Estate planning in California is all about planning what will happen to your loved ones when you are no longer around to care for them. There is a strong correlation between getting life insurance and estate planning.
Estate planning and life insurance
When appropriately combined, estate planning and life insurance let you provide your family with the needed financial support after you die. The best results may be seen when estate planning and life insurance are combined to make a comprehensive, cohesive plan.
Although life insurance can be used in estate planning in various ways, it is typically seen as providing additional financial support for your loved ones. It provides the family with the income needed to cover funeral costs, eliminate debts, and provide immediate funds to family members.
In many instances, life insurance policies do not face the same taxes that a person’s estate is subjected to after death. Sometimes, life insurance funds are used to offset the estate tax expense.
Life insurance and your estate
Using life insurance to equalize your estate can assist in dividing your assets equally among multiple heirs. This benefit is particularly notable when dealing with assets that are challenging to divide, such as a business or real estate.
For instance, consider a scenario where a person has two adult children. One child may wish to sell the family business after the parents’ passing, while the other intends to retain ownership. The child wanting to keep the business may need more financial means to buy out their sibling’s share. In such cases, a life insurance policy could be designated for the child interested in selling the business, equivalent to its value. This approach ensures both children receive comparable inheritances without necessitating the sale of the company.
Life insurance is a powerful tool in estate planning. It can help create the peace of mind that comes from knowing that when you die, the transition of your assets will be smooth, and those you love will be adequately cared for.