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Learn from Ultra-Wealthy Examples how to Avoid Mistakes in Life Insurance


Mention life insurance at a party and you’ll likely get some yawns, but if aligned with your overall goals and structured correctly, it can be a valuable part of your estate plan.

If it’s easy for the ultra-wealthy business owners discussed below to make mistakes with life insurance, then any of us can make these mistakes. Best advice: make sure that your estate planning attorney is involved in how these policies are structured. Done correctly, you can bet your life that life insurance can work well for you and your heirs.

A recent study that looked at the life insurance purchased by 94 ultra-wealthy business owners with a net worth of $30 million or more showed that roughly 40% of them didn’t have the appropriate level or type of life insurance—or it wasn’t properly structured to meet their needs and goals.

A recent Forbes article, “How The Ultra-Wealthy Avoid Life Insurance Missteps,” says that there were several reasons for these results. The most common mistake made by more than 80% of the business owners was buying more life insurance than actually was necessary. Also, for 60% of these uber-wealthy business owners, their life insurance wasn’t effectively integrated with their estate plans.

For example, if the policies are not held in irrevocable trusts, then the proceeds are included in the estate values and are subject to estate taxes. About 75% of these surveyed business owners had policies that were simply wrong for their specific situations. Each of us should have the type of life insurance that addresses the particular needs of our individual situations.

While the study was just exploratory, it demonstrates the need for working with a highly experienced and reputable life insurance specialist. Choose to be like one of the remaining 60% of successful business owners in the study who have the right amount of the right kind of life insurance that is properly structured.

The results of the research also suggest the practicality of a second opinion. If you have questions or uncertainty about the appropriateness of a life insurance policy, there’s no harm in getting a second opinion. Whether you are ultra-wealthy or an ordinary purchaser of life insurance, there’s the possibility of making costly mistakes or not being able to get the desired results.

Remember that life insurance is sold by people who make their income based on commissions from their sales. While that does not mean there are not many well-meaning professionals, it does make sense to get a second opinion, just as you would with any other large investment. Also, coordinate your life insurance policies, before and after you purchase them, with your estate planning attorney to ensure that the policies are optimized for your estate and your heirs.

Reference: Forbes (June 7, 2016) “How The Ultra-Wealthy Avoid Life Insurance Missteps”

Why would we recommend D.T.F.? Several Reasons: Your ability to explain complex estate problems, clearly and patiently; your total lack of arrogance and pretense; a strong feeling that you are motivated by what you perceive is best for your client, rather than what would generate the largest legal fees; finally, and importantly, you are a lovely guy. A.C.

Two words cannot sum up the entire process of creating my “trust.” I enjoyed your attention to detail, your patience of explaining terms and conditions until I understood, also giving me copies to read and understand. Thank you for your suggestions on what was best for “me” but still allowing me to make my choice. Most of all, thank you for thinking of “me.” Wells Fargo said “you were the best” I cannot deny that. Again thank you very much for everything. Anna is an asset or a compliment to the firm. She is warm and very caring. It was great doing business. Thank you.