When most people think of life insurance, they think of replacing income. But for families with real estate, a business or other significant assets, it also plays a quiet and powerful role in estate planning.
1. Creating Liquidity
Estates are often "asset rich, cash poor," with value tied up in real estate, a business or retirement accounts. A death benefit provides cash to pay final expenses, debts, administration costs and any taxes, so heirs are not forced to sell property in a hurry.
2. Equalizing Inheritances
If one child inherits the family business or a rental property, life insurance can provide a comparable inheritance to the others, helping to keep the peace.
3. Protecting Real Estate and Business Interests
Investors and business owners can use life insurance to fund buy-sell agreements, pay off mortgages or keep a portfolio intact when a key person is gone.
4. Estate Tax Considerations
Ohio no longer has a state estate tax, and the federal estate tax applies only to very large estates, with an exemption that changes with the law. For those estates, a properly structured irrevocable life insurance trust (ILIT) can keep the death benefit outside the taxable estate. This needs an attorney and tax professional.
5. Providing for Loved Ones
Life insurance can fund a trust for children or a surviving spouse, a charitable gift or a legacy for grandchildren, and pass outside of probate to named beneficiaries.
Which Policy Type Fits?
Permanent policies such as whole or universal life are often used for lifelong estate needs, while term can fund temporary obligations like a mortgage or business loan.
We are not attorneys or tax advisors. Please work with your legal and tax professionals; we are happy to coordinate with them.