Estate Planning and Life Insurance
Even if you don't anticipate having a large enough estate to worry about estate taxes, life insurance could still help with estate planning.
It can take a long time to pay out the proceeds from an estate. Even with a will, some assets may need to be liquidated before your loved ones receive any funds.
But with a life insurance policy, under normal circumstances, benefits are typically paid out within 30-60 days to the beneficiary.
All the beneficiary needs to do is contact the life insurance company, provide a certified copy of the death certificate and may also need to complete a form or other paperwork.
Once the life insurance company receives the appropriate paperwork, your beneficiaries will receive a check from the insurance company. They will not need to pay income taxes on the proceeds.
Be aware that there are some instances in which your life insurance proceeds may be included as part of your estate. This can usually be avoided by setting up an irrevocable life insurance trust (ILIT).