“Life Insurance As a Baby Boomer Estate Planning Tool” outlines just why a life insurance policy can be beneficial to those looking for ways to ease burdens their heirs may face. The article states that Care.com found that “forty-two percent of baby boomers don’t even have an estate plan” or that those who do have one haven’t updated it, so life insurance may be one way to do this since:
“Life insurance can play an important role in providing liquidity –cash — at death when faced with the following cash flow drains.”
Families facing a death have to deal with final expenses and may have to deal with unpaid debts so liquidity is crucial.
The article also outlines some of the costs associated with administering an estate including probate costs (including attorney’s and accountant’s fees), estate taxes, estate equalization, business succession, and any pre-planned charitable donations.
Life insurance can help a family opt out of forced liquidation because that solution can be more complicated than it seems. If there is a need to sell assets quickly there will be pressure to underprice them for a quick sale. However, even if the assets are sold quickly, the estate will still incur costs such as appraisals and commissions. And of course there may be capital gains tax to be paid on any assets sold.
While a tax expert can help you understand just how current tax law will affect your estate planning, a Fee-Only financial planner can assist your family with estate planning. While something may be better than nothing, you want to pick a life insurance policy that really fits your situation and a Fee-Only financial planner can help. And of course, life insurance is just one part of estate planning, but if you’ve been reluctant to makes these plans, getting a life insurance policy is a good start.