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Life Insurance in New York

Life insurance can be an important part of your estate plan, especially if you have young children or a disabled child. The purpose of life insurance is to provide cash for your heirs if you prematurely die. This is especially helpful if your estate does not have regular income coming in from other assets.

There is a wide variety of life insurance options available, such as term, permanent, whole life and universal. In addition, life insurance in general may not fit well into your estate plans. In putting together an estate plan, you should seek the legal advice of an experienced New York estate planning attorney.

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Let's talk about life insurance and estate planning.

Life insurance is a way to ensure that your loved ones have assets and funds if you pass away. It's a great financial planning tool. But how does it play into estate planning?

For one, life insurance proceeds can provide your estate with some liquidity to pay your estate administration costs. These could include estate taxes, probate fees and liabilities of the estate.

This can be a huge benefit for those whose estates do not have ready and liquid funds to pay off their expenses.

Neil Armstrong Autographed Unique Estate Plan with Life Insurance

Say you're going to take a flight into space, how would you prepare? It probably depends on the risks that you wouldn't make it back.

So imagine you were Neil Armstrong, who was planning on flying into space, landing on the moon, getting out and walking on the moon, then launching off the moon and crash landing into the ocean. There was probably a slight risk of death there. Clearly, Armstrong would have wanted to make an estate plan in the case he did not return.

At the time, the premiums on a life insurance policy that would cover a trip to the moon would have cost a fortune, according to NPR. So Armstrong and the other Apollo astronauts came up with their own life insurance policy.

Introduction to Term Life Insurance Basics

Life insurance can be an important part of estate planning, especially for the parents of young children or a disabled child. The purpose of an insurance policy is to provide cash for the beneficiaries upon the premature death of the policyholder.

For a person that does not receive regular income from investments or other assets, an insurance policy can replace lost earned income. There are even instances where a divorcing couple with children will have to declare their former spouses as beneficiaries in the event of the death of one of the parents. This means that life insurance affects a great number of Americans.

But the question is, how much do we know about this important subject? Luckily, the researchers at FindLaw have put together various resources about life insurance options.

Life Insurance and Estate Taxes

You may not think of life insurance and estate taxes together, but having the right life insurance policy can be the difference in helping your heirs enjoy their inheritance.

Right now, the federal estate tax exemption is set at $5 million. If you give away more than this amount, your estate will be taxed at 35 percent. So if you give away exactly $5 million, your heirs will be faced with a $1.75 million tax bill right off the bat.

Estate Planning Checklist: Documents to Gather

You can ensure that your heirs do not run into problems when your estate is divided by following an estate planning checklist of the documents to gather before the end-of-life.

The Wall Street Journal recently published an article on the 25 estate planning documents to have in order before you die, and the article is interesting as it stresses the 24 other documents you need besides your will.

Most people know about wills and the importance of wills to estate planning. But what most don't realize is that a will is not the end-all, be-all document.

Is Your Life Insurance Subject To Federal Estate Taxes?

Many New York estate planning lawyers will often encourage their clients to maintain enough life insurance when dealing with personal finances, but some people may salso not realize that they can actually collect life insurance without having their proceeds subject to taxes.

Most individuals decide to get life insurance to replace income they could potentially lose in the event they die prematurely. Policy beneficiaries can typically receive life insurance death benefit payments without any federal income taxes and, in most instances, even state income taxes. But can New Yorkers avoid federal estate taxes on their life insurance too?

New Yorkers Encouraged To Review Their Life Insurance Policies

Some New York residents may have a life insurance policy included in their estate plans to set aside money for tax purposes or to protect it from creditors. But The Wall Street Journal reported these variable insurance policies (some of which invested in mutual funds) may be in danger of failing due to a series of adverse effects caused by the upset in the market in 2008.

Let's say an individual has paid $2 million into a policy over a couple of years but has unexpectedly learned he or she will be left with no benefits upon death and could ultimately lose the full cash value of their life insurance. The insurance company would then notify him or her that more money is required to keep the policy alive but that it must be provided within 30 to 60 days, which isn't much time.

Using Online Retirement Calculators As An Aid To Estate Planning

Some estate planning advisors might compare an online retirement calculator to a financial GPS system. Even though it can generally guide you to your destination, a retirement calculator cannot exactly show you the most ideal route to take or the unsafe roads you need to avoid on the way to retirement.

Planners say most calculators provide a broad sense of whether or not a person will be able to restore close to 85 percent of his or her preretirement income. That is how much New Yorkers will likely need depending on the amount of money they have saved and plan to save, according to The New York Times.

Investing In A Stranger's Life Is Not So Definite

Life expectancies are a major factor for companies that invest in a stranger's life insurance. These businesses, such as Life Partners Holdings Inc., arrange to purchase life insurance policies from insured individuals. The company then sells a portion of the policy's interest to investors who can collect the death benefits of the insured person when he or she dies.

Take 84-year-old Marvin Aslett, an Idaho rancher. The Wall Street Journal reported Life Partners Holdings estimated in 2005 that Aslett had around two to four years left to live. Had the Idaho rancher died as the company projected, investors with a $2 million policy on Aslett's life would have gained a significant return. Instead, Marvin Aslett said he remains "as healthy as a horse" and continues to work on his ranch.

Carol Faber Files Lawsuit Against MetLife

A case was brought to the U.S. Court of Appeals in New York concerning whether some insurance providers can profit from investing and maintaining the proceeds of insurance policies distributed under employee-benefit plans. According to Bloomberg, a three-judge appellate panel must decide if New York-based life insurer MetLife owes a fiduciary duty to the recipients of retained asset accounts.

Bloomberg Markets magazine reported MetLife Inc. is one out of many U.S. insurers earning investment income on $28 billion owed to life insurance beneficiaries. Insurance carriers keep the money in so-called retained asset accounts and only pay the recipients when they review the account or write any drafts. Many beneficiaries claim they are entitled to the full amount that insurers make when they invest the retained assets.