Insurance Strategy: Estate Planning Protect your loved ones and your legacy with an estate plan
Having a plan for what happens to your assets after you are gone allows you to ensure your assets go to the individuals and organizations most important to you.
While you may think only the very wealthy need an estate plan, anyone who has property, personal belongings or assets has an estate. If you have assets you want transferred to heirs or charity at the time of your death, you should have a documented estate plan.
Why an estate plan is important
An estate plan, the documents that indicate what should happen to your assets when you die or if you become incapacitated, can ensure that the heirs or organizations you desire will receive assets upon your death. And, perhaps more importantly, it can help minimize the financial burden on those who depend on you.
Defining your legacy with an estate plan can help:
- Transfer your assets and property as you intend, after you pass away.
- Determine who will make your healthcare decisions, take care of minor children and manage your assets if you become incapacitated.
- Offer financial security to a surviving spouse and children, regardless of age.
- Ensure the succession of a family-owned or other business.
- Pay estate settlement expenses such as estate taxes and administrative costs.
- Protect assets for future generations.
Without an estate plan, probate court in your state of residence may determine how to distribute your assets when you die. Many issues can arise if no estate plan is in place such as higher estate taxes, final expenses, delays and legal problems. Reduce uncertainty for heirs by taking steps to document the legacy you want to leave.
What is included in an estate plan
An estate plan helps ensure the assets and property you own are properly taken care of after you are gone. It can also document and designate permission to a lawyer or loved ones to make decisions on your behalf should you become incapacitated due to mental incompetence or major illness while alive.
A fully documented plan makes it easier for your heirs. Consider these aspects of a thorough estate plan:
- A last will and testament/trust – a document that states what assets and property go to which heirs, based on your final wishes.
- Durable power of attorney – a person who can make financial decisions on your behalf, if you are unable to do so.
- Healthcare power of attorney – a designated person who will make healthcare decisions if you are incapacitated.
- Guardianship determinations – a person/couple designated to raise your children should something happen to you.
- Beneficiary designations – beneficiaries on certain accounts (e.g. 401(k) may allow some possessions to bypass your will.
- Letter of intent – a document covering your final wishes for your beneficiary or executor.
Estate planning strategies using life insurance
Life insurance, in addition to providing a death benefit, may offer other estate planning opportunities. It can help strengthen and balance your estate, provide liquidity and replace wealth.
Life insurance is a unique financial tool to enhance your estate plan by helping you:
- Protect your family and assets - Offers protection by replacing income for your family and providing a source of liquidity for your estate.
- Control your wealth - Gives you control over your wealth by helping address taxes and debt, and minimizing your assets' exposure to probate.
- Provide for loved ones or charitable causes - Offers you the ability to increase the dollars you leave to family, friends or charity by leveraging premiums into a generally larger policy death benefit.
