Life insurance is often an integral part of an estate plan. By acquiring life insurance coverage, you can provide liquidity when your family might need it the most, particularly if you’re relatively young. The policy’s proceeds can be used to help pay your mortgage, college tuition for your children or various other expenses.
Of course, you also must account for taxes. Generally, you can avoid dire federal estate tax consequences, based in part by using your gift and estate tax exemption. However, the exemption is scheduled to decrease after 2025, creating more complications. For many families, creating an irrevocable life insurance trust (ILIT) to hold your life insurance policy is a common solution.
Posted by Anthony Tran, Associate Editor, Wealth Strategies Journal