Later in life, many people begin to consider their finances and the legacy they can leave behind. Estate planning is often how people leave this legacy, providing gifts and treasured heirlooms to children and passing on wealth to set the next generation up for success. The effectiveness of an estate plan often correlates to the impact of the gifts, as a well-constructed plan may help avoid unnecessary taxes, quickly and efficiently give bequests to beneficiaries, and help navigate conflicts over who receives what.
Just as billions of unique individuals exist on the planet, many different ways to build an estate plan exist. Each plan will come from the individual’s needs, relationships, and financial situations. Therefore, there is no one-size-fits-all solution for estate planning. Simple wills or complex combinations of trusts and insurance solutions, medical powers of attorney or long lists of beneficiaries and trustees may all be facets of an individual’s estate planning process.
A skilled Florida and Minnesota estate planning attorney from Roulet Law Firm, P.A. may help evaluate potential estate plans and provide possibilities for insurance solutions. Consider booking a consultation today at (941) 909-4644 in Florida and (763) 420-5087 in Minnesota.
Impact of Insurance on Estate Planning
One key facet of Florida and Minnesota estate planning is insurance, specifically life insurance policies. Life insurance can provide benefits to descendants or other dependent parties after death, which has a distinct impact on estate plans. Factoring in the impact of insurance solutions in estate planning could help build a positive legacy for those close to the decedent.
In Florida, the policies and restrictions on life insurance are outlined in Florida Stat. § 627. These detail what policies are allowed in Florida and what restrictions and other laws bind both insurers and those purchasing insurance. Minn. Stat. 61A is the chapter that covers life insurance solutions in Minnesota. Understanding the relevant laws and their interactions, particularly for Minnesota snowbirds who may travel frequently between both states, may help clarify which life insurance solutions are most beneficial.
Benefits of Certain Insurance Solutions
Depending on the policy in question, certain insurance policies may provide certain benefits to beneficiaries. Many people employ life insurance as a way of providing for spouses or children should they pass away while they are still financially dependent on the decedent. However, while this is the most common employment of life insurance solutions, it is by no means the only one. Insurance solutions can help deal with estate taxes and debts and provide benefits or additional financial resources in trusts or inheritances.
Income Replacement
The primary use of insurance solutions in estate planning is to protect the futures of dependents who are left behind. Minor children and spouses often rely fully or in part on the income of the household’s provider. Should the primary earner in the household die, they may be at risk of losing income which could jeopardize their financial future. A life insurance policy may be able to provide income replacement to support them.
Debts and Taxes
Additionally, insurance solutions may be able to cover debts or estate taxes after death. Final expenses, funeral costs, debts, and other financial requirements can be a burden, but an insurance payout may cover these costs to help avoid financial challenges. Where others may need to quickly liquidate assets to cover these costs, insurance money could help avoid this outcome.
Funding Trusts
Trusts are a common tool for estate planning, and they are generally funded by the grantor’s assets. However, insurance may pay certain amounts to the grantor in certain situations. These payments could be used to fund a trust and pass those benefits on to beneficiaries. Replacing wealth and assets with insurance could help strengthen an estate plan.
Inheritances
Similar to funding trusts, an individual with lower financial needs could use an insurance policy to increase inheritances and bequests in a will or trust. Without the worry of debts or other end-of-life costs, insurance solutions could be used directly to enrich the next generation. For those considering insurance solutions in Florida and Minnesota, speaking with a skilled estate planning lawyer from Roulet Law Firm, P.A. may clarify more details.
Insurance Strategies in Florida and Minnesota
While there are many distinct benefits of insurance solutions in estate planning, this is not the end of the conversation. Many varied policies may provide distinct benefits for individuals, and understanding which policy is right for the circumstances can be difficult.
Irrevocable Life Insurance Trust (ILITs)
While it may not be intuitively obvious, life insurance policies may also be taxes just as properties and estates are. Therefore, understanding how to protect these benefits may impact an individual’s estate planning strategy. An irrevocable life insurance trust is a form of irrevocable trust that may help protect life insurance payouts from taxes. As with standard trusts, this may protect the contents of the trust from the probate process.
Second-to-Die Insurance
Many married couples also opt for a second-to-die insurance policy, which pays out benefits upon the death of the second death. This is often used to provide added income and support for children, specifically if the second spouse is the primary beneficiary of the first spouse’s estate plan. Also called survivorship insurance, these plans may cost less than a life insurance policy covering one life.
Life Insurance for Business Succession
Insurance solutions may also be valuable for business owners. Transferring ownership of a business can be difficult, and generally involves the purchase and sale of said business. As such, business succession may require a certain amount of liquidity from the decedent. A life insurance policy may provide that financial assistance and help promote the smooth transition of ownership.
Tax Implications of Insurance Solutions
Insurance solutions may impact taxes in several ways. Insurance payments may be tax deductible under certain circumstances, according to the Insurance Information Institute. Although it is unlikely, if insurance payouts are greater than the purchased value of the item, they may be subject to taxes. Life insurance policies may have unique interactions with taxes as well, due to their nature. Being aware of the changes in tax climates and their implication on estate planning can help provide insight into how to proceed.
Speak to a Florida and Minnesota Estate Planning Lawyer
Florida and Minnesota each have unique insurance laws that may impact estate planning in various ways. Maintaining awareness of these laws when planning for the future can help protect wealth and provide new avenues of estate planning. For more detailed information, speak with a skilled estate planning attorney from Roulet Law Firm, P.A. about insurance solutions. Call the office today at (941) 909-4644 for the Florida office and (763) 420-5087 for the Minnesota office. Or you can fill out the contact form on this page and a member of our team will reach out to you to schedule your consultation.
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