Life insurance can be a valuable tool to provide financial protection for your loved ones. When you set up your estate plan, do not forget to consider buying life insurance to meet your estate’s essential goals.
You might not have as much money in savings and investments as you would like.
If you passed away tomorrow, your survivors might struggle to pay off the mortgage, go through college, and pay off the household debts. The monthly premium payments for a life insurance policy could be an inexpensive way to make sure your family will have enough money. A California estate planning attorney can help you incorporate life insurance into your estate plan.
Life Insurance Can Get Money to Your Beneficiaries Quickly
You should have a will or trust to make the transfer of assets and payments of debts go smoothly for your loved ones. These documents are necessary, but it takes about a year or longer for a will to go through probate. Your estate cannot distribute money to your heirs until the creditors get paid, and the judge approves the asset distributions.
Trusts can get administered a little faster, but because the estate has to notify potential creditors and file tax returns, it can take months for a trust to be at the point at which the trustee can legally pay the beneficiaries. If a trustee gives money to the beneficiaries prematurely, the trustee could face personal liability.
If your family relied on your income for some or all of their support, they could face financial hardship having to go for months without that income stream. Life insurance can provide assets to your beneficiaries within a matter of weeks.
You have to name the individual people as the beneficiaries of the life insurance policy, not your estate. If you leave the “beneficiary” line blank or make your estate the beneficiary, the death benefit will have to go through probate with your will, which defeats the purpose of trying to get assets to your loved ones quickly. When you name specific people to receive the proceeds of the policy, the insurer will send the money to them directly.
You Have More Control Over Who Inherits from You with Life Insurance
Let’s say that you have a dear friend to whom you want to leave some money. If you make the bequest through your will or trust, your legal heirs might contest the distribution. Depending on your family dynamic, life insurance can provide a means to help someone without interference because the proceeds will go directly to that person.
How to Determine How Much Life Insurance You Need
The amount of life insurance a person needs will vary depending on the situation. If you have young children, you might want to buy enough life insurance to get them through high school and pay for college. You might want to leave your spouse secure by getting a policy that could pay off the mortgage and create a retirement nest egg. Some people buy a policy that is equivalent to several years of their gross income.
A California estate planning attorney can help you calculate how much life insurance you need for a well-funded estate plan. Contact our office today.