Estate Planning
What Does Estate Planning Mean?
Estate planning is the process of establishing a legal framework for the distribution of current and future assets upon an individual’s incapacitation or death. An estate plan may include wills drafted for beneficiaries, family trusts, asset bequests to heirs, estate tax implications for beneficiaries, and the designation of a power of attorney. Regarding life insurance, the estate plan aims to protect the estate and its beneficiaries from costs, fees, transfer charges, taxes, and other legal expenses incurred upon the policyholder’s death.
Insuranceopedia Explains Estate Planning
Life insurance is purchased to provide liquidity and financial support for covering all expenses associated with the distribution of the estate. When an individual dies before the property is transferred, the law allows relatives and other third parties to contest the will during a process known as probate, which can incur various legal fees. Additionally, the estate must settle any estate tax before a transfer can occur. Therefore, the proceeds from a life insurance policy can be used to cover these expenses while preserving the estate’s value. Life insurance also facilitates estate equalization, ensuring that family wealth is divided equally among the heirs.
