No one wants to think about what might happen after their death. However, planning now for the future can save you and your family anxiety and heartache after you have passed. Having a Life Insurance policy or a will as part of your estate plan helps to provide for your loved ones after you are gone. Planning doesn’t need to be complex and it doesn’t have to wait.
Why choose Life Insurance?
Life insurance is a crucial aspect of estate planning, as it funds funeral costs and ensures your loved ones have access to financial resources after your passing. Life insurance can act as a replacement of your income so your loved ones can carry on without you. It is a legal document that will pay out to the beneficiary stated on the policy. There are various types of life insurance available and an independent life insurance agent can help find the one that is right for you and your family.
How Life Insurance fits into Estate Planning
Accounting for estate taxes is a crucial aspect of estate planning. Estate taxes are fees paid to the government should the estate’s value exceed a set threshold.
Life insurance policies follow similar rules. Creating a life insurance trust is one way to ensure your loved ones receive what you have intended. Trusts are separate legal entities, allowing you to list them as beneficiaries on insurance policies. The trust principal isn’t subject to taxation, only the earnings, keeping the initial payout intact.
Because trusts have an appointed trustee to manage funds, they’re an excellent option if you have young children. You should periodically review beneficiary designations on trusts and insurance policies to ensure the “right” people receive funds. It’s particularly important to do so after the following:
- Marriage
- Divorce
- Birth of a child
Wills as part of your Estate Planning
Meanwhile, a will dictates all your final wishes and how your heirs will receive your assets after your death. It can address items such as money in bank account, vehicles, homes and personal belongings. The beneficiaries named in your will may be different than the beneficiaries of your life insurance. A will can also name a guardian for your children and pets. And, a will can be enforced not just after your passing but if you are incapacitated.
Explaining Probate and Non-Probate Assets
What happens if you pass without a will? In most cases, people have strong feelings about who inherits their property. However, not everyone creates a will before passing. States enact a legal process called probate, which verifies wills and distributes assets among heirs.
Without a will, a court-appointed administrator will conduct a probate proceeding, which can sometimes take years. In contrast, legally binding wills generally name an executor who promptly executes the wishes of the deceased.
While probate is more straightforward and quicker when the will contains clear instructions and a named executor, it can still take over a year to distribute assets.
Because life insurance policies are separate from wills, they don’t have to go through probate. Instead, the company follows internal protocols to verify your passing and disperse funds. The process usually takes no more than 60 days, ensuring beneficiaries get more immediate support.
A combined approach
Using life insurance in conjunction with a will is the best way to ensure loved ones receive your assets and get the financial support they need upon your passing. Professionals can help you stay updated on beneficiaries and even recommend the best terms for your needs. For assistance finding the right coverage for you and your family, contact Brooks, Todd & McNeil today.
Talk with a Brooks, Todd & McNeil Agent Today
Our dedicated independent agents can help you find the right life insurance plan that meets the needs of you and your loved ones. To learn more about our products and services, contact us today at (800) 448-4567.