Using Life Insurance in Estate Planning

Estate planning is essential to ensure your wishes are met after your passing. For many individuals, the process is relatively simple. Using beneficiary designations, creating jointly owned accounts and assets, and a simple will may very well be enough.

However, there are instances where all the planning in the world will leave gaps in what you want to happen and what will actually happen after your death. We’ve identified five scenarios in which life insurance should be considered in your estate planning.

Estate taxes – For 2022, individuals with a net worth of just over $12M ($24M for married couples) may be subjected to paying estate taxes. The highest estate tax rate currently sits at 40% and is due within nine months after death.

Final expenses – The cost of dying is getting expensive. Life insurance can help pay for funeral expenses, some of your debts, and any taxes your estate may owe.

Legacy planning – You may be inclined to leave an endowment for your alma mater or contribute to your favorite charity. Life insurance provides a cost-effective way to leave a legacy without tapping into your estate’s funds.

Estate equalization – Not all assets or families are created equal. For instances where it may be difficult to divide your assets equally, life insurance can be purchased to ensure everyone receives an equal share of your estate without selling assets.

Business ownership – If you are a business owner, odds are your current partners may not want to become partners with your spouse or family members. Life insurance provides funds to make a business buyout possible without tapping into company finances.

Estate planning is a complex and ever-evolving process. It is recommended you include your accountant, attorney, financial and insurance professional in your decision-making. If you are unsure where to start, contact me to learn more about your options.