How does life insurance affect estate tax?

How does life insurance affect estate tax?

Life insurance can play a significant role in estate tax planning. The death benefit is generally included in the taxable estate, but there are strategies to mitigate this.

What strategies can I use to minimize estate taxes with life insurance?

One common strategy is to place the life insurance policy in an irrevocable life insurance trust (ILIT), which can help keep the death benefit out of your taxable estate.

Are there any limits on how much life insurance I can have?

There are no specific limits on the amount of life insurance you can have, but larger policies may attract more scrutiny from tax authorities.

What happens if I outlive my life insurance policy?

If you outlive your term life insurance policy, it typically expires without value. However, permanent policies can accumulate cash value.

Can I use life insurance to pay for estate taxes?

Yes, many people use life insurance to cover estate taxes, ensuring that heirs receive their inheritance without financial burden.