Life insurance can be useful in a variety of circumstances.
Many people purchase life insurance policies when they have young families.
They want to provide income for their spouse and children if they were to die.
After all, life insurance is the only financial product that can create an “instant estate” before you have time to build an estate.
People often reevaluate the need for life insurance after their children are grown and independent.
According to a recent Kiplinger article titled “Other Uses for Life Insurance You May Not Know About,” there may overlooked benefits to holding a life insurance policy in retirement.
What are these?
A policy may be beneficial in providing an inheritance to heirs.
When the SECURE Act was passed in 2019, the “stretch IRA” was eliminated for beneficiaries who are not spouses.
What does this mean?
Although there are limited exceptions, leaving an IRA to a beneficiary who is not your spouse means they will be required to withdrawal all funds from your tax-deferred retirement account within a decade of your death.
As a result, your heirs could bear a significant tax burden.
Unlike these IRA accounts, life insurance payments are typically free from income taxes for those who inherit them.
As a result, life insurance proceeds can be a better option for providing an inheritance to your adult children.
Do you own a business?
You can designate a life insurance policy to fund a buy-sell agreement, provide retirement income, or pay off business debt.
About 70 percent of Americans age 65 will require long-term care in the future.
Unfortunately, many do not own a long-term care policy.
A life insurance policy with long-term care benefits can allow you to use policy proceeds to pay for long-term care or, if you do not need long-term care, provide the policy proceeds as part of the inheritance for your loved ones.
It is important to check policy information as to specifics on what will happen when you die.
Ask your estate planning attorney about how life insurance might benefit your heirs.
While you are at it, contact your life insurance professional for a policy review.
You and your loved ones will be glad you did.
“I sure wish my husband did not have so much life insurance,” said no widow ever.
Reference: Kiplinger (July 21, 2021) “Other Uses for Life Insurance You May Not Know About”