Throughout time, the purposes of life insurance in the estate planning context have simultaneously remained constant, while also dramatically changing. These alterations have occurred because of state and federal regulations. And these changes impact how estate planning attorneys advise their clients. However, it can be difficult for Texans to know the ways that life insurance can protect them against tax liabilities, along with ensuring assets are left for loved ones. Below are common ways—both previously and currently—that life insurance can be used in a Houston estate plan to benefit both the estate plan drafter and their family.
Paying Estate Taxes
Life insurance can be used to protect individuals against estate taxes. Previously, life insurance was traditionally used in estate planning for this purpose. While Texas does not have any state estate taxes, there are still federal estate taxes to worry about. Currently, individuals with an estate valued over $11.7 million will have to pay a tax. In these instances, people are often advised to use part of their life insurance policy to pay this amount—otherwise, the person’s estate will be required to pay this tax, and it may be taken out of assets otherwise given to heirs.