Protect your survivors financially with term life insurance

You can buy life insurance to help ensure that your survivors don't suffer financially when you die. You can protect their long-term financial needs by planning so that they will have enough money to pay their bills and live comfortably for years to come. You can also use life insurance to protect your survivors short-term financial needs. Because life insurance proceeds normally don't pass through probate, your loved ones will have enough money to pay their bills right away--they won't have to wait until your estate is settled.

| TOP |

Replace wealth that is lost due to estate shrinkage with term life insurance

Life insurance may be the number one method of replacing wealth that is lost due to estate shrinkage. To ensure that the estate (money and assets) you leave to your survivors isn't less than you intended, you can buy enough life insurance to cover the expenses associated with your death, such as taxes, fees, and other debts your survivors will have to pay.

| TOP |

Give to charity with term life insurance

If you want to leave money to charity when you die, consider using life insurance. Not only does life insurance allow you to make a substantial gift to charity at relatively little cost to you, but there are certain tax benefits as well. For instance, depending on how you structure your gift, you may be able to take an income tax deduction equal to your basis in the policy or its fair market value, or you may be able to deduct the premiums you pay for the policy. In addition, gifts to charity may reduce estate taxes owed when you die.

| TOP |

Plan carefully if you expect to leave behind a substantial estate

Your survivors generally won't owe income tax on any life insurance proceeds you leave to them. However, they may owe estate taxes if you leave behind a large enough estate but don't plan ahead. In general, if you're leaving behind a taxable estate worth less than a certain amount (the unified credit exemption equivalent--$675,000 in 2000), your survivors won't owe estate taxes on a life insurance policy you leave them. But, if you intend to leave an estate larger than that amount, you may want to consider the estate tax consequences of owning life insurance.

| TOP |

Avoiding life insurance-related estate taxes

Make sure that you don't:
A) Own the policy or have any "incidents of ownership" in the policy
B) Make the proceeds payable to your estate
C) Make the proceeds payable to your personal representative (executor)
D) Make the proceeds payable to a beneficiary to satisfy a debt or to pay alimony or support
E) Transfer an existing policy to a new owner within three years of your death