Safeguard Your Wealth by Adding Life Insurance to Your Estate Plan

You’ve spent your entire career building your legacy and preparing for the retirement of your dreams.

The last thing you want is for someone else to determine who gets what after you’re gone.

That’s where your estate plan comes in.

Although estate planning can sound complicated, it really boils down to your answering the question,

“Where do I want my assets to go after I’ve passed away or become incapacitated?”

Despite what a lot of people may think, that’s not a morbid question at all. In fact, there are few more caring, impactful steps you can take than planning for how you want your wealth distributed once you’re gone.

This distribution can include charities, research organizations, family or academic institutions. 

Dispelling Three of the Most Common Myths about Estate Planning

Let's start by dispelling a few of the most common myths about estate planning:

• Estate planning is too complex.
• Estate planning is only for the ultra-wealthy.
• If you don’t have a family, you don’t need an estate plan.

Simply put, none of these statements is true. Let’s take a closer look at why. 

What Does an Estate Plan Consist of?

A basic estate plan begins with just a few core documents. These include but are not limited to:

• A living will.
• Power of attorney.
• Guardianship designations.
• Account statements.
• Beneficiary designations.
• A healthcare power of attorney.

In some cases, a trust.

It’s really not that much, is it?

Of course, we’re talking about a basic plan here, but still, you can see that it’s not overly complicated to get started.

And a simple but thorough checklist like the one above can go a long way to avoiding the time-consuming and potentially costly process of probate.

I’m Not Worth $1 Billion. Why Should I Have an Estate Plan?

Regardless of your net worth, an estate plan allows you to be in control of handing off your assets.

As you can see, creating a basic, personalized plan isn’t going to break the bank. And that’s not even factoring in the value of the peace of mind you and your beneficiaries gain when you have a well-structured estate plan in place.

I Don’t Have Any Heirs. What’s the Point of an Estate Plan?

Just because you don’t have family to pass your wealth on to doesn’t mean you want to let someone else decide where your hard-earned money goes, does it?

Creating a robust estate plan will allow you, not the state or federal government, to determine how the transfer of wealth occurs, meaning you’re free to apportion assets as you see fit, helping to further causes that are especially meaningful to you.

This can include leaving a behest to your favorite charities, non-profit organizations, your college or university alma mater, your local library, medical research institutions, etc.

Even if you don't have heirs, we think it should be your decision, or the courts, as to where you decide to make an impact. 

How Does Life Insurance Fit into Estate Planning?

Now that you know why you want to have an estate plan in place, let’s talk about how you can use life insurance to add another layer of protection to the disposition of your assets.

First and foremost, including a life insurance policy in your estate plan, either as a standalone asset or in conjunction with a trust, can provide your beneficiaries with much-needed liquidity in the first several weeks and months following your death.

Life Insurance Can Save Your Beneficiaries from Having to Sell Assets

If you have life insurance, you’ll likely have sufficient, tax-free, guaranteed liquidity to pass on the assets you spent your lifetime acquiring and building.

That means your beneficiaries won’t have to make hard choices about which assets to sell to pay death taxes, for example.

The life insurance policy you’ve included in your estate plan will provide them with the funds necessary to pay those expenses without having to convert assets into cash.

This is particularly true for wealthy families and professional investors, as well as anyone seeking to maintain their current standard of living for their beneficiaries.

It’s also true for business owners, who can use life insurance to fund a buy sell-agreement or a tax-free retirement plan.

Combine Life Insurance with a Trust for Even Greater Protection

Coupling life insurance with an irrevocable life insurance trust (ILIT) is a simple, powerful, and effective strategy to ensure liquidity, ownership of assets, and protection for your loved ones or any organizations left behind.

If you own a life insurance policy and are listed as the insured, the money paid out after your death will be part of your total estate value. But, if the policy is owned by an irrevocable life insurance trust, then the payout from the policy doesn’t count as part of your estate.

👉This means it won’t be taxed by the state or federal government.

This Is Legacy Banking

Everything we’ve been talking about here fits under the umbrella of what’s called legacy banking — a technique by which you acquire life insurance, use it as a bank to fund life needs while simultaneously growing the policy, and ultimately use it for estate planning and retirement.

When designed and utilized properly, legacy banking is a financial Swiss army knife, giving you ready access to banking, liquidity creation, asset protection, tax minimization, and estate planning all in one! 

Even if estate planning is not top of mind, retirement, tax free cash flow, and security are hallmarks of a solid financial plan. Legacy Banking is the foundation to any well thought out retirement strategy and estate plan.