Protective life insurance has been a major attachment in most basic estate planning and development and the majority can offer a non-taxable income death benefit, which can go beyond the amount of premiums being paid by a client.
Still, a lot of protective life insurance payments and funds are mostly wasted if the designations for ownership and beneficiaries aren’t properly designed or structured.
Due to the established federal and state taxes, taxes might be obligatory on all properties that you own at the time of your death. This specific tax must be paid from your property estate. This tax will not be attached if the value of your estates is less than your estate tax exemption amount. If you have a protective life insurance policy, or your estate and yourself are included in your premium as beneficiaries, then your policy death benefits will possibly increase your estate value.
However, if you have already included your protective life insurance death benefit funds and your estate property’s value is still less than the state tax exempt amount, then there will be no federal estate that will be assessed. Hence, you insurance’s death benefit funds can easily be directed to any of your beneficiaries and will not be needed to pay all the estate tax liabilities.
If you own a particular property that exceeds your specified estate tax exemption amount, then you may have an estate that is taxable. If you are under a protective life insurance policy, or if you have specified you or your estate as the primary beneficiaries, then it is likely that you have exposed your policy’s death benefit funds to your estate taxes.
In most cases, whenever an estate tax is concerned, a protective life insurance policy is normally best and ideal, especially if it’s owned by someone else. However, you may also petition a binding trust to be the primary owner and beneficiary of your protective life insurance policy. Also, you may assign your children who are above 18 years old to be included in the list of your policy’s beneficiaries.
Either way, it can help you avoid the inclusion of your policy funds or contribution in your property estate. At the same time, third-party policy owners may also lend such contributions to your estate to provide you with cash that will satisfy and lessen your property tax liabilities. In cases where you enlist your spouse as the owner of a policy on your protective life insurance, make sure that, if your spouse meets an untimely death, you will not end up owning the insurance policy that is acquired through a living trust or by a provision that is stated in your spouse’s last will and testament.
Even if there are cases where the owner of the policy is a third party, if the beneficiary passes away before the insured, the contributions may be directly paid to your estate tax. Always remember that a gift of protective life insurance to any third party may be accompanied with a gift of tax consequences.
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