat.

A durable power of attorney is a legal agreement that avoids the need for a conservatorship and enables you to designate who will make your legal and financial decisions if you become incapacitated. Unlike the standard power of attorney, durable powers remain valid if you become incapacitated. 

Similar to the durable power of attorney, a health care proxy is a document in which you designate someone to make your health care decisions for you if you are incapacitated. The person you designate can generally make decisions regarding medical facilities, medical treatments, surgery, and a variety of other health care issues. Much like the durable power of attorney, the health care proxy involves some important decisions. Take the utmost care when choosing who will make them.

A related document, the living will, also known as a directive to physicians or a health care directive, spells out the kinds of life-sustaining treatment you will permit in the event of your incapacity. The directive creates an agreement between you and the attending physician. The decision for or against life support is one that only you can make. That makes the living will a valuable estate planning tool. And you may use a living will in conjunction with a durable health care power of attorney. Bear in mind that laws governing the recognition and treatment of living wills may vary from state to state.

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. 
This material was written and prepared by Emerald.
© 2011 Emerald Connect, Inc.