For most families, the need for life insurance is the most significant concern in life. Young children face the financial burden of supporting their families, and life insurance is imperative. Yet, ironically, the most deprived families are the least likely to pay life insurance premiums. Moreover, the need for life insurance usually diminishes as the family grows older and accumulates wealth and net worth. So, is there any link between life insurance and estate planning? 

There are two main types of life insurance: term life insurance and whole life insurance. 

The cost of term life insurance typically increases with age. However, if the policy remains active and the premium is paid until death, it will pay in the event of death. The tips you pay for insurance have no cash value when entering an insurance policy. Universal life insurance is term life insurance with a savings plan; thus, many types of endowment life insurance exist. This all combines savings plans and insurance coverage.

Is there any link between life insurance and estate planning?

You can purchase term or life insurance to fund your spouse or child who survived the death of an individual. 

• You can take out life insurance and provide your parents with retirement income. It can do so by converting the policy to an annuity or acquiring cash value. 
• Life insurance can provide non-farm heirs with dollars they can inherit, and thus agricultural wealth can flow to rural heirs. 
• The insurance money offsets the farm’s property, leaving the farm and business intact and the entire family receiving a portion of the property. 
• Life insurance can fund inheritance taxes, real estate costs, or deceased debt. For example, a farmer’s heirs may purchase insurance for the farmer’s parents. This serves as income for buying land, machinery, or equipment from other heirs when the parent dies when the parent evenly distributes the agricultural property to all children. 
• An essential aspect of this example is that the agricultural or business heir owns the insurance policy and pays all premiums. 
• The farmer’s parents will insure. The beneficiaries of the policy are the heirs of agriculture or business. This format ensures a distribution of death benefits to the intended individual. In addition, farmers often take out mutual insurance. This process provides funding to purchase the assets of a deceased partner in the event of premature death. The result is that it allows living partners to keep their farms and businesses intact.  
• Life insurance allows you to create or upgrade your property. It may be a real estate construction plan that provides money to the heirs. New life insurance options give people access to death benefits to cover long-term health care costs. This may not cover long-term care insurance. But it is beneficial for those who are covered by life insurance. Please get in touch with a qualified insurance agent.

How can we determine who should own the policy and how to establish beneficiaries?

Policy ownership can be neglected, but it is imperative, especially for large properties. Life insurance death benefits are generally included in the policyholder’s property, regardless of who pays the premium or who is designated as a beneficiary. Changing the ownership of a life insurance company is a complex issue. You should check with an experienced real estate planner or insurance agent for ownership regulations.

A beneficiary is a person who receives a life insurance death benefit. If your property is a beneficiary of your life insurance, your will or the plan in the trust will determine the distribution of death benefits. Often, the spouse of a beneficiary with a child is nominated as a secondary beneficiary. The money belongs to a trust for the child or directly to the child. The ultimate beneficiary may be real estate if the immediate family does not survive. 

A potential problem with this strategy is that the death benefit insurance could increase real estate beyond the tax exemption applicable to state or federal inheritance tax. This leads to inheritance tax issues, and thus, you can avoid this problem by entrusting your life insurance to an irrevocable life insurance trust (ILIT). The trust owns the insurance policy, but the court ensures the person. Death benefits are not included in your property value because you do not own it. Check with your lawyer or insurance agent, as this is a complex area.

Conclusion

Life insurance can play an essential role in property planning. Therefore, aligning all life insurance aspects with your overall estate plan is necessary. Carefully analyze all factors before purchasing life insurance. Term life insurance may be better, depending on your family and business situation, and vice versa. Keep evaluating your life insurance as family, wealth, and business needs change.