Insights: Article

The Role of Life Insurance in Estate Planning

September 11, 2018

The importance of life insurance goes beyond settling your estate. Regardless of what the future holds for estate tax, life insurance will always play an important role in your holistic estate plan.

While none of us want to think about our own passing, it’s important that life insurance does not go overlooked. Not only will a life insurance policy cover the often-shocking expenses surrounding funeral services and burial, but it can also ease the financial burden on your heirs well into their future. For example, if you have a large number of illiquid assets, it can be hard to split them equally between heirs. Many of our clients take this into consideration and utilize the cash sum from their life insurance policy to even things out financially, and these sums transfer quickly as well. In addition, if the policy is held within a trust, the cash payout can be distributed directly to your heirs, and they may be able to avoid the pressures of probate court and creditors. Naming beneficiaries also allows the cash to go directly to the people or entities of choice.

You can also use this cash sum to continue your charitable giving. Rather than simply giving a donation, one can set up their life insurance policy so that a charity is the beneficiary upon the policy holder’s death. If the policy is donated to the charity prior to the insured’s death, a portion of the policy and the premiums can be deducted as a charitable donation. Alternatively, one could establish a charitable remainder trust (CRT), which removes the asset from the taxable estate, and potentially provides income from the assets invested in the trust. When the insured passes away, the assets are then donated to charities of their choosing.

If you’re a business owner, it’s especially important for your succession plan to include a life insurance policy. Not only can life insurance reduce the financial hardship on the company, but it can also help when it comes to transferring ownership and/or providing cashflow for partners to buy out the family of the deceased. A good policy can also be beneficial throughout the life of the business owner. Insurance can be offered as part of an executive benefit package, as well as factored into retirement plans.

These are only a few of the many reason why it’s important to periodically review your insurance policies as part of your overall estate plan. Contact your Eide Bailly professional today and learn how a good insurance plan can help you work towards your financial goals.

Financial Advisor offers Investment Advisory Services through Eide Bailly Advisors LLC, a Registered Investment Advisor. Securities offered through United Planners Financial Services, Member of FINRA and SIPC. Eide Bailly Financial Services, LLC is the holding company for Eide Bailly Advisors, LLC and Eide Bailly Agency, LLC. Eide Bailly Financial Services and its subsidiaries are not affiliated with United Planners. Insurance products are issued or offered via Eide Bailly Agency, LLC. Eide Bailly Advisors may also be licensed as insurance agents/producers of Eide Bailly Agency.  Not all products are available in all states

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