Creating a Trust for Your Estate Plan? What to Tell Your Insurance Agent

You probably think of life insurance as a way to give your family financial stability if they don’t have your income to rely on. That’s important, but it can also be a key part of your estate plan, helping you make sure your heirs are financially secure, your wealth is preserved for them and your tax expenses are as low as possible. Learn the ways life insurance can help your family members.

What to Know About Insurance in Estate Planning 

Taking out a large life insurance policy can help cover the cost of taxes and ensure your heirs get fair shares of your estate. If you use an irrevocable trust as the beneficiary, you may be able to avoid federal estate taxes. Plus, the money is available right away for your heirs to use to cover any expenses. 

You may want to consider one of these trusts:

• Irrevocable life insurance trust (ILIT): You can transfer an existing life insurance policy to one of these trusts or pay the premiums on a policy that the trust purchases. The payout from the life insurance goes into the trust, and from there your trustee can distribute the funds according to your wishes.
• Special needs trust (SNT): You can create a trust for a child or heir with a disability and limit the use of the funds to education, insurance, equipment and medical expenses that aren’t covered by federal or state programs. Setting up an SNT can help ensure that your inheritance doesn’t reduce government benefits for your child or heir.

When Life Insurance May Be Important for Your Estate Plan

Life insurance estate planning can offer valuable benefits, especially in certain situations:

• Your inheritance isn’t easy to divide: Maybe one of your children wants to live in the family home or run a family business. It could be tough to leave your inheritance to your heirs fairly without selling the home or company.
• You have an heir with costly disabilities: If you have a child or heir who can’t provide for themselves, you want to make sure you can provide for their care. But you may not want that protection to mean your other children or heirs get a smaller inheritance.
• Your beneficiaries will have to pay estate taxes: Estates that are worth more than $13.61 million ($27.22 million for married couples) could be taxed at up to 40%. And that bill could be due within nine months — paying it could be a challenge for your heirs if the value of your estate is tied up in real estate or a business. Even if your estate isn’t worth that much, you’ll want to keep an eye on possible estate taxes, since laws may change.

Connect With an Agent for Advice

Estate plans are complex, and a Farm Bureau insurance agent can help you choose policies to give your heirs the income and ongoing support you want for them. Your insurance agent is committed to protecting your assets for your future and your family — reach out today for personalized guidance.