Welcome and Guest Introduction
Brandon Lawrence:
Hello everyone. Welcome back to another episode of Protect Your Nest with Brandon Lawrence, the lawyer for the city. I’ve got a great friend of mine here with me, Ms. Denise Bentley, and we’re going to talk about some insurance today, how insurance and estate planning go together. Welcome Ms. Bentley, how you doing?
Denise Bentley:
Thank you so much for this opportunity. I appreciate you inviting me.
Brandon Lawrence:
Well, no problem. Thanks for coming out in the snow today. If you guys know around this time of the year, we can get any kind of weather and today we got it. So we’ll start it off. Ms. Bentley, you’ve been in the insurance industry for quite some time and you work with a diverse group of people as far as the insurance that you provide, the services that you provide for these individuals. Now, like I said, we’re here to talk about how we can integrate some insurance and estate planning. One particular area that’s a way to integrate insurance (I’m talking from the aspect of life insurance), we can integrate that with estate planning.
As far as with the life insurance policy, it’s my understanding, you can clarify for us, it’s my understanding that within probably within a shorter amount of time, the life insurance policy will take effect and be able to be accessed by beneficiaries while the estate portion of a person’s, whether they’ve got a Will, whether it’s a contest or some other type of legal action is pending. Beneficiaries can access the life insurance proceeds while that is going on in order to pay some bills or whatever they need to do. Is that true?
Types of Life Insurance Policies
Denise Bentley:
So yeah, it is true. And there’s several types of life insurance and I think that’s important. But I think the most important step is that people realize that we need some level of life insurance as we talk about estate planning and what happens when people transition. And so, we often see TV commercials about for $9 a month you can get this coverage for your parent, things of that nature. That’s real. But I think it’s important to understand that that’s what we consider a “burial policy.” And a burial policy does just what it says. It’s supposed to cover the cost of your transitioning. And so I think the key thing is Brandon, is first we need to get of the mindset that we do need life insurance. And I want to say this, that GoFundMe is not life insurance. That’s not part of estate planning. So we need to make sure people understand that.
So when we talk about accessing the benefits, if it’s a burial policy, most of the time there’s a designated funeral home or funeral service that is the beneficiary. So if it’s about the cost of putting your loved one away, then that’s usually covered as the beneficiary or the designated person. And sometimes it’s called a “pre-need policy.” We’ve heard that name quite a bit of having a pre-need policy. So that’s part one.
And then we have other types of life insurance, and we’ll talk about the two most common, which is term policies and whole life policies, two different types of policies, two different types of processes. So it depends on where you want to go with this as it relates to estate planning.
Brandon Lawrence:
Okay, absolutely. So we’re talking about, okay, a burial policy is basically a bare bones policy.
Denise Bentley:
It could be bare bones, it could still have some type of a benefit to pay off bills to pay off credit cards. But the purpose of it is for the burial because what do we see so often when people transition is that people are saying, how do I pay for this funeral? How do I put my loved one away? So if you have that pre-need or burial policy, that should cover that. And sometimes there’s some residual that you can use for other things.
Affordability and Policy Selection
Brandon Lawrence:
Okay. Now as far as these policies go, you talked about the burial policy, whole life, term life – term insurance policy – as far as affordability, people may believe, I don’t know, that it’s beyond their reach as far as acquiring these types of policies. Now you mentioned $9. Are these policies beyond someone’s reach to even start to think about or even make an attempt to do?
Denise Bentley:
So, I think that’s a good question. And so when you see the advertisements to call this company and it’s $9, as little as $9, you really need to redefine print because it’s usually $9 per thousand dollars of coverage. So if you need a $10,000 policy, do the math. That’s what it’s going to cost you per month. So those are just advertisement push people toward thinking about insurance.
Term vs. Whole Life Insurance
Denise Bentley:
I tell people all the time, if you do not have a wealth of money, but you want to make sure that you can leave something for your family, then look at term policies. Term policies are a lot of coverage for a little bit of money, whole life policies, you can get the same amount of coverage, but it’s going to cost more because it gains cash value. So we hear about people that buy whole life policies for $250,000-$500,000 when they have kids when they first become parents, and they let that build over time and you pay on it forever, but it has a cash value. So when it comes time to send little Johnny to college, you can borrow against it. Term is just what it says. It’s usually a 20-year term policy. It’s a lot of insurance for a little bit of money. And depending on when you start that term, it can be as low as $15 or $20 a month.
Brandon Lawrence:
Okay. So these basically you have to do your research in order to find out what policy is best for you.
Denise Bentley:
You have to do research, but you have to think about what’s the purpose? What are you trying to accomplish? And so if you’re a husband and wife with two or three kids and you are the husband or you’re the wife and you’re the breadwinner, then you need to say, okay, if something happens to me tomorrow, will my kids be able to go to college? Will my spouse be able to pay off the home? Those are the types of questions that you need to have. And so when you’re 30 years old and you’re a family with children, and when you’re 60 years old, the difference is there’s a difference in what you really need. Because I tell people all the time, they always talk about wanting to be able to leave something for their kids. And I understand that, but I think when you have to make choices about how much money you’re going to spend, you think about, okay, your kids are one when you first get your policy, but now it’s 30 years later, your kids are 30, you’ve put ’em through college, they’ve gotten married, they have their own family.
Do you need that same level of coverage? Is it as important to leave that for your family? And so those are the things that I think people need to think about. But keep in mind, if you buy a term policy, let’s just say you buy term policy at 25 years old and it’s a 20-year term and it’s for a hundred thousand and you’ve paid $12 a month, when that 20 years is over, the insurance company is going to rate you on your new policy at the age of 45, because it’s 20 years later. So if you’ve had some health issues, if you’ve had some things that would raise an eyebrow with underwriting, it’s going to cost you more. So you have to weigh what you want to do.
Brandon Lawrence:
So basically the type of insurance that you get as you get older, whether it’s a term, well, whole life is going to carry you throughout.
Denise Bentley:
It’s just what it says whole life.
Brandon Lawrence:
Your Whole life. But term it could be a 10, 20-year term.
Denise Bentley:
Exactly.
Brandon Lawrence:
And when that term ends, it could be more dependent upon your lifestyle.
Denise Bentley:
Exactly.
Brandon Lawrence:
Okay.
Denise Bentley:
And health issues, things of that nature.
Brandon Lawrence:
Right, because life happens.
Denise Bentley:
Yes.
Brandon Lawrence:
So also the family dynamic could change in between that as well. You have more children. You get a divorce. Your spouse could predecease you. And you’ve got to, in these instances, you’ve got to constantly adjust your financial plan and your insurance plan.
Denise Bentley:
You sure do.
Brandon Lawrence:
And your beneficiary.
Denise Bentley:
You sure do.
Brandon Lawrence:
So because those things happen. And as well, I know that because my dad, he’s in the insurance industry and he’s told me he always had talked about a term. “Buy term invest the difference.”
Denise Bentley:
That’s the old style.
Brandon Lawrence:
Okay, that’s the old, yeah, because he was back in a little bit back in the day. So as far as to incorporate the insurance and the estate planning, I’ve discussed this for a little bit about the insurance could come into play prior to while the estate is going through, whether it’s a Will or something like that.
Now, as far as say for instance with the insurance, does the insurance, that insurance, well, the insurance can also come into play if you got an individual, maybe a child with special needs, something like that. I know in the estate planning portion you can have a special needs trust, and then if you are an older person or a person in need that is in need of Medicaid or you’re getting SSI or something like that, and you don’t want that to go into, you don’t want that to count against you as far as the limits, the $2,000 or $3,000 limit, the monthly that the government allows you to have.
Now is the insurance a way to protect that I know would be some type of trust, a special needs trust or irrevocable trust, things like that where the insurance, if something happens and you are able to access the insurance portion of it, that will not affect your standing, as far as SSI, Medicaid, that type of thing.
Have you run into situations where you have individuals that are in these types of situations as far as special needs, or they’re saying, Hey, I want to do something with Medicaid, or I’m going into a nursing home with insurance, with any type of insurance deal with those situations?
Denise Bentley:
So we do run into those situations and I as an agent, always refer them to an estate planning attorney. I mean, that’s not my job to give them legal advice. There’s a couple of things I think is important because I don’t want people to perceive that it happens like you buy a policy and unfortunately your parent transitions and within two weeks you have a check. That’s not how it works. And so there is some delay even with a state when you’re going through probate and things of that nature.
Insurance Underwriting and Contestability
Denise Bentley:
There’s a couple of things that people need to understand, and there’s two contestability periods. One is a suicide contestability clause. It’s in every life insurance policy. So that’s important for people. And we used to not talk about that a lot, but as times have changed, we’re seeing more and more people commit suicide. And so that’s important to understand. The second thing is if you didn’t disclose something, so it’s not an automatic just because you get an insurance policy. So let’s just say you answer the question, are you a smoker as no, and then six months later you die of lung cancer. That’s going to present a problem. And I think it’s important to put that out there.
Because of the way times have changed, one of the things insurances look for, insurance underwriters look for in your blood work is whether or not you’re HIV positive. That affects whether or not an insurance is willing to issue that policy.
So, there’s things that people need to understand. But in the event that everything’s okay and that the policy is issued and your loved one passes away, it is usually a process of course, of having to get death certificates, things of that nature, prove that you’re the person that’s supposed to be the beneficiary. And that can take maybe three to six months. So it’s not an instant. I want people to understand that. But anytime the question of estate planning, how do I make sure that my special needs person is taken care of or how do I make sure that I can leave this money without any repercussions from the government? I recommend people to people like you.
Brandon Lawrence:
Okay. So you do work in certain situations, you work hand in hand with estate planners is when those situations come up?
Denise Bentley:
The family works with them.
Brandon Lawrence:
Oh, the family. Okay. So that right. Okay. I understand what you’re saying. So as far as going, as far as the time, you say three to six months, people have to do a bit of legwork when something happens, when a person transitions and a beneficiary is already named in the insurance policy, they have to do some things as far as some prerequisite things as far as getting death certificates and other paperwork to one, demonstrate that the person has passed and two, what other reasons would that just be the only one people wanting to make sure that the person is deceased before they send anything out?
Denise Bentley:
Well, they’re certainly not going to send it out without proof of the person passing. So death certificates are usually the first thing insurance companies ask for. And because oftentimes there are rifts with families about he wasn’t supposed to be named and I was supposed to be in the Will, the insurance company is very, very diligent about making sure that the person that they write the check to is that person and that is the beneficiary.
You talked about something, life changes. People get married, people get divorced, people have children, they have children outside of their marriage while they’re married. It is important if you have insurance to review your insurance at least on an annual basis and look at your beneficiaries and maybe things have changed. It’s changed in my world. My kids were my beneficiaries, Candace and Marcus, Candace and Marcus are now 40 and 36. They have their own family. So guess what? I reviewed everything and now it’s about the grandkids. It’s important to review that and look at it. And it’s not about them having the ability to ride off into the sunset and be rich kids and trust fund kids. That’s not going to happen. I’m not that type of person, but it’s just knowing that I’ve done what I was supposed to do for my kids and now I want to leave something, some type of legacy for my grandkids.
And so often we don’t do that. And then you know that we get into the issue and that’s a legal issue of you’ve left stuff to your children, your children are now pre-deceased you, and then you’ve got all these other people that are trying to fight for that money, but the insurance company’s like, look, this is what we have and this is what you should have done.
Brandon Lawrence:
Okay. I understand. You mentioned legacy. Legacy is important to you, and I don’t know if it’s important to everyone, but people that acquire these policies do estate planning and prepare for situations responsibly. Legacy usually is important to them. Do you find that when you sit down and talk with someone about their insurance information and what they want to do that the legacy that they leave is important to them?
Denise Bentley:
No, life insurance is probably one of the hardest insurances to sell, and that’s unfortunate. I think one of the reasons is the lack of understanding and education, which is why I’m glad you’re doing this. But I think that we just sometimes don’t want to discuss or face our own mortality. So I hear those excuses of I don’t care what happens once I leave here or I’m not leaving any money for him to be with another woman. All those things I hear, and it’s not about that and I just can’t drill that in your head enough. It’s not about that.
It’s about making sure that when you leave here, that your life, your bills are not someone else’s responsibility. And that’s so hard, and that’s part of it for me. But if I can leave my grandkids something that they can buy a house with or use for a down payment or start a business with, that’s important to me. It’s not important to everybody, but it’s important to me. But it is a hard nut to crack to get people to talk about their mortality and what they should prepare for.
Brandon Lawrence:
So I also understand once you sign something as far as on the insurance end, when you sign it and name somebody a beneficiary, that beneficiary trumps everything. Even if you got a Will and says, I want to leave insurance proceeds to X, if you sign with the insurance company, I want to leave those insurance proceeds to Y, that is what they’re going to do. Is that right?
Denise Bentley:
That’s what the insurance company’s going to do. But I’m sure you’ve seen fights among families based upon what the Will says and what the insurance policy says or what was said privately. That seems to be the biggest argument with families is she told me something different. The insurance company is going to go with what’s on that contract and that’s what they’re going to do.
Brandon Lawrence:
Alright, so that’s an actual contract. Okay.
Denise Bentley:
So offer and acceptance. Yes.
Reviewing and Updating Beneficiaries
Brandon Lawrence:
Right. So you mentioned that, of course, we all know things change in our lives. How do you go about, you said review your insurance every year. How do you go about changing the beneficiary?
Denise Bentley:
You contact your agent. You contact your agent, or you can contact with most companies the home office. But it’s not just you picking up the phone saying, I want to take Susie off and put Johnny on. There is once again a contract. There’s paperwork, there’s notaries, there’s all those types of things. But it is important to review it. And if you want to make changes, it’s important that you notify your agent or the home office and do it the correct way because that has happened. It has happened where they’ve talked to their agent, the agent knows they’ve talked to them, but they didn’t go through the formal paperwork, the contract. And so the family is saying, no. I was sitting right here when they called their agent and said, take Johnny off and put Susie on. It doesn’t really matter.
Brandon Lawrence:
Okay. Just one more issue. If the beneficiary predeceases the person that’s insured, what happens then? You got to go in and do the same? You got to go through that process of changing them or would the insurance company contact? Well, they wouldn’t know. You’ve got to contact the insurance company and do what you just talked about.
Denise Bentley:
And that’s more of a legal question, but I’m going to try to answer it. I’m not a lawyer, but I think it’s important. If the beneficiary has pre-deceased the person that the policy is issued for and they did not notify their carrier, their insurance company, then I think that’s when they get into the legal of beneficiaries of the beneficiaries are the one or the next in line.
Brandon Lawrence:
Okay.
Denise Bentley:
And you may want to explain it to people because kind of complicated with that.
Brandon Lawrence:
Well, no, I think it’s pretty straightforward. Well, from what you said earlier, if you know your beneficiary is deceased, you need to go in there and change them.
Denise Bentley:
But if by chance that doesn’t happen, that doesn’t mean that the insurance company keeps the money because you didn’t have a designated beneficiary that could receive it, then it would go to their beneficiaries.
Brandon Lawrence:
Oh, okay.
Denise Bentley:
That’s what I want you to help people understand.
Brandon Lawrence:
It goes down, okay. It passes from that beneficiary to whoever they’ve got, their children or a wife or whoever. Okay. I got you. You’ve given us a lot of knowledge from your years of experience, and I do appreciate that. I appreciate you taking the time today to do this, on this snowy day. How do we get in contact with you, Ms. Bentley?
Denise Bentley:
Okay. So I am a licensed life, property and casualty agent here in the Commonwealth of Kentucky. I can be reached at (502) 554-5038 and I appreciate you giving me that opportunity to give my number, but some people are very comfortable with who they have now as your insurance agent. I just want to urge people to have that conversation and realize it especially, and I don’t know who your audience is, but it’s so often, as I said in the beginning, GoFundMe is not an insurance policy. And so it doesn’t take much to bury your loved ones. It does take the time for you to get a policy, whether it’s a term policy, especially if you know that people have a lifestyle that they may need a life insurance policy, spend that $15-$20 a month to make sure that you can do what you want to do with your child or with your loved one in the event of their death and that it’s not a public burden.
Insurable Interest Requirements
Brandon Lawrence:
So that leads me to another question you just mentioned. If you have to have an insurable interest on a person to take out a policy, so if you do have an insurable interest, you could take, even if your child has maybe a risky lifestyle, if you have an adult child, you can take out a policy on that person. Is that right?
Denise Bentley:
As long as they give you permission. If they’re under 18, I can’t take a policy out on you because we have no relationship or whatever and there’s no insurable interest. But if I have a 20-year-old child that I think I better get some life insurance or I’m going to be stuck with a bill or that they have children that I’m going to end up having to take care of, I can get a policy on that person that is an insurable interest, but my child has to give permission.
Brandon Lawrence:
So these are serious things that you’re talking about. They’re important things and because they’re important, they might take a bit of time to do, but it is worth the time to do all these things that you’ve talked about today.
Denise Bentley:
And when we have our children, you see these commercials to get your child a policy, those are fine and I think it’s great and they’re very inexpensive and it’s a $25,000 policy. But just keep in mind, if unfortunately something happens to your 2-year-old, it’s not a financial loss. It’s a loss. It hurts. It’s going to be a lot for the family to process.
I think we really need to have those serious conversations as we approach adulthood. And then unfortunately, because in my sixties, but those are the conversations that I had to have with my parents about we need to make sure that you’re taken care of if something happens. And so it’s a difficult conversation. It’s not like talking about auto insurance and we know we need auto insurance. We need to look at some type of life insurance, as it relates to the transitioning of people and estate planning. Because what do you see when you’re in court on estate planning? They’re shortfalls.
Brandon Lawrence:
There’s a lot of shortfalls.
Denise Bentley:
Exactly.
Brandon Lawrence:
And a lot of people don’t know. A lot of people are intimidated by the process. And when you come in, when they come in the office, a large part of it is getting a person comfortable, I’m sure familiar, as getting a person comfortable and educating them on some things. People know what they know and then they know…
Denise Bentley:
What they don’t know.
Brandon Lawrence:
…They know what they don’t know from a third person or commercial or whatever. And you’ve got to educate ’em and reeducate ’em sometimes to make them comfortable with the decision that ultimately they should make. But like you said, it’s got to be their decision. And that’s the important part of it. And to get a person to realize that, hey, this is your decision. This is something that you should be doing and this is something this going to benefit everybody in the long run.
Denise Bentley:
And this I think is more of a legal aspect, and I’ve experienced this firsthand. When my father passed suddenly, my mother and father had a joint bank account, and so it said his name “and” her name. And so the bank would not let us access that money until we went through probate, but they had a second bank account that said his name “or” her name. So that and/or made a difference. And sometimes people don’t understand it’s something as simple as that. And so we were able to access that money at his death as opposed to the account that said “and.” So that may be something you want to let people know about.
Brandon Lawrence:
And that could make all the difference in the world. The wording on something, words matter and what’s said and done when you’re alive matters. And that helps your family out and that helps alleviate a lot of financial stress and maybe some arguments or whatever that’s going on. And it’s worth sitting down with your family to talk about these things in order to get them ironed out before something, whether it’s sudden or whether it’s something that’s a gradual thing because we really don’t know. And it’s always better to have some type of plan in place.
Denise Bentley:
Absolutely.
Conclusion
Brandon Lawrence:
And that’s why we want everybody out here listening to share this episode in particular because this is some great information that Ms. Bentley has provided to us, and it’s something that everybody can use. It’s going to be beneficial to a lot of people. And I think it’s great that you should share this information and keep on. That’s why you keep watching and watching for future episodes. Thank you, Ms. Bentley for coming out.
Denise Bentley:
Thank you for the invite. I didn’t think I’d make it with this snowy day. I appreciate it, and I appreciate you doing this because people need to hear what you’re saying and people need to get with you as an estate planner. And I’ll say it again, whether it’s me or another agent, sit down and have that conversation. And you made a good point. Bring your family to the table because often there’s siblings that have different points of views or how they think things should go, but ultimately make sure that you have some type of safety net in the event of your transitioning.
Brandon Lawrence:
Well, most definitely. And thank you for coming, again. This has been another episode of Protect Your Nest with me, attorney Brandon Lawrence, the Lawyer for the City. Until next time, let’s talk it over.
