If you would like to protect your family in the future, you may want to make life insurance part of your estate plan. While life insurance isn’t something that estate planning attorneys prepare, they can advise you on integrating it with the rest of your estate planning structures.
What Is Life Insurance?
Life insurance provides a lump sum monetary payment to your chosen beneficiary if you were to pass away. Life insurance companies offer these payments in exchange for your payment of monthly premiums on your policy. Usually, you must undergo a health exam and fill out a lot of paperwork before your coverage can begin.
Insurance companies offer several types of life insurance, with the most common being term and whole-life. Term life insurance lasts for a specific time period such as ten or twenty years. It is less expensive than whole-life, but it gets more expensive as you get older. Coverage ends when the time period ends unless you renew the policy. Whole-life insurance covers you for your entire lifetime. The policy builds cash value as well as a death benefit payment. You can borrow against the cash value or invest it. Although you may have the option of purchasing whole-life without a medical exam, it will be more expensive.
How Can Life Insurance Be Part of an Estate Plan?
An estate plan aims to distribute a deceased person’s assets according to their wishes. Some people make estate plans with the intent of supporting loved ones left behind. But their cash on hand and other assets might not be worth much money. If they paid for life insurance, though, their chosen beneficiary will receive a cash payment to use for any purpose they wish.
It is even possible to name a trust or business as the beneficiary of a life insurance policy. Before you take this step, you should talk to an estate planning lawyer and your accountant about potential tax consequences. Since a life insurance policy pays out in a lump sum, the beneficiary will owe taxes in the year the payment is received – which can be quite expensive.
All in all, life insurance is a great addition to a comprehensive estate plan because for your monthly premium payments over time, your beneficiary can receive ready cash on hand to cover expenses. If you have fewer cash assets or relatives who would need immediate support without your income, consider life insurance.
Want to start planning your estate? Local attorney Andrew Szocka, Esq. provides thorough and speedy estate planning help in the Chicagoland area. To schedule a free initial consultation, visit the Law Office of Andrew Szocka, P.C. online or call the office at (815) 455-8430.