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Home >> Estate Planning Articles >> Life Insurance: Understanding its Many Benefits

Life Insurance: Understanding its Many Benefits

October 30, 2015 by Robert Kulas.

Life Insurance: Understanding its Many Benefits

Compliments of Our Law Firm

Written By: The American Academy of Estate Planning Attorneys

Few things in life are more devastating than watching a loved one struggle with a long-term or terminal illness. It can be one of the most helpless feelings ever experienced. While that’s overwhelming enough, there are medical bills and other costs which must be paid. Fortunately, life insurance policies are one option that can ease the financial burdens and eliminate unwanted distractions.

There are several ways life insurance policies can help.

For some, taking a “cash value” loan on their permanent policy (also referred to as whole life, variable life or universal life policies) is an option. Depending on how long you’ve had the policy, you likely have a portion of it that has become liquid, which would allow you to take out a loan. This could be a significant amount of money depending on how long you’ve had the policy. Remember, this is a loan, so there are interest rates, although competitive. In some cases, the loan may not be due until after the policy owner’s death, but instead, would be deducted from the insurance policy payout. Any remaining funds would then be paid to the owner’s beneficiaries.

Another option is taking the “surrender value” of a permanent policy. Instead of taking a loan on the policy, instead many will accept a sum of money, the “surrender value,” and cancel the policy. Again, the amount is determined on how long you have had the policy and other factors. Also, remember that the face value of the policy could be substantially higher than the surrender value.

There are policies with provisions allowing for a portion of the face value to be paid if the insured becomes terminally ill. These provisions are known as “living benefits” or “accelerated death benefits.” This will require a statement from the patient’s physician stating the patient is expected to pass away within a short span, usually 24 months. This may be part of the policy you have and you should speak with your insurance provider. Note, too, these are generally tax-free.

Finally, you may wish to use a life insurance policy as part of a “viatical settlement” option. A policy holder may wish to sell their policy to a third party for a portion of the face value of that policy. This option might have challenges as well and it’s important to understand what those challenges might mean. This is sometimes an option, even for those policies that do not accrue cash value. Be sure to “conduct due diligence,” i.e. research fully and speak with your CPA before making this decision since it could have repercussions for your collective financial situation.

There are an array of challenges associated with terminal illness. For one, the emotional and financial weight of the grief is simply inexplicable. Anything we can do to ease those overwhelming emotions and financial burdens is a good thing. This article helps to bring awareness to some of the available options. The key to planning for the future is always to prepare for the unknown.

Our firm is a member of the American Academy of Estate Planning Attorneys, for more information or to attend an upcoming seminar, please give our office a call.

Kulas & Crawford

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"Everyone treated us extremely well.  Robert explained how a trust works and the benefits of having one.  We decided to move forward and complete the process.  He was very kind and knowledgeable.  Julie was also very helpful and very patient with our questions.  We felt very comfortable with this firm handling our affairs.  We would highly recommend this firm to our friends and family."

Janice M
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Robert Kulas and staff made making a will an easy to understand process. They were very knowledgeable and attentive to my wishes. All my documents were provided in an organized binder which will be a great asset to my family. I would definitely recommend them.

Krissy L.
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I have worked with Mr. Kulas & staff before. And they are very professional. I am very satisfied with Mr. Kulas and his staff and give them the highest satisfaction and 5 star rating.

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Mr. Kulas and his staff have been extremely helpful & knowledgeable for the over 3 years we have been associated. They are easy to talk to and explain everything without feeling rushed. Very competent and professional.

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I have known Robert Kulas for 20 years since I was co-executor for friends who had Mr. Kulas prepare a Trust for them. When I felt I needed a trust also, I came to him. I have always been completed satisfied with his work and that of his charming, competent staff.

Joan C.
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We began our estate plan process in 2004 (12 years ago) and have been pleased with the periodic reviews we have gone through and when changes have been needed the firm has been thorough and professional in making those changes.

L.G.K.
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