June Newsletter: All About Life Insurance
June’s newsletter delves into all things life insurance. This critical yet often misunderstood aspect of financial planning can help secure your family’s future. In the newsletter, we explore innovative life insurance applications, from funding trusts for dependents to covering estate taxes and debts. We’ll also discuss the importance of naming the right beneficiaries and ensuring you have enough coverage to meet your evolving needs.
Creative Uses for Life Insurance
Currently, a record-high number of American adults lack adequate life insurance coverage. Misunderstandings about costs and types of policies are the main barriers. Even those with life insurance often fail to grasp its potential for being a powerful tool for securing your family’s future. Life insurance offers numerous uses and benefits, including:
- Funding a Trust: You can direct life insurance proceeds to a trust to ensure ongoing support for dependents with special needs, fund education, or provide for pets.
- Paying Taxes and Debts: Life insurance can cover estate taxes, debts, and creditor claims, preventing the need to liquidate assets to satisfy these obligations.
- Equalizing Inheritances: When assets like a family business or vacation home are not easily divisible, life insurance can provide an equal financial inheritance to multiple heirs.
- Making Philanthropic Donations: Policies can benefit charities or nonprofit organizations. Before making a donation, it’s essential to coordinate with the chosen charity to ensure compliance with its procedures.
- Paying Final Expenses: Specialized policies can cover funeral costs and outstanding medical debts, alleviating the financial burden on surviving family members.
Who Should You Name as a Beneficiary?
The proceeds from a life insurance policy can significantly benefit your loved ones by paying off debts, providing supplemental income, and covering funeral expenses. A life insurance policy can designate a single individual, multiple people, a trustee, a charity, or your estate as beneficiaries. It is essential to name both “primary” and “contingent” beneficiaries. The primary beneficiary receives the death benefits first, while the contingent beneficiary serves as a backup. Naming beneficiaries allows the death benefit to bypass probate, streamlining the process of settling your affairs.
Do You Have Enough Life Insurance?
Most people buy life insurance to provide tax-free income replacement for their families in case of sudden death. Experts recommend a death benefit of at least ten times your salary. Life insurance needs change with life events such as starting or expanding a family, incurring debt, retiring, or increasing income. It’s essential to regularly revisit your life insurance and estate plan every three to five years to better prepare for your family in the future.
Check out our latest newsletter for an in-depth look at all things life insurance. Additionally, contact Law Stein Anderson today to learn more about incorporating life insurance into your estate plan.