Estate planning basics: integrating life insurance
When thinking about the future, it’s important to understand the basics of estate planning. Estate planning is a way to decide what will happen to assets and personal items after you're gone, while making sure your loved ones are protected and provided for. It can also help if you become too sick or hurt to make decisions for yourself. A valuable tool that can help support this process is life insurance.
What is an estate plan?
An estate plan is a group of legal documents that help you protect your belongings and make things easier for your loved ones after you're gone. It usually includes a will, which details who you're leaving your possessions to. You can also name a power of attorney. This is the person who will handle legal or financial matters if you cannot. A healthcare directive can be included. This will let others know what kind of medical care you want if you're unable to speak or decide for yourself. In some cases, a trust is included. Especially in complex matters, a trust can help with managing property and money.
In the process of estate planning, you consult professionals who know about your family, goals, and the things you own. They help you create a plan that fits your particular situation. These trusted experts might include your accountant, financial advisor, lawyer, or life insurance agent.
Many people think of estate planning as something for the end of life. However, it can help during your lifetime as well. If you get hurt or become ill, that's where power of attorney and a healthcare directive might come into play. Tax planning can also be part of estate planning, helping some people manage income and estate taxes while they’re still alive.
How life insurance supports your estate plan
After you pass, life insurance provides a payout to the people you name as your beneficiaries. This is often a spouse, children, or other loved ones. Life insurance typically does not have to go through the court process, known as probate. Therefore, it can provide relatively quick financial support to your beneficiaries, helping them with things like funeral costs, medical bills, housing, and day-to-day living expenses.
Life insurance is also a way to leave a lasting legacy. You might use it to help fund a grandchild’s education or support a favorite charity. In addition, it can help make inheritances more equal. For example, if you leave a house to one child, you might want to use life insurance to give a similar value in cash to another.
Estate planning checklist
Many people start with an estate planning checklist to stay organized and make sure they don’t miss anything. Here is an example:
- List everything you own (home, car, bank accounts, personal items)
- Decide who will receive your belongings and money
- Create or update your will
- Name a power of attorney for legal and financial matters
- Prepare a healthcare directive (also called a living will)
- Check your life insurance policy and update your beneficiaries
- Consider creating a trust to manage special assets or simplify transfers
- Store your documents in a safe but accessible place
- Talk with your loved ones about your plans and wishes
- Review and update your plan every few years or after major life events
Planning now, a gift later
An estate plan is simply a gift to your family that helps them carry out your wishes with less stress. Think of estate planning as a way to help take care of your loved ones even after you're gone. Adding life insurance to your estate plan may give your family the financial support they need. It’s a simple way that can help make a big difference. No matter where you are in the process, thoughtful planning today can help make things much easier for your family down the road.
This article is provided by New York Life Insurance Company for informational purposes only. This article is not intended to provide tax, legal, financial, or accounting advice. Please consult your own professional for advice specific to your circumstances.
