When planning to leave your money and other property to your heirs, or to leave an endowment to your alma mater or a charitable organization, a will is only part of what's required. Careful financial planning is needed to spare your estate unnecessary taxation and to maximize the amount of assets you leave behind. While the future status of federal estate tax legislation is uncertain, you will still need to do some financial preparation to achieve your goals, because other types of taxes could apply. The Role of Life Insurance in Estate and Legacy Planning Life insurance, in particular permanent life insurance, which provides a unique combination of benefits, is frequently used in planning for these objectives. These taxes can take a significant bite out of an inheritance.
Life insurance proceeds provide instant liquidity to policy beneficiaries.
This money can be used to offset tax obligations so heirs won't have to sell assets to meet them. Donors can make direct gifts of insurance policies. This way, the family's own legacy won't be diminished by the size of the gift to charity. Creating a legacy If you want to leave your children a cash amount or create a college tuition fund for your grandchildren, for example, and you don't have the money to leave outright, you might be able to afford the annual premiums for a life insurance policy that would provide a tax-free cash legacy. For additional information, visit the Life Insurance section of the Web center.