Death Planning

It took me a while to get comfortable with the thought of dying and I always shoved the idea aside, basically denying the fact that my days on Earth were literally numbered. It was only when I gave birth to my first child that I finally acknowledged my mortality and really contemplated on what the effect of my death would have on him.

I took out my first life insurance policy a few months after I got married because of the investment component (sucker!). I wasn't thinking of leaving something for my husband in case I died, I just wanted the life insurance-investment combo. At that time, even if I was already the primary breadwinner, my mindset was that I'll probably outlive him and if he does manage to outlive me by some stroke of luck, then he can fend for himself with a little help from my VUL life insurance policy.

But when I had my first child, I began to internalize my primary breadwinner status and decided that I didn't want to leave my child's destiny to chance. If I suddenly died tomorrow, would my husband be able to provide the same standard of living we've grown accustomed to? Probably not. Would our family members have to help out? Most probably.

I didn't want that to happen, to have other people see my children as a burden because their mother neglected to provide for them. And so I began to act strategically, insuring myself and studying up on how to grow my net worth.

The first step was to take out life insurance on myself. The rule of thumb  is to get 10x-15x your annual income as insurance coverage, but if you want to get the more nuanced answer, then I suggest diving into this post.

To date, I have about 6x to 7x my annual income as the face value of my life insurance policies, with an additional 3x my annual income built into my policies as accidental death riders. I have also taken out health insurance on myself, both VUL and term, because it's those dreaded diseases that really wipe out your assets.

Another advantage of life insurance that doesn't get touted as much is that life insurance proceeds are exempt from estate tax if you designated your heir(s) as your irrevocable beneficiary(ies). But since my net worth is still well-within the standard deduction of 5M, I really don't have to think about estate tax just yet. However, it is a nice problem to aspire for in the future :)

The next step in my death planning was to ensure that my boys would continue to have a home. 

We live in two joined condo units, with one unit under my name and the other unit under my sister's name. Initially, I thought of paying off the unit in my name first because the principal amount was only 327k compared to the 580k principal amount in my sister's unit. But then I realized that my unit was insured under a mortgage redemption insurance so the mortgage would be wiped clean if I died before fully paying it off. It was not the case though with my sister's unit because my death would still leave her mortgage subsisting. Hence the decision to bring down her mortgage first by making extra payments towards the outstanding mortgage balance.

For my sons' education, I set up an educational fund by investing at least 10k monthly in select stocks and funds for the next 10 years or so. I also asked my brother to use part of my life insurance proceeds to invest in funds to be allocated as the boys' educational fund in case of my early demise. He was really freaked out about my death planning, but with a little arm twisting, I finally got him to agree.

I also thought of making a holographic will but then thought better of it since I didn't want my boys to have to undergo the hassle of probate, so I'll just prepare an extra-judicial settlement of estate for them to sign since I have no outstanding debts, save for my current credit card bills which I always pay in full when they become due. If the extra-judicial settlement is no longer updated by the time I die, then I'm sure one of my dozens of lawyer friends will be able to help them out.

 Another thing to do is to have a ready list of my insurance policies, bank accounts with passwords, and brokerage account to be given to my husband. One of my close friends works in an insurance company and she said that there are a lot of unclaimed policies simply because the beneficiaries didn't know that their loved ones took out life insurance policies. In the same manner, inactive bank accounts may be forfeited in favor of the government.

Despite all this planning, I still worry that my family will not be ok, that they'll be unable to cope with my loss. But what happens to them after I die is literally out of my control and I can only hope that they'll turn out alright. That my husband will seek out help if he needs it, because knowing my family and friends, they'll always be ready to help when asked.

I can prepare financially all I want, but really, I know that it will be the kindness of family and friends that will help my boys the most when I'm gone.

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Natalie Cruz said…
Um, wow. When I saw your IG post, I was expecting to read about insurance and/or writing a will but this is a lot! It's amazing how much thought you've put into making sure your family wouldn't be completely lost. Thank you for sharing and giving us ideas on how we can prepare as well.
Jillsabs said…
You're welcome Nat! I'm glad you found the post helpful :)
Anonymous said…
lost a dear friend in 2018. our pagpag consisted of bpi/bdo/mtb atm visits to zero out her accounts and a TON of online fund transfers. whewww. it helped that she had a list, like what you mentioned. plus her passwords were super easy to figure out. lol!

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