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Friday, November 20, 2009
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Advanced Life Insurance
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Call us at (800) 940-3002
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Estate Planning and Life Insurance
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DISCLAIMER: The purpose of this information is to provide general information which
is subject to change and is specific to state law.
ReliaQuote is not providing legal advice. If you have a specific legal issue
or accounting issue, you should consult with a lawyer who is licensed to practice
law in your jurisdiction or a certified public accountant familiar with tax regulations
in your jurisdiction. |
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You work a lifetime to accumulate an estate; however, at your death the assets you
pass onto your heirs may be subject to federal estate taxes and state inheritance
taxes. If your estate is subject to estate taxes, taxes are due usually within 9
months of your death. Life insurance can play
an important role in estate planning by providing the income necessary to pay estate
taxes and expenses and provide liquidity so those expenses can be paid. Some expenses
that must be paid upon an individual's death may include:
- federal estate taxes
- state inheritance taxes
- probate fees
- legal and administrative fees
- debts
- funeral expenses
There are three options to pay estate taxes and expenses: use cash (it may be unlikely
there will be much cash available), borrow the money (the money will have to be
repaid with interest), pay the IRS in installments under IRC Section 6166 (only
available for closely held family businesses or farms and there will be an IRS lien
placed on the business), or pay now by purchasing a life insurance policy with the
possibility of paying pennies on the dollar. Proper planning now may enable you
to pass more of your estate to your heirs. Proper planning involves identifying
estate transfer costs (federal estate taxes, state inheritance taxes, probate, etc.),
using available tax breaks to reduce costs and determining the least expensive method
of paying for remaining taxes and costs. The funded irrevocable life insurance trust
can be one of the most cost-effective ways to pay for estate taxes.
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