Life insurance is a popular tool that is often used in planning a person's estate. This also applies of course to the estate planning regarding a married couple and their children. Traditionally, in Texas and elsewhere, the purchase of life insurance was designed to pay taxes at death.
For a married couple, the estate tax exemption can now be parlayed into an equivalent of over $10 million in exemptions before a federal estate tax must be paid. With federal estate taxes largely off the table for most estates, other estate planning uses have come to the forefront. One obvious use is to pay for the immediate expenses of death, such as burial and funeral expenses, along with administrative fees and state tax assessments.
The funds obtained from a large term policy, for example, can constitute a great value to the family of the testator by replacing the enormous sums needed to fund long-term care expenses incurred in the testator's last years or months. The proceeds can also be used to fund a living or testamentary trust. This assists in planning for the care and education of a minor or special needs child.
Another popular use of insurance in Texas may be to fund a charitable bequest at death. The gift may be provided for in the testator's will and the estate's representative will pay the charity the specified amount. Life insurance has also been found to be helpful in providing gifts to children from a prior marriage of the testator. This is done in an attempt to equalize all gifts to the children of any prior marriages with the gifts given to children of a current marriage. As always, it is recommended that life insurance purchases and estate planning strategies be worked out in cooperation with one's estate planning attorney, and where necessary, with the input of a certified financial planner.
Source: elderlawanswers.com, "Life Insurance Can Still Play a Key Role As Part of an Estate Plan", Sept. 23, 2016