Why Life Insurance Should Be Part Of Your Estate Planning

You’ve worked hard and managed your money carefully throughout your life. So rest easy knowing that you will have more than enough assets to fulfill your needs during your retirement years.

You also need to think beyond your retirement years and consider what will happen to your assets after your death. For example, it is essential to consider whether your assets could result in tax liabilities for your heirs.

Generally, there are three types of assets during estate planning:

  1. Capital assets – shares in public or private companies, or real estate such as a second home or cottage.

  2. Income-producing assets – assets that produce income, such as RRSPs and RRIFs.

  3. Non-taxable assets – such as cash, TFSAs, your principal residence, and the proceeds from a life insurance policy.

How can life insurance help my heirs cover their tax liabilities?

There’s an old saying that there are only two things certain in life – death and taxes. So naturally, you do not want your loved ones to be burdened with tax liabilities when they inherit capital or income-producing assets from your estate. In most situations, the estate may not have enough cash to leave to your heirs to cover those tax liabilities.

Providing the means to cover tax liabilities upon your death is where life insurance can be such a valuable part of estate planning. With life insurance, you can both guarantee your heirs have the funds when they need them, as well as receive the death benefit tax-free. In addition, your heirs won’t have the stress of how they’ll come up with the money to pay taxes on any assets they inherit.

Are there any other reasons I should include life insurance as part of my estate planning?

Since life insurance death benefit is tax-free, it is an excellent source of liquidity to include in your estate planning. Your heirs can use the funds for a variety of purposes, including:

  • Paying off debts

  • Covering funeral expenses

  • As a source of income – If your family has suddenly gone from two income-earners to one, this can significantly affect their standard of living.

  • Provide funding for a considerable expense, such as college or university tuition.

We can help with estate planning

If you’d like to include life insurance as part of your estate planning but aren’t sure where to start – we can help you with that! We’ll talk to you about different types and amounts of life insurance coverage to see what works for you – call us or email us today!

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