Estate planning is an important tool that can help you provide for your loved ones after you’re gone but also help minimize taxes and maximize your funds both now and later. Life insurance policies and annuities can factor into your estate planning to ensure your estate planning goals are met. Below, we’ll go over how each of these tools can help on their own as well as how they can work together.

Life Insurance

Many people seek life insurance coverage to offer financial security to their beneficiaries. When it comes to estate planning, life insurance can serve other purposes as well. 

Transfer of Wealth

Your family can use benefits from your life insurance policy as liquid assets to pay for funeral expenses, taxes, debts, and other expenses without having to worry about immediately selling off non-liquid assets like real estate or other investments.

Tax Mitigation

Often, people structure their life insurance policy in such a way that the benefits cover estate taxes, final income taxes, unpaid back taxes, etc.

Equalization of Inheritances

For those who have multiple heirs, you might find it difficult to distribute your assets equally, if you have non-liquid assets like a home or family business that you would like to give to particular beneficiaries. Life insurance benefits can be designated for other heirs to balance out the value of their inheritance. 

Ongoing Financial Support

One of the main goals of estate planning is to provide financial stability for your family in your absence. Life insurance can be used to provide ongoing financial support for your children, spouse, and any other dependents. 

Preserving Wealth

For individuals who have a high net worth, life insurance benefits can be placed in an irrevocable life insurance trust to protect the proceeds and keep them separate from the taxable estate, which helps preserve your wealth for your family.

Annuities

One of the most common estate planning goals is to ensure long-term financial security in retirement and beyond for yourself and your family. Annuities can be a great solution to supplement retirement funds since they are financial products that provide regular payments over time. When it comes to your estate plan, you might consider structuring the annuity as a joint or survivor annuity so that your surviving spouse and dependents can continue to receive this guaranteed income after your death.

Since annuities can be owned by a trust, many individuals choose this route to protect assets for their minor children or children with special needs or disability (known as a Special Needs Trust).

Combining Life Insurance and Annuities in Your Estate Plan

These two financial tools can often work together in your estate plan, with life insurance providing lump-sum funds to help cover immediate costs, and annuities providing a steady stream of income to offer financial stability in the long-term. Life insurance benefits can also be used to fund an annuity or trust that can help manage and preserve your assets for your family and beneficiaries.

Make the Most of Your Estate Plans

Working with estate planning experts like the Estate Planning Group at Lonich Patton Ehrlich Policastri (LPEP Law) can help you get the most out of your estate planning. They have significant expertise and knowledge in all areas of estate planning, estate and trust administration, litigation, and probate. If you’d like to learn more about how your life insurance and annuities can best serve your needs and estate planning goals, call LPEP Law at 408-553-0801 to schedule your free consultation. 

Disclaimer: this article does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter. 

True or False? Only rich, elderly people need to have an estate plan.

It wouldn’t be a surprise if you chose ’True.’ After all, just the word ‘estate’ brings to mind large country manors with huge tracts of land. And that’s how the Oxford Dictionary defines it.

However, there’s another definition that refers to an estate as all the money and property owned by an individual. Therefore, if you have any assets, you should have an estate plan. 

But when should you create yours? That’s what we’re going to explore.

What’s in an Estate Plan

Everyone has different needs, and some estates may be more complex than others, especially if investments, real estate, retirement accounts, and luxury items exist. But some components should be included in every estate plan:

Last Will and Testament

68% of U.S. adults don’t have a will. They may assume that everything goes to their spouse or their children, but that’s not always the case. Instead, everything you own will be distributed according to California’s intestacy laws.

If you have a spouse and children, your spouse will get all the marital assets and half of any separate assets you may have. Your children will get the other half of the separate property. If you and your spouse don’t have children, then half of the separate property will go to your parents.

If you don’t have a spouse, everything goes to your children. The estate will go to your closest relatives if there is no surviving spouse or children. This has become such a common occurrence that it even has its own term: the laughing heir. Furthermore, without a will, certain sentimental items won’t get passed on to the people you wished to receive them. 

Even more important than material belongings, you can name a guardian for any minor children you may have in your will. Without that designation, the courts will decide your children’s care, and they may be raised by someone who doesn’t share your values.

Power of Attorney (POA)

If you were hospitalized due to an illness or injury and couldn’t communicate, who would take care of your financial affairs? How would your bills get paid? What if there were important investment decisions that needed to be made?

A power of attorney is a legal document that gives a trusted individual the authority to make financial decisions if you become incapacitated.

Healthcare Proxy and Advanced Directives

Just like a power of attorney handles your financial affairs during your incapacitation, a healthcare proxy handles the medical decisions. In addition, advanced directives outline what you want regarding end-of-life care.

Digital Estate Plan

We spend much of our time online. It’s crucial that you provide instructions on how to access your accounts, which should include:

URL
Username
Password
If it requires multi-authentication

You will also want to outline what you want done with your social media accounts, any domain names that you own, and pictures and documents stored in the cloud.

Estate Planning Help from LPEP Law

If you’re an adult, you need an estate plan, and the time to start is now. You may have been putting it off because it feels overwhelming. That’s where our lawyers at Lonich Patton Ehrlich Policastri can help. We have decades of combined experience and work with people throughout San Jose and the Greater Bay Area in creating tailor-made estate plans.

That’s because we understand everyone’s situation is unique. We will discuss your goals in making an estate plan, ensuring it is customized to your specific needs.

Contact us today to schedule your free consultation by calling (408) 553-0801.

Disclaimer: this article does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter.