Life insurance is a great estate planning tool. It gives your beneficiaries money, generally tax-free, and often very quickly after death. If the beneficiary is listed properly, it will almost always bypass the estate entirely, which keeps it safe from creditors and from estate taxes. It’s a great tool.
It’s a bit different when it’s left to the estate. It can still be a very beneficial tool, especially if the goal is to ensure it properly goes into trust for a minor beneficiary, but you will want to be careful that the estate isn’t the accidental beneficiary. If the designation is vague, then the best thing an executor can do is to seek advice from the court rather than trying to interpret it him- or herself.
The final catch is that the beneficiaries need to know that you have insurance. There’s no point to a large policy if no one knows to claim it.
