Traditionally the vehicles used in Estate Planning have been trusts, foundations and companies.
During the past 15 years though, the use of life insurance has been developed as an important tool in Estate Planning.
There are several reasons for the development and popularity of insurance. One of them is that life insurance receives a special tax treatment in several countries.
Another one is that they are vehicles used to protect financial assets, since in several jurisdictions insurance policies are not subject to seizure or affected by bankruptcy laws.
Other uses of life insurance are:
- Liquidity. To meet current family expenses and to avoid affecting the inherited estate.
- Tax payment and legal expenses. The execution of an inheritance may have very high costs and taxes.
- To contribute to charities. For a relatively low premium significant amounts may be bequeathed to charity.
- To equalize the inheritance. It may be the case that only one of the heirs receives a business or certain asset; with the insured amount the other heirs are compensated.
In conclusion, a sound Estate Plan may require the use of life insurance, and it should be considered an integral part of the whole patrimony.
Estate Planning
