Estate Planning Newsletter

Benefits of Purchasing Life Insurance

There are numerous uses for life insurance. Some are obvious; others are very creative. Some of the most common uses include paying estate taxes, estate administration, inheritance equalizing and many others.

Estate Taxes and Estate Administration Costs

Life insurance is often used to provide necessary liquidity to an estate. Since any federal estate taxes owed are due within nine months of the date of death, and federal estate tax rates begin at can be as high as 40%, life insurance may provide the means to pay the estate taxes without the heirs having to sell off other assets of the estate.

Creating an Estate or Equalizing Inheritances

For young families or those who have not amassed enough wealth to provide for a loved one, life insurance can provide an instant estate and enough assets to provide for the care of a dependent. Life insurance may also be used to provide equivalent funds to children who are not receiving certain assets from your estate. For example, if you are leaving your business to those children who are actively running the business, you may leave to your children who are not involved in the business a life insurance policy with an equivalent value.

Business Transfers / Losses of a Key Employee

Life insurance is often used to provide cash to finance the transfer of a business. As part of a business succession plan, an agreement is entered into with a business owner and a life insurance policy is acquired naming the business owner as the insured. Upon the business owner’s death the life insurance proceeds are used to purchase the owner’s share of the business from his or her estate. Life insurance may also be used to protect a business from the loss of a key employee. Upon the death of a key employee the life insurance proceeds may be used to attract and retain a suitable replacement for the employee.

Funds for College

The increase in the cash value of certain life insurance policies may be used to provide funds for college.

Paying off Mortgages or Other Debt

The proceeds from a life insurance policy may be used to pay off the outstanding mortgages owed or debt of the decedent, allowing the real property to pass to the deceased’s family without any mortgage.

Guaranteeing Loans

Life insurance proceeds can be used to guarantee the repayment of personal or business loans.

Charitable Planning

Life insurance is often used to replace the value of the assets given to a charity, thereby allowing the donor to fulfill their charitable inclinations while at the same time preserving the estate for the donor’s children.

Giving to Charity
It is possible to set up a trust for charitable purposes. Charitable trusts are quite common, but certain requirements must be met. Purpose of a Charitable Gift Reasons for charitable gifts funded through... Read more.
The Living Trust
Unlike a will or some other types of trusts, which take effect upon the death of their creator, a “living trust” or “inter vivos trust” comes into effect during its creator’s lifetime. The creator of a living trust is referred... Read more.
The Convention on the Form of International Wills
The Convention on the Form of an International Will (the “Convention”) was drafted and presented to the international community in 1973. The Convention was signed and ratified by a number of countries, including Canada and Belgium,... Read more.
Denying a Death Claim on a Valid Life Insurance Policy
The beneficiary of a life insurance policy is the person entitled to receive the death benefit of the policy when the insured person dies. In order to collect on a death benefit claim, the beneficiary must usually comply with specific... Read more.

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