Here for YOU Today and There for your FAMILY Tomorrow

How Life Insurance Plays a Supporting Role in Your Estate Plan


Insurance Plays

Life insurance is a very useful and often overlooked planning tool that has many different applications. One key function is providing liquidity for estate plans, as reported in FEDweeks article, “Proper Use of Insurance in Estate Planning.”

For example, if Dad passes away and leaves a sizeable estate to his daughter Naomi, there could be a big estate tax due. But if most of Dad’s assets are tied up in real estate and an IRA, Naomi might not want to be in a hurry to sell the real estate. She might think about withdrawing some of the inherited IRA to raise cash, but she’ll have to pay income tax on the withdrawal and lose a valuable chance for extended tax deferral.

A better strategy would be for Dad to buy insurance on his own life, and use those proceeds to pay the estate taxes. Then Naomi can keep the real estate while taking only minimum required distributions (RMDs) from the inherited IRA. If the insurance policy is owned by Naomi or by a trust, the proceeds probably won’t be in Dad’s estate and won’t raise the estate taxes.

Here are a few common life insurance errors that can wreak havoc with an estate plan:

  • Naming your estate as beneficiary. This puts the policy proceeds in your estate, exposing the money to estate tax and creditors. It also gives your executor more paperwork if your estate’s the beneficiary. Instead, be certain to name the appropriate people or charities.
  • Naming just one beneficiary. Designate at least two backup beneficiaries to eliminate confusion if the primary beneficiary dies before you. I always recommend to name a contingent beneficiary.
  • Filing away your life insurance and forgetting about it. Review your policies at least once every three years for changes in life circumstances.
  • Having too little insurance. With a young child, it’ll take hundreds of thousands of dollars to pay all his or her expenses, like college bills, in the event of an untimely death.

Term insurance is a very inexpensive way to provide your heirs with a healthy cushion against anticipated and unanticipated expenses. When whole life insurance policies are not feasible, term life is an affordable alternative.

Do you live in Miami-Dade, Broward, or Palm Beach counties in Florida? Laws are constantly changing-- has your estate plan been reviewed in the last 2-3 years? Call me (954-888-1747) right away for peace of mind. I can help!

  • My practice is exclusively estate planning and probate,
  • I have prepared numerous estate plans in 16 years of practice,
  • I have administered estates and trusts through Probate all over Florida,
  • I am a Certified Financial Planner Professional™, and
  • I am here for YOU today and there for your FAMILY tomorrow.

Reference: FEDweek (November 3, 2016) “Proper Use of Insurance in Estate Planning”

Why would we recommend D.T.F.? Several Reasons: Your ability to explain complex estate problems, clearly and patiently; your total lack of arrogance and pretense; a strong feeling that you are motivated by what you perceive is best for your client, rather than what would generate the largest legal fees; finally, and importantly, you are a lovely guy. A.C.

Two words cannot sum up the entire process of creating my “trust.” I enjoyed your attention to detail, your patience of explaining terms and conditions until I understood, also giving me copies to read and understand. Thank you for your suggestions on what was best for “me” but still allowing me to make my choice. Most of all, thank you for thinking of “me.” Wells Fargo said “you were the best” I cannot deny that. Again thank you very much for everything. Anna is an asset or a compliment to the firm. She is warm and very caring. It was great doing business. Thank you.