3 Ways Life Insurance Can Help with Estate Planning: Part 1

Did you know that only about 50% of Americans have life insurance? Life insurance is about making sure you have the money to cover your final expenses, and taking care of friends and family when you pass away.  But there’s more; life insurance can help with estate planning and the distribution of your assets.

How Life Insurance Can Help with Estate Planning

We often think of life insurance simply being about a final payout to your loved ones after you’re gone. But have you really thought about how you can best utilize the money? You can utilize the funds best when your life insurance policy works with your estate plan.

Your estate plan includes more than just a will or trust. It also includes a power of attorney, healthcare directive, life insurance, and other assets that cannot be included in your will, such as retirement benefits.

Here are 3 ways that life insurance can help with estate planning:

1. Final Expenses
   Funerals average around $7,000.00. Your life insurance will help pay for that. But final expenses can also include any debt your estate may still owe. In Illinois, your family may not be responsible for your debt after you die, but your estate is. Besides debt, the IRS may require any final tax payments from the estate.
2. Estate Equalization
   What happens if you have multiple heirs, but can’t easily split up your estate? One situation might be if your son lives in your house and you want to leave it to him. But it is worth more than the assets left to give your daughter. In this case, you can give the difference of the life insurance money to your daughter.
3. Special Needs Trust
   If you have a special needs child, you can set up your estate plan to care for them even after you are gone. Your life insurance money can continue to fund a special needs trust.

As you can see, your life insurance policy is an important part of your estate plan. And if you structure your estate plan wisely, you can continue to financially help your loved ones. Working with an experienced estate planning attorney can help you set up an estate plan specific to you and your family’s needs.

Read Part 2 of this article to learn more about how your life insurance can help with estate planning.

Oak Brook Estate Planning Attorney

Do you have questions about setting up an estate plan in Illinois? Contact us today at the Estate & Probate Legal Group at 630-864-5835. Our experienced attorneys understand the laws and can advise you on the best options to protect your loved ones.

Areas we serve: Cook, DuPage, Kane, Lake and Will counties.