When people think about estate planning, they often focus on wills and trusts. But life insurance estate planning can play a powerful supporting role—especially when your goal is to protect loved ones and provide long-term financial security. At the Law Offices of David Knecht, we help California families create estate plans that reflect their unique goals, and life insurance is an option to consider in that process. Estate planning is not a one size fits all, which is why individualized help from an experienced attorney is important.
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Provides a tax-free cash benefit
One of the biggest advantages of life insurance is that the death benefit is typically not taxable income to your beneficiaries. This means your loved ones can receive the full payout without worrying about income tax. According to the IRS, life insurance proceeds paid by reason of the insured person’s death are generally not taxable. -
Helps equalize inheritances
If you plan to leave a specific asset—like a family business or real estate—to one child, you can use life insurance to balance things out for your other heirs. This strategy helps avoid conflict and ensures fairness, especially when dividing assets of unequal value. -
Funds a trust for your children
Life insurance can be directed into a trust that provides long-term support for children or dependents with special needs. You can control how and when the money is distributed, helping you protect your loved ones’ futures. MarketWatch explains how a life insurance trust for children can provide peace of mind and control in their article, “Should You Get a Life Insurance Trust for Your Kids?”. -
Covers estate taxes
While most California estates aren’t subject to state-level estate tax, larger estates may face federal estate taxes. A life insurance policy can help your heirs cover those costs without needing to sell property or liquidate other investments. -
Protects families—not just the wealthy
Even if you don’t have a multimillion-dollar estate, life insurance can still be crucial. If you have anyone who relies on your income or care—such as a spouse, minor children, or aging parents—life insurance offers critical financial protection. -
Can be placed in a life insurance trust (ILIT)
An irrevocable life insurance trust (ILIT) removes the policy from your taxable estate and gives you more control over how proceeds are used. This can be especially helpful in high-net-worth estates or when you want to manage payouts over time. For more detail, see:
Life insurance estate planning gives you flexibility, protection, and peace of mind—whether you’re balancing inheritances, managing taxes, or providing for children.
Need Help? Contact the Law Offices of David Knecht
If you’re ready to create or update your estate plan, we can help you evaluate whether life insurance is a smart addition to your overall plan. Call us at (707) 451-4502 or visit www.davidknechtlaw.com to schedule a consultation.
