The reason why many decide to purchase life insurance is that it often helps them reach their financial goals. In some cases, life insurance can even provide individuals with benefits while they are still alive. Selecting the proper type of life insurance, however, can be challenging. Fortunately, an experienced estate planning attorney can help you obtain the best possible life insurance for your situation. This article will discuss some of the advantages (as well as disadvantages) involved with life insurance in an estate planning context.
The Benefits of Life Insurance
Life insurance offers some unique benefits, which include the following:
- After a person’s death, compensation from life insurance policies helps provide survivors with financial security.
- In comparison to other types of accounts like Roth IRAs, life insurance policies are not as restricted by tax requirements. This means that compensation administered after a person’s death is often tax-free.
- Another tax advantage provided by life insurance policies is that the value of the benefits grows at a tax-deferred rate while the insured is alive.
- Life insurance policies also offer the tax advantage that cash withdrawals up to the total of the life insurance policy can be made free of income tax.
- If a person wants to trade in a life insurance policy, they can do so without the substitute insurance policy being taxed.
- A large number of insurance can be adjusted to match the needs of the insured person. This means that benefits the survivors receive after the insured’s death can be modified. Premiums associated with the policy can easily be changed.
The Downside of Life Insurance Policies
It is unfortunate, but every type of estate planning device, including life insurance policies, has a downside. Some of the disadvantages associated with life insurance policies include:
- Policyholders sometimes experience difficulty in paying the premiums for life insurance policies.
- The nature of life insurance policies is that they are designed to compensate the insured’s loves ones after the insured’s death. This means that the insured often does not directly realize the benefits of a life insurance policy.
- Deciding which life insurance to acquire can be a particularly complex and frustrating process, but a knowledgeable estate planning can often provide assistance in navigating this process.
- When life insurance is used in an estate planning context, there are numerous complicated issues that arise concerning how the assets should be distributed after the death of the insured.
Speak with an Experienced Estate Planning Lawyer Today
Life insurance can be significantly helpful when it comes to estate planning, which is why you should consider using it despite the numerous challenges that might arise. Fortunately, Attorney Jim A Lyon has helped numerous people perform estate planning. Contact attorney Lyon today to schedule an initial free consultation during which time your various estate planning goals will be discussed as well as various methods that can be used to obtain these goals.