You should consider including life insurance in your estate plan. A savvy advisor can help you answer these questions:
How much coverage do you need? Rather than follow a pre-set formula, you should evaluate your personal situation and purchase adequate insurance while not buying unnecessary coverage.
Which type of life insurance do you need? Basic coverage is known as term life insurance, which will be in force for a specific time period. Often, this coverage is appropriate for a finite need: you might want family protection until your children are living independently.
The alternative to term life insurance, permanent life insurance, includes an investment account known as the cash value. As permanent insurance, this coverage might be necessary for an ongoing need, such as estate liquidity.
Annual premiums for permanent life policies may be much higher than premiums for term life policies. However, permanent life offers additional tax advantages. Over long holding periods, permanent life policies may turn out to be excellent investments. Who should own the policy? If access to a policy’s cash value is important, you may want to own it outright. On the other hand, there may be excellent reasons for holding a life insurance policy in an irrevocable trust. In trust, the policy proceeds may not be subject to estate tax, creditors, or squandering.
** For more information on life insurance policies, see item #3 above. **
