The Benefits of Using Life Insurance in Your Estate Plan

Your estate may be large or small, but everything you own holds value. Curating an estate plan helps you and your loved ones in innumerable ways. Additionally, life insurance can be used as an estate planning tool. It can maximize a small estate into a big one, protect the larger estates, and add liquidity to your taxes. Knowing how to maximize benefits while reducing the risks and costs using life insurances in estate planning is advantageous. 

Factors Affecting Life Insurances in Estate Plans-

  1. Your marital status- whether you are married or single,
  2. If you have no dependents,
  3. If you are the primary source of income in your family,
  4. If you have young children or children with special needs,
  5. If you own a business,
  6. If you are high net-worth person,
  7. If you have a non-citizen spouse

Types of Life Insurance For Estate Plan-

  • Term life insurance: This policy has a time limitation wherein the primary insured person is protected. The terms are usually from 10 to 30 years and are renewable upto the age of 90 years. 
  • Whole life insurance: These do not have a fixed term. They are active for the entire life of the primary insured person as long as the premiums are paid regularly. The cash value can be accessed tax-free at any time through policy loans.

Benefits of Life Insurance in Estate Planning-

  • Grows your asset value: Life insurance policies increase your total worth through the regular premiums. Depending on the time of demise and the type of policy purchased, your small estate can be increased many folds, adding profits for your beneficiaries.
  • Avoid taxes: The growth in the value of your assets through life insurance policies is not subject to federal taxes. Moreover, the death benefit of your life insurance passed to your beneficiaries is free from taxes. There is no tax included in the deposited money as it is not considered a profit.
  • Immediate estate: Any estate included in the life insurance does not go through the probate process after the insured person’s death. The funds are available to the beneficiary with the presentation of a death certificate.
  • Use as security for loans: For taking an emergency loan, you can present your life insurance policy as your security against the borrowed money. The sum assured is taken as the security for providing the loan. 
  • Retirement income: The money procured from the maturity of policies can be used as tax-free retirement income. You should regularly pay the premiums and not make any claims before the policy matures to gain such benefits.
  • Protection during illnesses: Life insurance policies can be used to protect from disability and critical conditions. Permanent life insurance policies with cash value are liquid and can be accessed during emergencies. For long-term care, you can use your plan to cover yourself with tax-free policy loans.

About Castle Wealth Group

Create your estate plan with the multiple benefits of life insurances with us. At Castle Wealth Group, we build a perfect strategy for your retirement, including income planning, investment planning, tax planning, health care planning, and legacy planning. Visit our website or call us at 844.885.4200 or email us for your financial advice.

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