When people think about estate planning, life insurance is often an afterthought. Many assume these plans only cover funeral costs or replace income for a short period of time.
In reality, life insurance can be one of the most practical tools in a Wisconsin estate plan. But how much life insurance belongs in an estate plan?
The right amount of life insurance is not about hitting a specific number. This is about making sure your plan works when your family needs it most.
Why Life Insurance Is Important
Life insurance provides something that many estates lack: immediate access to cash. While your estate may include valuable assets, those assets are not always easy to convert into money. A home, business, or retirement account can take time to sell or distribute.
On the other hand, life insurance proceeds are paid directly to named beneficiaries. In most cases, they directly avoid probate. That means your loved ones can receive funds right away.
What Life Insurance Can Accomplish
Life insurance can support your estate plan in several meaningful ways. This can include:
Provide Financial Stability
For families who rely on one or both incomes, life insurance can help a surviving spouse maintain financial stability while adjusting to a new reality.
Cover Final and Ongoing Expenses
From funeral costs to outstanding medical bills, insurance proceeds can prevent loved ones from having to dip into savings or sell assets under pressure.
Care for Children or Dependents
Life insurance can help make sure children are supported or that a dependent with special needs has resources set aside for long-term care.
Create Flexibility in the Estate
Cash from life insurance can give your executor or trustee the flexibility to manage the estate without rushing important decisions.
How Much Is Enough?
There is no one-size-fits-all answer. Your estate plan needs to look at the full picture, including:
- Your income and how long it would need to be replaced
- Outstanding debts and financial responsibilities
- The ages and needs of your children or dependents
- The value and liquidity of your other assets
- Whether your spouse could comfortably manage financially on their own
The goal is to align your coverage with your family’s actual needs. You want to avoid over-insuring or leaving gaps that could create problems down the road.
Reviewing Beneficiaries Is Not Optional
Life changes. Marriages, divorces, births, and deaths all affect how an estate plan should function. Life insurance beneficiary designations will override a will in Wisconsin. That means outdated designations can undo the most thoughtful planning.
You need regular reviews. That can make sure your policy reflects your current intentions and works in harmony with the rest of your estate plan.
What Is the Difference Between Term and Permanent Life Insurance?
Both term and permanent life insurance are useful, but they are used in different ways. Term coverage addresses temporary needs, such as income replacement during working years.
On the other hand, permanent life insurance may be used for long-term planning, estate liquidity, or legacy goals.
Choosing between them or using a combination depends on your age, financial picture, and estate planning objectives.
Consult an Estate Planning Attorney
Life insurance is a powerful tool, but it works best when it fits seamlessly into your overall estate plan. An experienced Wisconsin estate planning lawyer can review your assets, debts, and goals. They help make sure your coverage aligns with your wills, trusts, and other planning documents.
Along with that, these professionals can help you avoid unintended gaps, clarify beneficiary designations, and make sure your plan protects your loved ones exactly as you intend.
This step provides peace of mind knowing that all the pieces of your estate plan work together.
Life Insurance Is One Part of the Estate Planning Puzzle
But how much life insurance belongs in an estate plan? There is no set answer. However, the right amount of life insurance can provide peace of mind during a difficult time.
At Collins Law Firm, we can make sure your life insurance protects your family’s future, along with those other tools in your estate plan. Schedule a consultation today to learn more about your estate plan options.