Life insurance is designed to protect your family from financial ruin upon your death. It ensures there is enough money to carry out your wishes after you die. Life insurance is a way to financially provide for your family, even from the grave.
Who Does Life Insurance Benefit?
There are many people who will benefit from the right life insurance coverage. Some common ones are:
If you have a business and want someone to inherit it, you can get a life insurance policy that gives your children who will not get interest from the business cash. The surviving business partner can use the life insurance proceeds to buy the family’s interest in the business. This allows the family members to get money without the business partner having to use their own money to buy out the family.
Business can operate as it always has.
Parents of Young Children
With a life insurance policy, you can pay someone to take care of your children. As you know, raising children costs a lot of money, and you can ease the guardian’s financial pain by getting a life insurance policy to help with the expenses. Life insurance is also helpful to the surviving parent if the primary breadwinner in the family has passed on.
Caretakers Of Disabled Family Members
This kind of policy is also helpful in taking care of a family member with a long-term disability. You do, however, want to ensure that no government benefits are cut off, so plan accordingly with the life insurance policy.
People Who Could Get Large Tax Bill
If your property and accounts exceed the lifetime exclusion amount, your heirs will need to pay an estate tax. As such, a life insurance policy can offer your loved ones cash that can pay the tax bill. The financial benefit is advantageous if the property is not sellable, which would leave them to pay the tax out of their own pocket.
If you have charities you like giving to, you can set up a life insurance policy to pay out to your designated charity without taking money from other property or accounts you want your heirs to inherit. This also gives you the ability to give more to the charity after you die than was possible with lifetime contributions.
5 Possible Beneficiary Classifications Of A Life Insurance Policy
With a life insurance policy, you’ll need to elect a beneficiary to handle the distribution. What are some beneficiary classifications?
- No Beneficiary –Without a designated beneficiary, the policy relies on the default rules to distribute the funds – be it your spouse or children. It may also be subjected to state law or the estate, which means it’ll go through the very public probate process.
- Minor Beneficiary –You may decide that a life insurance policy goes to a minor child or grandchild. Before doing this, be aware that minors cannot control or legally own money, which means the court will choose a person to hold onto the money until they reach their 18th or 21st birthday (state-dependent). When that occurs, the money is given to the named beneficiary in total, and they can spend it how they want.
- Adult Beneficiary –An adult can get the life insurance money and spend it how they want. It’s also possible a divorcing spouse or debt collector can take the money to satisfy the judge. Simply put, the money won’t last very long.
- Trust Beneficiary –With this option, the life insurance money goes to the trustee with instructions on how the money should be used. You can include other provisions to ensure the trust is protected from predators, debt collectors, etc. This will protect the money and ensure it goes to the trust beneficiary.
- Charity Beneficiary– If you’re a philanthropist, you could name a charity to be beneficiary so the death benefit will be paid to the charity when you die. This could be useful for charities that need money now or have a large project in the works.
What You Need To Do Now
Set up a time for us to meet and talk about your estate plan. If you have a life insurance policy already, we can go through it and determine if the beneficiary designation is the right one for your desire. Whether or not you have a life insurance policy, we can sit down and talk with you about possible options. We will be happy to go over your financial affairs and develop a comprehensive estate plan that ensures all your wishes are met.