Why Life Insurance is a Smart Estate Planning Tool
Estate planning usually involves a lot of moving parts. From protecting your assets to providing for loved ones and avoiding probate, there are plenty of tools available to accomplish your goals. Investing in life insurance can be a smart estate planning choice.
Life insurance can help avoid probate
Life insurance proceeds typically do not go through probate. Beneficiaries are paid directly, ensuring that they have an almost-immediate cash influx after your death. This can be a lifesaver, especially, if your passing was sudden or leaves them without income.
Probate can be a lengthy process, especially if you have a complex estate or someone contests the will. Worse, creditors with valid claims could be entitled to your hard-earned savings and assets.
Life insurance proceeds are paid out by the insurer to the persons names on a valid beneficiary designation, outside of probate. Typically, that beneficiary would simply notify the insurer and provide documentation of proof of death to receive their portion of the proceeds.
Watch out for these exceptions and issues
There are certain exceptions and issues to watch for. First, life insurance proceeds will pass through probate when no beneficiaries are named, if all named beneficiaries are dead or you named your estate as the beneficiary.
If you divorce and your ex-spouse is still named as a beneficiary, Florida law will revoke their status as a beneficiary and the funds typically pass through probate. Each time you get married or divorced, a beneficiary dies, or you want to add someone new, you may need to update your beneficiary designation under the policy.
Working with a trustworthy estate planning attorney in Tampa, FL can help you take full advantage of all available estate planning tools. Call BaumannKangas Estate Law for a consultation.