Life insurance useful for beneficiaries of Nevada estate planning

With careful planning, residents of Nevada can use life insurance to help their beneficiaries with asset protection and other expenses after their deaths. Proceeds from life insurance should be taken into account during estate planning, as they can be liquid assets if necessary. For example, if a beneficiary is faced with a high estate tax bill and wished to avoid immediately rushing into selling inherited real estate, life insurance proceeds could be used toward an estate tax bill, while avoiding tapping into, say, an inherited IRA and thus being forced to pay income tax on the withdrawal. However, to properly use life insurance in estate planning, there are several common errors to avoid.

When naming a beneficiary, there are two frequent mistakes. The estate should never be named the beneficiary; doing so exposes the proceeds to creditors and estate tax, as it makes the policy part of the estate. It also forces unnecessary additional paperwork on the executor of the will. Secondly, never name only one beneficiary. Having at least two “backup” beneficiaries reduces confusion if the primary beneficiary should happen to predecease the will.

Another common mistake is not having enough insurance. If, for example, a young child is the beneficiary, carrying inadequate life insurance will inevitably mean that there won’t be enough funds to pay for the hundreds of thousands of dollars of likely expenses, such as college tuition. Important to remember, too, is to check a life insurance policy and keep it updated every few years. If the beneficiary named happens to be someone who has since died or become an ex-spouse, the policyholder will want to make sure to change the beneficiary with the insurance company.

Using life insurance in Nevada estate planning can be a wise decision when executed properly. However, the ins and outs can feel overwhelming. This is where an attorney with experience in asset protection can be very helpful. An attorney can make sure that all of the details are in order, that wills and trusts are established and that the policy holder and beneficiaries’ interests are safeguarded.

Source:, “Proper Use of Insurance in Estate Planning“, Nov. 3, 2016

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