There are many types of insurance policies that a person purchases in his or her lifetime. One of the most common is life insurance. A life insurance policy is designed to insure against financial loss upon the policy holder's death. The proceeds are paid to a designated beneficiary, usually a spouse, children, or to a trust.
Although creditors may seek to satisfy their claims from the assets of an individual’s probate estate, insurance proceeds are often free from their reach. Trust planning can also help to avoid some taxes in larger estates and provide protection against creditors.
One of the best things you can do for your family and loved ones is to plan for their financial security upon your death. Estate planning is not just for the rich, but is something that should be considered by everyone. One of the common misconceptions about estate planning is that it can only be done when an individual has amassed a large amount of assets. This is false. Through insurance planning an otherwise small estate of a deceased person can yield instant wealth to protect the family and replace lost income. While life insurance is particularly helpful to large estates, for tax and estate accumulation purposes, it is also important for very small estates when a young family is dependent on the support of a single or primary breadwinner.
It is possible to control how payment of insurance benefits are made upon the insured's death. Just because you have acquired a policy with death proceeds of say $1,000,000, your beneficiary does not have to receive the full amount all at one time. Instead, proceeds can be placed in a trust and distributed at regular intervals or on an "as needed" basis.
Benefits can also be limited to income only, or other restrictions can be made to apply. A policy owner can also select from various settlement options with the insurance company. However, placing proceeds in a trust is usually more desirable than utilizing these settlement options because it allows for more flexibility, and a trustee can have more investment power and general discretion than the insurance company. One of the many benefits of estate planning with life insurance is that often the proceeds of a life insurance policy can pass to the beneficiaries free from the federal estate tax, if the insured does not retain any "incidents of ownership" at the time of his or her death. Trust planning is often important or helpful to this goal.
Life insurance policies can create an "instant estate" and should be considered as part of complete estate plan. Although some of the greatest benefits of estate tax planning using life insurance are obtained by affluent individuals, you do not have to be a wealthy person, or even elderly, to benefit from using life insurance in your estate. In fact, if you are young and have limited assets, you should carefully consider your estate planning options, especially if you have a family that relies on your income.
At the Robert Weinstein, Attorney at Law in Newton, MA, we can explain how insurance, including the life insurance you may already have, can help protect your family's future. Contact the Law Office of Robert Weinstein or call 617-431-8424 for a free consultation with a Newton, Massachusetts estate planning and trusts attorney.
_____________________________________________________________________________Newton, Massachusetts Estate Planning Attorney Robert Weinstein at the Law Office of Robert Weinstein assists clients with Estate Planning, Wills and Trusts, Probate, Trust & Estate Administration, MassHealth, Long-Term Care, Elder Law, Conservatorships, and Special Needs Planning in Newton, Massachusetts and throughout Middlesex, Norfolk and Essex Counties, including Newton, Brookline, Cambridge, Needham, Dedham, Westwood, Weston, Waltham, Watertown, Lexington, Arlington, Belmont, Concord, Woburn, Stoneham, Tewksbury, Salem and surrounding communities.