Estate tax planning is not a task left only to the wealthy. Many people in Texas, including regular families, can benefit from planning for end of life. Planning ahead lets you record your wishes about a number of matters, including end-of-life care and the disbursement of any assets. It also lets you protect your heirs from any possible estate-related taxes.
When people consider the size of their estates, they often forget how value can be impacted by life insurance policies. Many individuals in Texas carry sizeable policies that could boost estate values by hundreds of thousands or even millions of dollars. When that happens, estates can move into new tax brackets, which leads to surprising results regarding tax burdens.
At the same time, life insurance can be a valuable tool in estate planning. If an estate’s value is tied up in real estate or other non-cash assets, then making payment on any type of estate tax might involve selling off items. A life insurance policy can provide liquidity that lets heirs pay taxes or other bills without delving into real property sells.
In many cases, life insurance is available to surviving beneficiaries faster than other elements of an estate. Most policies pay out upon the submission of a claim form with a death certificate, providing heirs or family members with much-needed cash during a time when other assets may be held up in probate or court disputes. That cash can pay daily bills, cover funeral expenses or let loved ones grieve without worrying about returning to work immediately.
Understanding how life insurance can impact estate planning and late-life tax burdens is important. By seeking professional assistance, you may be able to avoid estate tax surprises that can change the future for heirs or family members.
Source: The Huntsville Item, “Long-term tips for life insurance, estate planning” Sam A. Moak, Jan. 18, 2015
