Be suspicious if that is what appears in the illustration. These are potentially much higher returning investments than an insurance company would make on its own. The life insurance buyer simply needs to be aware of the complete picture. Policy benefits are paid directly to the beneficiary upon proof of death. But if the policy is payable to the estate instead, the proceeds are just like any other asset of the estate, and are subject to creditors of the decedent.
Most people know that life insurance death benefits are received income tax free by the beneficiary.
But regardless of who is named as beneficiary, if the policy is owned by the decedent - as opposed to ownership by a spouse, child, Trust, etc. Ownership of the policy by an irrevocable Trust may then be advisable to keep the proceeds out of the taxable estate. B. A few special uses of life insurance. Life insurance proceeds are a guaranteed, quick source of funds for the payment of post-death obligations. Despite maximal planning, substantial federal estate tax might be due.