Use Worksheet 8.1 Rachel Ehrlich is a 72-year-old widow who has recently been diagnosed with Alzheimer's disease. She has limited financial assets of her own and has been living with her daughter Stephanie for 2 years. Her only income is $750 a month in Social Security survivor's benefits. Stephanie wants to make sure her mother will be taken care of if Stephanie should die. Stephanie, 40, is single and earns $40,000 a year as a human resources manager for a small manufacturing firm. She owns a condo with a current market value of $85,000 and has a $61,000 mortgage. Other debts include a $5,000 auto loan and $400 in various credit card balances. Her 401(k) plan has a current balance of $62,000, and she keeps $10,500 in a money market account for emergencies. After talking with her mother's doctor, Stephanie believes that her mother will be able to continue living independently for another 3 years. She estimates that her mother would need about $1,250 a month to cover her living expenses and medical costs during this time. After that, Stephanie's mother will probably need nursing home care. Stephanie calls several local nursing homes and finds that it will cost about $4,500 a month when her mother enters a nursing home. Her mother's doctor says it is difficult to estimate her mother's life expectancy but indicates that with proper care some Alzheimer's patients can live 10 years after diagnosis. Stephanie also estimates that her personal final expenses would be around $13,000, and she'd like to provide a $15,000 contingency fund that would be used to pay a trusted friend to supervise her mother's care if Stephanie were no longer alive. Use Worksheet 8.1 to calculate Stephanie's total life insurance requirements.

Period 1 Period 2 Period 3 b.Net yearly income needod c. Number of years in time d. | Total living need per time penod (b c) TOTAL LIVING EXPENSES (add line d for cach period): 2. Special nceds a. cducation fund b. Children s college fund 3. Final expenses (funeral, estate costs, ctc,) 4. Debt 1 a. Housc mortgagc c. Total debt (4 a +4 b anc TOTAL INCOME NEEDS (add right column) Step 2: Financial resources available after death 1. Income Period 1 Period 2 Period 3 a. Annual Social Security survivor bencfits urviv sc s annual inoome c. Other annual pensions and Soc. Sec. benefits c. Number of years in time t. Total period income (dx c g. TOTAL INCOME 2, Savings and investments 3. Other life insurance 4, Other resources TOTAL RESOURCES AVAILABLE (1g +2+3+4) Step 3: Subtract available resources (Step 2) from the amount needed (Step 1) Step 1: Total income nceds Step 2: Available resources ADDITIONAL LIFE INSURANCE NEEDED Period 1 Period 2 Period 3 b.Net yearly income needod c. Number of years in time d. | Total living need per time penod (b c) TOTAL LIVING EXPENSES (add line d for cach period): 2. Special nceds a. cducation fund b. Children s college fund 3. Final expenses (funeral, estate costs, ctc,) 4. Debt 1 a. Housc mortgagc c. Total debt (4 a +4 b anc TOTAL INCOME NEEDS (add right column) Step 2: Financial resources available after death 1. Income Period 1 Period 2 Period 3 a. Annual Social Security survivor bencfits urviv sc s annual inoome c. Other annual pensions and Soc. Sec. benefits c. Number of years in time t. Total period income (dx c g. TOTAL INCOME 2, Savings and investments 3. Other life insurance 4, Other resources TOTAL RESOURCES AVAILABLE (1g +2+3+4) Step 3: Subtract available resources (Step 2) from the amount needed (Step 1) Step 1: Total income nceds Step 2: Available resources ADDITIONAL LIFE INSURANCE NEEDED