Giving Your Kids an Inheritance with Life Insurance: 3 Things to Consider

Are you hoping to leave your children with an inheritance once you pass? Using a life insurance policy can provide many unique advantages when it comes to estate planning. Learn more about the benefits of giving your kids an inheritance with life insurance, and the three things you should consider before doing so.

The Benefits of Passing on Your Life Insurance

Investments and stocks are never guaranteed because they fluctuate with the market. So if the stock market were to collapse before your death, your beneficiaries may receive less than what you had intended. With life insurance, the policy can be fixed and guaranteed so that when the time comes, the amount that your beneficiaries receive from the death benefit will be exactly what was planned for. 

Life insurance payouts also bypass the estate and probate process so that any proceeds will be directly passed onto your beneficiaries tax-free. This flow-through can translate into thousands of dollars in savings. Your beneficiaries can also use the benefit to offset other taxes that might occur. For instance, if you pass on a second property to your children, they might be required to pay capital gains tax. If they do not have enough money in the bank to cover these taxes, then they might be forced to sell the property. However, if they receive insurance proceeds, they could use these funds to pay the taxes and keep the property.

The life insurance benefit can also help to pay off any debt obligations that are passed down to your beneficiaries. If you carry a mortgage, credit card debt or other amounts at the time of death, the insurance proceeds can be used to pay these off.

As you can see the ability to pass on tax and probate-free benefits to your children can help to provide them with many advantages while solving problems that may arise at the time of death. But before you decide to purchase or ramp up your insurance policy, what do you need to consider?

How Much Is Enough?

The amount of coverage you need will depend on your agent and financial status. Determining what type of insurance is most suitable and the level of coverage can be best assessed through an insurance broker. 

 What Policy Should You Choose?

Not all policies are created equal and the policy you choose can impact the payout to your beneficiaries. Whole or universal policies are more expensive, but they are often the better option for estate planning because they guarantee a death benefit. An insurance professional can help you determine what policy is right for you.  

How Will It Factor Into Your Estate Plan?

Using life insurance as an inheritance can be a worthwhile option but depending on how your estate plan is already set up, it might not be appropriate for your situation. An advisor can help you determine how to maximize your tax position to provide your family with the most protection.  

Our team at Rowat Insurance can help you decide if a life insurance policy is the right decision for your estate planning. Contact us today to learn more.

ROWAT INSURANCE

Insuring Ontario and Quebec since 1955. Trust Rowat Insurance Brokers to look after your home, auto, business and life insurance needs. We always guarantee fast, friendly service and highly competitive premiums. As brokers, we are entirely independent from Insurers and Financial Institutions; we will work with you to analyze and advise on risk, and customize the coverage that is right for you.