Category Archives: Estate Planning

The Case for Universal Life Insurance as a Conservative Investment Alternative

Everything we do in life involves some element of risk.  Some risks are known, and believed to be understood, while others are more uncertain and involve either probability or magnitude that we find difficult to quantify.  When investing, we generally seek to obtain the highest return possible given the amount of risk that we are able and willing to tolerate.  Unfortunately, gauging the degree of risk associated with various investments is not always easy.  Studies have shown that people tend to prefer known risks over unknown risks[1].  In many cases, this propensity, referred to as “ambiguity aversion,” can cause us to overweight or exaggerate risks that we are unable to quantify or that we do not entirely understand.  At the same time, people are prone to downplay risks that are common and familiar, where undue significance may be attributed to our own subjective personal experience (i.e., “I’ve done this for years, and nothing truly bad has happened to me, so it must not be very risky.”).  Taken together, these (often subconscious) biases can prevent us from properly assessing our alternatives – resulting in decisions that are based on perceived risk, rather than actual risk.  Chances are, you know people who are frightened of flying in airplanes but don’t think twice about getting into an automobile, despite statistics that place the odds of dying in a plane crash at 1 in 11 million while the odds of dying in a car crash are (according to some sources) as high as 1 in 5,000.[2] Continue reading

Estate Planning Basics: What Everyone Should Know

I like to write at least one article on basic estate planning each year because it’s just that important.  Financial advisors spend years working on financial plans and investment programs that can easily be dislodged by overlooking small estate planning tasks.  Many people start thinking about these issues once they get married and/or have kids because that’s when others start relying on them.  Even if that continues to be the case, some basic level of estate planning really should be a priority for everyone, even if to a lesser extent.  For example, an unmarried individual with some money and property may use a Will simply to designate a few people and charities to give their stuff to.   However, a married couple with a baby may be more concerned with issues of guardianship such as what they would do in the unspeakable scenario in which they were to die together and somebody had to take custody of the kids.  This should be spelled out in your Will so that relatives and friends don’t have to guess at your wishes about such a sensitive and important topic.     Continue reading