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Life insurance policies and estate planning

On Behalf of | Aug 11, 2017 | Trusts

Estate planning is a complicated matter, and becomes more complicated as a person’s assets become more complex. In many cases, some types of assets may prove far less valuable than they seem at first if a person does not take proper precautions to protect them against the drains of taxation after they die. Few assets are as vulnerable to this type of asset deflation as life insurance policies.

A life insurance policy is an essential part of estate planning for many individuals, and is the safety net that catches one’s family when they pass on. However, without proper planning, the recipients of the life insurance payout may find that they get far less than they anticipated after the IRS takes their cut.

One way that estate planning can help in this instance is by transferring the policies into a trust. Under a trust, the policies don’t trigger the same harsh taxation when the subject of the policy passes away, because the “owner” of the policy is actually the trust itself. This means that the family of the policy subject retains the majority of the payout and also receives the payout much sooner than they might if they were forced to wait for the taxation before receiving it.

If you believe that you might benefit from a life insurance trust, you can consult with an experienced attorney to examine your options. With professional guidance, you can create an estate plan that accounts for all the assets and liabilities you carry while crafting personalized protections that help your loved ones and beneficiaries receive more of what you leave them when your time comes.

Source: Findlaw, “Ten Common Estate Planning Mistakes to Avoid,” accessed Aug. 11, 2017


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