3 Ways to Use Life Insurance In Your Estate Plan
When I was younger, I loved playing the game of life because it was unpredictable, just like life.
In the same way, we never know what unexpected events might occur in our lives, but a good plan can protect us no matter what happens.
On our Pour Hour this month, Nels talked about the 3 main goals of estate planning; caring for your children and/or loved ones, directing your own finances and care if you are incapacitated, and, distributing your assets after your death, which can include leaving a legacy.
Life Insurance and Estate Planning
Estate planning primarily aims to ensure the well-being of loved ones in our absence.
Life insurance serves as a vital tool for this purpose, commonly employed in estate planning. Many recognize its value in aiding children or settling debts. However, estate planning encompasses more than just life insurance.
I recently spoke with a client who felt they hadn’t saved enough for retirement due to a focus on life insurance for their children when they were younger. Yet, with the right strategies, it’s possible to plan for both retirement and provide a death benefit.
The second way to utilize life insurance in estate planning involves policies designed to accumulate cash value. tirement but of course, also provides a death benefit.
I use an IUL plan that combines retirement savings and a death benefit. This way, if something happens to me, my children have financial security, and if I live a long life, I have retirement savings.
However, estate planning is about more than just life insurance and retirement. It involves organizing everything to protect loved ones, regardless of what happens.
Unfortunately, many people avoid thinking about not being there for their kids and fail to plan properly. This is especially true for younger individuals focused on saving for daily expenses and college. But it’s vital to prepare for unexpected events and ensure loved ones are cared for.
If you’ve already handled your estate planning, talk to your kids or grandkids to ensure their protection too.
On a personal note –
Inheriting money as a minor has taught me valuable lessons about the importance of proper planning. To distribute a small inheritance to my boys, I had to obtain court guardianship, a common step when grandparents leave money to grandchildren. Each year, I must report to the court on how I manage the funds and seek approval for any expenditures on their behalf until they turn 18. If you intend to leave money to minors, ensure proper setup to avoid complications or to designate it for specific purposes.
Conversely, when children become independent, life insurance is often considered unnecessary. However, even in this scenario, life insurance remains a valuable asset. For instance, in the context of the third estate planning objective – asset distribution after passing away – life insurance can facilitate tax-efficient asset transfer. Explore more about diverse life insurance applications in a previous power hour.
If you have questions about estate planning or utilizing life insurance in various ways, please reach out. Our team is ready to assist in ensuring proper structuring to safeguard your loved ones regardless of circumstances
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