• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Sinclair Prosser Gasior

Annapolis Estate Planning Attorneys

  • Facebook
  • LinkedIn
  • Twitter
  • YouTube

Call Now: (410) 573-4818

Attend a Free Workshop Trustee School

  • Home
  • About Our Firm
    • About Our Firm
    • Founding Attorneys
    • Meet Our Team
  • Services
    • Annapolis, MD Asset Protection and Business Planning
    • Estate and Gift Tax Figures
    • Annapolis, MD Elder Law & Medicaid Services
    • Annapolis, MD Trust Administration & Probate
    • Family-Owned Businesses & Farms
    • Annapolis, MD Incapacity Planning
    • Annapolis, MD LGBTQ Estate Planning
    • Annapolis, MD Pet Planning
    • SECURE Act
    • Annapolis, MD Special Needs Planning
    • Estate Planning for Young Families
  • Resources
    • DocuBank
    • Elder Law Reports
    • Estate Planning Definitions
    • Free Estate Planning Worksheet
    • Frequently Asked Questions
      • Asset Protection Planning
      • Estate Planning
      • Frequently Asked Questions for Families Without an Estate Plan
      • Legacy Wealth Planning
      • LGBTQ Estate Planning
      • Medicaid
      • Power of Attorney
      • Probate Avoidance
      • Trust Administration & Probate
      • Wills
    • Is Your Estate Plan Outdated?
    • Probate Resources
    • Reports
      • Advanced Estate Planning
      • Basic Estate Planning
      • Trust Administration
      • Estate Planning for Niches
    • Top 10 Estate Planning Techniques
    • Newsletters
  • COMMUNITIES WE SERVE
    • Anne Arundel County
      • Annapolis
      • Crownsville
      • Davidsonville
      • Highland Beach
      • Millersville
    • Baltimore County
    • Calvert County
      • Dunkirk
      • Huntingtown
      • Owings
    • Charles County
      • Charlotte Hall
      • Waldorf
    • District of Columbia
    • Howard County
    • Maryland
      • Clarksville
      • Columbia
      • Ellicott City
    • Prince George County
      • Bowie
      • Fort Washington
      • Glenn Dale
    • Queen Anne’s County
      • Grasonville
      • Queenstown
      • Stevensville
    • St. Mary’s County
      • Charlotte Hall
      • Leonardtown
  • Reviews
    • Our Reviews
    • Review Us
  • BLOG
  • Contact Us
  • Make A Payment
  • Client Portal
Home / Estate Administration / The Importance of Using LIfe Insurance in an Estate Plan

The Importance of Using LIfe Insurance in an Estate Plan

November 25, 2013 by Sinclair Prosser Gasior

Colleen Sinclair Prosser, Attorney

Life insurance is a unique asset.  Because of its tax-favored benefits, it can be used to solve some of life’s perplexing financial problems.  Most people regard life insurance as a “protective” asset, and it is indeed one of the very best assets to protect against potential losses.  But life insurance is also a major planning asset to develop and implement your financial and estate plan.

When someone passes away, there are expenses such as funeral costs, accounting fees, mortgage payments, insurance, maintenance of real estate, attorney fees, appraisal fees, etc.  Federal estate taxes are due and payable nine months after death.  In some states, probate costs can be as great as five percent of your assets. If there is little or no cash in the estate it will be challenging for the family, executor or trustee to determine how to pay the expenses.  Often a family member will pay for the expenses out of their own funds; but there is a risk of being reimbursed if the estate is insolvent. 

Many will consider liquidating assets such as stock or real estate.  If it a slow market there is a risk of selling at a discount to get the cash in a hurry. The better alternative is using life insurance to pay these expenses, while leaving illiquid assets that oftentimes carry sentimental value untouched and available to be distributed to the estate owner’s heirs.

Borrowing to pay estate expenses can also be challenging.  It may be difficult to obtain a loan due to today’s stringent lending policies.  Plus, the estate will pay interest on the funds borrowed. 

In the same light, pulling funds from an IRA or 401(k) is not a good idea.  Qualified accounts have income tax issues that have to be addressed if the funds are used to pay estate expenses.  Most likely the beneficiary of the account is not the estate therefore the executor will not have direct access to the funds.  And, when you pull money from a qualified account you have to pay income tax on the amount drawn.

As you can see, life insurance has many uses.  Talk with a qualified estate planning attorney to determine if you should consider using life insurance as part of creating a comprehensive estate plan.

  • Author
  • Recent Posts
Sinclair Prosser Gasior
Sinclair Prosser Gasior
Our firm is dedicated to providing you with quality estate planning resources, so you can become familiar with all of the existing options. When you visit or call our office, we want you to feel comfortable discussing such an important issue concerning both you and your family. We want to arm you with the information you need to make an informed decision about your family’s future.
Sinclair Prosser Gasior
Latest posts by Sinclair Prosser Gasior (see all)
  • How Often Should I Meet with an Estate Planning Attorney? - January 18, 2018
  • Tax Law Changes for 2018 - December 29, 2017
  • Dedicated Gardeners & Creative Spaces in Annapolis, MD - May 30, 2017

Filed Under: Estate Administration, Estate Planning, Estate Tax, Funeral Planning, Individual Retirement Accounts (IRAs), Life Insurance, Probate, Taxes Tagged With: Asset Protection, Estate Taxes, Executor, Inheritance Planning

Other Articles You May Find Useful

Comparing the Roles of Trustees and Personal Representatives
Sorting Household Stuff: A Guide for Personal Representatives
Administering Estates During a Pandemic
How Trust Administration Works Better Than Probate
Final Income Tax Return
Sinclair Prosser Gasior
Filing Taxes for the Deceased

Primary Sidebar

Download our free estate planning worksheet

There's a lot that goes into setting up a comprehensive estate plan, but with our FREE worksheet, you'll be one step closer to getting yourself and your family on the path to a secure and happy future.
  • This field is for validation purposes and should be left unchanged.

Follow Us

  • Facebook
  • LinkedIn
  • Twitter
  • YouTube

Testimonials

5 Stars
Client Review
September 3, 2020
    

We initiated estate planning following a presentation by Sinclair Prosser Attorney Jon Gasior. We were so impressed, we contracted with them to complete our estate planning. Subsequently, we assembled information on our assets and Sinclair Prosser Gasior did the rest. Correspondence was communicated to our financial institutions and the estate was established. We were very pleased with the courteous manner of the Sinclair Prosser Gasior staff. However, it was their professionalism that made us satisfied we chose this firm to handle our estate. We have nothing but praise for Sinclair Prosser Gasior .

default image
– Walter K.

Blog Subscription

Sign up for our blog to receive all of our latest estate planning news and updates!
  • This field is for validation purposes and should be left unchanged.

ANNAPOLIS

900 Bestgate Road
Suite 103, Annapolis, Maryland 21401
Phone: (410) 573-4818
Fax: (410) 573-2802

BOWIE

4201 Mitchellville Road
Suite 403, Bowie, MD 20716
Phone: (301) 970-8080
Fax: (410) 573-2802

MILLERSVILLE

1520 Jabez Run Rd
Suite 300, Millersville, Maryland 21108
Phone: (410) 573-4818
Fax: (410) 573-2802

WALDORF

Hamilton Centre II
3261 Old Washington Road, Suite 2020 Waldorf, MD 20602
Phone: 800-366-4615

Map

map for office

Footer

footer logo
  • Facebook
  • LinkedIn
  • Twitter
  • YouTube

The information on this Maryland Attorneys & Lawyers / Law Firm website is for general information purposes only. Nothing on this or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. This information on this website is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.

© 2023 American Academy of Estate Planning Attorneys| Privacy Policy | Contact Us | Disclaimer | Site Map