In California, life insurance and other estate planning tools all serve the same purpose: to make life much easier for your loved ones when you are gone. Therefore, it’s only fair to use them in tandem and not just rely on one method alone. Here’s how the process works.
Naming beneficiaries
When estate planning, one of the most crucial steps to take is naming your beneficiaries. These are the people or organizations who will inherit your assets after your passing.
You can use life insurance to help with this process, as you can name both primary and secondary beneficiaries to your policy. This is especially useful if you have minor children or grandchildren, as they cannot directly inherit assets until they reach 18 years of age in California.
Avoiding probate
Probate is a legal process in California where the court validates a deceased person’s will and oversees the distribution of their assets. This process can be lengthy, expensive, and can cause disputes among family members, making it an unpleasant experience for your loved ones. By using life insurance, you can bypass the probate process, as your insurance company will pay the death benefit directly to the designated beneficiaries without going through probate.
Covering estate taxes
In California, if your estate is worth more than $12.92 million, it may be subject to estate taxes. This can significantly reduce the overall value of your estate that your beneficiaries receive. However, life insurance death benefits are generally not subject to income or estate taxes, meaning that the full amount of the death benefit can go to your designated beneficiaries without any deductions.
Life can be a lot easier for you and your loved ones when you take advantage of every tool at your disposal to minimize your financial risk. Life insurance is one of the most effective ways to take care of your loved ones after you pass away. It provides financial security and peace of mind for your beneficiaries, ensuring that they are not left with any unexpected expenses or debts.