Estate Equalization

Definition - What does Estate Equalization mean?

Estate equalization involves striking a balance in the distribution of assets or an estate such that each heir receives an equitable inheritance that has both financial and emotional value. Purchasing life insurance can be a way to ensure effective estate equalization so that all beneficiaries receive shares in the estate in nearly equal amounts.

Insuranceopedia explains Estate Equalization

Estate equalization using life insurance is ideal for business owners who are trying to pass down their wealth equally to their children. For instance, a challenge presents itself when one or more of the recipients, has contributed more towards the building of that wealth compared to other siblings. Other times, a beneficiary might not be interested in taking part in the running of the family business or having a stake in the estate.

A life insurance policy is purchased to ensure that the estate is distributed equally while ensuring each member of the family is treated fairly. The members of the family with an interest in the estate get to inherit the family business, while the other members are bequeathed an equivalent value to the estate from the life insurance policy.

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