Life Insurance as a tool to Protect your Wealth

At its most basic your estate plan is meant to help you preserve assets while you’re alive and to control distribution after your death. Every estate plan (no matter how basic) is unique. Among other factors your plan should reflect your life stage, wealth, age, health and lifestyle.

An average estate might require only a simple will or revocable trust and incapacity documents, while larger estates concerned with potential estate tax burdens require a more sophisticated strategies involving complex and irrevocable instruments. Most estates, regardless of size or complexity can potentially benefit from considering adding life insurance as element of the overall plan. When used with a will or trust, life insurance can benefit your plan in several ways, including:

  1. Funding payment for Federal Estate Taxes

For individuals subject to Federal Estate Tax, the sums owed to the government can be daunting. The monies owed are generally a significant percentage the gross estate and must be paid in cash within nine months of your death. Often the estate’s personal assets are used to pay the tax debt, and these assets are not always easily liquidated (and often have negative tax implications) in the short timeframe before payment is due. Conversely, life insurance proceeds are generally tax-free and can be used by beneficiaries immediately to fund estate taxes while preserving assets.

  1. Preserving Family or Business Assets

If you have a business that you would like to see continue after your passing you should have a solid plan that you communicate on who has the interest and ability to carry on management of the business. Here insurance benefits can be to “cash out” heirs or business partners, if so desired, preserving peace, streamlining succession and continuing the viability of the business.

  1. Facilitating and easing the burden of Administration

If your estate must be probated, it could take a great deal of time before money is released and distributed to your loved ones. Expenses such as funeral costs, business debt, and estate taxes can place financial burdens on your family. They may be forced to liquidate assets or delve into their own accounts. A life insurance policy could ease this burden by providing immediate funds in the form of a tax-free death benefit.

  1. Estate Plan Creation

Life insurance also has the immediate ability to create wealth for your beneficiaries when you die, far in excess of your original investment in the policy. It allows money to be passed directly to the designated beneficiary, tax-free and without the complex and expensive probate process.

The bottom line is working with your estate planning attorney, your financial advisors, accountants and insurance providers can give you peace of mind. You can rest assured that a lump sum of money will be available upon your death, providing an effective way to transfer wealth to your beneficiaries. If you or someone you know have questions about estate planning, please contact attorney Sarah Geltz of the Kendrick Law Group for a complementary consultation 407-641-5847.

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