We often use life insurance as a tool in helping clients. Life insurance is important in many estate-planning situations, such as the following:
- Young families. Life insurance can help raise the kids and get them through college if a young parent dies unexpectedly.
- Business owners. A buy-sell agreement between partners in a business is important. But the agreement may not work without some cash to pay off the owner’s family. Life insurance helps provide that cash.
- Blended families. In a 2nd marriage with a new baby? But the husband already has grown children? Life insurance allows him to leave funds to his older children at his death, but still provide for the new baby and his new wife. Download 10 Tips for Blended Families here.
- Estate taxes. For our clients who are concerned about estate tax, life insurance is almost always considered in reducing it. Why? Because it gives more leverage. For instance, you can give $13,000 to your child (without any gift tax liability). However, if you instead use the same funds through a life insurance trust, that money may buy $1 million or more in death benefits. Proper planning will use pennies on the dollar to transfer money to your family without estate taxes.