Life Insurance Awareness Month And Estate Planning

By Andrew Bosshard, Estate Planning Attorney

September is Life Insurance Awareness Month, making it the perfect time to review how life insurance fits into your estate planning goals. While life insurance is often viewed only as a way to provide financial protection after death, it also plays a powerful role in shaping an effective estate plan. Whether you are building wealth, providing for your family, or planning your legacy, understanding the connection between life insurance and estate planning ensures your loved ones are protected and your wishes are carried out.

Why Life Insurance Matters In Estate Planning

Life insurance provides a tax-free lump sum to your beneficiaries upon your death. For many families, this payout is the cornerstone of financial stability during a difficult time. But beyond immediate support, life insurance also offers strategic advantages in estate planning:

• Income replacement: Provides ongoing financial support for dependents.
• Debt repayment: Ensures mortgages, loans, or medical bills are covered.
• Estate liquidity: Supplies cash to cover estate taxes, legal fees, or final expenses.
• Equalization among heirs: Balances inheritances when assets such as a family business or real estate cannot easily be divided.
• Charitable giving: Allows you to support nonprofits while preserving other assets for family.

Types Of Life Insurance To Consider

Not all life insurance policies serve the same purpose. The right choice depends on your goals and overall estate plan.

• Term life insurance: Offers coverage for a set number of years, often used for income replacement while children are growing.
• Whole life insurance: Provides permanent coverage with a cash value component that grows over time.
• Universal life insurance: Combines flexible premiums with lifetime coverage.
• Second-to-die policies: Pay out after both spouses pass away, often used for covering estate taxes.

A thoughtful estate plan often blends different policy types to cover both short-term needs and long-term legacy goals.

Tax Benefits And Estate Considerations

One major advantage of life insurance is that the death benefit is generally income tax-free for your beneficiaries. However, life insurance proceeds may still be included in your taxable estate if you own the policy at your death.

To minimize tax exposure, many high-net-worth individuals use tools such as:

• Irrevocable life insurance trusts (ILITs): Transfer ownership of the policy to a trust, keeping proceeds outside of your estate.
• Charitable designations: Directing proceeds to qualified charities for tax efficiency and legacy purposes.

Reviewing these strategies with an attorney ensures you maximize the financial benefits for your heirs.

How Life Insurance Supports Your Broader Estate Plan

Life insurance should not be considered in isolation. Instead, it works best as part of a comprehensive estate plan that may include:

• A will or trust to direct how assets are distributed
• Powers of attorney for financial and healthcare decisions
• Beneficiary designations aligned across accounts and policies
• Planning for guardianship of minor children
• Business succession planning if you own a company

Coordinating these elements reduces conflict among heirs and ensures your wishes are clearly carried out.

Why September Is The Right Time To Act

Life Insurance Awareness Month is a reminder that planning ahead is critical. Many families delay purchasing or updating life insurance, often underestimating how much coverage they need. Reviewing your policy each fall helps you confirm that your estate plan reflects current needs such as:

• A new child or grandchild
• Marriage, divorce, or remarriage
• Buying or selling a home
• Starting or selling a business
• Health changes or retirement planning

If your circumstances have changed, now is the time to update your life insurance and estate plan together.

Protecting Your Family And Legacy

By combining life insurance with tools like trusts and updated wills, you can protect your family, minimize taxes, and leave a lasting legacy.

At Bosshard Parke, we help individuals and families across La Crosse, Sparta, and western Wisconsin create estate plans tailored to their needs. If you’re ready to review your estate plan or explore how life insurance fits into your legacy, contact us today for a confidential consultation.

Disclaimer: This blog post is for informational purposes only and does not constitute legal or tax advice. For personalized guidance, please consult an attorney or tax professional at Bosshard Parke.