LIFE INSURANCE

We buy life insurance for lots of reasons but mainly to replace property or income lost on the insured’s death – to take care of those we leave behind.  If those we leave behind are minors, it makes sense to have the policy beneficiary be a trust that can administer the funds and make sure our wishes are followed.

Practical advice => Don’t make your estate or your spouse the beneficiary of your life insurance. If the proceeds end up in the hands of minors, they will be subject to Court supervision and be paid in full to the minors when they reach age 18.  We all can appreciate the danger of letting large amounts of money get in the hands of an 18-year old.

In most instances, life insurance is included in your estate for death tax purposes.  You should be concerned about estate taxes because of the uncertainty surrounding the future of the death tax debate. We don’t know where that is going but with a three-year look back, the decisions you make today can save big money later.  In 2011, the death tax is scheduled to return and tax all estates over $600,000.  Getting insurance out of your taxable estate is probably the easiest estate planning tool available.