Life insurance has several estate planning perks.
Estate planning allows you protect your loved ones and provide for them.
Although estate planning is important for those without children or spouses, it is critical for those with families.
Those you leave behind have more at stake when you die.
According to a recent Kiplinger article titled “Other Uses for Life Insurance You May Not Know About,” your monthly income will be dearly missed by your family.
A life insurance policy can be a wise investment.
With a policy, you can replace your income and preserve the standard of living for your spouse and children.
It can also be used to fund the college education of your children.
Once your children are grown, it is tempting to think you no longer need your life insurance policy.
Even so, life insurance can still benefit you.
The Stretch IRA disappeared with the SECURE Act.
This means beneficiaries who are not spouses must empty these accounts within ten years of the death of the original owner.
Depending on the tax bracket of your beneficiary, there could be a significant tax on the inherited account.
Because life insurance benefits are typically free from income taxes, your beneficiaries would benefit from the inclusion of a policy in your estate plan.
If you own a business, life insurance can also help when it comes to paying off debt or funding a buy-sell agreement to preserve the business after your death.
It may even be used to fund retirement plans.
Long-term care can be a significant expense in retirement.
In fact, the cost of long-term care for one spouse may threaten the financial security of the other spouse in retirement.
The median cost for a year of care in an assisted living facility is $51,600.
For a private room in a nursing home, the median cost is $100,000 for a year.
While many people avoid long-term care insurance because of the cost, it is far more expensive to pay for long-term care costs personally.
Some companies offer life insurance with long-term care benefits.
When the policy owner dies, a death benefit will be provided if the owner did not require long-term care.
If the owner did need care, money will be provided to pay for these expenses and the death benefit will be reduced.
Work with an experienced life insurance professional to determine what type of life insurance plan, if any, would work best for your situation and goals.
Reference: Kiplinger (July 21, 2021) “Other Uses for Life Insurance You May Not Know About”