Cambridge, Massachusetts Financial Planning and Investment Management blog
2024: The Finances of Moving to Europe
More than a few of you out there have been asking about the possibility of leaving the United States, temporarily or permanently. Whether because you have always dreamed of an Irish cottage overlooking the sea or because your life in the U.S. seems ready for a change, we are including this series for you. Over the next several months, we will be updating some of our standard articles on U.S. finance and posting new articles specifically on the financial aspects of moving to Europe.
I’m not thinking this post will make me popular, but honestly, we would be a much happier population next April if we each spent an hour or less reviewing the tax situation now, in July.
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Something about the fall makes people start to wonder about life insurance. I can't explain this phenomenon, but I can give you a little primer on how life insurance works...and doesn't work. Let's start with this, though—a lot of people do not need life insurance. Are you one of them?
First, check to see if you fall into one of these categories:
The real purpose of life insurance is to fill in for the financial support that one person is providing for others if the provider dies. If someone (your children, your partner, your parents, etc...) is counting on you to provide for them, life insurance probably makes sense. How much the policy is worth and how long you want that coverage for will depend on the costs you are trying to cover.
Insurance companies provide "key person" life insurance policies to help cover the costs to the business of losing a key employee or owner. Those costs can range from hiring someone to fill the "key person's" place to paying off their family as shareholders, to paying the costs to shut down the business. Notice that unlike the category above, the beneficiary of this policy isn't a person—it's the business, itself. Sole proprietors are generally fine to use a standard personal life insurance policy, instead.
Trust & Estates attorneys often make use of insurance policies to move wealth to an heir while keeping down taxes. In most cases, this becomes an issue if your estate is worth more than your state and federal estate tax exemptions (an impressive $5.43 million for 2015 for the feds but $1,000,000 for my state of Massachusetts). But imagine you own a large family property or family business, both of which could easily top exemption amounts. Your attorney might talk to you about an insurance policy that allows your family to pay the estate taxes without selling up. As you might have guessed by now, if you are buying insurance for tax purposes start by talking with your attorney, rather than your insurance agent.
Don't fall into one of these three categories? Then you probably don't need life insurance. And that's good news, as it means you can start putting the money you might have spent on premiums into something you can enjoy while you are still kicking around. If, on the other hand, you do think you need life insurance, stay tuned for my upcoming post on understanding the kinds of life insurance out there and how they work.
