“When should I get life insurance” is a question many people ask. And the answer is right away! Planning for the financial stability of your loved ones after you pass away is an important part of planning for the future. Life insurance can cover funeral costs, as well as pay expenses related to assets, such as an estate tax. For this reason, if you plan to leave behind a financial legacy, make sure to include estate planning when choosing a life insurance policy.
Tax Benefits of Estate Planning
The accumulation of cash value and the death benefit associated with your insurance policy has certain tax benefits for estate planning. You can make arrangements so that there are designated funds to pay for future estate taxes and enable beneficiaries to maintain ownership of the property. This can also prevent the need to sell other assets to pay for estate taxes or other expenses.
It is also possible to use the cash value as collateral for a loan from the bank or insurance company. Or, a certain amount may be withdrawn without tax consequences. You may also be able to pass the payout to a beneficiary without the need for them to pay income tax.
Other Benefits of Estate Planning
In addition to providing immediate funds to cover the cost of funeral expenses and some key tax benefits, there are other advantages to estate planning with your life insurance company. For example, you can make arrangements for a trust that will provide financial care for dependent loved ones, such as children or handicapped dependents. Your loved ones can also use the funds to buy out your share of a business.
An irrevocable trust can also be purchased with premiums already paid, or the funds set aside for the beneficiary to pay the premiums. To collect from the trust, the beneficiary must survive for three years after the owner has passed away. This type of policy enables the beneficiary to avoid paying federal estate taxes, which can be quite large. Make a plan with your whole or term life insurance company when writing your policy, and be aware of any stipulations associated with the trust.
Common Mistakes in Estate Planning
To ensure your loved ones receive the maximum benefit from your life insurance policy, make sure you don’t make any of the mistakes listed below.
- Only One Beneficiary. Naming only one beneficiary can pose a problem if the person named passes away before you do, and the policy has not been updated. Add at least two other names as backups to maintain control over where the money goes when you are gone.
- Low Payouts. When choosing your whole or term life insurance plan, consider any dependents you may leave behind and the cost associated with their care. Make sure to choose a policy with a payout that is high enough to cover these costs, as well as funeral expenses, estate taxes, and any other potential costs.
- Not Checking the Policy Often Enough. Once you have obtained the desired life insurance policy, don’t just file it away and forget about it. Check it at least every couple of years to make sure everything is still applicable, and no changes need to be made.
Pacific Wealth Solutions
When should you get life insurance? As soon as possible, especially if you have dependents who will be inheriting property, real estate, or other assets. Contact Pacific Wealth Solutions to learn more about whole life insurance and term life insurance policies. We’ll help you determine which is right for you and ensure that all of your assets and dependents will be well cared for when you aren’t there to do it yourself.
Pacific Wealth Solutions
It’s time to start prepping for your family’s future. Request a free quote from Pacific Wealth Solutions to begin the simple, no-medical-exam-required application process!
Term Life Application Steps
Step 1: Apply Now
We will take you to the Coverpath term life page
Fill out the “Get a quote” questionnaire and click “Apply Now.”
Step 2: Create an account.
Manage your policies and investment accounts.
Get help from MassMutual directly, or you can always contact PWS via live chat or email on our website.
Set preferences and notifications. Get helpful financial resources.
Step 3: Submit the application.
Sign in to your account and finish your application.
Submit the application and wait for the approval.
Permanent Life Application Steps
Step 1: Apply Now
Navigate to the Permanent Life Insurance page.
Click “Apply Now” and fill out the questionnaire.
After the questionnaire is filled out, we will send you a customized link to continue the process. That’s it!
Start planning for your future and apply for permanent life insurance.