There is a theory out there called the theory of diminishing needs for insurance. It is based on the premise that, if we plan properly, we eventually become self-insured through the elimination of debts, the accumulation of investment assets and the reduction of expenses. To tell you the truth, I used to believe it! However, the past 17 years (and more) of experiences with my own clients and other friends and acquaintances have shown otherwise. For those whose success has not been on schedule, the needs for insurance coverage persist until later years when certain forms of coverage become very expensive and eventually unaffordable (term insurance). For those who have been successful, often beyond their initial expectations, they have done it through tax-efficient investments that ultimately lead to a deferral of tax. That tax becomes payable ultimately upon death or the second death in a marital relationship and often the estate must sell off assets at fire sale prices in order to pay the tax man.
Behind every estate problem that I have witnessed laid a lack of liquidity, leading to estate shrinkage at huge cost – often one-third to a half of the value of the estate!
Solution: A written estate plan to take into account the creation of an estate where one does not substantially exist or the preservation of a large estate from the ravages of taxes and other estate costs.
Mistake #5 – Not obtaining a proper market survey
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