Planning For A Secure Future

Life insurance and estate plans

On Behalf of | Feb 13, 2024 | Estate Administration & Probate

A life insurance policy allows the policyholder to provide financial support to named beneficiaries upon their death. Some may wonder if a life insurance policy could become part of a California estate plan. Although beneficiaries of a will or trust may receive assets when probate closes, a life insurance policy could be a valuable addition.

Estate plans and life insurance

Estate planners interested in purchasing a life insurance policy may choose a term policy or a permanent policy. The amount the policy pays will vary, and the estate planner might choose an appropriate amount that covers expenses that beneficiaries might face. Some may need to pay inheritance taxes or cover business expenses from inherited companies.

There are various reasons why someone might buy a life insurance policy. An estate planner may intend to cover college tuition costs for a young person unable to afford the expenses. Beneficiaries with a disability may be unable to work and rely on an insurance policy to pay for essential living expenses.

Other notes about life insurance

A life insurance policy may factor into estate planning when the planner does not have a substantial estate. The settlement from the life insurance policy could be the only funds that beneficiaries receive, but the amount might be significant. Also, since life insurance policies do not go through probate, beneficiaries might receive their funds quickly.

An estate planner might have concerns about how well beneficiaries will manage their life insurance settlement. Persons with such concerns may place the policy inside a trust, allowing the funds to be managed per the planner’s wishes. Some may prefer to pay the settlement from the trust incrementally, for example.

Life insurance could play an important role in your California estate plan. Because everyone’s financial situation is different, there are a number of factors to consider.