A Look at How to Include Life Insurance in Your Estate Plan
To make sure life insurance fits your aims and objectives, take into account the following before adding it to your estate plan:
- Amount of Coverage: Take into account your estate planning requirements, such as future costs, obligations, and estate taxes, when determining how much life insurance coverage is necessary. To determine the amount of coverage required to meet your goals, evaluate your financial status and consult with a financial counselor or estate planning lawyer.
- Ownership of the Policy: Think about who in your estate plan should own the life insurance policy. Although many people own their life insurance policies outright, some may decide to create an irrevocable life insurance trust (ILIT) in order to receive extra benefits such ownership over the policy proceeds, tax advantages, and creditor protection.
- Beneficiary Designations: Make sure your estate planning objectives are being met by periodically reviewing and updating the beneficiary designations on your life insurance policies. To ensure that the distribution of additional assets in your estate plan is coordinated, think about designating trusts or certain people as beneficiaries.
- Tax Implications: Recognize how life insurance may affect your estate plan’s taxes, including inheritance taxes, income taxes on policy surrenders or withdrawals, and even gift taxes. To reduce tax obligations and optimize life insurance benefits for your heirs, consult with a tax counselor or estate planning expert.
- Selecting the Correct Life Insurance Policy: Whether you need whole life insurance for permanent protection, term life insurance for short-term coverage, or a combination of policies to accomplish certain goals, pick the appropriate life insurance policy for your estate planning needs. When choosing an insurance policy, take into account elements including policy flexibility, cash value buildup, and affordable premiums.
