Many people don’t think of a life insurance policy as part of an estate plan, but it is. Even if you are leaving considerable assets to your family and other loved ones, many of those assets won’t be available immediately after you die.
A life insurance policy can help cover expenses that arise while your estate is being settled so that your family members don’t have to use their own money to do so. Here are some examples:
- Final expenses: These can include medical expenses, funeral and burial costs and other bills.
- Estate administration and probate costs: These include court costs as well as fees for attorneys and other professionals.
- Estate taxes: If your estate is subject to the federal estate tax, that will likely need to be paid in cash and will be due nine months after you pass away. That could be before the estate is settled and funds are disbursed.
- Business operating costs: Regardless of what the succession plan is for your business, the people running it will need liquidity while the transition is being made to the new owners. A life insurance policy can provide that.
If you don’t have much in the way of assets to leave loved ones, a life insurance policy can allow you to provide them with something when you’re gone. Life insurance benefits aren’t subject to income or estate taxes, so your beneficiaries get the full amount within a reasonably short period.
The last of the baby boomers (those born in 1964) are turning 55 this year. Many of those preceding them are well into their senior years. If you’re in this generation and haven’t yet established an estate plan, this should be one of your New Year’s resolutions. An experienced attorney can help you set up a plan that works for you and your loved ones.