Most people are aware of the fact that life insurance is often utilized in the field of estate planning as a way to replace your income in the event of your unexpected passing. However, life insurance is used in other ways as well, and this underscores why it is important to work with an estate planning attorney when you’re planning for the future.
There are a lot of strategies that exist that the typical layperson would have no reason to be aware of, and this is one of the reasons why it is wise to retain the services of an experienced estate planning attorney when you’re planning for the future. You don’t want to be penny-wise and pound-foolish with a matter as important as providing for your loved ones after you pass away.
In addition to its value as a vehicle of income replacement, life insurance is often used to balance inheritances. To provide an explanation of what this means, allow us to present a hypothetical example.
Let’s assume that you are the owner of a highly successful small business and the value of this business represents the most significant asset that you have. Now, imagine that you have two children.
One child has always worked in the business and really enjoys her participation. She is the obvious candidate to inherit the business because your other child long ago embarked on a different career path. But how do you make sure that you are providing for both of your children equally when you are planning your estate?
What a lot of people do is balance inheritances by first ascertaining the value of the business. You then purchase a life insurance policy on your life that will pay an amount that is equal to this estimated value of the business. You make the second child the beneficiary, and upon your death, each of your children receives a similar inheritance.
If all that sounds confusing, set up a consultation with an experienced and qualified estate planning attorney.