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Home » Estate Planning » Is Life Insurance Included in Your Estate Plan?

Is Life Insurance Included in Your Estate Plan?

February 25, 2021 by Pamela Potter

inheritance balancingA lot of people who do not have estate plans in place say that they have not taken action because they do not have sufficient assets. Life insurance can provide a solution, and we will provide the details in this post.

Whole Life Insurance

The two most prominent types of life insurance are whole life insurance and term life. When you have whole life insurance, a portion is set aside as an interest-earning savings component. This is typically referred to as the policy’s “cash value.”

When the funding reaches a certain point, you can withdraw all or some of the cash value, and you can take loans against it. As a result, whole life insurance provides a death benefit while it simultaneously serves as an investment vehicle.

If you are a healthy 35-year-old man who is a non-smoker, the average monthly premium for a $250,000 death benefit would be somewhere between $282 and $432. For a woman of the same age, the average cost is in the $245-$349 range.

Term Life

Term life insurance is the ideal income replacement vehicle for people that have not had enough time to accumulate significant resources. This type of coverage has no cash value, and as the name would indicate, it is in place for a particular length of time.

You decide on the length of the term when you take out the policy, and the premium will stay constant during that interim. However, if the term expires and you are still alive, you got nothing for your money except peace of mind.

Yes, it is likely that you will survive the term, but when you are protecting the people that you love the most, the security is priceless. The good news is that term life insurance is much less expensive than whole life.

A 35-year-old female that is living in Charlotte, North Carolina can get a 25 year term life insurance policy with a half-million dollar death benefit for somewhere between $25 and $40 a month.

Inheritance Balancing

Aside from the income replacement angle, life insurance can be used for some other purposes, and inheritance balancing is one of them. The best way to explain is through a simple example.

Let’s say that you are a chef. You have owned your own restaurant for years, and it is very successful. You have a daughter and a son, and your son worked in the business while he was in high school.

After graduation from culinary school, your son works full-time with you in the restaurant. As the years pass, he earns a lot of sweat equity, and you decide that you want to leave the restaurant to him in your estate plan.

Meanwhile, your daughter embarked on a different career path, you want to leave equal inheritances to your children. To balance the inheritances, you could make your daughter the beneficiary of a life insurance policy with a payout equal to the value of the business.

Buy-Sell Agreements

Partners in small businesses can use buy-sell agreements for succession and estate planning purposes. The partners would determine the value of a share of the business, and they would take out life insurance policies with a benefit that is equal to a business share.

When one partner dies, the life insurance proceeds would be used to purchase the deceased owner’s interest in the business from the estate. These agreements can also be used to facilitate exits while the owners are living, and insurance does not have to be the source of the funding.

Access Our Free Worksheet!

In addition to the ongoing posts that we share on this blog, there are many other written materials on this site you can access free of charge. One of them is our estate planning worksheet, and you can come away with a better understanding of the process if the take the time to go through it.

To get your copy, head over to our worksheet access page and follow the simple instructions.

Need Help Now?

If you are ready to work with an estate planning attorney to develop a custom crafted plan, we are here to help. You can schedule an appointment in Charlotte, North Carolina or Huntersville, North Carolina if you call us at 704-944-3245.

Our Ashland, Kentucky estate planning location can be reached at 606-324-5516, and our Florence, Kentucky office can be reached at 859-372-6655.  We also have a contact form on this site you can use to send us a message.

 

  • Author
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Pamela Potter
Pamela Potter
Owner and founder of the Ashland, Kentucky based Potter Law Firm, Ms. Potter concentrates her practice in the area of estate planning, estate administration, and elder law. Mrs. Potter’s goal is to help her clients plan secure financial futures for themselves and their families. To achieve that goal, her firm offers a wide range of estate planning services, including wills, trusts, and powers of attorney in addition to probate, estate administration, elder law, and Medicaid Planning services.
Pamela Potter
Latest posts by Pamela Potter (see all)
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Filed Under: Estate Planning Tagged With: buy sell agreements, inheritance balancing, Life Insurance

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About Pamela Potter

Owner and founder of the Ashland, Kentucky based Potter Law Firm, Ms. Potter concentrates her practice in the area of estate planning, estate administration, and elder law. Mrs. Potter’s goal is to help her clients plan secure financial futures for themselves and their families. To achieve that goal, her firm offers a wide range of estate planning services, including wills, trusts, and powers of attorney in addition to probate, estate administration, elder law, and Medicaid Planning services.

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Overall The Potter Firm was very professional. They took what could of been a very complicated process and were able to break it down so it was a lot easier to understand. We are confident we now have made the right decisions in our estate planning. Good firm to work with.

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John Potter has been a real pleasure to work with. He is very knowledgeable and explains things in a very simplistic manner so the average person can understand how/why the laws are written. He is very attentive and asks questions in such a way that not only helps him understand your goals, but also helps you think about what type of goals and expectations you should be considering. Exemplary client service.

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My husband and I selected Ms. Potter to assist with our small business. She responsive and attentive every time I have a question or need assistance, and is extremely knowledgeable and able to answer any legal question I have had. I know I can count on Ms. Potter for all of my business legal needs and I would highly recommend her to anyone needing legal assistance with such.

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