While you may have heard of the term life insurance, you may not know exactly what it is or what its significance is in the estate planning process. However, this concept does not have to be as complicated as you may think. To learn more, read on and see how one of the seasoned New York City wills, trusts, & estates attorneys at Zimmet Law Group, P.C. can help you in navigating different life insurance policies.
What are life insurance policies and what is their significance in estate planning?
Put simply, life insurance is a contract between you, as the policyholder, and your insurer. With this contract, your insurer promises to pay a certain amount of money to designated beneficiaries once you have passed on. These can either be lump-sum payments or regular payments, in exchange for the premium payments you made while you were alive.
What are the types of life insurance policies in New York state?
New York state essentially recognizes three main types of life insurance policies. They read as follows:
- Term life policies: these provide a large death benefit for a low premium. As implied, term life insurance is selected for a specific period.
- Whole life policies: these provide a death benefit and investment component, stay in effect as long as premiums are paid, and remain effective for your lifetime. Since these remain in effect for as long as you pay the required premiums, these premiums are usually higher than those of term life policies.
- Variable life policies: these are a kind of whole life insurance that allocates a portion of your premium dollars to an investment account comprised of stocks, bonds, etc. This investment aspect makes them riskier than the other policies.
How can I incorporate life insurance into estate planning?
For one, you can create a life insurance trust. This is used in estate planning to protect insurance proceeds from your taxable estate. That is, this allows your life insurance benefits to pass directly to your beneficiaries once you have passed without estate tax consequences. Notably, life insurance trusts are irrevocable, and changes may not be made once the policy is placed in the trust.
With all of this in mind, you should set up your life insurance policy as soon as you possibly can, for your sake and your beneficiaries’ sakes. If you still have additional questions, do not hesitate in consulting with one of the competent New York City trust attorneys today.
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If you require the services of an effective New York City attorney of estate planning and administration, divorce and family law, real estate, commercial litigation, business law, bankruptcy, or landlord-tenant law, contact Zimmet Law Group, P.C. today to schedule a consultation.