Life Insurance and your Final Expenses
While it is not a topic anyone likes to talk about, it is a subject that should be discussed in depth. Death is an inevitable part of life and can be an expensive and financially devastating experience for the family members that are left behind. When a husband or wife passes they not only leave their family the grief of losing a loved one they also leave financial uncertainty that in many cases, could be insurmountable. Expenses associated with the death itself, as well as those that were paid for by the now missing income, must be considered. Discussing and planning for these expenses, should be a part of every family budget and life insurance for most people is a viable solution.
Final Expenses
The list is long and in most cases must be paid for immediately and without proper planning these expenses can deplete the family’s savings accounts. When a person dies, they leave behind funeral expenses, taxes on the estate, legal and accounting fees, possible probate costs and normal day to day living expenses. Trying to determine how these expenses will be covered after your loved one has passed can add to an already stressful situation that can and will, in many cases, leave a family with nowhere to turn. Adding life insurance to a family’s financial contingency plan will give your family the peace they need during a very troubled time.
Tax Planning
When a person dies, depending on their situation, their estate may go into probate or become subject to various estate taxes. Any amount of an estate that exceeds $3.5 million will subject the benefactor to taxation on the proceeds they receive from the estate. This depends on a variety of factors including, however not limited to, the value of the deceased’s estate at the time of death. You can read more on this and other estate taxation issues at www.IRS.gov.
Life insurance proceeds can help you avoid leaving your family with a large tax bill and insure that they receive all the money that you intended them to. Life insurance proceeds are given to your beneficiary without being subject to taxation, as long as the proceeds are equal to the face value of the policy. If the proceeds are paid in installments rather than one lump sum, these installments will most likely include interest. Any interest earned will become subject to taxation and will be included in the beneficiary’s gross income in the year it is received.
Even if your estate value, including your life insurance policies, exceeds the $3.5 million dollar cap, life insurance can be held in an irrevocable trust which will effectively allow you to give the benefits tax free to your loved ones. You should ask your tax professional about this and other ideas using life insurance as a tax planning tool.
Considering life insurance while planning for your family’s future is an essential part of any family budget and should be considered now rather than when it is too late.
Final Expenses
The list is long and in most cases must be paid for immediately and without proper planning these expenses can deplete the family’s savings accounts. When a person dies, they leave behind funeral expenses, taxes on the estate, legal and accounting fees, possible probate costs and normal day to day living expenses. Trying to determine how these expenses will be covered after your loved one has passed can add to an already stressful situation that can and will, in many cases, leave a family with nowhere to turn. Adding life insurance to a family’s financial contingency plan will give your family the peace they need during a very troubled time.
Tax Planning
When a person dies, depending on their situation, their estate may go into probate or become subject to various estate taxes. Any amount of an estate that exceeds $3.5 million will subject the benefactor to taxation on the proceeds they receive from the estate. This depends on a variety of factors including, however not limited to, the value of the deceased’s estate at the time of death. You can read more on this and other estate taxation issues at www.IRS.gov.
Life insurance proceeds can help you avoid leaving your family with a large tax bill and insure that they receive all the money that you intended them to. Life insurance proceeds are given to your beneficiary without being subject to taxation, as long as the proceeds are equal to the face value of the policy. If the proceeds are paid in installments rather than one lump sum, these installments will most likely include interest. Any interest earned will become subject to taxation and will be included in the beneficiary’s gross income in the year it is received.
Even if your estate value, including your life insurance policies, exceeds the $3.5 million dollar cap, life insurance can be held in an irrevocable trust which will effectively allow you to give the benefits tax free to your loved ones. You should ask your tax professional about this and other ideas using life insurance as a tax planning tool.
Considering life insurance while planning for your family’s future is an essential part of any family budget and should be considered now rather than when it is too late.
