by Guest » Mon Jan 25, 2010 06:52 am
I've always known life insurance as one of the best ways to secure my family's future as also to pay for the funeral expenses and our medical bills. But, some people are saying that it could also play a key role in estate planning. I'd love to have your opinion regarding this!
Posted: Mon Jan 25, 2010 07:10 am Post Subject:
Great question. Since 2010 is the perfect year in which to die, it has little application between now and 12/31/2010. But we can safely assume that Congress will not extend the unlimited exemption on estate values beyond the end of the year.
If they do nothing, on 1/1/2011, every estate valued at $1,000,000 or more will be subject to estate tax (the so-called "death tax") at a marginal rate of up to 50%. If they do anything before then, the conventional wisdom suggests that the exemption might be set at $2,000,000 or possibly $3,000,000. No telling what the tax rate might be. Certainly not less than today's maximum of about 45%.
So here's a question in answer to the substance of your question:
If, when you died, your heirs/executor would be faced with an estate tax bill of 50% of the value of the "stuff" you leave behind, would you want them to have to sell some or all of your "stuff" to raise the money to pay the tax, or would you rather trade a small amount of what you have today ($$), while you're alive, to obtain a life insurance policy that will provide sufficient funds to pay the tax so that none of your stuff, in essence, goes to your rich Uncle Sam?
That's the primary emphasis of life insurance in estate planning. There are additional uses, such as funding a buy-sell agreement in a business situation, or other monetary needs beyond taxes in which a forced sale of estate assets would not be your preferred choice (paying off secured debts, for instance).
I'm sure others will weigh in on this topic.
Posted: Mon Jan 25, 2010 08:14 pm Post Subject:
Estate planning is nothing more than planning for what happens when you die. Max is talking about estate tax planning which is a subset of estate planning.
In general, the purpose of life insurance in estate planning is to leave money behind at death.
For instance, you don't need money just to pay your final expenses, your family may need your income replaced.
Posted: Tue Jan 26, 2010 04:43 am Post Subject:
Insurance expert brings up a good point. Many assume that estate planning refers to the process of using life insurance to pay for estate taxes, this is only part of the application life insurance has with regards to estate planning, and only part of what estate planning means.
There are a lot of things to think about with respect to what dieing might cost you or your loved ones; unfortunately, a lot of people are way off in outer space when it comes to what reality will most likely bring.
Posted: Tue Jan 26, 2010 06:49 am Post Subject:
this is only part of the application life insurance has with regards to estate planning, and only part of what estate planning means.
Thanks..I got your point that this is only a part of it's application in estate planning. But, then what other areas would involve life insurance? May be you could just end up explaining the entire estate planning thing if required.
Posted: Tue Jan 26, 2010 11:26 am Post Subject:
May be you could just end up explaining the entire estate planning thing if required.
This is very funny.
Posted: Wed Jan 27, 2010 02:04 am Post Subject:
Not about to explain all the facets of possible estate planning. It really depends on the person. If you have specific questions or concerns you can leave them here and we can attempt to help. Or you can seek out the help of an advisor and sit down with him or her.
Posted: Wed Jan 27, 2010 05:36 am Post Subject:
Life insurance could be used to set your assets in such a way as to offer extra financial security for you and your family. If your Life insurance is owned by an ILIT, then your policy proceeds would be transferred to your beneficiaries without any hassles. These proceeds would be free of income and estate taxes.
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