New York Estate Planning & Elder Law Blog
For many years, life insurance played a critical role in estate planning to either pay off or avoid estate taxes. Due to the raising of exemptions to a sizable degree including both on a federal and New York state level, people now utilize life insurance to achieve various goals. This article reviews some of the ways that you can achieve estate planning goals through the use of life insurance.
Income Taxes
Following the recent passage of the Secure Act, some new techniques have been introduced involving income taxes. The Act requires beneficiaries who inherit IRAs to make withdrawals from these accounts over the following decade. The creation of this 10-year duration lowered what was once expected to be the rest of the withdrawer’s life.
Because IRAs are now much larger on average, the beneficiaries of IRAs now must pay much more in taxes and consequently are at increased risk of being moved to a new tax bracket. The accompanying tax could end up having a punitive result on the beneficiary. Life insurance, however, is now capable of being used to protect against the problem presented by income taxes.
Long-Term Care Costs
Long-term care insurance is a powerful way to protect against assets or income in situations involving long-term care needs. Besides protecting assets, life insurance can now also be used to protect against long-term care costs. Traditionally, long-term care insurance only pays if someone enters a long-term care facility. Life insurance proceeds payout for any funds that are used for long-term care. Utilizing long-term care insurance is a better idea in an era where people face a substantial amount of taxes from IRAs or can utilize long-term care costs at a substantially lower tax rate.
Blended Families
When it comes to establishing an estate plan, blended families face unique estate planning challenges. Besides potential conflicts, issues exist of passing on assets to make sure that all estate planning goals are met. To protect stepchildren, life insurance is often utilized to compensate the descendants of the person who passed away. This makes sure that all intended beneficiaries receive an inheritance rather than the surviving spouse’s children. Life insurance can be a helpful tool in resolving estate planning challenges, which is why it is often a good idea to consider insurance when circumstances justify it.
Estate Planning Techniques You Should Consider
A growing number of individuals are retiring with large retirement accounts. This means that a substantial amount of taxes must be paid by families and clients. To minimize taxes, it’s possible to utilize an estate substitution technique during which a person acquires a life insurance policy to pay either annual or monthly premiums.
Speak with a Knowledgeable Estate Planning Attorney
Estate planning is a nuanced process, but a skilled estate planning attorney can make sure that your estate plan achieves your goals. Contact Ettinger Law Firm today to schedule a free case evaluation.