Life insurance is a well-accepted means for protecting families in the event of the insured’s death. A life insurance policy provides the ability to help pay off debts, pay the mortgage and other living expenses, pay for college for children, grandchildren, nieces and nephews and helps replace the income that is lost.
Many people don’t have an estate plan because they don’t think they have enough assets for one. But a life insurance policy is an asset. The estate planning attorneys at San Luis Obispo’s Toews Law Group, Inc. believe it is important that people understand how their life insurance and an estate plan can work together.
Including life insurance as an asset in an estate plan provides for more control over how the benefits are used. When a life insurance policy becomes part of the estate it is managed by the estate executor on behalf of the policy beneficiaries. One example of the benefits of including life insurance in your estate is funding education.
The life insurance benefits are paid to the estate then dispersed by the executor according to your wishes. An insurance policy, or a portion of the policy, that is set aside for college can be held by the estate trust and protected until the child is ready for college.
- Other benefits, especially when an insurance trust is part of the estate plan, include:
- More control over how you want the assets from your insurance policies to be used
- An additional asset that can add more resources to an estate plan for your family
- Protection against estate and other taxes
Understanding estate planning
A properly structured estate plan provides you, and your heirs, with the resources to avoid prolonged and unnecessary court actions such as probate, makes sure the persons you trust the most are going to handle your health and finances and provides them with flexibility to meet your wishes, and makes sure all of your assets, include the proceeds from life insurance policies, are transferred according to your wishes.
One of the main differences between a life insurance policy that pays benefits directly to beneficiaries and one that pays to a trust in an estate plan is control. No matter how much we might trust a beneficiary to “spend” the insurance money in the way we intended, life happens. Grief can cause people to make poor decisions. The person who agreed to manage the college funds might not get the best advice for protecting those insurance benefits. If a college fund trust isn’t set up correctly, the young person it is intended for might be able to access it too soon. These are only a few situations that can develop without a solid estate plan.
In addition to setting up your estate plan correctly for the most benefit to your heirs, the San Luis Obispo estate planning attorneys at Toews Law Group, Inc. can help advise you about:
- Life insurance policies that will provide the most benefit for your wishes
- The benefits of a life insurance trust as part of your estate plan
- Other kinds of insurance to benefit your estate
Along with advice about insurance, Toews Law Group, Inc. help you identify all of your assets, including retirement accounts, real property, annuities, pay-on-death accounts and joint tenancy assets. You don’t have to be a millionaire to have an estate. Many of us have property, accounts, and investments that are worth more than we think. A well structured estate plan protects those assets, and can even help manage some assets so they increase in value over time.
Call today to get your estate plan started.