You might only think of life insurance as a way to provide financial assistance  to loved ones after your passing.

Here's what you may not have considered: Incorporating a life insurane policy into your estate plan could help mitigate potential complications for your heirs by ensuring they have the liquidity needed to pay estate taxes when the time comes. 

Consider Arkansas chicken tycoon Don Tyson, who helped build Tyson Foods. Upon his passing on January 6, 2011, Don left behind $1 billion to his heirs. His death came just six days after the return of a 35% federal estate tax, which had essentially been 0% for anyone who died in 2010 through the Economic Growth and Tax Reconciliation Relief Act of 2001. According to Forbes, had Don died just six days earlier, the estimated tax bill from his estate could have been lower by as much as $350 million. 

While not everyone has to worry about passing down a $1 billion inheritence, changes in tax laws could have an unfavorable impact on your beneficiaries. That's why you should consider incorporating borrowing strategy into your estate plan. You'll just need to ensure you meet the necessary criteria, which can include factors like having a minimum amount of investable assets and net worth.

The Step-by-Step Process
Taking out a permanent life insurance policy can enable your heirs to pay estate taxes with the proceeds from the policy, which would be held in a trust, from the rest of your estate. You can then use financing to pay for the policy's annual insurance premiums. 
Here's a step-by-step breakdown of how the process works:

• Insurance carrier issues policy to you.
• You pledge collateral to support the loan as the cash value of the policy builds over time. 
• You selected bank allocates funds to you through the trust.
• You use the funds from the trust to cover the annual insurance premiums and interest on the loan. The cash value in the policy will grow over time, which may be used to repay part or all of the loan. You can also repay the loan with personal assets.
• Upon death, funds are dispersed to your trust, which will repay any remaining balance on the loan.
• Remaining assets in the trust are distributed to your beneficiaries free of estate and income taxes. 

Breaking Down the Benefits
While life insurance premium financing doesn't make sense for everyone, it could be an effective strategy to enhance your estate plan and better protect both your current financial situation and your heir's situations in the future. 
Reach out to your advisor to learn more about your premium financing options. 

Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.