Which Type Of Life Insurance Is A Popular Estate Planning Tool?

Estate planning can seem like a gloomy task but, in reality, it comes with peace of mind. When you take the proper steps to secure your assets, you can rest assured that your loved ones will be protected, even in your absence.

There are a lot of options out there, but one that some potential policyholders fail to recognize is estate planning with life insurance. It can get complicated, though it can be the best decision to secure one’s life’s earnings. Below, we’ll share how you can make the most out of your life insurance options for estate preservation.


Take Taxes into Account

Estate planning is not just about thinking about your current assets. When you create a plan to secure your assets, it’s also about planning for your future assets, not only while you’re still living but also when you’re gone.

When it comes to estate planning, one of the first things to do is start filing the proper paperwork. Another is to consider taxes and how planning your estate and choosing a life insurance policy will affect your tax rate. There are lots of policies to choose from and options are endless when it comes to choosing the perfect fit.

When considering how to secure assets, a lot of those planning their final wishes forget to think about taxes and how they will apply upon their death. In some cases, the tax rate can be large, which takes away from beneficiaries, reducing the overall amount they receive.

Because of the low (sometimes tax-free) rate that is typical of life insurance policies, those looking for options can secure their estate with help from a life insurance policy. If you’re wondering how to do so, we’ve got some tips and things to consider below.


Using Help from the Right Life Insurance Policy

Over the span of one’s life, they have likely gathered a number of assets. Among them are things like homes, cars, businesses, collectables, and money. In the event of a death, these items are given to beneficiaries if there is a last will, though they are subject to taxes.

Tax liability is something that could render family members from being able to cover funeral costs and keep assets (mortgages and other payments) afloat. If you are the sole provider for your family, your death could be extremely devastating, leaving your family to cover your expenses out of pocket.

Due to high tax rates on some assets, it’s not always possible for families to hold onto the property, even if it was the last wish of the one who passed away. It’s for that reason that those looking to secure their assets without leaving a burden for their family can use the help of an insurance policy.

With the right insurance policy, the death benefit is paid to the family upon the death of the policyholder, giving them instant access to funds that can help them pay capital gains taxes and other costs. This could not only provide security in the event of an unexpected death but also ensure that families won’t get bombarded with high costs to maintain assets.


Finding the Right Amount of Insurance

It’s not just about finding the best policy but also about finding one that comes with enough coverage. If estate costs and capital gains taxes are too high, a low-coverage life insurance policy might not be enough to help families secure assets.

Instead of going with just any coverage, it’s recommended to calculate assets and other costs that go into maintaining them, ensuring that the policy will cover what’s needed. It’s not just about picking a policy and sticking with it either, as policyholders should consider adapting their policy as their life changes.

Some key things to add into the calculation include debts, complicated circumstances with beneficiaries, and tax and probate fees that are to be paid by the estate. In doing this, future policyholders can have a better grasp on the amount they need to secure their assets without taking away the value of their assets.


Your Estate Planning Checklist

Because there is a lot to consider when it comes to finding the right life insurance and estate planning combination for your situation, it can help to speak to a professional. Before you do so, there are some key things to ask yourself, helping you prepare for all costs to find the best possible fit. A few things to think about include:

  • Minimizing capital gains and the steps you can take to reduce them
  • Probate costs and whether or not there is a way you can avoid them
  • Preservation of RRSPs and RRIFs for heirs
  • If you haven’t created a will, it’s recommended to do so
  • Who will be your beneficiaries (both for life insurance and your last will)?
  • What limitations, if any, would you like your beneficiaries to have to access your assets?
  • Is my life insurance policy death benefit enough to cover my assets and all other necessary costs?

As you can see, there is a lot that goes into estate planning. Taking these things into consideration will ensure that assets are covered and that the value won’t get lost due to taxes and other unforeseen costs. To do so, it’s recommended to work closely with a professional.


Find your Perfect Fit

Because there are so many options when it comes to life insurance, it’s recommended to work with a professional.  Sim is the perfect match for those looking to offset their capital gains tax on assets with a life insurance policy, as she has experience with both.

Not only can she guide you through your life insurance options but she can also help you make the right moves so that you get the most out of your life’s earnings. Securing your assets for your family and future generations is possible, even more so if you’re not losing it to taxes and other fees upon your death.


FAQs & Helpful Resources Regarding Life Insurance for Estate Planning


Other Types of Life Insurance Products You May Want To Check Out





get quotes