The Importance Of Whole Life Insurance In Estate Planning

Whole life insurance plays an important role in estate planning. It is a potential source of income as it can cover several important expenses like death taxes, college and funeral costs and many other things. It is important to know the relation between whole life insurance, taxes and your estate.

                Whole life insurance and taxes

estateplanningBecause the life insurance benefit is not taxable, insurance payouts are probably the only way you can give someone one million dollars without paying taxes. This is because life insurance proceedings are not considered part of your estate.

However, there are three situations in which the life insurance payout is taxed:

  • The insured named his or her estate as the beneficiary. This is a strategy of paying for estate taxes and costs. Creditors may increase their claims, since the benefit will be part of your estate. This can actually increase taxes.
  • The insured had an incident of ownership in the policy at the time of death. An incident of ownership is the rights to make important changes to the policy.
  • The policy has changed owners in the last three years.

The advantages of whole life insurance in estate planning

A whole life insurance online quote may appear expensive to many, but this type of insurance plans have many advantages when it comes to estate planning. Here is how your family and estate can benefit from a permanent plan:

  • Avoid inheritance taxes. Inheritance or death taxes can take a big portion of your estate. The money paid in taxes will not reach your heirs, so your family will lose money. A life insurance benefit is not taxable, so it can work as a tax-free inheritance.
  • Cover estate taxes. Life insurance proceedings can be used to cover estate taxes, mortgage loans and many other debts.
  • Protect your estate. The biggest advantage is the protection life insurance offers for your family and estate. Your loved ones will be provided with a substantial benefit which will allow them to keep the same lifestyle.

In conclusion, life insurance can be an important tool in estate planning. Take into consideration all of the above if you need to purchase a plan.

Whole life insurance has a reputation for being expensive, but we can prove otherwise! Visit our blog and compare cheap whole life insurance quotes from top providers!