Life Insurance & Legacy Planning
Life insurance has long been a part of Legacy planning in the United States. Although life insurance does not need to be a part of every person’s estate plan, it can be useful, especially for parents of young children and those who support a spouse or a disabled adult or child. In addition to helping to support dependents, life insurance can help provide immediate cash at death. Insurance proceeds are a handy source of cash to pay the deceased’s debts, funeral expenses, and income or estate taxes.
To determine whether it makes sense for you to buy insurance to provide financial help for family members over the long term, consider these questions:
- How many people depend on your earning capacity?
- How much money would your dependents need for living expenses?
- How long would it take for your dependents to be come self-sufficient?
assess whether you need life insurance for short-term needs:
- What assets will be available to take care of your dependents’ immediate financial needs?
- After you die, how long will it be before your property is turned over to your inheritors?
- Will your estate owe substantial debts and taxes after your death?
If you are the sole owner of a business, how much cash will it need when you die? Do you want and expect that some of your inheritors will continue the business? If so, do you think there will be enough cash flow for them to successfully maintain the business? You may need insurance proceeds to cover any cash flow shortage of the business. Will there be liquid funds to pay estate taxes?
- How much is your death likely to affect the value of the business?
- Will there be enough cash to keep the business alive until it is sold?
- If you are one of several co-owners, life insurance proceeds can be used to buy out co-owners’ interests.