WHAT IS IT?

Many assume that estate planning is something that only the extraordinarily wealthy need concern themselves with. This is most certainly incorrect.  No matter the quantity or value of one’s assets, sound estate planning practices carry immense value.  Properly crafting one’s estate can ensure the creation of a strong legacy, maximize the wealth transfer to the next generation, enhance the efficiency of settling the estate, and minimize the tax implications and other costs.  Estate planning is a subject that all individuals, from all backgrounds, at all stages of life should pay mind to as one never knows when estate planning will become unavoidably relevant.

HOW DOES IT WORK?

Though there are numerous fundamental estate planning components such as wills and power of attorney, we at Paradigm Insurance Inc. focus on life insurance.  In the event of the death of the insured, a life insurance policy produces a tax-free benefit to the named beneficiary.  This function makes life insurance a crucial inclusion in one’s estate planning strategy.  Outlined below are a few common estate planning objectives which can be achieved by means of life insurance.

CREATING AN INHERITANCE

  • Life insurance can act as a tax-free benefit to the named beneficiary for the purpose of creating an inheritance. This benefit can be distributed among as many individuals as one desires.

DONATE TO CHARITY & PRODUCE A TAX-CREDIT

  • By naming a registered charitable organization as the beneficiary of a life insurance policy, one simultaneously creates substantial change and produces a sizeable tax-credit for their estate. This tax-credit is equal to the policy’s face amount and can be used to cover the tax-liabilities that may arise upon one’s death.  More can be learned about insurance for charitable giving by clicking here.

GENERATE LIQUIDITY

  • Many estates will contain mortgages and other debts that need to be addressed. As an alternative to selling the assets, life insurance can be utilized to pay off these liabilities so that one’s heirs can continue to enjoy them.

PROVIDE STEADY INCOME FOR AN INDIVIDUAL

  • Upon one’s passing, their life insurance benefit can be used to establish a fund which can distribute regular payments to an individual on a predetermined schedule.

Ultimately, whether one endeavors to create or preserve an estate at the time of their death, life insurance is essential.

WHO BENEFITS FROM IT?

Proper estate planning results in profound benefits for all involved.  First, the beneficiaries of one’s estate are positively affected.  If one sufficiently crafts their estate plan, their beneficiaries will benefit from reduced legal and administrative fees, minimized tax-liabilities, an expeditious settling process, and the efficient dispersing of the chosen assets.

The individual whose estate is in question, too, benefits from estate planning.  There is most certainly comfort in knowing that one’s assets will be distributed as he or she chooses and that one’s beneficiaries will not be unnecessarily burdened.

Finally, if one chooses to name a registered charitable organization as the beneficiary of their life insurance policy, the chosen cause would benefit immensely from the donation.  Paradigm Insurance Inc. specializes in life insurance for charitable giving.  To acquaint yourself with the topic in greater detail, please click here.

WHAT IS THE PROCESS?

Generally speaking, there are three categories of life insurance solutions under which all products fall.  These are Universal Life Insurance, Whole Life Insurance, and Term Life Insurance.  You can read a detailed description of the varying life insurance options by clicking here.

When it comes to estate planning, determining the proper life insurance product begins by understanding one’s unique needs.  If an individual prioritizes short-term estate planning needs such as mortgage protection, term life insurance may be the best option if cash flow is somewhat limited.  Term life insurance offers guaranteed rates for a defined period of time, between 10 and 25 years, and will pay out if the insured passes away during the life of the policy.  At the end of the term, the policy either renews at very high rates or is cancelled and replaced.  Term insurance is a markedly affordable and convenient solution to one’s short-term estate planning needs.

Commonly, some form of permanent life insurance will be recommended to an individual planning their estate.  Permanent life insurance often comes in the form of either Universal Life insurance or Whole Life insurance.  The two strategies are compared in detail here.  Briefly, both universal and whole life insurance offer steady rates and coverage for life.  This ensures that your estate will benefit from the policy pay out regardless of when you pass.


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