Life insurance has long provided a source of liquidity to pay estate taxes and other expenses. Even though for many families, federal and state estate taxes aren’t a concern, life insurance continues to offer many benefits for these nontaxable estates. For this reason, it’s important to properly account for your life insurance policies in your estate plan.
Who should own the policy?
If you own life insurance at your death, the proceeds will be included in your taxable estate unless you take certain steps. Ownership is usually determined by several factors, including who has the right to name the beneficiaries of the proceeds. If estate taxes are a concern, the way around this problem is to not own the policy when you die. However, don’t automatically rule out your ownership either.
To choose the best owner, consider why you want the insurance. Do you want to replace income? Provide liquidity? Or transfer wealth to your heirs? And how important are tax implications, flexibility, control, and cost and ease of administration?
Here are four possible owners:
Turn to us for help
Contact us if you’re planning to include life insurance in your estate plan but are unsure of the best way to do so. We can help you determine who should own the policy given your specific circumstances.