Life Insurance for Estate Planning

Up to 68% of Americans lack a will or a trust, meaning that most estates must go through probate to be settled. That's unsettling! But, did you know that life insurance generally avoids probate? When you pass away, life insurance typically goes to your family income tax free. In some more rare cases federal estate taxes may apply if the policy proceeds and other estate assets combined exceed the substantial estate tax exemption amount, or if a state has an inheritance tax. But, if you're under that threshold, and most Americans are, you will provide a tax free legacy.

Life Insurance and Estate Planning

The reason life insurance and estate planning go together is because the life insurance death benefit is tax free. If you're passing down assets to your family that they will need to pay taxes on, the life insurance benefit can cover those taxes. At times if someone is leaving a legacy behind for their favorite non profit, they will leave their 401k or IRA as a gift because non profits don't generally pay taxes on those gift. Then they can leave the tax free life insurance benefit to their family.

Through your living trust you can determine how and when you want your life insurance benefit to be dispersed. In other words, if you have young children and you determine who will take over responsibilities and care for your children should you pass away, the living trust can outline at what age your legacy goes down to your children and what amounts. Parents will often provide one sum at 18, another at 25, and another at 30. But, you can outline whatever you think is best.

Estate Planning Using Life Insurance

When it comes to estate planning using life insurance you want to determine what the death benefit will replace. In other words, life insurance is a product to replace income. While alive depending on the type of life insurance you buy, you can use the death benefit while you're alive in case of chronic, critical, or terminal illness. When you pass away, it allows your family to maintain their lifestyle and pay off the mortgage. Take a look at this article on life insurance for mortgage protection.

Insurance and Estate Planning

So what insurance do you buy for estate planning? You have term life insurance or permanent life insurance. Term is most affordable and lasts for a certain duration of 10 years, 20 years, or 30 years. A permanent policy like whole life or indexed universal life will last to age 99 or above.

The healthier you are the most affordable it will be. You can get a free instant quote directly on the website here. Click on "Get a Quote." When you see something you like or want to learn more about, book a free no obligation consultation here.