Should You Add Life Insurance to Your Estate Plan?

For high-net-worth individuals with estates of $50 million or more, life insurance can be an invaluable estate planning tool. Not only can it protect your heirs from tax burdens, but it also provides flexibility and liquidity to ensure your assets are preserved across generations.

Key Benefits of Adding Life Insurance to Your Estate Plan

Cover Estate Taxes: Estates over $13.61 million (or $27.22 million for married couples) are taxed up to 40%. Life insurance can help your heirs pay these taxes without needing to sell estate assets, such as businesses or real estate, at a loss.

Imagine your loved ones forced to sell valuable assets quickly—likely below market value—Just to cover taxes. Does this align with your legacy goals?        

Provide Liquidity for Complex Estates:

Life insurance offers immediate cash that can prevent the need to liquidate illiquid assets.

Equalize Inheritance Among Heirs:

Dividing assets among heirs can be challenging, especially with family businesses or properties. Life insurance can balance inheritances, ensuring each heir receives their due while preserving key assets intact.

Provide for Heirs with Special Needs:

Life insurance, particularly when structured through a trust, can secure ongoing support for heirs with disabilities without jeopardizing their government benefits.

Types of Life Insurance to Consider

• Permanent Life Insurance Permanent life insurance (e.g., whole or universal) offers lifetime coverage, making it suitable for estate planning. While it’s more costly than term insurance, it provides lasting value that aligns well with larger estates.

• Term Life Insurance Term life insurance is cost-effective and provides coverage for a fixed period, which can be beneficial for finite needs but is usually less effective for long-term estate planning.

Strategic Deployment of Life Insurance

To maximize the benefits of life insurance within your estate, consider structuring it through an irrevocable trust. This can help exclude the policy proceeds from your taxable estate, protecting your heirs from potential tax liabilities.

• Irrevocable Life Insurance Trust (ILIT): By transferring a policy to an ILIT, you ensure the proceeds are not counted toward your estate. The funds can cover estate taxes, fees, and other necessary expenses, while providing managed disbursements to heirs.

• Special Needs Trust (SNT): If you have an heir with disabilities, an SNT allows life insurance proceeds to be used for their benefit without affecting eligibility for government support.

Why Act Now?

The cost of life insurance depends on age and health, meaning the sooner you act, the more affordable it will be. Tax laws also change frequently, which can impact estate planning strategies.

Do you want to leave these decisions to the future, or are you ready to shape your legacy now? 

There is a cost of doing something & a cost of doing nothing. You get to choose!         

Next Steps

Consult with a knowledgeable estate attorney and financial advisor to discuss your options and select the best life insurance structure for your estate.

By taking action now, you can ensure your legacy supports your family, honors your wishes, and aligns with your goals.