Is Life Insurance Part of My Estate?
No. Life insurance is designated for the beneficiaries of the policy — not the insured. So if you have a life insurance policy on yourself, you don’t (technically) have to consider it part of your estate.
However, life insurance is an important part of estate planning and you should discuss life insurance options with your estate planner. For example, you might consider buying a life insurance policy that aligns with your mortgage — so as your mortgage decreases so does the amount of the life insurance policy that would pay off the mortgage. This option is especially helpful for parents with young children. If one of the parent’s passes away before the house is paid off, then the life insurance policy ensures that the family won’t have to leave the house.
Your estate will be responsible for paying off any debts you hold as an individual. So if you have a significant amount of debt on your credit cards, in private student loans, or in business loans, then you and your attorney should discuss the best kind of life insurance to prevent your spouse from losing other assets to pay down those debts.
In addition, you need to work with your attorney to determine if any of your current assets (like investment accounts) can immediately be transferred upon your death without any impact from probate.
Debt can mean a significant burden on those left behind to pay the bills. Work with your attorney and a good life insurance agent to determine how to keep your family safe from your financial burdens.