Financial Planning For Your Children’s Future

This post is sponsored by Mason Finance.

Facing our first deployment as a family back in 2008 forced my husband and myself to make some important decisions, including making a will and looking into our life insurance policies. We had to think about the future of our children, not just ourselves.

Fast forward 11 years and I’m still constantly thinking about the future of my children and trying to make the best decisions for them. I’ve talked friends into getting life insurance policies, and also to make a will. It’s not something we want to think about, but I’ve heard too many stories about financial troubles due to unexpected deaths and not having an insurance policy in place.

I’ve had the same life insurance policy for about 10 years and recently learned about the modified endowment contract. Most people don’t know what an MEC is, but for those that have additional assets that they do not plan to use, it’s a way to leave a larger tax-free inheritance to their family or heir.

A life insurance police becomes MEC when the paid premiums exceed federal tax law limits within the first seven years. The limitation expires after seven years, as long as there are no changes to the policy. When a life insurance policy becomes a MEC, the taxation structure changes, so it could be a good retirement tool, or a bad one if you need to withdraw early.

MECs are an alternative to annuities and can be a retirement planning tool. On the other hand if you plan on withdrawing the cash before the time allowed, it’s important to make sure your policy does not automatically become a MEC.

Do you have a life insurance policy? Did you know about the modified endowment contract?