Uses of Life Insurance – Protecting Your Family's Financial Future

Life insurance is an instant estate builder. Proceeds of life insurance can provide liquidity at the insured's death for:

  • The payment of taxes and other transfer expenses
  • Satisfaction of debt
  • Income to surviving family members

Other Advantages of Life Insurance

  • If a policy has named beneficiaries other than the estate, the proceeds will go directly to those beneficiaries without being subject to probate.
  • Proceeds pass to beneficiaries generally free of federal income tax. 
  • If an irrevocable trust or someone other than the insured/decedent owns the policy, and the insured/decedent possessed no incidents of ownership and the policy is not payable to the insured's estate, the proceeds will generally not be included in the insured's gross estate for federal estate tax purposes. 
  • Benefits are available immediately and may be used to help pay such expenses as final illness and funeral costs, eliminating the need to sell estate assets to cover these costs.

More Uses of Life Insurance in Estate Planning

  • Providing education funds for children and grandchildren
  • Equalization of inheritances (life insurance may be left to those heirs who do not wish to receive a part of the family business or farm) 
  • Funding of business continuation plans 
  • Funding of charitable gifts 
  • Provide funding for a special needs child or adult

Careful consideration should be given to the ownership and beneficiary arrangements of any life insurance purchased for estate purposes. You should consult with a qualified tax professional to coordinate your insurance program with your overall testamentary arrangements.

State Farm® offers a variety of life insurance products to meet an estate owner's needs. Whether it is a policy needed for estate tax purposes, survivor income, or business continuation, a State Farm agent can help provide information to you to help you choose a life insurance program to meet your needs.


State Farm and its affiliates do not provide tax, investment, or legal advice. Federal and state tax laws are subject to change. If tax, investment, or legal advice is required, please seek the services of a licensed professional.

Issued by:
State Farm Life Insurance Company (Not licensed in MA, NY or WI)
Bloomington, IL
State Farm Life and Accident Assurance Company
(Licensed in New York and Wisconsin)
Home Office, Bloomington, Illinois

IL - 29.1