Where will your life insurance end up?

Where will your life insurance end up?,insurance.


The purpose of life insurance is to provide cash in case of your death for a person or for some purpose. Therefore, it is surprising how many people fail to make plans to fulfill their purpose. There are a few tricks and traps to be aware of…

life insurance
life insurance

More and more of us are turning to life insurance to provide for our loved ones in case we die unexpectedly or face a debilitating condition.

Life insurance provides cash payments in the event of your death. If you are permanently disabled or suffering from any critical illness, the policy may also provide for payouts. Payments may be used to support your spouse and children, pay off debts, or fulfill certain other estate planning purposes, such as meeting tax obligations, providing cash to a beneficiary in exchange for other assets, Or giving money to charity.

You can either put your life insurance through an individual policy or through your super fund.

However, it is surprising how many of us have not properly considered the consequences of our life insurance. You need to take the time to consider who will receive income from your policy, and how to reduce taxes and other claims on cash.

There are several traps to be aware of and plan for in order to ensure that your dependents are properly cared for.

Who will receive income from your policy?

If you take out life insurance, an important consideration is who will receive the income. There are some traps, which can mean the difference between money going directly to your family or being used to pay off outstanding debts and obligations.

Keeping the policy in your name:

If you are the owner of the policy, the proceeds will go to your estate and will be settled under your will. Accordingly, you must specify who will receive those income in your will. If your will is silent on this issue, the proceeds will become part of your 'residual assets' and the rest of your beneficiaries will be paid.

If you have outstanding debts or other claims against you at the time of your death, your estate assets (including policy proceeds) can be used to pay off these debts and obligations, which could mean that your dependents are exempt. Went.

In addition, a person who is not adequately provided for in your will can challenge your will, and potentially take a larger portion of the insurance proceeds than you intended.

Naming a beneficiary to receive income:

If instead you name a beneficiary under the policy, the proceeds will not be paid to your estate. Instead they will bypass your estate and go directly to the designated beneficiary. For example, if your spouse has a lifetime policy with you, the proceeds will be paid directly to your spouse after your death.

If the income goes directly to the beneficiary, the beneficiary will receive the lump sum income at that time. If the beneficiary has unsatisfied debts or liabilities, the proceeds can be used to meet those claims. In addition, if the beneficiary is a child, they will be entitled to the full amount of those incomes at age 18, which may be too early for them to handle the money properly.

There is no right or wrong way to deal with a life insurance policy. You have to take into account your individual circumstances and then structure your affairs accordingly.

If you are unsure how your life insurance arrangement may affect your estate planning and would like some advice, call Andreev Lawyers on 1300 654 590.

Consider Using a 'Testamentary Trust' in Your Will

If you are going to use the proceeds from life insurance to pay for your assets, you should consider including a testamentary trust within your will to ensure that your objectives for life insurance are met. has gone. A testamentary trust will:

Make sure the income is passed on to your intended beneficiaries, whenever you direct. For example, you may wish for income to be paid out to youth beneficiaries over time;

Provide capital gains and income tax benefits to your beneficiaries, especially if the beneficiaries are under the age of 18; And

Provide a significant level of protection for assets in case a beneficiary becomes insolvent or divorced.

Andreev lawyers can talk to you about including testamentary trust provisions in your will.

Super . insurance through

If you hold a life insurance policy through your super fund, you need to consider several additional issues.

First, your options regarding the person receiving the income are more restricted if the policy is placed outside the super and the tax considerations are more complex.

You are restricted to nominating either your estate or a person who qualifies as a 'dependent' for retirement law purposes to receive super income.

If your nomination is not a valid binding nomination, the Trustee of the Super Fund has the right to cancel your nomination to ensure that your benefits are distributed fairly.A are.

Also, if the life policy is held through Super then there may be an additional layer of tax on the payment to the beneficiary. This would be the case if the beneficiary is not a 'dependent' for purposes of tax law, (which is a slightly different definition than for purposes of retirement law).

Make sure your life insurance is aligned to your estate plan - and give your family the protection you intend to.

source:advisedlifeinsurance.com.au only information purpos.

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