People who may be worried about their children paying the remainder of their bills after death should look into life insurance to save their heirs a lot of money, said Margarette Burnette in an article on Insurance.com.
Quoting Marvin Feldman, president and CEO of the Life Foundation, she said people need to start thinking about estate taxes if they're gaining wealth. By purchasing a life insurance policy and designating children as the beneficiaries, the cash they inherit can be used to pay estate taxes and more. This includes money in retirement and bank accounts, the value of a home, cars, artwork, business interests and more.
"Anything you own in your name can be taxable," Feldman said. According to the article, the total value of assets that exceed the federal tax exemption of $5 million is taxed. Heirs probably will not have to worry about federal taxes if the estate is worth less than that. Beyond the exemption, heirs will be taxed at the federal estate tax rate of 34.5 percent of the value of the estate.
The Wealth Pilgrim website notes policyholders need to specifically name who their heirs are and should not be vague, as that could result in a lengthy and expensive probate process. People should also name their living trust, as the policy wouldn't have to be constantly updated.