Boomers, Remarriage And Life Insurance

As for purchasing brand new life insurance, boomers need to decide who they want to protect, and how, say experts.

Do a comprehensive needs analysis and find out what it will take, suggests Winter. “Sometimes, when boomers see it will take one or two million dollars, it blows their minds,” he explains. “So, if they are planning to remarry, ask ‘what do you want for these new people in your life? You need to step up and take care of it.’”

Most people seem to afford what they really want, Winter observes. “Life insurance usually isn’t it–at least, not until the agent and the needs analysis help them decide that what they really want is to take care of the family.”

He recommends positioning life insurance as “just one tool” that will help them do that. “It is the answer to the question: How do I provide?”

Emotions can get stirred up when considering life insurance at time of remarriage, agree experts. But that’s not a reason to avoid the issues, says Weisman. “I don’t see any cold feet among my clients when discussing these things.”

Bilderback agrees, adding “this is on the business side of remarriage, and it needs to be discussed.”

The second time around, boomers spend a lot of time thinking about it, she observes. “But the issues can be very difficult and very emotional, especially if children are involved. What happens to them? They are stakeholders too. For example, the new couple needs to look at the blended family and possible complications from an ex. How will the older children be supported, and the children they will have together?”

Another issue is whether and how well the new spouses have bonded with the new blended family, adds Weisman. “We need to ask thought-provoking questions, make them think it all through.”

If the agent is still in contact with both ex spouses, Winter suggests the agent not let either one know what the other has said about life insurance or anything else. That stirs up emotions, he says, “and you don’t want to be in the middle.”

Weisman advises using a planning approach, talking about how the change will affect lifestyle as well as relationships. For instance, he asks: “Are you prepared to take on the responsibilities for the kids?” The answer opens up discussion about how to provide for his, her and their kids, in event of a spouse’s death, with life insurance.

Ideally, this should occur before the remarriage, Weisman says, so as to avoid serious problems. “For instance, a father who has not planned may just decide to leave all assets to the new wife. But he may be disinheriting his kids as a result.” But if the father does advance planning, say as part of a prenuptial, the advisor could urge the father to see an estate-planning attorney about perhaps setting up a trust for benefit of the minor children.

Younger boomers often have younger kids, observes Winter. If they only have $50,000 in life insurance, though, and if they will be adding a second family upon remarriage, they need to sit down and talk about getting more life insurance–”maybe term insurance to get the kids through college if something happens to the parent.”

Unfortunately, he says, younger boomers often blow this off. “They’ll spend hundreds of dollars a month on gourmet coffee and then say they don’t have enough money to pay for more life insurance.”

In such cases, Winter says the agent needs to help the boomer think about the family, “not just for today but for tomorrow.

“Ask, ‘how much do you care about your kids and your new spouse?’ Say, ‘if it’s taking 2 incomes now to pay for the house, taxes, mortgage and other expenses, what will you do if one spouse dies?’ At the least, it’s good to have enough life insurance to pay off the mortgage.”

To iron out potential problems, Bilderback recommends using life insurance to create “estate equalization.”

For instance, the “moneyed spouse” can leave the bulk of assets to the kids from the previous marriage and then buy a $1 million life policy on self, naming the “less moneyed” spouse as beneficiary, she says. Or, if the remarriage will cause the kids to be disinherited from a key asset such as the family home (which in Florida goes to the surviving spouse automatically), the boomer can buy life insurance, with the proceeds going to the kids to replace that lost asset.

The newlyweds could consider buying separate policies, per each child as beneficiary, she concedes. “But that is not simple to do, and most boomers want simplicity. A clear, well-written life insurance trust could handle this better.”