Ask a Question” mailbag: What Type of Life Insurance Is Best for My Estate Plan?
“I need life insurance as part of my estate plan to cover the cost of my son’s college tuition and pay off the mortgage on my home in Doylestown. What policy best fits my needs?”
First, focus on the reasons for why you are purchasing life insurance. Life insurance is an excellent Estate Planning tool, but only if you are clear as to its purpose.
A Proper Estate Plan Incorporates Your Life Insurance.
In your case, life insurance is being purchased to address specific expenses. These costs will either be paid or will diminish over time. If you are alive to pay your son’s tuition checks, then after he graduates that expense will no longer exist. If you are alive to pay down your mortgage, over time the needs for a large sum at your death will diminish or disappear.
Because of this diminishing need, ask your wealth advisor or insurance professional to run numbers on two different types of policies. First, get a quote for a policy that allows you to reduce the coverage over time. Second, get a quote for two policies, so as your needs diminish you can drop one policy. Even though the total amount of insurance will be the same, the premium costs will differ. You can then purchase the policy that best fits your needs at the most reasonable price.
Consider Using an Irrevocable Life Insurance Trust “ILIT.”
Whether you get one or two policies, also consult with your Estate Planning Attorney. Your attorney can advise you about the possibility of having an Irrevocable Life Insurance Trust “ILIT” purchase these policies. Depending on your situation, this trust may provide valuable tax savings and asset protection. The small extra cost might pay big dividends.
What Type of Life Insurance Is Best for My Estate Plan?
In conclusion, in this Post, I tried to answer the question, “What Type of Life Insurance Is Best for My Estate Plan?” So, let me know how I did, comments and questions are welcome!
If you have further questions about Life Insurance as part of an Estate Plan, or any other questions about Estate Planning in Bucks County, feel free to contact our office for a free consultation.
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Author, Peter Klenk, Esq.