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A Wall Street Journal article focuses on the use of life insurance policies to help with the cost of long term care. With the aging of baby boomers, many states are looking to this resource to cover the rising costs of elder care.
Many people forgo long term care policies since they feel they may be buying something they may never use. And often you hear someone say that they no longer need life insurance since they are empty nesters or are widowed. Now there is another reason to maintain life insurance coverage into your older years. Doing so may give you the option of electing a Life Settlement enabling you to receive funds to help pay for your care either at home or in a facility.
States Ease Use of Life Policies for Elder Care | The Wall Street Journal
When choosing a life insurance beneficiary, it is important to think about the purpose of your life insurance. Here are some questions to guide you:
As you think about your answers, make a list of potential beneficiaries. These might include one, two, or more people. These commonly are family members, such as spouses and children, but may include others as well. Keep in mind that listing family members directly as beneficiaries may make your insurance liable to incur estate tax. Also, when you name your spouse as primary and your children as secondary, you may inadvertently exclude a grandchild originating from a deceased child. Consider naming your children as per stirpes beneficiaries, or by representation, instead.
You may also want to consider making a trust the beneficiary of your life insurance policy. This will exempt the funds from certain estate tax considerations, and you can specify through a will that these funds will not be used to pay off creditors.
A favorite charity may also be named as a beneficiary.
Finally, you may name your estate as beneficiary. This however, may make your estate subject to additional estate taxes. It could also complicate your probate process resulting in increased legal fees.
While you are still alive, these decisions may be changed at your discretion. It is always a good idea to review your policy and beneficiary designations once a year. BCS is not providing tax or legal advice. To discover what is best for you, please contact your tax advisor.