Any Ozark fans out there? Remember the scene in Season 1 when Marty Bryde had to move from Chicago to the Ozarks in a week and demanded his assets in cash from the bank… and the bank was less than pleased? The banker told him that it needed at least 24 hours to get that amount of cash ready for him to withdraw. Marty, being the smart guy that he is, advised the bank that it needed to give him his cash, otherwise the bank could get in trouble for not having their assets allocated properly (I’m summarizing here - Marty was much more eloquent).

Many people underestimate the importance of having funds immediately available in an uncomplicated way. Often the passing of a loved one or family member comes with a string of expenses that can quickly exceed expectations, not to mention the mental toll of grief. Much of what Americans have as assets resides in investments like 401ks, IRAs, housing, and other illiquid assets with very little cash on hand. Most of us aren't Marty Byrde with a bunch of cash sitting in the bank.

Life insurance proceeds protect families from having to force the sale of these assets at unfavorable tax rates. Some inheritable assets come with immediate payment requirements. Properties that aren’t fully paid off, cars, and the like, however, can leave families with short-term liabilities requiring cash.

There are numerous other benefits to owning a life insurance policy aside from providing a large sum of money to beneficiaries:

• Life insurance provides immediate cash upon death that can pay debts, final income taxes of the insured, and funeral expenses.
• Life insurance cash can also pay estate taxes (if applicable) and avoid the forced sale of assets.
• Mostly, the proceeds from life insurance will pass to the named beneficiary free of income tax.
• Life insurance proceeds can transfer to a trust as part of a will the insured created for the benefit of minor children, special needs, or elderly relatives.
• The proceeds of a life insurance policy can be payable to someone other than the insured’s estate and avoid passing through probate when owned by an irrevocable insurance trust. For example, the funds can pay marital settlement obligations for spousal or child support.
• If the insured person owns a closely-held business, a life insurance policy can fund a buy out of their interest.
• Properly filled-out  beneficiary designation forms of a life insurance policy can prevent proceeds from going through probate.

How might this work out in real life? Glad you asked!

For example -  if you own a business and one adult child wants to take over the business after you pass away, the other adult children may not be interested in keeping it. The life insurance proceeds can provide the cash to buy out those other children’s business interests while leaving the business intact. Blended family systems can also benefit from life insurance payouts to ensure that all children receive an inheritance, not just the children of the last surviving spouse.

Life insurance should be a part of your family estate plan. It can increase the wealth your heirs inherit and provide a ready source of cash for immediate financial obligations after your death. Which form of life insurance best suits your needs will depend on your age, family and assets.  While Marty Byrde was able to get his bank to hand over all his cash in a lump sum - we aren't characters on a Netflix show, and will have to deal with real-world realities that often involve needing an influx of cash after the death of family member.

If you'd like to know more about how life insurance can be a part of your estate plan, schedule a call for a free consultation today!