Maryland Bar Bulletin
Publications : Bar Bulletin : February 2006

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Cheers for Insurance and Financial Planning

"It's a dog-eat-dog world, and I'm wearing Milk-Bone™ underwear." Many TV aficionados can quickly identify this line as one of the many "Norm-isms" from the television show Cheers. For those who don't remember "the place where everybody knows your name," it was a staple on Thursday night "Must See TV" from 1986-1995.

So, looking at the title of this article, how does Cheers relate to Insurance and Financial Planning? You might say about as well as Lilith and Frasier did on Thursday nights. However, the characters on Cheers were people with lives to live and problems to overcome, and while they kept us laughing, they might also have something to say to us about planning for the future and protecting our loved ones.

Many of us wonder, "Will my family or business be okay if something happens to me?" The answer to this question is different for everyone, but it usually involves some type of insurance and/or financial planning. Perhaps one good way to address this question on a broad basis would be to look at the life situations represented by a few of our favorite characters from Cheers –identifying some of the problems that they might face from a financial standpoint, as well as some of the potential solutions that could help them.

Let's begin with Sam. He is charming, handsome, arrogant and a self proclaimed ladies' man who is a recovering alcoholic and former star pitcher for the Boston Red Sox. He is also a single business owner who gets paid only after he pays the salaries of his employees, as well as the other overhead expenses to keep the bar up and running. Sam was constantly worried about having Cheers bought out from underneath him by his long-time enemy, John Hill, from the rival bar, Melville's – but did he ever consider what might happen to the bar if he were to become disabled? What about life after Cheers? Here are some things that might have been good for him to consider:

Disability Income and Business Overhead Insurance. If an unforeseen illness or injury were to keep Sam from working, these policies could help replace a percentage of his income, as well as pay overhead expenses, including rent, utilities and salaries of non-owner, non-family employees to keep the taps flowing and keep Carla and Diane waitressing until he could get back to work.

Retirement Plan. Sam, like all of us, needs to plan for his retirement. There are many options for sole proprietors, and they can choose to establish a plan purely for their own tax-deferred retirement savings, or they can establish a plan that includes their employees (something that might have sweetened Carla's disposition and kept her highly motivated).

Norm! He was one of the most beloved characters, delivering some of the funniest lines on the show. He described himself best when Sam asked him, "Whatcha up to, Norm?", and he replied, "My ideal weight, if I were eleven feet tall." Despite being a bit too short for his weight, Norm was a jovial business man who was hopelessly devoted to his often unloving wife, Vera. If Norm had spent a little less of his time and money running up a bar tab and a little more securing his family's future, he might have considered:

Permanent and/or Term Life Insurance. Depending on his cash flow, Norm may have chosen from these to provide a surviving income to Vera, capital to pay off the mortgage and his outstanding liabilities (including his bar tab), and also to pay taxes and other estate settlement costs in the event of his death.

Individual Disability Income Insurance. This aid for/by him could have assured that the benefits would be received tax-free in the event he was to become unable to work due to sickness or injury. This would have allowed him to continue to pay the bills without Vera having to go back to work.

Finally, let us consider Dr. Frazier Crane. Frazier was the uptight psychiatrist whose wife, Lilith, made a python seem warm-blooded. Frasier and Lilith were both professionally successful, had a son together and enjoyed many of the finer things in life (the company of each other not being one of them). From a financial planning standpoint, Frasier might have wanted to consider a few different things:

Disability Income Insurance could help Frazier to maintain his lifestyle in the event of a disability. He might also consider a specific disability policy or rider that would replace lost retirement contributions in the event of his disability to help ensure a secure retirement.

Life Insurance to provide for his son's future in the event of his death and to pay off mortgage and other debt obligations.

Education Funding through his state's 529 Plan to save for his son's education.

Long-Term Care Insurance (LTCi) would help offset the cost of his long-term care if it should become necessary. Assuming that Frazier was a physician in private practice and self-employed, his LTCi premiums would now be 100 percent deductible, not to exceed the IRS limitations. In many states he could also receive a tax credit or deduction as a first-time purchaser of LTCi.

Retirement and Estate Planning to help ensure that his later years are financially secure and that there is an orderly transfer of assets to his heirs, including his son, dad and neurotic brother, Niles – but that's another series.

Carefully planning for the expected as well as the unexpected in life is important no matter who you are. Make sure to consider the appropriate planning for yourself, your family and your business, lest you find yourself in Milk-Bone™ underwear.

John C. Morris, CLTC, is an associate of FranklinMorris, Coordinating Broker for the Bar Associations Insurance Agency, Inc. For more information on the insurance benefits available to MSBA members, visit www.msba.org/departments/membership/baia/franklinmorris.pdf.

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Publications : Bar Bulletin: February 2006

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