The Role of Insurance in Estate Planning

Insurance and Estate Planning

Insurance products can play various roles in estate planning strategies. Understanding these roles can help you have more informed conversations with your advisors.

Life Insurance in Estate Planning

Liquidity Provision

Life insurance can provide immediate cash to pay estate taxes, debts, and other expenses without forcing the sale of other assets.

Wealth Transfer

Life insurance death benefits can transfer wealth to beneficiaries, often with tax advantages.

Business Succession

For business owners, life insurance can fund buy-sell agreements and help ensure smooth business transitions.

Types of Policies Used

Term Life Insurance

Provides coverage for a specific period, suitable for temporary needs.

Whole Life Insurance

Permanent coverage with a cash value component that grows over time.

Universal Life Insurance

Flexible permanent insurance with adjustable premiums and death benefits.

Trust Arrangements

Insurance policies are often held in irrevocable life insurance trusts (ILITs) to keep proceeds outside the taxable estate.

Important Considerations

Estate planning with insurance requires careful consideration of:

• Overall estate size and composition
• Tax implications
• Family dynamics and goals
• State-specific laws
• Policy ownership and beneficiary designations

Professional Guidance

Estate planning is highly complex and individual. Always work with qualified legal, tax, and insurance professionals to develop your strategy.