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1958 Wash. U. L. Q. 379 (1958)
The Use of Life Insurance in Estate Planning

handle is hein.journals/walq1958 and id is 389 raw text is: THE USE OF LIFE INSURANCE IN ESTATE PLANNING BY HIRAM H. LESARt The principal role of life insurance, the type of insurance with which estate planning is primarily concerned, is to provide liquid funds to pay the costs of dying. These include, in addition to debts, administra- tion and funeral expenses, expenses of the last illness, taxes, and the care of dependents. When one reflects that insurance is an asset which is as liquid as cash and yet is an earning asset, that it is worth more at death when needed and that the increase in value above the amount of premiums paid is not subject to the income tax, its importance in meeting these expenses is apparent., In determining how best to utilize the assets of an estate, then, careful consideration must be given to the disposition of insurance. But beyond the problem with respect to the use of existing assets, one needs to be aware of the various specific uses to which insurance may be put. There is evidence that not enough estate owners and their advisers have been aware of the possibilities2 These perhaps can best be presented by considering small estates first, and then larger estates. Before so discussing the subject, however, it seems advisable to de- scribe briefly the kinds of insurance and the types of settlement options available under the policies TYPES OF INSURANCE Although there are a great many kinds of life insurance, each of them, except term insurance itself, is simply some combination of term insurance and investment. A term policy is one in which the insurer agrees to pay the face value of the policy if the insured dies during the stipulated term, nothing being paid if the insured survives.3 Some- times referred to as pure insurance, this is, of course, low cost insurance. The cheapest pernzanent insurance is ordinary or continuous- premium whole life insurance. In this kind of policy premiums are paid throughout life,4 but there is an investment feature which even- t Professor of Law, Washington University. 1. See Mehr, Life Insurance: A Tool in Estate Planning, 6 J. Am. Soc'y C.L.U. 227 (1952). 2. See the statistics, note 61 infra, on the liquidity of estates filing estate tax returns. 3. Huebner, Life Insurance 97 (4th -ed. 1950); Mehr & Osler, Modern Life Insurance 34 (rev. ed. 1956). 4. Actually most of these policies are written as endowment at age 96 or 100, but for practical purposes it is ccisidered that the insured must pay premiums throughout his life.

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