Definition - What does Estate Planning mean?
Estate planning is the process of preparing a legal structure for the disposition of current and future assets upon the incapacitation or death of an individual. The estate plan can cover wills written to beneficiaries, family trusts, bequests of assets to heirs, estate tax implications to beneficiaries, and the power of attorney. In terms of life insurance, the estate plan involves protecting the estate and beneficiaries of your estate from the costs, fees, transfer charges, taxes, and other legal expenses incurred upon the death of the policyholder.
Insuranceopedia explains Estate Planning
Life insurance is purchased to provide liquidity and financial support to cover all expenses associated with the process of distributing the estate. When an individual dies before the property is transferred, the law provides a window for relatives and other third parties to contest the will. Referred to as probate, this procedure can incur a variety of legal fees. The estate also incurs an estate tax to be settled before a transfer. Therefore, proceeds from a life insurance policy may be used to cover all these expenses while protecting the value of the estate. Life Insurance also provides for estate equalization to ensure the family wealth is divided equally to the heirs.