If you are concerned that your children’s inheritance is being reduced by the collapse of the housing and investment markets, rising medical costs, a sluggish economy and a longer-than-expected lifetime, you needn’t be. According to a recent study, family values, traditions and history still mean more than money as an inheritance.
 
These results are from the 2012 Allianz Life American Legacies Pulse Study* which surveyed baby boomers (age 47 to 66) and “elders” (age 72 and older). Allianz Life conducted a similar study in 2005. Interestingly, despite the financial crises that occurred between 2005 and 2012, the results were strikingly similar, with a high percentage of both boomers (86%) and elders (74%) agreeing that family stories, values and life lessons are the most important part of a family’s legacy.
 
In addition, in both studies, only four percent of boomers said that an inheritance is “owed” to them. By contrast, the number of elders who felt an inheritance is owed to their children dropped from 22% in 2005 to 14% in 2012; this may be a result of their concern about having to use more of their savings for living expenses, compounded by loss of savings from lower market values.
 
While the size of the financial inheritance is not seen as important, planning is. A high percentage of both groups (82-84%) emphasized having instructions in place in the event a parent were to become terminally ill or permanently unconscious. Both have strong desires to avoid family conflicts when it comes to estate planning and legacy issues. Younger people also believe that keeping family possessions is important.
 
Elders also want to impress upon their children the importance of personal responsibility. About three-fourths of elders surveyed have obtained some professional assistance with estate planning and have initiated discussions with their children about end-of-life and inheritance issues. By contrast, only about a quarter of the boomers have planned their estates and less than half have had discussions with their own children about these issues. That may be partly due to boomers being less frugal in general than their parents, or that they simply feel they have plenty of time left to plan.
 
Wondering how to ensure your family values, traditions and history are passed on to future generations? Here are some ideas to help you get started.

• Encourage elders to tell stories about their family and their own lives and experiences. Family gatherings when multiple generations are present are perfect, but one-on-one conversations work well, too. Videotape as much as possible to capture not only words, but also the storyteller’s personality and mannerisms. No need to have a formal interview; just put the camera on and let it roll. Don’t tape too long at a time, though; the storyteller could tire easily. If you don’t have video, assign someone to take notes and share the stories with other family members.
• Scrapbooking and photo albums are great ways to document family history by themes and occasions. Just be sure photos are identified with names, dates and places.
• Write your memoirs or autobiography, family history, or a collection of essays about your relatives or what life was like when you were growing up.
• Write letters to your children or young grandchildren about life lessons you would like them to learn from you.
• Share your faith and/or testimony with family members in person or in writing.
• Create a family medical history. Include date and location of births and deaths, cause of death, burial location, marriages and children, notable illnesses and medical conditions.
• Make an inventory of special family heirlooms and possessions. Take a photo of each and document its story. If you want a certain person to receive a certain item, include that in your estate plan. Better yet, if you can bear to part with it, go ahead and give it to that person now.
• Use the internet to share family history and traditions with other members of your family. Create a family website. Post stories or videos of your elder storytellers and old family photos. Document family reunions, marriages, births and passings.

Note: If you store information on your computer or online, be sure to provide access for someone else in the event something happens to you. Include specific information about where files or accounts are located and passwords that might be needed to access them.
 
Most importantly, talk with your parents or children about end-of-life issues (incapacity and health care directives, location of important financial documents, estate planning) and what is important to them and to you. Do this now, before illness or aging interfere and prevent you from having these discussions.
 
* 2012 Allianz Life American Legacies Pulse Study, sponsored by Allianz Life Insurance Co. of North American, surveyed 1,000 “boomers” (age 44-67) and 1,007 “elders” (age 72+). The online survey was conducted January 12-19, 2012. For more information about the survey, go to https://www.allianzlife.com/about/news_and_events/news_releases.aspx?articleID=106

Source: EstatePlanning.com

From time to time, it’s good to review why having a complete, up-to-date estate plan is so important. In addition to confirming our own actions, it can provide us with valuable information to pass along to friends and family who, for whatever reasons, have yet to act. So, here are five common estate planning mistakes to avoid.

1. Not having a plan. Every state has laws for distributing the property of someone who dies without an estate plan—but not very many people would be pleased with the results. State laws vary, but generally they leave a percentage of the deceased’s assets to family members. (Non-family members, like an unmarried partner, will not receive any assets.) It is common for the surviving spouse and children to each receive a share, which often means the surviving spouse will not have enough money to live on. If the children are minors, the court will control their inheritances until they reach legal age (usually 18), at which time they will receive the full amount. (Most parents prefer their children inherit later, when they are more mature.)

2. Not naming a guardian for minor children. A guardian for minor children can only be named through a will. If the parents have not done this, and both die before the children reach legal age, the court will have to name someone to raise them without knowing whom the parents would have chosen.

3. Relying on joint ownership. Many older people add an adult child to the title of their assets (especially their home), often to avoid probate. But this can create all kinds of problems. When you add a co-owner, you lose control. Jointly-owned assets are now exposed to the co-owner’s creditors, divorce proceedings and possible misuse of the assets, and the co-owner must agree to all business transactions. There could be gift and/or income tax issues. And if you have more than one child but only name one to be co-owner with you, fluctuating values could cause your children to receive unbalanced/unintended inheritances.

4. Not planning for incapacity. If someone cannot conduct business due to mental or physical incapacity, only a court appointee can sign for this person—even if a valid will exists. (A will only goes into effect after death.) The court usually stays involved until the person recovers or dies and the court, not the family, will control how their assets are used to provide for their care. The process is public and can become expensive, embarrassing, time consuming and difficult to end.

Giving someone power of attorney as a way to avoid the court process can be risky because that person can do anything they want with your assets with no real restrictions. For this reason, a living trust is often preferred for incapacity planning. With a trust, the person(s) you choose to act for you can do so without court interference, yet they are held to a higher standard as a trustee; if they misuse their power, they can be held accountable.

Someone also needs to be given the power to make health care decisions for you (including life and death decisions) if you are unable to make them for yourself. Without a designated health care agent, you could be kept alive by artificial means for an indefinite period of time. (Remember Terri Schiavo? Terri’s story and information about the Terri Schiavo Foundation can be found at http://www.terrisfight.org/, ) The exorbitant costs of long term care, most of which are not covered by health insurance or Medicare, must also be part of incapacity planning. Consider long term care insurance to protect your assets.

5. Not keeping your plan up to date. Every estate plan is based on the personal, family and financial situations, and tax laws, in effect at the time it was created. All of these will change over time, and your plan needs to change with them. It’s a good idea to review your plan every couple of years or so and make sure it still does what you want it to do. Your attorney will let you know when a tax law change might affect your plan, but you need to let your attorney know about other changes that could affect it.


If you need help with your estate planning, please contact our office. We will be happy to help you create the plan you desire or update the one you already have.

Here are four more common mistakes in estate planning. If your plan is in place and current, this will serve as more validation that you are on the right track. Feel free to share this information with friends and family members, especially those who may not have a plan in place.

1. Not having a coordinated estate plan. It can be difficult to coordinate multiple beneficiary designations and titles so that your beneficiaries inherit the way you want. For example, while the benefit payable from a life insurance policy generally remains the same, real estate and investment values can fluctuate greatly. This makes it quite possible that one beneficiary will receive more and another will receive less than you intended. Keeping beneficiary designations and titles balanced while you are living is a challenge; impossible if you should become ill or incapacitated. Also, if a beneficiary dies, you may want to control who ultimately receives that share of your estate instead of it letting the beneficiary choose who will receive it.

One easy way to coordinate all assets into one coordinated plan is to make a trust the owner and beneficiary of as many assets as possible, then put the distribution instructions in the trust document. This ensures that each beneficiary will receive the correct proportionate amount of the estate, regardless of the value of an individual asset. To add a beneficiary or change a beneficiary’s inheritance, only the instructions in the trust document need to be updated; this is a much simpler process than having to change multiple titles and beneficiary designations. The trust can also include your instructions for what happens to a beneficiary’s share upon his/her death, preventing the inheritance from falling into the hands of someone you might not approve of.

2. Not funding a trust. A trust can only control the assets that are placed into it. The document may be written well and have excellent instructions, but until it is funded (by changing titles and beneficiary designations), it doesn’t control anything.

3. Not titling newly acquired assets in the trust’s name. It is not unusual for people to transfer existing assets to their trust but then forget to add new ones. It bears repeating: a trust can only control the assets that are placed into it. Any assets purchased or accounts established after the initial funding is complete must also be titled in the name of the trust so they can be part of your complete, coordinated plan.

4. Not using a qualified attorney. Estate planning is not something that should be attempted with a kit or online program. A simple mistake or omission can have far reaching effects that only come to light after you are gone. A local, experienced estate planning attorney understands the terms and legal requirements in your state. Most have counseled many families and have seen the results of proper and improper planning. An experienced attorney can guide and assist you in making smart decisions about your estate planning, including who should be the guardian of minor children; how to provide for a child or elderly parent with special needs; how to provide for children fairly (which may not be equally); and how to protect an inheritance from creditors and irresponsible spending.

If you need help with your estate planning, please contact our office. We will be happy to help you create the plan you desire or update the one you already have.

IRAs are among the largest assets inherited by heirs and beneficiaries. These accounts have been able to grow to such large amounts because income taxes are deferred until the owner begins to take distributions, usually after reaching age 70 ½.

Those who inherit an IRA must be very careful to follow the rules, which are complicated and often confusing. It is possible to keep an account growing tax-deferred for decades, but an innocent error can cause the recipient to lose the tax-deferred advantage and force her to pay tax now on the entire account balance. As a result, it is critical to talk with an expert before making any decision or taking any action, and to understand all available options. Here are some to consider.

Cash Out Option

Anyone who inherits an IRA can cash it out and withdraw the full amount. But because income taxes must be paid on the full amount at one time, this is not usually the best choice.

Spouse Options

A surviving spouse who inherits an IRA from his/her spouse can roll it into a new IRA or merge it with his/her own IRA. In either case, the account can continue to grow tax-deferred and the surviving spouse can continue to make contributions until he/she must start taking required distributions (after age 70 ½).

If it is rolled into a new IRA, the surviving spouse will name new beneficiaries. It is highly advantageous to name someone who is much younger (e.g., children and/or grandchildren) because after the surviving spouse’s death, distributions will be based on the beneficiary’s actual life expectancy. This will allow the account to continue to grow tax-deferred for decades. Under IRS rules, this rollover and stretch out can be done even if the original owner spouse had started taking required minimum distributions before he/she died.

Non-Spouse Options

If the original owner died before beginning to receive required distributions, a non-spouse beneficiary can establish a Beneficiary IRA and start taking annual distributions based on his/her own life expectancy, with the option to take a lump sum at any time. (This is called the “life expectancy option.”) This must be done by the end of the year following the original owner’s death. If the first distribution is not taken by then, all of the IRA must be withdrawn by December 31 of the fifth year after the owner’s death. (This is called the “five year rule.”)

If the original owner died after beginning to receive required distributions, a non-spouse beneficiary must take a distribution equal to the owner’s required minimum distribution for the year he/she died if one had not been taken. For subsequent years, distributions can be based on either the new owner’s life expectancy or the original owner’s remaining life expectancy (whichever is longer).

The original owner’s name must be listed on the title, but the inheriting beneficiary will name new beneficiary(ies). A non-spouse beneficiary cannot roll an inherited IRA into his/her own IRA or make contributions to an inherited IRA, as a spouse can. But when distributions are stretched out over a longer period of time, the tax payments are also stretched out. And by keeping more money in the IRA for as long as possible, the tax-deferred growth can be maximized…which will result in a much larger balance.

A Free Estate Planning Webinar for American Families and Businesses

Friday, Nov. 16, 2012  •  2:00-3:00 p.m., ET

Speaker: Peter G. Lennington, Esq.
 
A once-in-a-lifetime opportunity exists through year end.  Are you prepared to capture this opportunity?
 
This webcast will help you gain a deeper understanding of why you need to immediately leverage certain wealth transfer strategies that will not likely be available in the future. 
 
The current estate planning and tax laws have created a number of opportunities for you to transfer significant amounts of wealth before the end of 2012.
 
Low interest rates and depressed asset values will increase over time, and exemption amounts and tax rates may not be as favorable in the future as they are between now and the end of 2012. 

There has been a lot of media coverage about the Bush tax cuts that are set to expire on December 31, 2012 and whether they will be extended for all taxpayers or if they will be discontinued for top earners. But not nearly as much has been said about the current estate and gift tax rates that are also due to expire on December 31.
 
What we have for the next few months is, indeed, an historic opportunity in estate planning, one we have never had before and likely will never see again.
 
You may remember that, at the end of 2010, Congress put in place a two-year estate tax provision, probably with the assumption that two years would give it time to do something more permanent. In this provision was a huge gift that no one had been expecting: a $5 million gift and estate tax exemption, the highest it has ever been. It was indexed for inflation for 2012, making it even higher—$5.12 million—but for this year only.
 
Not nearly enough people have taken advantage of this. Some think it doesn’t apply to them because their net estate is less than $5.12 million, and others think they can’t use it because they don’t plan to die in 2012. But they are mistaken, and are likely missing the chance of a lifetime when it comes to estate planning.
 
Here’s why 2012 is such an incredible year for estate planning:

• This is a combined gift and estate tax exemption, so you don’t have to die in 2012 to use it. You can use it to make gifts in 2012 and still exclude up to $5.12 million from estate taxes when you die, regardless of the amount of the estate tax exemption at that time.
   
• This exemption is per person, so a married couple can give twice this amount, or up to $10.24 million.
   
• Under current tax law, the $5.12 million exemption we have in 2012 will decrease to just $1 million on January 1, 2013. In addition, the top tax rate will increase from 35% in 2012 to 55% in 2013. This means that if your estate is over $1 million and you don’t plan now, more of your estate will go to pay estate taxes if you die in 2013 or later, leaving less for your loved ones.
   
• The generation-skipping transfer (GST) tax exemption is another reason to plan this year. This tax applies when you transfer assets (by gift or inheritance) to a grandchild, great-grandchild or other person more than 37.5 years younger than you. It is equal to the highest federal estate tax rate in effect at the time and is in addition to the federal estate tax. In 2012 the exemption for the GST tax is also $5.12 million ($10.24 million for married couples) and the tax rate is 35%. Next year, the exemption will be about $1.4 million and the top tax rate will be 55%. Planning now lets you leave considerably more to grandchildren and future generations without paying this tax—or gift or estate taxes.
   
• Current law also has income tax rates increasing in 2013.
   
• In 2012, we have options that estate planners have come to rely upon as “standards.” For example, currently you can make gifts using life insurance, various trusts, family limited partnerships and others—often using discounted values that make your exemption go even further--and still keep control. But these may soon be history as lawmakers search for more ways to generate revenue and close perceived loopholes.
   
• Lastly, interest rates are at historic lows and thus there has never been a better time to do intra-family loans and other interest-rate-sensitive planning.

In short, 2012 is a very favorable time for estate planning. In 2013, the laws are not nearly as favorable.
 
Of course, Congress could change the laws before January 1, but we only have to look at recent history to see how likely that may be. Starting in 2001, Congress increased the amount exempt from estate and gift taxes, from $675,000 in 2001 to $3.5 million in 2009. The intent was to give Congress time to reform these tax laws. A “stick” to motivate them was included: if Congress did not act, there would be no estate tax in 2010. Congress did not act in time, so in 2010, for one year, there was no estate tax. As a result, there were some very wealthy people who died that year (including George Steinbrenner, owner of the New York Yankees) whose estates paid no estate tax.
 
Keep in mind that even if Congress does change the law, we have no idea what the new law will look like. And it’s best to plan based on what we know—not on what we think might happen.
 
Those who have sizeable resources, and their families, stand to benefit the most from the $5.12 million exemptions. But, remember, those with net estates of more than $1 million can also benefit.
 
This once in a lifetime opportunity is about to expire. You don’t want to miss it. 

Source: EstatePlanning.com.

For the rest of 2012, every American can transfer up to $5.12 million free of federal gift, estate, and generation-skipping transfer tax. In the estate planning community this is a big deal, and estate planners are doing everything they can to motivate you to act before year end so you can take advantage of this unprecedented opportunity.
 
To understand why it is such a big deal, we only have to look at recent history. From 1987 through 2001, the federal estate tax exemption—the amount of assets an individual can leave to others without having to pay estate taxes—increased from $600,000 to just $675,000. Then the Bush tax cuts went into effect, and the exemption increased from $1 million in 2002 to $3.5 million in 2009. When Congress failed to change the law, the estate tax was repealed in 2010, so there was no estate tax on estates of those who died that year.
 
Then, at the end of 2010, just before the exemption was scheduled to revert to $1 million in 2011, Congress and the President reached an unexpected agreement. The result: a $5 million exemption for 2011 and 2012 only that applies not just to estate taxes but also to lifetime gifts and the generation-skipping transfer tax. This is important because even under the original Bush tax cuts, when the highest estate tax exemption was $3.5 million, lifetime gifts were limited to $1 million. (The amount for 2012 was adjusted for inflation, so that is how we came to have a $5.12 million exemption.)
 
Now, here’s what this means to you—and why it really is important for you to plan this year.
 

• This law was only for 2011 and 2012. If Congress does not act to change the current law by the end of this year, the gift, estate and generation-skipping tax exemptions in 2013 will be just $1 million.
•  very American has a $5.12 million exemption in 2012, so a married couple can transfer up to $10.24 million out of their estates.
• You do not have to die in 2012 to use this exemption. You can use it to make gifts now, while you are living.
• You do not have to make the transfers in cash or liquid assets or completely give away your assets. You can transfer illiquid assets like your business, or your home or other real estate, to a trust. If you transfer your home, you can continue to live there and take the tax deductions. If you transfer your business, you can do it in a way so that you can keep control and receive the income. Future appreciation of these assets will not be subject to estate tax, and current depressed values will result in favorable valuations.
• You don’t have to use the full $5.12 million exemption to benefit. Those with $1 million to $5 million in assets can save substantial amounts. And those with less than $1 million should consider some planning to prevent future tax liability.
• There are proven estate planning techniques available now (discounting, family limited partnerships, grantor trusts, etc.) that may soon be eliminated as Congress looks for more ways to raise revenues. Coupled with the $5.12 million exemption and historic low interest rates, families can transfer significant assets at little or no tax.

 
No one knows what will happen with the law in the future, but it is likely that the gift taxexemption will fall significantly, probably to $1 million. This is true even if the estate taxexemption stays the same or falls to a lesser number, like $3.5 million.
 
Bottom line, this really is a unique estate planning opportunity to transfer substantial assets tax-free, and it will very likely be gone on January 1, 2013. You owe it to yourself and your family to meet with your estate planning attorney as soon as possible to find out how much youcan save by planning before the end of the year.

Source: www.estateplanning.com.

If you have a minor child, you need to name someone to raise your child (a guardian) in the event that both parents should die before your child becomes an adult.  While the likelihood of that actually happening is slim, the consequences of not naming a guardian are great.
 
If you don’t name a guardian, a judge (a stranger who does not know you, your child, or your relatives) will decide who will raise your child without knowing whom you would have preferred.  You can’t assume the judge will automatically appoint your mother or sister to raise your children; anyone can ask to be considered and the judge will select the person he/she deems most appropriate.
 
If you have named a guardian in your will, the judge will still need to appoint the guardian, but will usually go along with your choice.  If you are divorced, the judge will usually name the other parent, but will appreciate knowing if you have any concerns about his or her parenting capabilities.
 
Choosing a Guardian
The person you name as guardian does not have to be a relative, so consider all of your options. You may, in fact, be very close with another family with whom your child is already comfortable, and you may agree to be guardian for each other’s kids if something happens to either of you.
 
As you begin to list and evaluate your candidates, consider the following:

• Parenting style, values, and religious beliefs should be similar to your own.  If your candidates have children, observe how they are raising and disciplining them.  If they don’t have children, find out all you can about how they were raised; people tend to parent how they were parented.
• How far away from you do they live?  Would your child have to move far away from a familiar school, friends, and neighborhood at an emotionally difficult time?
• How comfortable with them is your child now?
• How prepared emotionally are your candidates to take on this added responsibility?  Someone who is single may resent having to care for someone else’s children.  Someone with a houseful of their own kids may not want more around or they may welcome the addition.
• Do they have the time and energy?  Your parents may have the time, but consider if they would have the energy to keep up with a toddler or teenager.  Someone who works long hours may not seem the ideal candidate at first, but they may be willing to change their priorities if needed.
• If your candidates have children of their own, would your child fit in or feel lost?
• Consider the age of your child and of your candidates.  An older guardian may become ill or even die before your child is grown.  A younger guardian, especially an adult sibling, may be concentrating on finishing college or starting a career.  If your child is older and more mature, he or she should have some input into your decision.
• Is your selection willing to serve?  Ask.  Don’t assume they will take the job if it comes to them.

The Financial Side
Raising your child should not be a financial burden for the person you select as guardian and a candidate’s lack of finances should not be the deciding factor in your decision.  You will need to provide enough money (from your own assets, from life insurance, or both) to provide for your child the way you want.  You may even want to help the guardian buy a larger car or add onto their existing home, if needed.
 
Consider naming someone else to handle the finances.  Naming one person to raise the children and handle the money can make things simpler, because the guardian would not have to ask someone else for money.  The best person to raise your child may not be the best person to handle the money and it may be tempting for them to use this money for their own purposes.
 
Many parents set up a trust for the child’s inheritance (so the child will not inherit everything at age 18) and name someone other than the guardian to be the trustee of the trust.  There can be disagreements over expenses (for example, whether the child should go to public or private school), so be sure to name two people who can work together for the best interests of your child.
 
Provide a Letter of Instruction
Consider writing a letter to the guardian explaining your expectations and hopes for your child’s upbringing.  Include your desires about your child’s education, activities, and religious training.  Read and update your letter every year as your child grows and interests develop.  You may also want to discuss these with your selected guardian.
 
Having a Hard Time Making a Decision?
If you are having trouble making a decision, list the pros and cons for each candidate.  If you and your child’s other parent are having trouble coming to a mutual agreement, try making your own separate lists of top candidates and look for some common ground. Be sure to name at least one alternate in case your first choice becomes unable to serve.
 
Keep in mind that the person you select as guardian will probably not raise your child.  The odds are that at least one parent will survive until your child is grown.  You are simply being a good parent here and planning ahead for an unlikely, but possible, situation.  Next, realize that no one but you will be the perfect parent for your child, so you are probably going to have to make some compromises in some areas.  Also, you can change your mind.  In fact, you should review and change the guardian as your child grows and if the guardian’s situation changes.
 
Don’t wait too long.  Remember, if you do not name someone to raise your child and the unlikely does happen, a total stranger will decide who will raise your child without your input. 

Source: www.estateplanning.com.

You probably already know that life insurance can provide for your children, your spouse, a sibling, aging parents and others if you should die while they are depending on you to support them. Life insurance proceeds can provide extra income to help pay ongoing household bills and child care; pay off a mortgage, credit cards and other debts; pay for your children’s college; and pay your funeral costs and other final expenses, among other things.
 
A simple way to determine how much life insurance you need is to take the amount of income you want to replace and multiply it by the number of years you want to replace it. Keep in mind that there will be no personal expenses for you—food, clothing, travel, insurance and even taxes on your income—if you are no longer here. So instead of using the amount you earn, use the amount you actually contribute to your household. If the person to be insured is a stay-at-home parent and does not earn an income, figure out how much will be needed to pay someone to take over those responsibilities.
 
Now, how long will you want to replace this income? You probably want to provide for your family until your children are grown and out of college. You may want your spouse to have enough to last until he/she can collect on social security and other retirement benefits. Let’s say, then, you are 40 and you want life insurance that will provide for your family for 25 years. Take the amount of annual income you want to replace and multiply that by 25. That’s how much life insurance you want. This amount is called the “face value” or “death benefit.”
 
This may be a pretty big number. So, now the issue becomes how much life insurance you can afford and that will depend, in part, on the kind of life insurance you purchase. Basically, there are two kinds: term and permanent. (Permanent can include sub-categories like whole life, universal life and variable universal life, but for now we will keep to a basic explanation of term and permanent.)
 
Term life insurance covers you for a set number of years, or term. It is pure insurance, and is similar to the insurance you have on your car or home. It can be a good choice if you want coverage for a certain number of years, for example until your kids are out of college or your mortgage is paid off. It is also less expensive than permanent insurance, and is least expensive when you are young and healthy. For these reasons, term life insurance is a popular choice for young families.
 
Permanent life insurance, on the other hand, does not expire at the end of a specified term (assuming you continue to pay the premiums, of course). Generally, the coverage stays in effect during your lifetime and the premium, depending upon the type of policy, can either stay the same or fluctuate based upon the financial performance of the policy. Permanent policies also build cash value over time that can be borrowed from the policy (reducing the proceeds paid at your death), can be used to help pay the premiums, or can be refunded to you if you cancel the policy.
 
The amount you pay for life insurance must be an expense you can live with. Buying life insurance to provide for your family for 20 or 25 years may be out of the question, even with term insurance. A viable alternative is to cover five to seven years of expenses, which will give your family time to adjust and cope with your absence. If you can afford more, there will always be a need, like paying for college and paying off the mortgage.
 
Life insurance proceeds are exempt from income taxes and can be exempt from probate. Depending on how much insurance you decide you need, a life insurance trust can keep the proceeds from being subject to estate taxes. Life insurance can also be used in business succession planning (in the event of your disability, retirement, and/or death) and in estate planning. An experienced and qualified professional can help you determine the correct uses and amounts of life insurance for your personal and financial circumstances. 

Source: www.estateplanning.com.