Everyone faces death at some point, which is why anyone who is leaving something behind for survivors should consider life insurance. It’s part of “end-of-life planning,” which encompasses financial concerns such as funeral expenses and payments to beneficiaries. Here’s a look at how life insurance can involve wills and trusts to clarify survivor benefits.
Life Insurance Basics
Individuals who invest in life insurance make it possible for family members to secure property and funds after the policyholder dies. It’s a way to ensure your loved ones have financial protection after your death. It covers final expenses such as your unpaid bills, as well as your mortgage and the future education of your children.
How a Will Differs from Life Insurance
Like a life insurance policy, a will provides instructions on how you want your assets distributed upon death. However, it doesn’t include assets in which ownership is shared with others, such as a house. A life insurance policy can cover such assets. However, a will is not the same as insurance since the only payouts to beneficiaries are from existing estate assets.
Getting a will is important because it’s a legal document that specifies how assets will be divided among survivors. It helps settle issues during probate, the legal process for distributing a deceased person’s assets. Probate involves court proceedings that finalize how assets are distributed. If no will is made, the court decides what to do with the estate, which usually is divided among family members.
Usually, you cannot use a will to distribute death benefits from your life insurance. All payouts in a life insurance policy go to beneficiaries named in the policy. If all your beneficiaries die before you do, your life insurance payouts will simply be paid to your estate according to the terms of your will. Your will can name an executor who is in charge of handling your assets after you die.
Life insurance doesn’t go through probate. It involves direct payouts to beneficiaries. One of the main advantages of a life insurance policy is that it distributes money faster than probate. While a will can go through probate for months, life insurance payouts occur quickly after beneficiaries file claims.
Reasons for a Trust
A trust is an account in which you can place assets and provide instructions regarding what to do with them. You will name a trustee to manage your trust, who can even be the same person as the executor of your will. There are different ways a trust, will and life insurance policy can be integrated. It’s possible to name a trust that receives a payout from your insurance policy. Some of the reasons for setting up a trust are to reserve funds for specific purposes or to leave money for family members.
Conclusion
Are you wondering what to do about end-of-life planning? At Donald Weiss Insurance Services, we’ll help you understand your options regarding life insurance, wills, and trusts. Contact us today to learn more!
