Life insurance policies offer an important tool to a wide range of people planning their estate, though the specific way that life insurance policies are utilized often differs depending on the needs and situation of the individual. For example, a young family with limited assets may benefit from buying life insurance for a very different reason than an established senior with extensive property may benefit from buying life insurance.
Below, I’ve listed four different situations in which a life insurance plan can become an important aspect of your estate plan.
- You need to support your beneficiaries. The most traditional use of life insurance is to replace the lost income and earning power of the person who died. Families with young children and families who have not yet accumulated significant wealth need to consider where they will get financial support after the loss of a breadwinner or care provider. A life insurance policy ensures that your children or other dependents will have the funds they need even if you are gone.
- You need liquidity to pay estate taxes. For larger estates, life insurance can have a totally different purpose: providing liquid assets to pay death taxes. This is ideal for individuals who have significant wealth, but who do not have a large amount of liquid assets, such as people who own valuable real estate but do not have large savings accounts. This is also a great plan for those in the Silicon Valley or surrounding area who have privately-held stocks that cannot be sold before estate taxes are due.
- You have a blended family. Leaving behind assets can be an extremely complicated and sensitive issue especially if you have remarried or married into a blended family. Life insurance policies are an easy way of leaving behind funds for children and stepchildren when a biological parent dies, often avoiding conflicts and complexities.
In addition to these three main uses of life insurance funds, there are other less common reasons to take out a life insurance policy as part of your estate planning, including funding retirement plans, paying debts, or accumulating wealth. The best way to know if your estate plan may benefit from a life insurance policy – and the best way to know how much life insurance you should buy – is to speak with an estate plan attorney about your situation, your concerns, and your needs.
At The Law Office of Janet Brewer, we can help you with every aspect of your estates plan, including life insurance planning. To speak with an experienced, compassionate California estate plan attorney today, please call: (650) 325-8276.