How to Leave a Legacy with Your Life Insurance
by Brittney Burgett
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Ask someone if they want to leave a legacy after they're gone, and they'll almost assuredly answer yes. Ask someone if they know how to go about accomplishing such a benevolent task, and they'll probably say, "I have no idea."
You might be surprised to learn there's a simple solution: your life insurance policy.
The payout from a life insurance policy (called a death benefit) can be a legacy that far outlasts your time on earth, and it's not only for people who want to leave a legacy to their spouse and children.
So if you think life insurance isn't for your particular situation, think again. A life insurance policy can change many different people's lives, or even entire communities, after you're gone.
1. Care for Your Immediate Family First
The greatest legacy you have is your family, and life insurance can help financially protect the people you love most from the unexpected. If you have people who rely on your income for their day-to-day lives, they're the first people you should consider when deciding if life insurance is for you and how much coverage you need.
Your legacy can live on through a death benefit that can help pay off the family home, fund college educations, and provide income that helps them continue to meet their financial needs if you're no longer there.
2. Cement Yourself as the Cool Aunt or Uncle
Your nieces and nephews probably don't need a life insurance policy from you to ensure their day-to-day financial needs are covered. Most likely, they are covered through their parents' life insurance.
But naming your niece or nephew as a beneficiary of your life insurance policy is a profoundly sweet move that would cement you as the cool aunt or uncle.
Leaving nieces and nephews a nest egg could continue your legacy long after you're gone. Life insurance proceeds can help you fund that backpacking trip through Europe or contribute to their college tuition as you always intended to do.
There are many uses for life insurance that could help your extended family, which should be considered if you always planned to do so. Just make sure that you have a conversation with your brother or sister to give them a heads up, set expectations, and allow them to factor the money into their family's overall financial plans.
3. Leave a Legacy to Your Favorite Charity
With the recent election, many social media newsfeeds have been full of photos showing friends and family marching, volunteering, donating, and giving back to organizations and movements they are passionate about.
If this resonates with you as well, perhaps your legacy should be giving back to your favorite organizations. Life insurance can offer a way to ensure if you're no longer around to donate or volunteer, you can still continue giving back and advocating for what you believe in.
One of the simplest ways to give back to a charity via life insurance is to name a trust as the beneficiary of your life insurance policy. Make sure the trust has specific instructions to give a certain amount of your estate to the charity if you were to die.
4. Set Up a College Scholarship in Your Name
Another way to use your life insurance payout in an altruistic fashion is to establish a scholarship at your alma mater. A scholarship is a profound way to have your legacy, and name, live on after you are gone.
Each college has different rules and guidelines for establishing scholarships. You should contact your chosen college's development or advancement office for help with this. Typically, you need $25,000 or more to be able to endow a scholarship at a university. The college or university will usually invest the $25,000 with their current endowment pool and issue a $1,000 scholarship yearly based on the criteria you and the college establish.
Similar to donating a portion of your life insurance benefit to a charity, it's simplest to name a trust as your beneficiary and ensure the trust has specific instructions for the donation. You can leave instructions in your will to set up a trust or foundation, but you run the risk of your heirs misinterpreting your intent. An estate attorney can help you set up a 501(c)(3) charity, foundation, or trust to help establish, fund, and award the scholarships.
Calculator: How much life insurance do I need?
5. Build a City Park or Playground
Love your city? Consider leaving a legacy by creating a small park or playground. You'll typically need to check with your city council on proposed locations and projects. The council can be an excellent help in determining the city's need, recommending parcels of land if you don't already have some to donate, and helping to guide you through how to make a difference.
Communities are almost always in need of a safe place for children to play, but they often lack the funds to build the playground and then maintain it. Through a trust, you can allocate a certain amount of money to create a better environment for your community.
Leave a Lasting Legacy
Many of us dream of leaving an impact on our loved ones and communities that will carry on long after we're gone. Aside from financially protecting your family, directing a life insurance payout for altruistic means is a surefire way to leave a legacy far beyond your years.
If you're interested in alternative ways of using life insurance to give back long after you're gone, it's a good idea to consult an estate attorney who can help you make the best choice for your specific situation.
Brittney Burgett is an insurance educator at Haven Life, an online life insurance agency. When she's not teaching people about life insurance, she's busy exploring her hometown of New Orleans via scooter.
Take the Next Step:
- Does it seem like your finances keep getting more and more complicated? It seems that way because it's true. And that means that you need to keep things organized. Not only for yourself, but ultimately for your children. Our pre-retirement checklist will walk you through the steps you need to take.
- Use this tool to maximize your retirement by determining the best age to take your Social Security benefits. Don't leave thousands on the table by taking Social Security at the wrong time.
- Find information geared specifically for Baby Boomers in The Dollar Stretcher section dedicated to your financial issues. If you're over 50 your financial needs are different. And so are your questions.
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