– Business owners can use life insurance to equalize the value of each child’s inheritance or to buy the deceased partner’s interest from their family.
– Parents with young children can use life insurance to pay for the expenses of raising children and provide for a surviving parent if the deceased parent was the family’s primary source of income.
– Anyone caring for a disabled family member can use life insurance to provide money for continuing care, but they must be cautious if the family member is receiving government assistance.
– Charitably-inclined individuals can use life insurance to fund charitable endeavors without taking away from other accounts or property they want to leave to their loved ones.
– People facing a large estate tax bill at death can use life insurance to provide cash for their loved ones to pay the tax. – If no beneficiary is designated, the death benefit will be distributed according to the policy agreement’s default rules.
– Naming a charity as a beneficiary means the death benefit will be immediately paid to the charity.
– Leaving the money from a life insurance policy to a minor child or grandchild may require a court to select someone to hold the money on the minor’s behalf until they reach the age of majority. – Naming a minor child as a beneficiary of a life insurance policy may not be ideal, as court costs, attorney’s fees, and guardian’s fees can greatly reduce the amount of money available to the child, and restricted investment options can limit the growth of the funds.
– Naming an adult as the beneficiary of a life insurance policy allows them immediate access to the funds, but there is a risk of the money being spent irresponsibly or being taken by a divorcing spouse or for outstanding debts.
– Naming a trust as the beneficiary of a life insurance policy can provide a more controlled and protected way of leaving money to loved ones, as the funds are managed by the trust and distributed according to the terms of the trust agreement. 1. A revocable living trust can be a beneficial option for individuals with accounts and property valued below the estate tax exemption, as it allows them to coordinate life insurance proceeds with their estate plan.
2. An irrevocable life insurance trust provides an added layer of protection by owning the life insurance policy and being named as the beneficiary, while also allowing for the removal of the policy’s value and death benefit from the taxable estate.
3. Life insurance policies offer a wide range of options, and working with insurance professionals, financial advisors, and estate planning attorneys can help individuals navigate these options and achieve peace of mind.
4. For assistance with estate planning, individuals can contact Amanda Dorio at amanda.dorio@henlaw.com or by phone at 239-344-1362.
https://www.henlaw.com/news-insights/life-insurance-101-part-2-what-you-need-to-know-about-beneficiary-designations/
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