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Why Adding Life Insurance to Your Estate Plan Is Crucial

Couple meets with advisor to discuss adding life insurance to their estate plan

The Vital Role Life Insurance Plays in Securing Your Financial Legacy

Most people know proper estate planning is vital to ensuring their assets are passed down according to their wishes. While many people focus on creating wills and trusts, an often-overlooked but equally vital component of any comprehensive estate plan is life insurance.

Life insurance can play a crucial role in providing financial protection and peace of mind for your loved ones in the following ways.

Financial security for your family

One of the most important reasons to include life insurance in your estate plan is to provide financial security to your loved ones. Losing a family member is an emotionally charged experience, and it can be even more stressful when the death leads to financial insecurity.

Life insurance can act as a safety net to ensure your dependents are taken care of. Your beneficiaries will receive a lump-sum death benefit following your death that can help cover expenses and offer your loved ones the flexibility to grieve and cope without the added burden of financial worries.

Debt repayment

No one wants to saddle their loved ones with debt. By incorporating life insurance into your estate plan, you can help your family members pay off joint debt (such as credit card balances, your mortgage, car loans and medical bills). This debt repayment can greatly ease the financial strain on your loved ones.

Equalizing your legacy

If you have assets that are difficult to divide, such as a family business or real estate investments, life insurance can be used to provide a cash benefit to any beneficiaries who don’t receive an equitable share of the difficult-to-divide assets. This allows you to provide a more equal distribution of assets to your loved ones.

Business succession planning

If you’re a business owner, you may consider using life insurance to help ensure the smooth transition of your company to your desired successor(s). The death benefit can be used to buy out your share, which can help prevent potential disputes and financial challenges within the company.

Charitable interests

If you’re charitably minded, life insurance can be a powerful way to support your favorite causes following your death. By naming a charitable organization as a beneficiary of your life insurance policy, you can leave behind a significant and lasting legacy.

Could you use some help incorporating life insurance into your overall estate plan? Creative Planning is here for you. Our in-house teams of advisors, insurance professionals and estate planning attorneys works together to support our clients’ wealth and estate planning needs. For help getting started, schedule a call with a member of our team.  

This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.


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