I cannot stress this enough: you likely need more life insurance. Life insurance plays a vital role in your estate planning. It helps preserve the value of your estate. It provides for your dependents and your surviving spouse or partner. It helps ensure money is available to pay for any taxes, fees, outstanding debts, and other expenses incurred upon your death, such as your funeral and burial expenses, which can be often cost more than $7,000. Any estate – large or small – needs money to pay these expenses.
Just as important as a Will or Revocable Living Trust is as part of your estate plan, life insurance plays another big role in your estate plan, especially if you have minor children.
Provide for Your Surviving Spouse/Partner and/or Dependents
Life insurance proceeds help replace earnings, pay outstanding debts, provide for the daily living expenses of your dependents, pay for the education of your children. If you have special needs child who requires lifetime care, life insurance can provide the necessary funds and relieve the burden from your other family members. Or if you are divorced, your divorce settlement might even require life insurance be in place to continue your spousal and child support obligations.
Preserve Your Estate and Equalize Your Beneficiaries’ Shares
Before any distributions can be made to your beneficiaries, outstanding debts, expenses, taxes and other estate costs must be paid first. Life insurance proceeds can help with this thereby ensuring that your beneficiaries’ shares are not eroded by those expenses and your estate would remain intact and preserved for your beneficiaries.
It can also help facilitate equal distribution of your estate to your beneficiaries. For example, let’s say your estate consists primarily of one significant asset, such as a family business, which will be distributed to a specific family member who is actively involved in the business. Life insurance can help make up for the difference for other family members not receiving a share of the family business to ensure fairness.
How Much Life Insurance Do You Need?
This is where I recommend you consult with a financial advisor or life insurance broker. There are several online calculators you can consult, too. When completing your asset information worksheet at the beginning of our communications, this is why I often ask for information about your life insurance so that I can help you gauge whether you should get more. I have several people I can put you in touch with when you are ready to take that step.
For more information on how life insurance proceeds taxed, see here.
Contact me with any questions!