How to Use Life Insurance to Pay Estate Taxes

When you’ve done your estate planning homework, you’ve laid a roadmap for your loved ones to take action quickly if and when something happens to you. This can ease a lot of concerns in the most difficult moments of their grief but it’s important for you to think about how all of your estate planning strategies work together.

Life insurance should be a component of your estate planning because it can help provide immediate liquidity in the event of your death and can be relatively simply transferred compared to some other assets inside probate that might be liquidated. Life insurance can also provide a way to pay for estate taxes.

A person who has a taxable estate above $11.7 million federally for an individual in 2021, allows for those payments to be made in the timeframe required of 9 months after death. There are many conversations happening right now about whether or not the estate exemption will be reduced which will make it even more important for people to consider the opportunities with appropriate planning.