Estate planning is not just about preparing for your death. It is about preparing to help the generations of your family that follow you to live.
For many people, the focus is on building generational wealth, and that goes beyond simply building up a retirement fund or stock portfolio to pass on to their heirs. For those who want to know that future generations are being taken care of, they often add life insurance to their estate plans.
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“Life insurance can provide benefits that go beyond payment to meet the immediate needs of beneficiaries,” said Shane Canfield, CEO worldwide insurance for employees of public bodies. “It can create estates or provide long-term funding for loved ones or philanthropy. For example, as someone with a son who has special needs, I will use a trust, funded by life insurance, to support him for the rest of his life. Life insurance is more than a financial planning strategy; it’s peace of mind.
Types of insurance
When shopping for insurance, you will hear of two types: term life insurance and permanent insurance (more commonly known as whole life insurance).
According to insurer Nationwide, term life provides a tax-free death benefit to the beneficiary upon the death of the insured. It provides insurance protection for a specific number of years, usually ranging from 10 to 30 years. This is often what breadwinners will buy to protect their young families.
Permanent insurance goes one step further. It covers a lifetime and comes with a higher premium payment. It also has a tax-free death benefit, but is designed to have cash value over time. It does not expire at the end of a term.
Life insurance for generational heritage
Rachel Marshall, co-founder of The advantage of moneyis a believer in whole life insurance, and she has a personal story behind her.
“Life insurance is not a necessary product; it’s about creating whatever you want for your family. And it’s not just for a hypothetical scenario; when is that,’ she said. “My near death experience has shown me that death is a reality that we will all face. We don’t know when.
“If you have a whole life insurance policy, you guarantee that every time you step out of this life, you will leave behind the greatest gift of love so that your family can live out the dreams you have planned together – that whether you’re there for them or not.To me, whole life insurance is the peace of mind that whether I live until tomorrow or until I’m 112, I’ll be leaving the greatest possible legacy for my children. – complementing all the other assets I have built in my lifetime.
See also: How to find the best life insurance policy for you and your family
Marshall said whole life insurance is redundant.
“Throughout the journey I have a place to store money and use it simultaneously, so my money is working in two places at the same time,” she said. “I get tax benefits that (keep) my estate intact, and my kids won’t pay tax on death benefits, so they’ll have as big a financial legacy as possible.
“And, because the death benefit is always greater than what you paid out, when the life insurance check is used to buy more life insurance with each generation, you create the foundation for tremendous generational wealth. .”
Other life insurance benefits
Life insurance has other practical benefits that can help you during your lifetime and help your heirs after you’re gone, said Tanya Taylor, New York-based financial coach and founder of Grow your wealth.
“The death benefit can be used to pay your inheritance tax, instead of selling assets,” she said. “The death benefit can also be used to pay off debt and help with final expenses.”
Plus, she says, if you have a whole life insurance policy, you can withdraw cash if you run out of money or are hit by stock market volatility. If you are a business owner, life insurance also helps with succession planning.
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