For those who know me and read my stuff, they would know that I am an advocate of life insurance, among other financial instruments. Life insurance is something Filipinos lack sorely and for those who have some life insurance, chances are it is not enough. I stand with my belief that it is a financial instrument that allows you to have peace of mind and a great risk management tool when it comes to the uncertainties in life. In fact, life insurance is the quickest, fastest and most cost-effective mechanism for financial protection in case of untimely demise or serious physical breakdown. It is a travesty that the percentage of insured Filipinos are so unbelievably low and getting proper insurance protection is not in the priorities of many of us. If I had my way, I would want every Filipino parent to have adequate insurance coverage.

However, I do not recommend getting life insurance coverages for children. In the past, I must admit that I made a mistake recommending life insurance for children and even bought some for mine as well. In retrospect, I regret doing so. Investopedia states best why you should not get life insurance for children:

“Life insurance is designed to provide a safety net for your heirs/dependents. Because children don’t have heirs to worry about and, statistically speaking, most kids will grow up safe and healthy, most parents should not purchase life insurance for their kids…”

Instead of paying premiums for coverage, it is better to use those funds and invest in mutual funds, uitf, deposit accounts and other more viable investment instruments and invest it on their behalf. Years from now, you will realize that said investments will perform so much better than the life insurance policy of your kids. Unless you child is a child star and he or she provides for you, reconsider getting a policy for your child. Instead, assess your own insurance needs — chances are you will need to add more insurance on your own life or that of your spouse.

I think a lot of insurance agents would stop reading my blogs after this post… but, I encourage you to periodically assess your need for insurance and act on it — just don’t believe those who will tell you to get for your kids too because it’s really not a good idea.

… conclusion.

For some reason, and despite the obvious importance of taxes in the daily operation of the state, it has exempted life-insurance proceeds from the ambit of tax laws, save for some exceptions, of course.

Our Tax Code recognizes the role and importance of insurance to the family of the person insured. It also exempts insurance proceeds from garnishment, attachment and execution of judgment-creditors. For those who have accumulated a hefty estate, life insurance can do wonders for them.

Most, if not all, estates left and brought into the inventory of the Bureau of Internal Revenue (BIR) are comprised of illiquid assets. If the typical Filipino would put it, the heirs are already in their advanced ages before they step into the succession, and the grateful recipients are not individually willing to shell out money for the settlement of estate tax and money claims of creditors. Others do not simply have the means.

In one case, the Supreme Court sustained the BIR when it assessed and collected the entire tax due from one of the heirs among several even if it means that all he had inherited would be dissipated in the process.

This need not happen unless we forget that life-insurance proceeds can be used to pay the taxes and claims and, in the process, keep the assets intact. A person can also use insurance proceeds to provide for his illegitimate descendant who may be left out of any shares in his estate. An illegitimate child gets the equivalent of half of the share of a legitimate child, and that share will be taken from the free portion, if any.

In other words, life insurance can promote “equitable” sharing. Most important, for a person with modest earnings, life insurance can provide an estate as big as his millionaire neighbor who did not believe in his insurance, the latter probably has very little or none at all.

Life insurance is just one of the tools for your estate plan. To emphasize its importance, Black’s Law defined estate planning as “the preparation for the distribution and management of a person’s estate at death through the use of wills, trusts, INSURANCE POLICIES and other arrangements, especially to reduce estate-tax liabilities.”

Do not just plan on the aspect of accumulation, plan for its conservation and distribution, for in the latter is where your absence will be.

Life insurance is not the only way to go about estate planning, it is just a tool among many. However, life insurance is a very powerful and cost-effective tool.

“A good man leaves an inheritance for his children’s children, but a sinner’s wealth is stored up for the righteous.” – Proverbs 13:22, NIV

…con’t.

Christianity has modernized our mystic concept and infused it into our laws. “Birth determines [legal] personality. Death extinguishes it.” You, as the owner of the estate, may be about to leave this mundane world, but your legacy may be passed on to your heirs and for generations to come, and that’s what makes you immortal.

People have been looking at ways on how to distribute wealth to their heirs—hence, estate planning. This is a concept that is looked at as a design, a scheme, to help a person avoid the impact of heavy taxes on a person’s “privilege” of accumulating wealth and passing it on to his heirs.

Yes, the Tax Code will tell you that what you have is a mere privilege. Settling taxes first is the operative act before the family can acquire the properties left to them.

Is inheriting automatic? How automatic is “automatic”? my beloved professor so loves to ask.

Technically so, inheriting your parent’s or grandparent’s properties is not simply “automatic” even when the law says “by operation of law.”

Estate planning is much more than simply avoiding taxes. Tax is not always the main consideration when one looks at estate planning.  This writer believes that estate planning is all about supervision, conservation and distribution. Tax avoidance is just an incident of what planning brings to him.

There are many tools for planning one’s estate in the aspect of conservation. Let us, however, focus on the most simple yet effective of them all—that is, life insurance.

Taxes are the lifeblood of the state. Its collection should not be in any way delayed. It cannot be overemphasized how important taxes are. The Supreme Court says in a myriad of cases that if there is doubt on whether or not to grant tax exemption, the doubt shall be resolved against the taxpayer.  Avoiding taxes and grant of exemptions are frowned upon. Nonpayment of taxes even merits a criminal offense. The Tax Code also assesses the taxpayer, “whichever is higher.” … (to be continued)

Catch Part 3…