Estate plans often benefit from the use of life insurance. However, it should be approached cautiously.
Life insurance is a possible solution to supplying ready cash during probate or if you don’t have sufficient assets. However, mistakes can be made in the process, according to Wealth Management in "Eight Life Insurance Mistakes Clients Make."
Here are some of the mistakes:
- Not buying life insurance at all when people have good reason to do so.
- Buying too little coverage to meet the expected needs of minor children.
- Many people purchase the wrong type of coverage for what they need.
- Just getting life insurance from their current employer's benefit plan, instead of shopping around and then leaving jobs and losing coverage.
- Not purchasing any coverage for stay at home parents, since the breadwinner will need to take more time off work, should anything happen to the other spouse.
- Purchasing a policy that only offers coverage until children reach the age of 21, instead of funds for college and when getting started in their careers.
- Not creating a trust to handle any payouts, after a child reaches the age of 18, especially when the child is still too young to manage it.
- Canceling a policy as soon as possible, before making sure the child will not need it, if something happens to the parent.
An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances and may include life insurance.
Reference: Wealth Management (May 25, 2018) "Eight Life Insurance Mistakes Clients Make."