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The Role of Insurance in Estate Planning

Insurance is the forgotten side of estate planning. So many focus on the investment side of estate planning and financial planning that they ignore the huge role that insurance can and should play. From my chair, I believe that both life and long term care insurance are vital to a complete estate plan.

Life insurance is relatively obvious why it is so important to estate planning. For one, it is generally one of the largest assets that you will leave to your beneficiaries and second, it is the single biggest security net for minor children. Also, for high wealth and asset individuals, it is a great tool for covering your estate tax bill. It also transfers income tax free, can be used to fund a trust, and avoids probate. It is essential. There are multiple types of life insurance, so everyone should talk to their adviser and attorney to see what is best for them.

The other type of insurance that is often forgotten is long term care insurance. For all intents and purposes, long term care insurance pays for either home health care or nursing home care once you meet certain criteria. I find it to be an invaluable tool in Medicaid access and asset protection planning. When someone has long term care coverage, it makes five year look back period moot because you will be covered for nursing home care while you wait for the five years to run. Do I think that it removes the need for Medicaid planning? Absolutely not. What I do believe is that it is a fantastic tool that makes your Medicaid Asset Protection plan rock solid, protecting you from the high cost of nursing home care and protecting your assets for your family.

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