There are many strategies that a person may utilize to plan an estate. Along with a last will and testament, many people in Florida and elsewhere are utilizing life insurance policies and even life insurance trusts in order to achieve their estate planning goals. This can allow people to help their heirs avoid paying additional taxes which they may not have to.

Life insurance helps heirs avoid paying the federal estate tax. As the law is currently written, any assets of an estate above $5.25 million are subject to being taxed. However, it is important to properly structure the life insurance policy in order to help heirs avoid taxation. If the life insurance policy is directly paid out to one’s estate, it will be considered as part of one’s estate just like any other assets. Therefore, the benefits paid out by the policy will be subject to the same estate tax rules as any other assets.

On the other hand, by structuring the policy to be paid out directly to beneficiaries, estate taxes and probate may be avoided. Another strategy is to transfer the ownership of one’s policy outside of one’s estate, such as one’s children. However, once ownership is transferred, one will no longer have control over the life insurance policy. Therefore, if the new owner decides to cash in and terminate the policy prior to the insured’s death, the insured person will not be able to do anything about it.

Another strategy that many in Florida and elsewhere have adopted is to transfer ownership of the policy to irrevocable life insurance trusts. This allows the insured to ensure that the policy remains intact as long as the insured is still alive. The trustee chosen for the trust will distribute the insurance benefits upon death. However, no matter what one’s estate planning strategies are, it is important to have a strong understanding of applicable laws and any changes which may be enacted by lawmakers in order to create the most effective estate plan.