Life insurance is a contract between an insurer and their policy holders that promise to pay the policy holder’s beneficiaries a certain amount of money after the policy holder passes away.  These policies have been utilized around the world in various forms for years and it is not unusual for a life insurance policy to become the only asset left to potential heirs. Including life insurance in your estate plan can provide your heirs with the funds necessary for your funeral expenses, to pay death taxes, or to give beneficiaries a source of financial support during the grieving process. Even celebrities with high net worth include life insurance in their estate plans with late actors Heath Ledger and Paul Walker having multimillion-dollar policies.

Plan for Taxes

Life insurance policies create an option for those who want to leave their surviving spouse money that is typically tax-free. Naming your spouse as a beneficiary or establishing a tax efficient trust are ways to move funds with little to no major tax penalties. However, if the beneficiary of a life insurance policy is named in the policy but not in the will, that could create difficulties for your executor. Not all insurance companies are willing to tell the estate who received life insurance benefits, making it difficult for your executor to correctly file estate taxes.

Check for Contradictions

Anyone who has created a will and obtained life insurance should periodically check to make sure their asset distribution has no contradictions. Common issues are a will naming on a person the beneficiary of a life insurance policy while the policy itself designates an entirely different person. These types of errors can create problems between your heirs, making the executor’s job more difficult, and has the potential to cause a ripple effect that impacts the worth of the entire estate.

Multiple Policies

It is financially advantageous to own more than one life insurance policy if the option is affordable. There are multiple reasons to include more than one policy in your plan, but one of the reasons cited most often is affordability. At times, purchasing two less valuable separate term life insurance policies is cheaper than purchasing one valuable policy. Also, there are times when you may benefit from investing in one small life insurance policy that will be used for your final expenses and a separate policy that is more valuable that will financially support your surviving family members.

Discuss Your Options

Prior to investing in a policy, schedule a consultation with a trust and estate lawyer to discuss what options will help meet your long term estate planning goals. An attorney is able to help you determine how to best utilize life insurance policies within your estate. The attorneys at MMZ Law understand that every person’s needs are different and we are prepared to help you decide the best way to protect your heirs. Contact us today at 909-256-6702 to schedule an appointment at our Claremont, California office.



341 W. 1st St. Suite 100
Claremont, CA 91711

MARIVEL M. ZIALCITA is the founder of MMZ LAW, A Professional Corporation, where she practices in the areas of Elder Law – Medi-Cal Planning Asset Protection, Trust & Estate, Special Needs, Conservatorship, Trust Administration, & Probate. Ms. Zialcita is a frequent speaker on trust and estate matters and holds memberships in the State Bar of California, Trust and Estate Section, The San Bernardino County Bar Association, Wealth Counsel and Elder Counsel. She currently assists in the pro bono legal services program at the James L. Brulte Senior Center in Rancho Cucamonga, California. She is based in Claremont but assists clients throughout Southern California.

This information is educational information only and not legal advice.