The popularity of life insurance for estate planning purposes is increasing among America’s senior citizens. Here are some ways it can be used in estate planning according to an article by InsuranceNewsNet.com.

• Life insurance can help reduce the impact of the huge estate tax your estate may incur.  For instance, if a 70-year old man’s heirs are facing a $2 million estate tax bill for his property, he can take out a policy with a $2 million death benefit. Assuming the insured is in good health, such a policy would cost about $54,000 annually. If he lives for 15 years, his total premium paid amounts to $810,000. In exchange, the heirs get the full $2 million death benefit to cover the estate tax.

• You can utilize life insurance to efficiently transfer wealth to heirs or charitable institutions by creating an irrevocable life insurance trust or a wealth replacement trust.
• Life insurance policies can be useful if you do not want to purchase private, stand-alone long-term care insurance because it is too expensive – especially if it comes with optional death benefits. Under this set-up you would pay for the cost of his or her long-term care. A life insurance trust guarantees proceeds of large amounts to pass tax free to beneficiaries even if you spend down your assets to pay for skilled services.
• Life insurance can provide for your children from previous marriages. In this approach you would name your children from a former spouse as the life insurance beneficiary while your current family would get your other assets.