Why is Life Insurance Important in Estate Planning?

When preparing an estate plan (Will, Trust, etc.), life insurance becomes a central component of that planning in many instances. This holds true in various scenarios. For individuals or families with somewhat modest assets, life insurance could provide the necessary resources to fully fund a trust that is being set up for young (or not so young) children. Especially for those with limited savings, this can be a key part of their estate plan. For some “high net worth” individuals or families, life insurance may be used to provide liquid cash to help pay estate taxes that would due upon their death. In any case, life insurance alone does not constitute a thorough estate plan. However, it very often does, when paired with estate planning tools such as a Will or Trust, become an integral part of that plan.