Life Insurance: a dirty word, but a powerful gift
January 19, 2015 by Rebecca Kincaid
My five-year-old daughter lost her first tooth the other day. I asked her, “What will you do with the money from the tooth fairy?” With a big smile she said, “I’m going to buy an iPad!” Clearly, my sweet girl doesn’t know the tooth fairy didn’t account for inflation and only brought a dollar. Children today have a distorted view of money, responsibility and the value of items we purchase.
Let’s take the just-finished holiday season, for instance. Every year, the grandparents ask, “what do you want us to get your kids for Christmas?” Let’s face it, most kids today (mine included) are spoiled brats and have more junk than they know what to do with. The reality is that most toys, clothes, etc. will end up in some dusty old tub in the basement or being lugged off to Goodwill. So, I thought to myself, “Self, what would be the least labor-intensive gift for my parents to give to their grandkids that won’t end up in some yard sale 10 years down the road?”
I wanted to think of something that would be outside the reach of my young children, but still within reach when they needed it. The thought that came to me was not a gift, but a strategy to help lay the foundation for their financial futures. Sure, most grandparents give out old peppermints that taste like moth balls, but how many have given the compounding, tax-free gift of college, or a down payment on a house, or assisted their great grandchildren whom they may never even meet?
Well, how do you do it? The word I am about to say is a dirty one: life insurance. That’s right, life insurance. So many people like what life insurance can do, but they don’t like insurance. So many people need life insurance and could put it to great use, but just don’t know how or why.
I hear it from so many grandparents, including those in my own family: “You mean I can buy a life policy for my grandchild and help them start building a tax-free bucket of money? I can sweeten the pot even more and throw in an LTC supplement, too?” Yes, you can, and now we’re cooking.
I love the idea that in 15-20 years, my daughter will have a nice nest egg that was given to her by her grandparents. If you think back to gifts over the years you have given and received, how many of them really made an impact on your life? Truthfully, probably only a handful, if you’re lucky. My grandmother bought a goldfish for me when I was little, but Dolly got flushed a few weeks after Christmas.
Sometimes, we need help when we can’t help ourselves. Controlling a gift for a minor and funding it as a gift for future benefit is a novel idea and will continue to be useful a lot longer than an iPad will.