One Of The Best Assets To Inherit Isn't Cash Itself

The task of laying out your final wishes isn't something that most look forward to. Even so, many will eventually leave cash and other assets to their beneficiaries. While there's no denying the value of a cash inheritance when it comes to ease and speed, there are actually numerous other accounts and asset types that can serve as useful cash substitutes. For instance, while life insurance isn't typically a great option to use as a retirement savings tool, it can be a valuable means of passing on a sizeable inheritance to your loved ones.

Life insurance can vastly simplify the transfer of value from a deceased person to their beneficiary. This is because claiming the benefit after a loved one has died generally circumvents the probate process, which might otherwise hold up the transfer of assets. Life insurance benefits are also not assessed as income, so they hit a beneficiary's bank account without any tax liability — although they are considered a part of the estate, so sizeable transfers may incur estate taxes. However, there are some important factors to consider when using a life insurance policy as an inheritance tool.

While it's advisable to write a will when you turn 18, since this is the legal age for will creation in the United States, many tend to push the task further down the road. However, this delay can be especially expensive when it comes to life insurance. It's important to note that buying into a new life insurance policy as a senior comes at a much higher premium price than if you were to invest in a policy earlier in life. With that said, for those who want a quick and largely hassle-free means of transferring wealth, it can still be an ideal candidate.

Another thing to consider is that, since life insurance policies are contracts, you must amend the terms with your insurer if you want to change a beneficiary or stipulate other specific instructions. Also, adding language to your will won't alter the payout instructions on a policy, so taking an ex-partner off your beneficiary list or adding new children must be done outside the scope of your will.