In the short film, Black Heirlooms, filmmaker Amanda Brown begins the story by showing pictures of family, particularly her beloved grandmother Mee-Mah Royal. Soon after the montage of family photos, the dollar amount: $51,283.50 appears on the screen as Brown describes that “this is the amount of money that tore my family apart.”
After a stroke in 2009, Royal’s family became “irreconcilably divided” over her care and her estate. “The family she built was destroyed.”
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Not only do battles over estates come between family members, but even when individuals do create estate plans, financial problems from estate taxes and probate–which typically take at least six months–can further complicate financial problems for those the estate is intended to help.
Financial advisers say life insurance should be a significant component of any estate plan.
“Life insurance is a great way to protect and create an estate for pennies on the dollar,” says ShirleyAnn Robertson, a financial professional based in Schaumburg, IL,with Prudential Advisors.
“When I’m talking to clients, the word ‘estate planning’ sounds a bit daunting. An estate plan is a map that reflects how you feel about your personal and financial affairs, and how you want them to be handled in case you’re incapacitated or in the event of death. Life insurance helps you create the financial security you intend when you pass on,” Robertson adds.
Life insurance proceeds don’t go through a probate process. Your designated beneficiaries get access to funds right away to pay bills and cover other expenses that could become a burden due to the loss of your income.
You can also work with an estate planning attorney or financial professional to insure that you have enough life insurance to cover the costs of settling your estate. The top federal estate tax rate is currently 40%. Some states also impose separate inheritance or estate tax. If you fall into these estate tax categories, life insurance can be the helping hand your heirs need, so that they don’t have to go to extremes like selling real estate or a business to cover the taxes.
Giving a life insurance policy as a gift to a charity can also reduce the taxable amount of the estate, as gifts to charity are an estate tax deduction. This can work well for upper income individuals.
As for the type of life insurance that works best with your estate plans, you need to consult a financial professional, and someone who is familiar with the federal and state estate planning laws that apply to you.
“Collectively, blacks have to adopt a mind-set in which we make legacy planning and maximizing generational wealth a priority, and part of our conversations,” says Roberts.
Conversations that can keep families together and wealth moving from one generation to the next.