Taking Care of Business
The average cost
of probate typically ranges from 4 to 5 percent of the gross estate, and probate
can last several months to over a year.¹ With proper estate planning, business
owners can avoid the costly probate process while helping to protect their
family and their business.
Your heirs may inherit more than your estate when you die. Federal estate taxes
can be as high as 47 percent. An estate strategy using life insurance can help
your estate avoid probate and provide cash so heirs can pay estate taxes.
When you own a life insurance policy, the issuing insurance company will pay a
death benefit to your designated beneficiaries upon your death. Your heirs can
use this money to pay ongoing business expenses or to settle estate taxes. It
can also be a source of funds to buy your business and keep it running, or to
pay for expenses associated with selling your business.
Put Trust in Your Estate Plan
An irrevocable life insurance trust can be used to hold a life insurance policy
outside of your estate. Because the policy is owned by the trust, it is not
considered part of your personal estate and is not used to calculate estate
taxes.
Remember, the cost and availability of life insurance will depend on such
factors as age, health, and the type and amount of insurance purchased. As with
most financial decisions, there are expenses associated with the purchase of
life insurance. Policies commonly have mortality and expense charges. And if a
policy is surrendered prematurely, there may be surrender charges and income tax
implications. Before implementing a strategy involving life insurance, it would
be wise to make sure that you are insurable by having the policy approved.
You've worked hard to build your business. With proper estate planning, you can
help protect both your business and your family.
1) 2004
Field Guide, National Underwriter; Nolo.com, 2005
