Estate planning is a complex and often emotional exercise. Many people consider planning for this scenario to be taboo. But it is important to plan for the future, even when it is a worst-case scenario. Estate planning can help you keep your legacy in place. It can also provide a plan to support your loved ones when needed.
Without a plan, your loved ones might be surprised by a huge tax bill, or it might lead to conflicts when your assets are distributed. Developing an estate plan should be top of mind if you have personal or business assets you want to leave behind to your family. An estate plan considers your goals and wishes. It can also incorporate the best way to distribute your assets to your loved ones to optimize their financial situation.
Estate planning can be a complicated exercise with lots of moving parts. Even if you outline your wishes, goals and objectives, it cannot be easy to figure out how to make them work. However, thinking through the implementation and execution is as important as the goals and objectives. One tool many people lean on to implement their estate plans is the use of insurance.
There are various insurance policies, and there is no one-size-fits-all solution to insurance. When thinking about insurance in the context of your estate plan, you and your advisors may want to consider many things, such as:
- What kind of policy supports the objectives of the plan?
- How much coverage is necessary?
- Who are the intended beneficiaries?
Four Reasons to consider insurance in your estate plan
Insurance can play a crucial role in your estate plan and provide one mechanism to execute your plan according to your goals.
Provide Financial Support to your Loved Ones
One of the primary reasons for estate planning is to provide your loved ones with financial support when needed. Many people establish a fund to provide income for the individual they wish to support, such as their spouse, children or grandchildren. Insurance can provide cash flow to help keep them when they need it most. In addition, it can provide peace of mind that your loved ones are cared for and supported.
Provide Flexibility and Equalization
Estate planning can become complex when your assets might be less liquid, such as real estate, a business, or other non-liquid assets. For example, while you might intend to gift these to support your loved ones, they might not all want or need them. Or it might be challenging to split up certain assets fairly or equally.
For example, if you intend to provide for your three children, but only one is interested in your business, it cannot be easy to divide the business equally. Insurance policies can help with estate equalizations, especially as is the case for family businesses. Equalization can help create a plan that is fair and conflict-free.
In the event of a death, there might still be tax obligations that need to be carried out by the deceased’s representatives or estate. There might even be debt or mortgage debt that comes due. Often the burden may fall on the family of the deceased. This can result in selling off assets such as business, real estate, or other non-liquid assets to create sufficient cash flow. Having a plan helps eliminate the need to rush the sale of assets, which you prefer to be left to your beneficiaries.
Selling non-liquid assets can also take time. An insurance policy provides quick cash flow when needed. The right type of insurance can provide sufficient cash flow in the estate to pay out any taxes, debt or mortgages due. The right insurance policy can help keep their legacy and assets intact and help provide for the intended beneficiaries.
Support Charitable Causes
Many people want to leave a portion of their assets to support a charitable cause near and dear to their hearts. An insurance policy can help you leave your legacy for the causes that mean the most to you. In addition, some choose to name a charity as a beneficiary or create a charitable trust. Once you can clarify your estate planning objectives, you can use an appropriate insurance policy to help those wishes come to fruition.
Estate Planning and Insurance
Estate Planning and insurance and both complex topics. They can offer tailored solutions for your needs, but you might need guidance or expertise to ensure your plan makes sense. Insurance is one of many tools in estate planning that can provide a way to help achieve your plan’s objectives. While it can feel overwhelming to think through difficult scenarios, having a plan can give you peace of mind. A proper estate plan ensures that your legacy is intact and your loved ones are supported.
Whether you are just getting started or need help reviewing your estate plan, qualified tax and wealth management experts can help ensure your plan makes sense.
Contact Ford Keast Wealth Management in London, Ontario, for all your Wealth Management Needs
At Ford Keast LLP, our wealth management experts work with you to create plans to help you plan for tomorrow. Our professional tax consultants and wealth advisors can guide you through all aspects of financial planning, from picking the right insurance to creating a comprehensive financial plan that meets your needs and tax considerations. To learn how Ford Keast Wealth Management can provide you with the best financial expertise, contact us online or at 519-679-9330.