Three Suggestions For Utilizing Life Insurance coverage In Your Property Plan – New York Property Planning Lawyer Weblog – Apr 14, 2021
Lots of people realize that Life insurance can play a valuable role when someone dies unexpectedly. What is a much smaller group of people is that life insurance can play a vital role in estate planning as it can be used to provide liquidity when needed.
With proper estate planning, the insurance proceeds can then be used to pay estate taxes. Hoping that you will get the most out of life insurance in your estate plan, this article lists some important details about using life insurance.
# 1 – Avoid Common Mistakes
Unfortunately, some life insurance strategies can put your estate plan at risk. Some of the most common life insurances that can put your wealth at risk are:
- Designating an estate as a beneficiary jeopardizes the assets of the estate tax and creditors. Additionally, your executor will almost certainly have more paperwork to do than if you named a person as a beneficiary.
- Some people choose to only designate one beneficiary, but this is almost certainly a mistake. You should designate at least two “backup” beneficiaries to reduce the likelihood of undesirable situations in which the main beneficiary dies before the testator.
- Some people make the critical mistake of thinking that estate plans are a “one-time” process. In reality, you should review the terms of your estate plan at least every few years.
# 2 – why you should choose life insurance
The proceeds of a life insurance policy can mean far more than just a substantial sum for the beneficiaries. Some of the other benefits of using life insurance as part of your estate planning strategy are:
- Life insurance provides instant cash at the time of a person’s death to cover funeral expenses, for example
- Life insurance proceeds can also be used to pay estate taxes and avoid foreclosure sales
- Life insurance revenues payable to a named beneficiary are exempt from income tax
- Life insurance proceeds provide inexpensive funds that can later be transferred to a trust
- If the insured owns a closely run business, the proceeds from life insurance can be used to buy up interest
# 3 – The role of irrevocable life insurance trusts
An estate planning strategy with insurance involves creating one irrevocable life assurance confidence Avoiding estate tax on the proceeds paid at the time of the death of the insured. In the case of irrevocable life insurance, the policy holder transfers it to a trust. Funding will be provided to enable the trust to pay the policy-related premiums. Because the tax benefits are substantial in such a situation, it is important to involve professionals in trust creation to ensure that the correct steps are followed.
Get help from an experienced estate planning attorney
Estate planning can be a challenge, but a knowledgeable attorney can help you navigate this process. Therefore, if you or a loved one needs help planning for the future, please do not hesitate to contact us Law firm Ettinger.