Life Insurance And Estate Planning

Fundamentals and Objectives of Estate Planning 

Broadly speaking, estate planning involves the creation and conservation of an estate as well as its final dissolution. Thus, all insurance planning is part of estate planning since it is concerned with the conservation of assets and income-earning ability. Inadequate health insurance or even property or liability insurance can nullify an otherwise good life insurance program. In normal usage, however, the term estate planning is used to identify the process of preparing for the disposition of an estate in a manner that will accomplish the owner’s wishes with a minimum shrinkage of estate assets. The owner’s objectives, however, should be placed above tax avoidance incentives. Estate planning is more than tax planning, even though it was the advent of federal estate and income taxes which stimulated the increased interest in estate planning. 

The size of the estate and the nature of its assets determine to a large extent the solution to estate problems. For example, the amount of liquid assets and the amount of borrowed funds determine the need for liquidity in the estate plan. However, estate planning is not always more important in larger estates; in fact, the reverse may be true because a smaller estate has a smaller margin for error. A single mistake in planning may be disastrous.