Why Would You Want Someone Else To Be The Owner Of Your Life Insurance Policy?
Young people often buy life insurance policies with modest payout amounts. Uttering the words, “I don’t want to be worth more dead than I am alive” is often the first symptom of a mid-life crisis. For people who have yet to receive friendly greetings by mail from the AARP, life insurance policies are tied to strong emotions. In some cases, the motivation to buy a life insurance policy is love. You want to provide for your young children no matter what happens, even if you die an untimely death. Meanwhile, carrying life insurance often means harboring resentment if the court has ordered you to secure an alimony obligation by maintaining a life insurance policy with your ex-spouse as the beneficiary. The thought that your ex will continue to collect money from you whether you live or die is not a comforting one. The older you get, though, the more you get used to the idea of your own mortality, and the more you realize that fantasies about depriving a family member of your money are a waste of time. Once you reach a certain age, it is not possible to buy new life insurance policies at all, and it is obvious that your descendants can have more fun with your money than you can. If you currently own a life insurance policy, or if you are still young enough to buy one, a Tampa estate planning lawyer can help you make the best decisions about it.
You Can’t Be the Beneficiary of Your Own Life Insurance Policy, but It Is Also Possible Not to Be the Owner
No matter how young you are, it is not possible to be the beneficiary of your own life insurance policy. The beneficiary is the person who gets the money after you die; most people choose their spouse or children as beneficiaries of their life insurance policies. A more meaningful choice is whether the policyholder should be you or someone else. If you are the policyholder, the payout amount counts toward the value of your estate. If someone else, such as the beneficiary or another relative, is the policyholder, then the value of your estate does not include the amount of the life insurance payout?
Why does this matter? If your estate is already worth several million dollars, then the life insurance payout could push its value so high that it would be subject to federal estate taxes. That sounds like high class worries for most of us, but probate is more time consuming and there is more room for the heirs to grumble if the personal representative must pay estate taxes. A more likely scenario is that you have a life insurance policy because you don’t have much money for your family to inherit. If the value of your estate is less than $75,000, your estate qualifies for summary administration instead of full probate, but if it is greater than $75,000, it must go through full probate proceedings. A life insurance policy can easily make an otherwise modest estate ineligible for summary administration.
Contact David Toback With Questions About Estate Planning When You Have Nothing to Give Except Love
A Central Florida estate planning lawyer can help you qualify for summary administration if you own very few assets. Contact David Toback in Tampa, Florida to set up a consultation.
Source:
annuityexpertadvice.com/life-insurance-policy-owner-beneficiary/
