Even when an estate wouldn’t owe any federal estate taxes, life insurance can play a useful role in your overall financial and estate plan.

Let’s take a closer look at some of the advantages of considering life insurance as part of your financial plan.

Liquidity

A life-insurance death benefit can help assure your loved ones have money readily available when they need it most to pay final expenses such as:

• Funeral costs
• Capital gains taxes
• Income taxes

That liquidity also eases settling the estate among the beneficiaries.

Estate Equalization

Estates can be made up of various assets, some of which are harder to divide than others—business interests and real estate, for example.

Imagine an estate where the largest asset is a business, with one child actively involved and the other not active. Leaving the business to the child involved in the company may be practical, but it may leave the other child in an unequal position.

A life insurance policy can provide the funds to allow all an estate’s heirs to receive a more equal portion.

Equality for Blended Families

Using life insurance to equalize inheritance can help prevent discord between blended-family members when a loved one passes away.

For example, children from a prior marriage can receive proceeds from a life insurance policy instead of relying on a surviving stepparent to distribute an inheritance.

Legacy Protection

Should you need to spend down more of your assets during your lifetime than originally planned, life insurance can provide your heirs with an inheritance. Payouts often aren’t subject to taxation, which boosts their benefit. (Be sure to consult with a tax professional about specific tax implications for your state and policy choice.)