Baby boomers in Ohio and other parts of the United States can take comfort in knowing they are part of the wealthiest generation in American history. Because of this fact, many boomers also wish to pass along certain assets to preferred beneficiaries. However, unexpected estate-related expenses may make this task difficult. One possible way boomers in The Buckeye State with significant assets can make things easier for heirs is by making life insurance part of an estate plan.
The main benefit of using life insurance for estate planning purposes is that it provides faster access to liquidity, or cash. For survivors, this extra cash can help with final expenses and probate-related costs that might include fees for accountants, attorneys, and appraisers. Additionally, a boomer’s beneficiaries may be able to use life insurance payouts to take care of estate taxes, which often need to be paid several months after death. State inheritance and estate taxes may also be due.
Life insurance benefits may also provide the cash needed to keep a business running during ownership or management changes. Cash payments may also equalize inheritance if an estate mainly consists of real estate and other assets that are not easily dividable among beneficiaries. Plus, life insurance death benefits are generally not subject to income tax. While some heirs may prefer to sell off estate assets to provide liquidity, doing so may result in extra expenses from capital gains taxes or commissions and other sales expenses. And if market values change, heirs may have to accept lower offers for assets that were originally worth more.
With estate planning, an attorney may recommend setting up a trust that excludes life insurance from the estate to make the death benefit it provides free from estate tax as well. Other than drafting or updating estate documents, a lawyer can offer advice on leveraging indexed universal life policies and the most appropriate way to manage asset distributions. They might also seek input from other advisors, such as financial planners. In general, it’s advised that clients of any age looking to make estate plans have clear goals and objectives when doing so.