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Estate Planning Insurance - Do You Need Estate Planning Insurance?

assets heirs taxes type

Many people work hard all their lives to accumulate wealth so their kids and heirs have a better life and better opportunities in the future. The sad part is that many times, a large part of a person’s estate is eaten up in taxes, probate and court fees, after he/she dies. Many times, the loved ones left to deal with all these costs may be in financial trouble, and are unable to handle it; other times, after all these costs have been satisfied, the estate is reduce significantly, leaving not much to heirs. Through estate planning insurance, a person can ensure that his/her assets remain and that they are distributed as he/she wished. However, the question remains – Do you need Estate planning Insurance?

If you have assets and beneficiaries in your will, you may want estate planning insurance for the above-mentioned reasons. It provides you with peace of mind that your assets will be protected and distributed as intended. By obtaining this type of insurance, you can plan ahead of time so the cost of taxes and settlements are paid, lifting a burden from your loved ones and protecting your assets. Many times this type of insurance policy is called Second to Die, covers the other spouse as well, but the benefits are usually paid to the heirs on the second death. This is when an estate passes to the heirs and taxes are due as well as court settlements. Taxes are usually due nine months after the death of a person.

On the contrary, if you are not leaving any assets or do not have any heirs or beneficiaries, there is no logical need for estate planning insurance. This type of insurance is designed to protect the assets by taking care of the related costs after someone’s death and make things easier for the heirs.

This type of policy usually have features which are convenient such as premium payment options, a flexible death benefit, which a person can increase as needed, and a no-lapse guarantee – as long as the premium is in effect, the policy remains in force, regardless of the cash value at the present moment.

Estate planning insurance is considered a type of universal life insurance and is part of the estate planning portfolio. When a person is planning their estate, a series of important steps and documents are necessary to be in place such as will or trusts, powers of attorney, beneficiaries, gifts, property ownership, and so on. This is done to try to reduce the impact of taxes and probate into one’s estate, and state planning insurance is part of that planning.

Using life insurance as an estate planning tool is important, however, this type of insurance should be transferable in ownership. By transferring ownership upon your death, you are no longer the owner of the policy and therefore the policy does not become part of your estate, and therefore, not subject to probate. Another way is by creating an irrevocable trust for life insurance, which will appoint a trustee since it is with a trustee, technically it does not belong with your estate.

Sometimes people think that they do not have much to leave to heirs and that their assets will not be subject to much penalty. However, when the assets such as a home, insurance policies, bank accounts, retirement plans, and other are tallied up, you can easily surpass the 1 million dollar tax guidelines, depending on the state that you live. Taxes can take as much as half of an estate, without proper estate planning. Guidelines for estate taxes continuously change and vary from state to state. That is why it is so important to think about state planning and about estate planning insurance as a way to protect your loved ones after you are gone. It gives you peace of mind.

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