Estate planning attorneys will emphasize the importance of estate planning for people of all ages, even if you don’t have a lot of financial resources to pass on to your loved ones. One of the primary reasons for this is because if you’re like most people, your family relies on your income to maintain their quality of life.
If you were to die suddenly in an accident or due to a catastrophic medical event, your family would be left in a very difficult situation financially as well as emotionally if you did not made preparations for such a contingency.
This is why life insurance is so highly recommended as a vehicle of income replacement. You not only have to take the first step in obtaining coverage, but you are also going to want to update your coverage as your family grows and your financial responsibilities increase.
Life insurance is used in the field of estate planning for other purposes as well. One of these would be in small business succession planning. Partners in small businesses often execute buy-sell agreements such as the cross purchase plan. Each partner takes out a life insurance policy on every other, and when one of them dies the combined proceeds are used to purchase the deceased partner’s share in the business from his or her heirs.
Another way that life insurance is utilized in estate planning is to balance inheritances. Suppose you own a business and it is your most valuable asset. You have a son or daughter, and you would like to bequeath them equal sums, but you want to give the business to your daughter. You could take out a life insurance policy on yourself that is worth the same amount as your business and make your son the beneficiary to balance the inheritances.
To learn more about life insurance and estate planning, take a moment to get in touch with an experienced estate planning attorney to arrange for a consultation.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.