Importance of Life Insurance in Nevada Estate Planning

The Importance of Life Insurance in Nevada Estate Planning www.wealth-counselors.com 1

THE IMPORTANCE OF LIFE INSURANCE IN NEVADA

ESTATE PLANNING “An appropriate plan allows you to remain in control of your

finances, including how they are distributed, while sparing your loved ones from the frustration and expense of

managing your affairs after your death.”

BRADLEY B. ANDERSON RENO NEVADA ESTATE PLANNING ATTORNEY

http://www.wealth-counselors.com/services/estate-planning-services/


Creating a comprehensive estate plan is one of the most important things you

can do to protect the future of your loved ones. An appropriate plan allows you

to remain in control of your finances, including how they are distributed, while

sparing your loved ones from the frustration and expense of managing your

affairs after your death.

An estate plan can include any number of tools for managing and protecting your

assets, including life insurance policies. In fact, the importance of life insurance

in estate planning should never be overlooked.


WHY IS LIFE INSURANCE NECESSARY?

There are benefits to having life insurance policies besides merely providing large

sums of money to your

beneficiaries upon your death.

For example, life insurance

policies can provide immediate

cash to pay your funeral

expenses and remaining debts,

which takes a huge weight off

your family. Life insurance

proceeds can also provide

funds to pay estate taxes,

thereby avoiding a forced sale

of assets.

AVOIDING TAXES AND

PROBATE

Another huge benefit is that life

insurance proceeds are

distributed to the named

beneficiary tax-free. The proceeds can also be transferred to a trust for the

benefit of a minor child, for example. This makes an insurance policy a relatively

low-cost source of funds for creating a trust.

Also, life insurance proceeds are distributed to the named beneficiary without

having to first pass through probate.


CREATE AN IRREVOCABLE LIFE INSURANCE TRUST

A very popular and useful estate planning strategy that involves insurance

policies, is to create what is known as an irrevocable life insurance trust. Doing

so, will avoid federal estate taxes on the proceeds paid by the policy upon your

death. These tax benefits are usually very significant. So, it is important that

your trust is created properly, in order to ensure it operates the way it needs to.

HOW AN IRREVOCABLE LIFE INSURANCE TRUST WORKS

An irrevocable life insurance trust can be established one of two ways: either the

owner of the policy transfers it to the irrevocable trust, or the trustee purchases

the policy. The trust is set up with sufficient funds to pay the premiums on the


policy, if it is not paid in full upon purchase. There are two conditions. First, the

insured must survive for three years after the policy is transferred to the trust, in

order to avoid being included in the estate.

Another condition is that the insured must have no “incidents of ownership” in

the policy. For example, any right to change a beneficiary or modify the terms of

the trust, will result in the insurance proceeds being included in the insured's

estate.


WHAT TYPE OF INSURANCE SHOULD BE PURCHASED?

The type of life insurance policy you choose, whether it be whole life or term, will

depend on your age and your current situation at the time the policy is

purchased.

If you have an existing policy that you intend to transfer to the irrevocable trust,

you must notify your insurance company of the change in ownership. This will

likely be considered a gift and, depending on the amount, may require a gift tax

return to be filed. If you purchase a new policy, all of the documentation must

reflect that the trust owns the policy, and you have no interest in the proceeds.


ARE THERE OTHER OPTIONS?

If you are not comfortable with the often

strict requirements of an irrevocable

trust, a revocable trust is still a good

alternative. Although the estate tax

benefits will likely be lost, there are still

many other benefits that make it worth

the effort. For instance, trusts are

typically established to care for minor

children, the disabled or elderly, or

anyone else who may rely on the insured

for support.

If you have questions regarding life

insurance, or any other estate planning

needs, please contact Anderson, Dorn &

Rader, Ltd., either online or by calling us at (775) 823-9455.

http://www.wealth-counselors.com/contact-us/


About the Author

Bradley B. Anderson

Prior to founding his own firm in 1995, Mr. Anderson served as a

senior counsel for two major financial institutions and witnessed

the often devastating effects of ineffective estate planning with

many customers of those institutions. When he eventually decided

to venture out on his own, this experience led him to focus

exclusively on estate planning, providing his clients with a full

range of basic and advanced planning options.

Mr. Anderson began his professional life as a teacher of mentally-challenged, visually impaired

students. After four years as a special education teacher, Mr. Anderson returned to school to

obtain his law degree and begin a second career. Upon finishing law school, he went to work

for a civil litigation firm, spending five years handling litigation, probate and wills work. He

then moved on to Wells Fargo Credit Corporation where he served as senior counsel. In 1990

he accepted a position with the First Interstate Bank Legal Division, where he had

responsibility for several divisions, including the Trust Department. In 1995, he began his own

practice as Bradley B Anderson, Attorney at Law. The firm has continued to grow into the

premier estate planning law firm we see today.

Anderson, Dorn& Rader, Ltd. Legacy and Wealth Planning Attorneys

500 Damonte Ranch Parkway Suite 860 Reno, NV 89521

Phone: (775) 823-9455 Fax: (775) 823-9456



http://www.wealth-counselors.com/

Importance of Life Insurance in Nevada Estate Planning

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