Many people assume that their estate plan is about their current assets only, whether it’s real property, collectibles, or retirement accounts. But one type of asset you might want to acquire during the estate planning process is a life insurance policy. Even if you have other assets inside the estate plan that you hope to pass to your beneficiaries, life insurance has some unique benefits.
First of all, life insurance proceeds will pass on to your chosen beneficiaries tax free and outside of your estate. This can be very important for providing your loved ones with support outside of the traditional process of probate. Since it’s governed by the beneficiary forms you filed with the insurance company, that’s what dictates the passing of those assets.
Compared to the lengthy process of probate, the insurance company will require some documentation in order to claim the policy proceeds, but it is likely to be paid out to your chosen beneficiaries faster than other assets. This can be a big advantage when your beneficiaries include a spouse who might be reliant on that policy to recoup some final expenses or be able to continue paying a mortgage or other continuous costs.
If you so choose, you can even use a tool known as an irrevocable life insurance trust to help move the assets from your ownership into the ownership of a trust instead. There are many different reasons to consider doing this and you can discuss those options directly with a Pasadena, CA estate planning lawyer.
If you have more questions about how life insurance can be used to help you accomplish your estate planning goals smoothly and effectively, our office can help you with this and other aspects of your existing or future estate plan.