subject: Life Insurance Provisions [print this page] Life Insurance Provisions
INTEGRATING LIFE INSURANCE WITH THE PROVISIONS OF YOUR WILL
The following checklist is designed to call to your attention a variety of areas involving life insurance where consideration should be given to the management of these matters in close correlation with your Will.
(1)As previously pointed out, arrangements with respectto whether or not insurance proceeds will qualify for the marital deductionmust be integrated with similar arrangementswith respect to other property as provided in the Will.
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(2)If there is life insurance in connection with a businessbuy-and-sell agreement or a plan for stock redemption, it isessential to see to it that the Will contains coordinated provisions authorizing the executor, or the executor and the trustees, or the trustees alone to carry on the business, or tocontinue to hold the stock or business interests as estate ortrust investments. If this is not desired, a specific directionmay be required to liquidate the business interests. If thebusiness is of such a nature that a specific direction to liquidate is necessary, and that is what is desired, the specificdirection should be included in unequivocal terms.
(3)Provisions for the payment of life insurance proceedsto children as contingent beneficiaries must be coordinatedwith provisions in the Will for the trusteeship, guardianship,or other arrangements for the payment of income and principal for the accounts of the children during their minority.
(4)Where life insurance is to be included in the estateassets subject to the marital deduction, and where contingentbeneficiaries are named in the life insurance policy, you mustbe sure that the beneficiary clause of the policy containsappropriate language giving the spouse the power to withdrawthe proceeds or appoint to her estate. Otherwise, the spousemay have only a "terminable interest" which will not besufficient to qualify for the marital deduction.
(5)Beneficiary arrangement of mortgage cancellation insurance should be set up so your wife is given a free choice ofmaintaining the mortgage or of paying it off with the lifeinsurance proceeds.
(6)Remember that the arrangement and value of an insurance estate may depend on what your Will says about thepayment of estate taxes. Be sure that you make provision forthe payment of taxes either out of the residuary estate or byapportionment against the other items of the estate, if that iswhat you desire. Be specific on this point, since your residuarybeneficiary may be the one in whom you are most interested.If you are a widower, and your residuary beneficiary is Columbia University, you may not be as concerned as if yourresiduary beneficiary is your beloved wife of many years.
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