The importance of life insurance

Life insurance is an essential estate planning tool.

Cover estate taxes upon your death

Paying taxes is inevitable upon death so life insurance can be useful to pay them without requiring the liquidation of assets. Buy a life insurance policy where the proceeds are payable to the estate to cover the taxes on the deemed disposition of your assets. Important fact: any life insurance product paid to a beneficiary is not taxable.

Donate your policy to a charitable organization during your lifetime

You can also donate your life insurance policy to a charitable organization. As the donor, you pay the premiums and the organization is the beneficiary. If you donate your policy to a charitable organization during your lifetime, you'll be entitled to a tax credit in the amount of the premiums and the benefit payable upon death. The tax credit can be declared on the deceased's income tax return the year of death or, if needed, the preceding year.

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