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The Life Insurance Blog

Helping millions of Americans become educated
in making decisions about their life insurance needs


Tax Planning, Estate Planning, and Life Insurance?

Aug 24, 2016 9:00:00 AM

Life insuranceBenjamin Franklin put it most eloquently when he said, "in this world nothing can be said to be certain, except death and taxes." Hopefully, you'll have a lot of living and joy in the interim, but planning for certainties only makes sense. This is why it's important to devote some time and resources to such things as tax planning, estate planning, and setting up the right life insurance policy for your needs.

What Does Tax Planning Have to do With Insurance?

Most people wouldn't equate tax planning with life insurance, but the two easily work in tandem. For example, if you have a permanent life insurance policy as opposed to a term insurance policy, there is an investment component. The investments will grow tax-sheltered, which allows for greater accumulation over the life of the policy. Also, the proceeds from any type of life insurance policy are generally paid tax-free to your beneficiaries. Finally, if you do have assets that are going to be subject to an estate tax, property taxes, or other business taxes, the proceeds from an insurance policy can help your beneficiaries to meet these obligations.

Estate Planning and Life Insurance Policy Choices

While tax planning has its place in your life insurance policy decisions, so do other aspects of estate planning. Having the right life insurance policy in place will ensure that your loved ones are provided for when you are no longer around. If you have outstanding debt, you'll want to make sure that this isn't passed along to family members when you die. Life insurance proceeds can be used to pay off debts and even make sure that a cherished business remains operational. The death benefit and investment value of an insurance policy can also be used to make charitable contributions and to leave an equitable inheritance behind for your children. Life insurance

Other Life Insurance Policy Considerations

When estate planning and purchasing a life insurance policy, it's never too early to get started. It's a fact that your policy will be more affordable the younger you purchase. The same holds true with estate planning. Too many people believe that they are too young to die and then leave their families with no will, estate plan, or life insurance policy. Once you begin your estate planning and purchase a life insurance policy, your work isn't complete. It will be your responsibility to keep your plans up to date. Commit to reviewing your documents at least every two years and make adjustments to your wishes, coverages, and list of beneficiaries as needed.

Life insurance can be a useful and flexible estate planning tool that will generally provide tax protections and tax-free proceeds for your loved ones. The liquidity provided by a life insurance policy can allow an estate to follow your direct wishes and provide for family members when you are no longer able to do so. Contact us to start a simple needs assessment or to request a quote now.





Topics: Life Insurance, Financial Planning and Life Insurance, Financial Future