Rebalancing Beneficiary Insurance - Howard Nightingale Toronto Family LaywerPlanning Financial PEACE OF MIND for the future

There is now a simple, helpful concept available to families who are in the process of a divorce.

This is a difficult period when families often are in turmoil but have to make sound financial decisions which can have long term implications.

One of the key advantages of Rebalancing Beneficiaries comes into play here: it provides financial peace of mind for the future while building in flexibility for people to deal with life’s changing circumstances.

A little background

A quick review of the basics: people buy insurance to protect against harmful circumstances that can cause financial ruin. Life insurance will provide income for the named beneficiary if the policy owner dies. In the traditional family not so long ago, the policy owner and family provider was usually the husband, who assumed the policy in order to protect his wife and children should he die.

Today, of course, it can be the other way around, or both parties might hold policies for one another. But whatever the specific circumstances, once signed, these insurance policies are set in legal stone, so to speak. Life’s circumstances, however, change in ways that can’t always be anticipated. A flexible insurance instrument and approach would be helpful in such situations and this is the concept underlying Rebalancing Beneficiaries.

How does Rebalancing Beneficiaries work?

A divorcing couple puts a life insurance policy in place to guard against the death of the paying spouse in order to provide the recipient spouse with financial assistance (essentially, this replaces the lost spousal support). As well, this insurance will help the spouse to raise the children, if there are any, thus replacing lost child support. So far so good.

As the children grow older, however, becoming more independent and nearing an age when they will be self-supporting, the amount of child support/life insurance required obviously decreases. For example, if it is determined that two children under five will require $500,000.00 to cover their support and provide for a university education, then that life insurance is put in place. Ten years later, when the children are fifteen and that much closer to finishing school and establishing careers, half a million dollars is simply no longer needed.

At the same time, the paying spouse will likely experience changed circumstances and might wish to, or need to, elect a second beneficiary. This is where the rebalancing beneficiaries concept comes into play. Rebalancing allows the paying spouse to divert a portion of the $500k insurance from the custodial parent to another beneficiary.

For spouses who remarry and have to extend their obligations to a new partner, and for the protection of the second spouse as well, this can be a real benefit. Indeed, this is a new concept for the insurance industry, and it seems to be a win-win!

Please refer to the website, for additional information and calculators to help you arrive at some possible scenarios. But please take the advice of the website seriously – it is intended as an aid for you, not a replacement for professional consultation and services.

Need more advice? We’re just a phone call away

For any questions or concerns you might have regarding the Rebalancing Beneficiaries concept, please contact us at Howard Nightingale Professional Corporation. 416-663-4423 or 1-877-224 8225.

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