Is Life Insurance Part of Your Estate Plan? It Should Be!

  • Estate Planning
Life Insurance and Estate Planning

A life insurance policy can protect your loved ones after you are gone. Life insurance is a good way to protect your loved ones after your death and can be an important part of your estate plan. Life insurance gives the policyholder a guaranteed amount of insurance that they can access during their lifetime, and they can leave the insurance policy to their heirs.

Here are three ways life insurance policies can provide additional benefits for your estate plan, and protect the future of your loved ones.

3 Ways Life Insurance Can Enhance Your Estate Plan

1. Life Insurance Is Taxable
Proceeds from a life insurance policy are taxable to the beneficiaries. With proper estate planning, life insurance proceeds paid to beneficiaries are generally income tax-free. Since the SECURE Act went into effect in 2019 and you can no longer use a stretch IRA, transferring retirement income from IRAs and other funds into a life insurance trust may be a good option to lower estate taxes.

2. Life Insurance Trust
An Irrevocable Life Insurance Trust (ILIT) in Illinois protects your estate from taxes so you protect your loved ones after you are gone. You must contribute funds to the trust each year to pay the life insurance premiums. These life insurance funds can provide income for a surviving spouse, children, and any other beneficiaries.

3. Long-Term Care Insurance
A life insurance policy with long term care benefits combines the benefits of long-term care insurance with those of permanent life insurance through the purchase of an optional rider, says Kiplinger. They provide a “death benefit if the owner passes away without having needed long-term care. If the owner does need long-term care, a certain amount of money or time is allotted to cover costs. If this amount isn’t used up, some policies can offer a “return of premium” guarantee upon death or termination of the policy. If a remaining amount is passed on, beneficiaries may be able to enjoy it tax-free, depending on the policy.”

Life insurance can provide financial security for your loved ones. There are benefits to life insurance for taxes, estate planning and long-term care that can protect the future of your loved ones after you are gone.

Lombard Trusts and Estates Lawyer

Do you have questions about how life insurance can enhance your estate plan? Our experienced estate planning attorneys in Cook, Dupage, Kane, Lake, and Will counties in Illinois can advise you on the best options to protect your assets and loved ones. To talk to an estate planning attorney contact the Estate & Probate Legal Group at 630-864-5835.