While you may have heard about life insurance, and may even have a policy, you may not know exactly how it ties into your estate planning. However, this concept is more straightforward than you may think. Read on to learn the different types of life insurance policies and how a seasoned Nassau County estate planning lawyer at Barrows Levy PLLC can help you through the overall process.
What are life insurance policies?
Put simply, a life insurance policy is a contract between you (i.e., the policyholder) and your insurance company.
How are life insurance policies tied to my estate plan?
Once you have passed on, your insurance company will refer back to your life insurance policy to distribute certain amounts of money to your assigned beneficiaries. These payments can either be lump-sum payments or regular payments. Essentially, this is seen as an exchange for the premium payments you made while you were alive. Commonly, these are referred to as death benefits.
How do I include life insurance into my estate plan?
Notably, you can create a life insurance trust. This trust is an important tool used in the estate planning process because it essentially protects your insurance proceeds from your taxable estate. In other words, your life insurance benefits will pass directly to your designated beneficiaries without estate tax consequences. It is worth mentioning that these trusts are irrevocable, meaning that changes cannot be made once your policy is placed in the trust.
What are the types of life insurance policies in New York state?
Generally, there are three main types of life insurance policies that are seen in New York state, and they read as follows:
- Term life policy: this policy provides a large death benefit for a low premium. Implied by the name, term life insurance is selected for only a specific period.
- Whole life policy: this policy provides a death benefit along with an investment component. It will stay in effect as long as premiums are paid and remain effective for your lifetime, so long as you pay the required premiums. Because of this, these premiums are usually higher than those of a term life policy.
- Variable life policies: this policy is a type of whole life policy that allocates a portion of your premium dollars to an investment account comprised of stocks, bonds, etc. Of note, this investment aspect makes them riskier than the other policies.
If you are still unsure as to which life insurance policy to elect, do not hesitate in talking with one of our competent attorneys today.
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If you need a Nassau County lawyer who has significant experience handling family and estate planning matters, contact Barrows Levy PLLC to schedule a consultation with one of our experienced attorneys today.