Whole Life’s Estate Equalization Strategy: Fair Distribution of Illiquid Assets
In estate planning, **Estate Equalization** is a key strategy where Permanent Life Insurance is used to ensure that all heirs receive an equal share of the estate, even when the estate contains valuable, illiquid assets like a family business, real estate, or a farm.
The Problem of Illiquid Assets
If a parent wants one child to inherit the family farm (due to their operational interest) and treat the other children equally, selling the farm is often not desirable. This creates an equalization problem.
The Whole Life Solution
The parent purchases a Whole Life policy with a death benefit equal to the value of the illiquid asset. The estate plan specifies:
- **Child A** inherits the illiquid asset (the farm).
- **Children B and C** receive the tax-free cash from the life insurance death benefit, ensuring a fair, equal distribution without forcing the sale of the asset.
Disclaimer: This content is for informational purposes only and is not financial or legal advice. This strategy is complex and requires careful coordination between the will, the policy, and a qualified estate planning attorney.