Life Insurance can help your Estate Plan and I can show you some creative estate planning uses for life insurance. When one dies today, in our country, what estate taxes will their heirs be burdened with? If their estate is of significant size, the burden might be very great. One unique way to reduce the bitter sting of taxes due upon death is to use life insurance as part of a well-reasoned Estate Plan. 

WILL MY ESTATE OWE TAXES? WHO PAYS IT? 

You might be wondering whether your estate will owe taxes, who pays it, and how it’s collected. First of all, rest assured… Fewer than 1% of estates will owe federal estate tax in 2019, and that’s because you can leave millions of dollars to your heirs before triggering a tax event. The exact amount you can leave is the “Federal Tax Exemption." If your estate does owe federal estate tax, however, it must be paid by your estate (via your executor or trustee) within 9 months of your passing. If your estate is largely comprised of business or real estate, or other non-liquid assets, and it will owe taxes, that’s another great reason to consider life insurance. Life insurance provides quick, liquid cash that can be left to your estate (or a trust) to pay a tax bill that your estate otherwise might not be able to readily afford.

FEDERAL ESTATE TAX EXEMPTION FOR 2019 

Each individual can pass away and leave an inheritance of up to $11.4 million (for married couples, it’s doubled to $22.8 million) without their heirs incurring any federal estate tax. This is known as the “federal estate tax exemption” amount, and it changes (usually increases) just about every year. Every dollar left to heirs over the exemption amount is currently taxed at 40%. Pretty generous, right? We pay taxes on everything, but apparently very few of us will ever pay federal estate taxes if the exemption amounts stay this high! (Taxes at the state level are separate) 

Where Life Insurance Fits Into Estate Taxes 

It’s true, that with the current 2019 exemption of 11.4 million per person, only the very wealthy need to worry about Federal Estate Taxes – but at a whopping 40% tax rate, the wealthy should certainly make plans well in advance so their estate is not decimated by Federal Estate taxes! If you are in this category, you don’t need me to tell you, as your attorney and accountant will have discussed these issues with you often. 

Why Purchase Life Insurance NOW?

If you have not yet utilized Life Insurance to help offset the impact of taxes on your current or FUTURE estate, now would be a good time to consider it. Why have your family come up with a massive tax payment if you could buy life insurance, and pay pennies on the dollar now to cover that payment? You will never be younger or healthier than you are today, so the cost for Life Insurance to protect your estate will never be lower. 

Finding The Right Life Product and Company 

It is vital to select a strong life insurance company – not necessarily the one with the cheapest rates, but one with a stable history and good credit rating. An independent life insurance agent can help you find the right carrier and the right product for your estate planning needs, and I am just a click or a phone call away! 

Contact me today to review your options!