How can life insurance assist in estate planning?

Life insurance plays a significant role in estate planning primarily by providing liquid assets to cover estate taxes. When an individual passes away, their estate may be subject to various taxes, which can include estate taxes, debts, and other final expenses. This can create a burden on heirs, as they may need to sell off assets or property to cover these costs before they can receive their inheritance.

Having a life insurance policy in place ensures that there is a readily available sum of money that can be used to pay these estate taxes and other associated expenses. This can alleviate financial pressure on the heirs and allow them to inherit the estate without the immediate need to liquidate assets or take on debt. The death benefit from the policy is typically paid out quickly and can directly address the financial obligations of the estate, making it a crucial component of comprehensive estate planning.

The other options reflect different aspects of financial planning but do not specifically capture the unique role of life insurance in providing liquidity for estate settlements.