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Estate planning and life insurance

Life insurance is a critical component of a well-prepared estate plan. It can increase the wealth for your beneficiaries and provide cash to cover any liabilities. This article provides several common scenarios for the use of life insurance in estate planning. Life insurance and payment of the home loan Case scenario: You are married or in a de facto relationship with or without children and you still have a home loan or other liabilities or both. In this cases your life insurance will provide a financial safety net for your partner or your family to pay for your funeral, to pay off the home loan and cover any other liabilities. Life insurance and passing on the business to a family member Case scenario: You are the business owner and have 2 children – only one of them is involved in the business. You want for your business to continue on and all of your beneficiaries to be taken care of. You can leave the business to one child and the life insurance payout of similar value to the other. This will avoid the forced sale of the business to fairly divide your assets between your 2 children. Life insurance and passing on the business to your business partners Case scenario: You are one of several business partners. You want to make sure that if one of the business partners dies the surviving partners can buy out the deceased partner’s interest from their beneficiaries. This is achieved by buying life insurance policies on each owner which can be paid for by the business or by each owner. A life insurance can fund a buy-sell agreement. Such an agreement can help prevent a situation where the surviving partner finds themselves in business with a surviving spouse or the children of their deceased business partner. With no life insurance in place the business may have to be liquidated or sold to settle the deceased partner’s estate. Life insurance and blended families Case scenario: You are in a blended family because you have remarried/re-partnered following a divorce or the passing of your spouse or de facto partner. Some of your children may be young and others are financially independent adults. You want to make sure that children from a previous relationship are also provided for if you die. You take out a life insurance and nominate such children as your beneficiaries. If you die your children from the previous relationship will receive your life insurance payout, so the remaining estate will be left to your current spouse and younger children. This will minimise the potential for any of your children of contesting your will claiming you have not provided adequately for them. Life insurance and children with special needs Case scenario: You have a child with special needs. You are concerned that if you die they may struggle financially as they cannot work. You can take out a life insurance so if you die the benefits will be paid to the trustee of a special disability trust to support your child and provide sufficiently to maintain and improve their quality of life. Life insurance and philanthropy

Case scenario: You have been supporting a charitable organisation and you want to make sure that your legacy of giving will continue after you die. Life insurance can provide the cash needed to take care of the charities that matter to you so they can continue to operate. You can then leave your estate assets to your loved so you will not compromise their financial security. Buy nominating a charity as the beneficiary of your life insurance you will also avoid the possibility of any of your beneficiaries contesting your will. The life insurance will be paid directly to the charity and will not form part of your estate.

Crystal Lawyers is not a licence insurance broker and cannot advise you about your life insurance needs. However, we work with reputable insurance brokers who you can rely on for best insurance advice.