Life insurance plays a significant role in estate planning by providing immediate liquidity for identified needs, insuring tangible assets, and providing finances for dependents and outstanding debts. It also gives heirs bargaining power in purchasing any business concerns of the deceased.
The role of life insurance in estate planning is quite significant because of the benefits that can be derived from the application of life insurance to the estate or other stated beneficiaries of the insurance plan. As such, some of life insurance’s roles in estate planning include providing immediate liquidity that can be applied to identified needs upon the death of the insurance plan owner, which implies provision for the needs of any beneficiary. Life insurance in estate planning can also be applied to insure any tangible assets left behind by the deceased.
One of the uses of life insurance in estate planning is the provision of finances that can be used to care for loose ends, including burial of the deceased and the provision of finances for living dependents who would have lost any potential wages. that the life insurance holder would have brought home over the years. The obvious benefit of this is the fact that it gives dependents more security in terms of finances and more confidence for the future, knowing that any outstanding debts that have not been settled before the death of the insurance holder will be settled by the insurance. of life. For example, if a person had outstanding estate taxes and the heirs lack the funds to pay off that debt, financing from life insurance could serve as a means to pay off that debt. It is important to note in this type of situation the fact that immediate access to cash will eliminate the need for the decedent’s heirs to sell part of the estate or any other inheritance in another to raise the money required to settle the outstanding debt.
The value of life insurance in estate planning stems from the fact that such access to finance will also give the heirs bargaining power of the deceased in terms of purchasing any business concerns of the deceased. For example, consider a scenario where three business partners start a business from scratch and grow it into a successful organization. Assuming that two of them board the company’s private jet en route to a business trip and the plane crashes, the heirs of either deceased will have the financial means to buy out the other’s interest if the heirs decide to sell their share. of the business.
Smart Asset.
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