Estate Equalization
What Does Estate Equalization Mean?
Estate equalization involves balancing the distribution of assets in an estate to ensure each heir receives an equitable inheritance that holds both financial and emotional value. Purchasing life insurance is one method to achieve estate equalization, as it helps ensure that all beneficiaries receive nearly equal shares of the estate.
Insuranceopedia Explains Estate Equalization
Estate equalization through life insurance is ideal for business owners who wish to pass down their wealth equally to their children. A challenge arises when one or more recipients have contributed more to the accumulation of that wealth compared to their siblings. In some cases, a beneficiary may not be interested in participating in the management of the family business or holding a stake in the estate.
A life insurance policy is purchased to ensure that the estate is distributed equally while treating each family member fairly. Those family members with an interest in the estate inherit the family business, while the other members receive an equivalent value from the life insurance policy.
