Life insurance plays two roles in the job of estate planning. One is providing estate liquidity and two is enhancing the estate. The principal role of life insurance in estate planning is to provide funds to facilitate estate conservation. Clients can use life insurance policies to pay estate taxes and settlement costs rather than having to liquidate estate assets to pay these costs.
Did you know that your heirs may have to liquidate your home or rental properties immediately after your death, unless you create an Irrevocable Life Insurance Trust (ILIT)?
Most people are interested in passing their wealth to their heirs. With the demise of the baby-boomer generation, an enormous transfer of wealth will occur during the coming years. The government is poised to capture this wealth through the estate tax, which is imposed upon death.
Currently, the Federal estate tax exemption amount is $1.5 million for individuals and $3 million for married couples. Any amount over the exemption will be taxed (Federal estate taxes average around 45%). Furthermore, this tax must be paid within nine months after you die.