When managing your estate, liquidity—the availability of cash or assets easily convertible to cash—is key. Liquid assets make it possible for your loved ones to cover costs such as estate taxes, outstanding debts, and administrative fees. Life insurance policies are often crucial in creating liquidity, yet many of us overlook their status. Sometimes, we even lose track of policies altogether, leaving assets unclaimed and adding complexity to the settlement process.
Life insurance policies are designed to cover expenses efficiently when needed most. They provide beneficiaries with immediate cash, which can be used to cover liabilities, fund children’s education, or simply support loved ones. But for life policies to deliver these benefits, they need to be active and easily accessible to those who will handle your estate.
Here’s where things can go wrong. It’s common to have an inactive or forgotten policy—whether from a job change, a life phase, or simply lost documentation—that beneficiaries aren’t aware of. This can mean lost funds that would otherwise support your estate plan. Even when families know about a policy, miscommunication or outdated contact details can lead to lapses, meaning the policy may hold no value due to unpaid premiums.
The impact? When policies are inactive or forgotten, they don’t contribute to estate liquidity, leaving gaps that your beneficiaries will have to address themselves. Without sufficient liquidity, your family may struggle with delays or, worse, may need to sell other valuable assets to cover costs.
To ensure liquidity, consider taking these steps:
1. Conduct an Annual Policy Review
Take time each year to review your life insurance policies. Verify that the coverage amount aligns with your current financial goals, and update contact information to avoid missed notifications.
2. Locate All Policies, Past and Present
Use tools like Verifi to find, track, and manage policies. Verifi consolidates your insurance information, even for policies you may have forgotten. This way, you can ensure your beneficiaries will know exactly what’s available.
3. Inform Your Executor and Loved Ones
It’s helpful to make sure that key people understand your policy details and how to access them. This way, they can ensure your estate has the liquidity it needs when the time comes.
4. Consider Your Policy Type
Different types of policies provide different levels of liquidity. For instance, a term policy may be less flexible in providing funds for future estate costs, whereas whole or universal life insurance often has a cash value that can be accessed even before it’s paid out.
5. Check Beneficiary Information Regularly
This one is crucial! Regularly review and update your beneficiaries to prevent disputes and ensure that benefits are directed where you want them.
By ensuring your policies are current and active, you are not only maximizing your estate’s liquidity but also providing clear, actionable support for your loved ones. Remember, an estate plan isn’t just about assets—it’s about peace of mind for the people you care about most. Tools like Verifi make it easier than ever to track your policies, giving you the confidence that your legacy will reach the right people at the right time.