How to Use Insurance to Protect Wealth, Offset Estate Taxes, and Ensure Future Liquidity 

August 1, 2025

For individuals and families with substantial assets, insurance serves as more than just a financial safety net—it is a strategic instrument that can protect wealth, reduce estate taxes, and ensure liquidity when it is most critical. When thoughtfully integrated into your estate planning¹, insurance¹ solutions extend beyond traditional coverage to help preserve your legacy, maintain control over wealth transfer, and provide financial flexibility to your heirs.

The Role of Insurance in Wealth Protection

Insurance can act as a powerful shield to safeguard your estate¹ from unforeseen events that might otherwise diminish your accumulated wealth. Life insurance, in particular, guarantees a benefit payout to your beneficiaries, ensuring financial security even during unexpected losses.

There are several types of insurance policies that can be tailored to fit your goals:

• Whole life and universal life insurance policies not only provide death benefits but also build cash value over time. This cash value can be accessed during your lifetime to supplement income, cover emergencies, or fund other financial needs.
• Term life insurance provides affordable coverage for defined periods, such as until your mortgage is paid off or until your children reach financial independence. This targeted protection can be a cost-effective way to cover specific financial responsibilities.

By carefully selecting policies aligned with your wealth preservation objectives, you can protect your estate’s value and ensure your family’s financial security.

Using Insurance to Offset Estate Taxes

Estate taxes pose a significant threat to the transfer of wealth, especially for high-net-worth individuals. Without proper planning, these taxes can substantially reduce the assets your heirs ultimately receive.

Insurance offers several strategies to address this challenge:

• It provides immediate liquidity to cover estate taxes, preventing heirs from needing to sell valuable assets quickly and potentially at unfavorable prices.
• The use of an Irrevocable Life Insurance Trust (ILIT)¹ allows the ownership of life insurance policies outside of your taxable estate. This structure ensures that the insurance proceeds pass to your beneficiaries free from estate tax, preserving more of your wealth.
• Premium financing arrangements enable you to leverage loans to pay insurance premiums. This approach allows you to maintain liquidity and potentially invest capital in higher-return opportunities while securing substantial coverage.

These strategies can be customized to minimize estate tax exposure while giving you control over how and when your wealth is distributed.

Ensuring Liquidity When It’s Needed Most

Liquidity is often overlooked in estate planning¹, yet it is essential to meet immediate obligations such as estate taxes, debts, legal fees, or family support without forcing the sale of assets.

Insurance proceeds serve as a reliable source of cash to:

• Cover estate settlement costs efficiently, avoiding the need to liquidate investments¹ or property under time pressure.
• Provide funds during market downturns, when selling assets may not be advantageous.
• Support the ongoing financial needs of your heirs or beneficiaries, helping maintain their lifestyle and financial stability.

By integrating insurance into your estate plan, you create a dependable source of funds that can be accessed quickly, providing peace of mind during periods of uncertainty.

Tailoring Insurance Strategies to Your Unique Estate Planning Goals

No two estates are the same, and insurance strategies should be tailored to your specific financial situation and family dynamics. Collaboration with your financial advisors and estate planning¹ team is critical to develop a cohesive approach.

Considerations when designing an insurance plan include:

• The size and complexity of your estate¹, which influences the level and type of coverage needed.
• Your goals for wealth transfer and legacy, whether you wish to provide for children, grandchildren, charitable causes, or business successors.
• Your risk tolerance and desire for control, balancing between irrevocable structures and policies you may access or modify during your lifetime.
• Anticipated impacts of state and federal tax laws, which can evolve and affect your estate plan¹ over time.

This personalized approach ensures your insurance solutions integrate seamlessly with your overall estate plan¹, supporting your long-term financial and legacy objectives.

Conclusion

For those aiming to protect wealth, mitigate estate taxes, and ensure liquidity for future generations, insurance offers a versatile and sophisticated suite of tools. Beyond basic coverage, advanced strategies such as life insurance trusts¹ and premium financing empower you to safeguard your legacy and maintain financial flexibility.

At First Western Trust, we have extensive experience working with affluent individuals and families whose lives and wealth require more customized insurance solutions than those typically offered by large companies. We have the capability and expertise to collaborate closely with you to create a personalized insurance plan that addresses your unique needs, ensuring you are always protected and have lasting peace of mind.

Our goal is to help you preserve what matters most and transfer wealth with intention and efficiency.

If you would like to explore how insurance can enhance your estate plan¹ and protect your wealth, please contact our team for a personalized consultation.

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Disclaimer:

1. Insurance, Investment, and Trust and Estate products and services are Not FDIC Insured, Not guaranteed by the Bank, May Lose Value

This content is for informational purposes only and does not constitute legal or tax advice. Please consult your legal or tax advisor for specific guidance tailored to your situation. First Western Trust Bank cannot provide tax advice. Please consult your tax advisor for guidance on how the information contained within may apply to your specific situation.