Most people know that a life insurance policy is vital to any estate plan. However, to get the most out of it, you should consider your wishes and how life insurance can help you achieve those goals. Understanding how to best use life insurance in your estate plan can help optimize the assets you leave your loved ones. In addition to providing your family with immediate funds after your death, life insurance can have various benefits that our Orange County estate planning attorneys will discuss in this blog post.
Replacement for Income
One of the main reasons to buy a life insurance policy is to ensure that your loved ones are financially taken care of after you die. Although the risk of death is generally low for people in their peak earning years, typically 35 to 55, their deaths can significantly impact the lives of family members who rely on their income. Even if you are young, life insurance can give you the peace of mind that your family will have funds should they lose you. That way, they can continue to live comfortably and pay for ongoing expenses such as a mortgage, car payments, or utilities.
Planning for Retirement
You can use life insurance to preserve a source of income for your family when you retire because a life insurance policy will accrue cash value that can be withdrawn in retirement. Plus, these withdrawals may not be subject to taxes. These funds can help to supplement your retirement income, replace the income from your pension, or pay long-term care costs.
Some people find it helpful to leverage the cash value of a life insurance policy to pay tuition fees for a child, grandchild, or another beneficiary. While this option will likely require a high rate of return to pay for the substantial fees today’s students face, one benefit is that the policy’s cash value will not count toward the expected family contribution when financial aid is considered. This means that your college student may still be eligible for grants and loans.
A life insurance policy can help cover the expenses associated with an estate, including estate administration fees. It can help you to pass on your estate efficiently, particularly if you have a high-value estate and must transfer various assets. Your loved ones may also use life insurance cash to reduce estate taxes or avoid the forced sale of assets.
Contact an Experienced Orange County Estate Planning Attorney
In addition to covering funeral expenses and providing loved ones with immediate funds after your death, life insurance can offer various benefits as part of your estate plan, some of which are not obvious but extremely helpful. A life insurance policy can allow your family to cover basic living expenses after your death and may even help you meet certain costs while you are still alive. Contact our experienced Orange County estate planning attorneys today at (800) 244-8814 to learn more about how life insurance can work for your estate plan.