Many of our readers have a life insurance policy in place. These policies are designed to cover certain expenses upon death and can provide dependants with a source of income that would have typically come from the policy holder. Some people identify these policies as an estate planning tool utilized by those who may not have the financial resources to cover certain expenses that can be accrued when someone passes away. However, life insurance policies are reportedly becoming more popular with extremely wealthy people as an estate planning tool for limiting tax implications.
For example, an unknown California billionaire recently purchased the most valuable life insurance policy ever. The policy is said to be worth a staggering $201 million and many people have wondered why someone who apparently has such a robust estate already would not only buy a life insurance policy, but would purchase the most valuable policy that has ever been recorded.
Protecting assets and enormous taxes are certainly some of the reasons that an already-wealthy person would also have a life insurance policy. There are some payments that need to be made upon a person’s death, including some loan payments and the significant death taxes for Californians. A life insurance policy could be used to pay these expenses and limit the financial risk that could be assumed by beneficiaries.
Planning for how your assets will be handled upon death can be a very complicated issue for people across California. There is no one way to do it, as every person has different priorities, circumstances and financial needs to consider. Because of this, there is also a wide variety of solutions that may be appropriate for you, even if they are not right for someone else.
It can be very helpful to discuss your estate planning goals with an experienced attorney. By exploring the numerous options and weighing the benefits and drawbacks of each one, people can develop an estate plan that meets their needs and protects the interests of any beneficiaries.
Source: Forbes, “Mystery Billionaire Buys Record-Breaking $201 Million Life Insurance Policy,” Natalie Robehmed, March 14, 2014