High net-worth families and individuals generally have sufficient assets to pay taxes and to leave a portion of their estate to their children and grandchildren even without life insurance. However, life insurance mitigates risk and provides further peace of mind as it creates new wealth to ensure that, no matter when the policy pays out, there are more than sufficient funds to cover all costs while taking care of beneficiaries.
Often the high costs of estate taxes, administrative costs, and claims against an estate greatly diminish an estate's value when a family is forced to sell assets in a down market due to insufficient liquidity.
The death benefit of life insurance provides an immediate source of liquidity to pay taxes and other expenses, thus avoiding the forced sale of assets.
Life insurance also has the added benefit of offering estate equalization. The legacy of many affluent families and individuals contains significant non-monetary assets, such as businesses, art collections, or real estate. When passing specific assets to certain individuals, life insurance can solve the challenges of equitably dividing an estate by providing a comparable inheritance for other heirs.
Advanced funding and gifting strategies reduce the burden of premiums for larger policies, allowing the true cost to be leveraged.