Life insurance is a valuable financial planning tool, helping to protect one’s family in the event of an unexpected death. This tool should be reviewed regularly, to ensure the policy in place meets your current life insurance needs.
As your personal situation, financial situation, and laws change, you might require more or less life insurance. Recently, the laws did change. The Tax Cuts and Jobs Act of 2017 made significant changes to the tax code, and those alterations could change the way life insurance is used as an estate-protection vehicle.
Many people who are concerned about estate taxes use life insurance as a way of paying these taxes. However, the new law has doubled the estate tax exemption, from $5 million per person to $10 million per person. This means couples can now transfer up to $20 million to their heirs without paying any federal estate taxes.
That reduces the need for some to have life insurance as part of an estate plan.
Should you reduce your life insurance as a result? Not necessarily. The higher exemption amount is temporary, so many people who bought life insurance as an estate-planning tool might decide it is best to keep their current policy in effect.
Moreover, many people have life insurance for reasons other than estate planning. It is often in place to provide income for their loved ones. Due to these diverse factors, it is best to consult with a financial advisor before making any changes to your life insurance.