First, having a will in place is crucial. A will allows one to control how and to whom assets are distributed, and it can be used to suggest a guardian for the care of children or other dependents. Without a will in place, state inheritance laws could determine how one's property is distributed, and even who should care for your children. Having a will helps to ensure your wishes are met.
However, even with a will, assets may not always transfer immediately to beneficiaries. There are many circumstances that can impede the process - the most common being probate court. Debt, funeral expenses, and the care of dependents could all be hanging in the balance during a potentially lengthy court process. At the time of death life insurance can provide generally tax-free access to the death benefit proceeds - helping to give beneficiaries the financial support they may need during a difficult time.
Life insurance may help create a solid estate plan that allows one to not only preserve what they have now, but also build their estate throughout their lifetime. Good estate planning works to help protect assets while also considering other factors, like outpacing inflation and growing the estate value.
How does it work?
Estate planning is a complex process and should be done in collaboration with other professionals you may work with (e.g. attorneys, accountants, trust officers, etc.). An in-depth analysis of personal and professional assets can help determine what will best benefit the estate. Plans for the allocation of different types of property can be constructed, as well as a life insurance policy to provide a liquid asset in the form of the death benefit proceeds.
A popular method is to use a joint survivorship life insurance policy. This type of insurance policy can insure two lives under one policy for a low cost and provides death benefit proceeds when both insureds have died, providing financial support to those who need it. The beneficiaries are typically children, a charity , an organization or a trust. The death benefit can also be used to help pay taxes on sizeable estates upon death.