Estate Planning and Life InsuranceIt is very common for a person planning for the future to take out a life insurance policy on themselves in order to be sure that their loved ones will be taken care of in the event something happens to them. Therefore, it comes as no surprise that estate planning and life insurance are natural companions as both are aimed at preparing for the future.  By using life insurance as an estate planning tool, you can help contribute to the future of your family.

Life Insurance and Your Estate Plan

Life insurance is a valuable asset as it ensures your loved ones’ financial support in the event of your death. Generally, the earlier in life you obtain a policy, the less you will have to pay for the coverage.  Depending on your circumstances, life insurance can be purchased relatively easily and allows beneficiaries to receive from the policy without the burden of probate.  This type of insurance can be an important asset for those with minor children as the proceeds will provide for their future if a parent dies.  For older individuals who may no longer need to provide for their children, these policies can serve to support their surviving spouse, pay for their long-term care or other medical expenses, as well as final expenses such as funeral costs.

Types of Life Insurance

There are two main types of life insurance: Term Insurance and Whole Life.  Term insurance is a policy which will last for a specific amount of time and then expires once that time period is over.  This type of policy tends to be less expensive and can be structured according to your circumstances.  Whole life insurance lasts your entire life.  Because this policy is for life, it has a higher premium.  In some cases, the cash value of the policy can be accessed by the holder and will be paid back to them if the policy is canceled.

Life Insurance Trust

One way estate planning and life insurance can complement one another is through a life insurance trust.  For those with large estates which will reach the estate tax threshold, placing the policy within a trust allows proceeds to be passed to beneficiaries without being considered as part of the estate.  However, most estates will not be large enough to risk estate taxes.

Other Measures

In some cases, a high amount of coverage from a policy is not realistic due to the costs of the premium or policy limitations.  This may leave the policyholder needing more in terms of providing for their beneficiaries.  For this and other reasons, it is important that other estate planning measures be in place in order to address these concerns.

Life insurance can be an important piece of your estate plan.  Whether it serves as a central part of your planning or a supplement to other measures you may have in place, having this coverage will provide you with comfort knowing you have done all you can to be prepared for the future.

By working with a knowledgeable and experienced elder law attorney, you will have the advice you need in order to create your estate plan and determine how to best incorporate life insurance in your planning.  We are experienced in estate planning and can advise you on your options.  Please contact us online or by phone if we may be of assistance.

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