A will, trust, and power of attorney are standard estate planning tools individuals use to manage their property and assets. These tools can help people plan for the future, protect assets, and distribute them according to their final wishes after their passing. A life insurance policy is another tool that can help your plan.
Life insurance policies offer several benefits that other estate planning tools can’t provide. An estate planning attorney can advise you about the best way to utilize a life insurance policy in your estate plan to offer flexibility and protection.
What Is Life Insurance?
Life insurance is a legally binding contract between an insurance provider and an individual. The individual pays premiums to the insurance company, which promises to pay a specific sum of money, or death benefit, to designated beneficiaries when the policyholder passes away.
There are two standard forms of life insurance: term life and permanent life insurance. Term life insurance provides financial benefits to beneficiaries if the insured individual dies during the specific term. When the term expires, the policyholder can renew for an additional term or convert the policy to permanent coverage.
Permanent life insurance provides lifetime coverage as long as the policyholder continues to pay their premiums. Additionally, permanent life policies accumulate cash value over time. However, permanent life insurance policies tend to be more expensive than term life insurance since term policies only offer benefits for a restricted time frame and have no cash value.
Incorporating Life Insurance into a Wisconsin Estate Plan
When incorporated into a comprehensive estate plan, permanent life insurance policies offer several unique benefits. One of the most immediate benefits of a life insurance policy is that the payout goes directly to named beneficiaries. It provides a reasonably quick and efficient money transfer to an individual’s beneficiaries. Another benefit is that insurance payouts do not have to pass through probate following the policyholder’s death.
A life insurance policy combined with a special needs trust or other estate planning tools can also help provide for family members with special needs or disabilities. The insurance payout can give these people additional financial stability, while assets from your estate can be distributed to heirs as you see fit.
You could purchase a life insurance policy to cover your estate taxes if you know that your estate will be required to pay them.
While you can take out a life insurance policy and add your preferred beneficiaries, you can also name a trust as the beneficiary of your policy as part of an overall estate plan. An irrevocable life insurance trust and a special needs trust are the two most common trusts funded by life insurance, which may benefit your family, depending on their unique needs and circumstances.
Customize Your Estate Plan Today with Help from a Wisconsin Estate Planning Attorney
The estate planning team at Peterson, Berk & Cross, S.C., can evaluate your situation and help you find the life insurance and estate planning tools that meet your needs and goals.
Contact our office today, and let’s discuss how we can help you protect your future.