How Insurance Fits into Your Estate Plan
Estate planning is not something people like to talk about. If you're planning your own estate, it can be a little morbid because you're planning for life after your own death. If you're planning an estate for your family member, it can be very sad because you're getting ready for life without your loved ones. However, the truth of the matter is none of us will be here forever. It’s important to plan for what comes next.
Life insurance can be a helpful financial tool to alleviate the financial burden that comes with a death, and can be helpful in your estate plan. The proceeds from life insurance can be used for a variety of reasons from helping out your family to taking away any additional stress from money issues. Could you imagine losing a loved one and having to deal with the stress of money issues during the time of grief? It could be a lot to handle.
If you don't have life insurance, it may be a good time to talk to a financial advisor and see exactly how life insurance fits into your estate plan.
Here are five ways life insurance can help during your time of grief:
Pay off the balance of your mortgage
If you and your spouse bought your home together and were approved for the mortgage together you may not be able to manage the mortgage payments and monthly financial commitment for upkeep if they pass away.
It would be very difficult to have your family dynamic change after the loss of a spouse and have to change your life because you can no longer afford your home. Purchasing life insurance to cover the outstanding balance of your mortgage can help ensure you're able to keep your home.
Cover the outstanding credit card balances
When someone passes away debts are not automatically forgiven, they are actually still owed. In Canada when someone becomes the executor of your estate they accept the good with the bad, a.k.a. the assets along with the debt.
According to Yahoo.ca “If you leave an estate, the executor of your estate will have to deal with any debt before assets are distributed to any beneficiaries." Buying life insurance can help pay off any outstanding debts at the time of death. This ensures all assets will go the beneficiaries without any deductions to repay debts owed.
Leave a legacy for your loved ones
When you purchase life insurance you can name a person or a charity as the beneficiary. This leaves a financial legacy to someone or to a cause after you're gone. Leaving a financial legacy is especially important if you were the sole breadwinner in the home or if your income was the majority of the household income.
Leaving life insurance proceeds for your family ensures they will be able to maintain their lifestyle after you're gone because it can be used to replace the lost income.
Pay for final expenses
Believe it or not a death can be very expensive. Funeral arrangement need to be paid for and final taxes have to be paid. If you don't have accumulated savings the payout from life insurance can be used to cover these lump sum costs.
Make use of your insurance to create a better estate plan, and you’ll have peace of mind and provide for your family.