Georgia residents might wonder how life insurance policies can be used in estate planning. Life insurance policies can do more than pay funeral expenses or provide for dependents after an individual’s death. They can also provide a tax-free lump sum for taking care of other expenses.
Among very wealthy individuals, life insurance policies can be used to pay estate taxes instead of dipping into income. This is the reason that General Electric paid hundreds of thousands dollars in life insurance premiums for a policy worth $22 million for their CEO. An irrevocable life insurance trust owns most policies in these types of instances, and this is why they are not treated as being part of the decedent’s estate.
Since Georgia is not one of the states that has an estate tax, residents can take advantage of the federal estate tax exemption, which currently stands at $5.43 million. There are a number of other ways to potentially avoid or reduce estate tax including gifts and trusts.
Whether individuals are very wealthy and need to take advantage of tax exemptions or have more modest assets, most individuals who are planning their estates want to pass their assets on to their loved ones while spending the least amount of money on administration, probate fees and other expenses. An attorney may be able to guide individuals according to their circumstances toward the best strategies. For example, wills may be the best options for some individuals while other families may benefit from trusts. While many people think of trusts in association with wealth, trusts can be good choices for many different income levels. People should also not neglect making plans for their end-of-life care or in case of becoming incapacitated.