Life Insurance for Estate Planning [What You Need to Know]

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This video focuses on an all too common gap in the financial community’s interpretation of life insurance who tend to think that life insurance is only important for replacing one’s income at death.

There are other critical uses of life insurance for estate planning purposes that go way beyond income replacement.

Before we dive in, let’s review what is estate planning?

Estate planning is a plan to manage and distribute your assets in the event disability or death. Your assets are everything you own and this is not just an essential for wealthy people. Having no estate plan makes you a default candidate for your state’s estate plan and most of the time, the outcome of the state’s plan doesn’t follow what people really want. State laws are often convoluted, impartial and expensive to administer. For more about estate planning, check out:

Estate Planning

So, estate planning involves the process of getting the right legal documents to manage and distribute your assets, first for yourself and then upon death to your designated beneficiaries. These documents may include a last will, power of attorney, medical directives and potentially a living trust of some kind. For more on living trusts and wills visit:

Top Advantages of a Living Trust vs a Will

Additionally, an estate plan involves ensuring a smooth transition of assets and support for future generations. This is something that most financial pundits completely ignore.

How is life insurance critical for ensuring that an estate plan follows smooth transition and provides support for loved ones. I’ll summarize this in 2 important points.

Life Insurance:
1. Provides Liquidity
2. Supports Legacy

Liquidity is needed for a few important reasons that may include estate expenses, such as final expenses and estate administration costs, income and potential estate taxes and family business succession costs. Liquidity is especially important for high net worth households. For more about High Net Worth Estate Planning with Life Insurance visit:

High Net Worth Estate Planning with Life Insurance [Top 8 Strategies]

Legacy relates to preserving your intentions for loved ones such as getting an education or maintaining the integrity of a family business or taking care of aging parents or those with disabilities. Legacy can also be about preserving charitable intentions. For more on business continuity succession planning or charitable estate planning check out:

Business Continuity Succession Planning

Charitable Remainder Trust and Charitable Lead Trust Planning

Should you purchase term life insurance for your estate plan? Of course, term life could work because it provides a death benefit to the estate. However, there are some reasons not to rely upon term life insurance, or even other types of permanent life insurance, summarized as follows.

1. Statistically, term life death benefits aren’t used because the policies lapse prior to death. This point is often missed in the haze of permanent life criticism.

2. Term life continues to get more expensive is we age, so it can make sense to secure permanent life for your estate plan when you’re young and it is less expensive.

3. Non-whole life products, which are “market-based investments” like Indexed Universal Life or Variable Universal Life, are vulnerable to hidden costs and market-based fluctuations and thus in time may be underfunded and jeopardize the estate plan. Still, these policies are often superior to term life because the offer permanent protection and flexibility.

4. Whole life is arguably the most reliable way to fund an estate plan; however, these are fixed premium policies. So, so it is critical arrive at an affordable premium that can be sustained over the period in which premium payments are required.

For more about the various types of life insurance, visit:

Remember, every financial plan needs a “safe bucket” as termed by Robert Kiyosaki and permanent life insurance, particularly whole life can fulfill this goal. Reliable life insurance protection is powerful when applied to your estate plan because it will preserve your legacy and the ensure the welfare of generations to come.

For more about Robert Kiyosaki’s “safe bucket” check out:

Second Chance – Exploring the Past, the Present, and Future with Robert Kiyosaki

If you take steps, be sure to talk with a seasoned expert. Check out this article about why to avoid “Do It Yourself” Estate Planning:

Do it Yourself (DIY) Estate Planning is a Huge Risk


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