When putting your affairs in order by creating or shoring up your estate plan, the many decisions you face can be overwhelming. It is easy to overlook some things — especially items they don’t think of as traditional assets.
Many people are surprised when they realize a life insurance policy is an asset – often a valuable one – and can be part of a sound estate plan. Here are four ways life insurance can improve your estate plan.
Covering federal estate taxes
While Texas does not impose an estate tax, federal estate taxes can still apply. This means your estate assets may be used to cover this obligation. This might significantly reduce the inheritance left for your beneficiaries. Life insurance proceeds can be used to pay these taxes instead – helping to ensure that your heirs receive the full value of your estate.
Providing swift liquidity
Life insurance usually provides immediate liquidity, allowing your beneficiaries to access funds quickly. This can prove useful in covering funeral expenses, paying estate debts or managing urgent financial matters. It can also prevent the need to sell off assets at a loss to cover these expenses.
Equalizing your inheritances
In cases where you have multiple heirs, life insurance can help you even out the inheritances you leave. For example, you could leave a business or property to one child and use life insurance to provide an equivalent value inheritance to other heirs. An added reward is helping ensure fairness and preventing disputes over the estate among beneficiaries.
All the benefits of life insurance discussed combine to provide another invaluable advantage – it helps you preserve your wealth and assets across generations. Having experienced legal guidance can help you learn more about fortifying your estate plan.