Once there is a death in your family, survivors are many times undergoing the task of sorting through assets and liabilities of the deceased, while they are still in the process of understandable grief from the loss. The purchase of life insurance from us here at the Alexander Insurance Agency can take away the burden of estate planning by offering financial support to family members and the all-important task of covering important business assets. After you make the decision to buy life insurance, it is important to think about your needs and circumstances and make sure that you have answers to some very basic questions about how much you need and the varieties of coverage out there.
Here are some of the ways that life insurance can help with the task of estate planning, and ease the burden when certain perils and pitfalls may come your way.
Estate Taxes Payment: One of the most opportune ways to pay for estate taxes is by possessing a life insurance policy. Typical Federal estate tax applies to the gross estate of anyone deceased, and must be paid within nine months after any official owner’s loss of life. What do CPAs and attorneys everywhere see as a strong point regarding this action? Proceeds of life insurance are frequently free of taxation.
Functional and Full Coverage of Business Assets: Making the choice of Universal Life Insurance allows you to access an investment savings component, and even make the choice to borrow the cash value as a cushion in case you have unforeseen financial trouble along the way. Buy-sell agreements are the checks and balances set in place to set prices and terms that surviving partners need to follow to purchase the shares of the leaving or soon deceased spouse. Surviving owners will receive death benefits, and your family will see your payment for your vested interest in a company.
The Longstanding Fruition of Faster Payouts: Any expense related to the death of an individual may include debts, taxes, and extensive costs for a proper burial. Properly liquidating assets can take time, but the Death Benefit of a life insurance policy can be claimed immediately, which makes it useful for paying out expenses and downplaying the financial burden of sudden death on your loved ones and family.
Equalization of the Estate: if there are more than one heirs to any estate, there are a few different complications you may face. It may be difficult to split up assets, and certain cases may come up when breaking up an estate that can reduce its ability to generate positive revenue. Life insurance can be used to properly equalize estate inheritance, wherein one heir may receive property while another may receive the death benefit proceeds regarding the insurance policy.
Game-Changing Planning for the Future: As the owner of a policy, you will have the option to choose how the proceeds of your insurance is going to be used. You can continue supporting a loved one after you pass away, which is useful for seniors, minors, and others who may need to continue alimony or child support payments. With the institution of a fully-fledged trust, you can hold assets on behalf of your beneficiary under the constant supervision of a legal trustee.
How do I Choose the Life Insurance Policy That’s Right for Me? Before you go through with a decision this important, you need to think about the answers to a few basic questions. Using these as guidelines will guide you through the choices of preparing to provide for the ones you love if anything were to happen to you.
- Calculate the Optimum Coverage Needed: it is important to consider your yearly income, assets, expenses, and the total amount you owe. A form of coverage that provides ten times the salary you draw is a good place to start, and could be useful for nearly anyone. As the post-recession landscape has changed, it is helpful to include all outstanding debts when completing the calculations that show you how much coverage you need.
- Deciding Which Type Fits Your Needs: If you opt for Term Life Insurance, your loved ones will receive a simple death benefit payout. This “specified term” only covers a certain number of years, but if you happen to outlive the term, the said payment will not be distributed. Permanent life insurance includes Universal Life Insurance and Whole Life Insurance, and lasts a lifetime.
- A Close Comparison of Insurance Providers and Their Prices: Payouts usually happen during the times in your life that are the most stressful and having a reliable provider can help your loved ones have an experience without any difficulty. The best practice is to compare personalized quotes from at least 3 different providers such as us, and check the customer service ratings of insurers if at all possible.
- Be Fully Educated on Every Detail Within the Application: Once you find the right insurer for you, it’s time to move forward to the application process. Ask ahead of time if there are documents that you need to prepare, and what basic personal information you need to provide. Depending on the type of policy you choose, you may also need to see a medical professional for a detailed screening of your health.
- Select your Ideal Beneficiaries: The beneficiary of your policy can be a person or an organization, and your insurance provider will tell you what vital information is needed. Social Security numbers and tax ID numbers are usually a mandatory addition, and if you plan on naming a minor or disabled child, it can be wise to leave the entire cash value to a trust.
Is an Irrevocable Life Insurance Trust Ideal for Your Needs? If you are looking to use life insurance as a strong anchor in your estate planning, an irrevocable life insurance trust can help with controlling either a term or permanent insurance policy while said policy owner is still living. By these means, you can transfer your policy to the trust or use it to purchase life insurance, which means the trust sees ownership of your insurance policy. This trust document will determine who will have full control of the assets, designate beneficiaries and establish terms on how the beneficiaries will be able to receive their benefits.
An Irrevocable Life Insurance Trust will swiftly remove a life insurance policy from your estate’s holdings, aiding you in getting rid of estate tax liabilities on assets that do not qualify for a charitable or marital deduction. It also can help with the allocation of any proceeds upon the death of the insured by quickly offering up the liquidity factor for the decedent’s estate and beneficiaries. The Benefits of Irrevocable Life Insurance Trust: Our experienced agents here at the Alexander Insurance Agency think that this is a great option if you want to set aside certain assets for specific purposes, but you may be responsible for paying gift taxes if any beneficiary withdraws themselves from a trust. This actually ensures that your heirs will get more funds, and will lower federal state taxes since the proceeds will be excluded from your total of the gross taxable estate. You will also be allowed to determine just how insurance proceeds will be paid out, and not be able to make any changes after a formal agreement has been signed and executed.