written by Denise Chaney, ChFC, CLU, CASL |  

February is a month to focus on love and love is a reason to focus on life insurance. It is also a time for husbands and wives to pay attention to the looming crises for Baby Boomers of women and widowhood, increased tax rates and uncertain estate tax exclusion amounts.

The fact that 7 out of 10 Baby Boomer women will become widows and they can look forward to a widowhood of 15, 20 or even 25 years, makes life insurance a women’s issue. These women are going to be living with the consequences of how much life insurance is on the man in their lives. This does not mean that women who are also breadwinners do not need life insurance. Quite the contrary, since they also want to protect their loved ones. However, the facts are clear that there is a 70 percent chance that the woman will be the beneficiary of the life insurance contract .

Also, Boomer men are the most underinsured they have ever been in history. The decline in home prices and 401(k) accounts has eroded wealth, which makes the gap between what they have and what they need larger. Therefore, if Boomer women do not ensure that the men in their lives are properly covered, they are the ones who will suffer. Find a widow who is living well and one who isn’t and talk to them. There is probably one thing separating them and that is the life insurance proceeds they received.

Most people will not argue that tax rates need to rise in the future. It is estimated that every man, woman and child currently owes about $500,000 each in deficit obligations. History gives us a great perspective on how much that rise in taxes could be. In the last 100 years, the average marginal tax rate has been about 61 percent, with periods as high as 90 percent and ones as low as 30 percent. The current marginal tax rate is 35 percent.

Yet, most people continue to put money in 401(k)’s, IRA’s and other deferred compensation plans at this low rate. Does it make sense to avoid paying taxes at our current low rates, defer and grow it so you can take it out when marginal tax rates are possibly back in the 40, 50 percent or higher range?

To most people, this does not make financial sense at all and the features of permanent life insurance make it a perfect solution. While you don’t get the small deduction on your current taxes, the money grows tax deferred and you can withdraw money from these policies tax free at any time while you are living. And, when you die, the benefits go to your family tax free as well. Also, in many states the cash value and death benefit can not be attached by creditors, or by divorce, nor are they considered for student financial aid. Your 401(k)’s and IRA’s do not afford this protection.

Estate tax has always been associated with the wealthy and most people ignore planning for this tax. Do you know that anyone who dies in 2010 is exempt from having to pay any estate taxes? This is because Congress has not yet pass...

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