Family and legacy

What do you want to leave, and for whom?

Legacy planning with life insurance is about what you pass on: to a spouse, to children and grandchildren, or to a cause you care about. It can also include coverage on a child's life. These are long-term decisions with real alternatives, so we look at the goal first and compare life insurance honestly with other ways of reaching it.

Review your legacy plan

Cornerstone Capital is an independent life insurance brokerage, not an insurer. Carriers make underwriting decisions, and approval is never guaranteed. This form does not apply for coverage.

A grandmother's and a child's hands resting side by side on a porch rail

This page is for you if

You want to leave a defined amount to specific people or a cause.
You are a parent or grandparent thinking about a policy on a child.
You want heirs treated fairly and are not sure your current plan does that.

Before anything else

Questions to ask yourself

Talk these through with a broker

Who do you want to provide for, and what should the money do for them?
Are the adults in the household adequately covered before covering a child?
If the goal is education, have you looked at accounts built for that purpose?
Are your beneficiary designations current?
Do you want heirs treated equally, and do your current plans do that?
Have you spoken with an attorney about a will or trust?

01The problem

Good intentions without instructions

Most people know roughly what they want to leave and to whom. Far fewer have beneficiary designations that match, a will that is current, or enough liquidity for the plan to work without something being sold.

What would your family want to keep, not just pay off? A legacy plan starts there and works backward to the tools.

02The tool

A death benefit as a gift with a name on it

Life insurance pays a set amount to named beneficiaries, generally outside of probate. That makes it one straightforward way to leave something specific to a spouse, a child, a grandchild or a charity. A legacy need has no end date, so permanent coverage is usually what gets considered.

It works alongside a will or trust. It does not replace either.

03The mechanics

How it works

Leaving a legacy with life insurance

A death benefit is paid directly to named beneficiaries and generally passes outside of probate. That can make it a simple way to leave a defined amount to specific people or to a charity.

Because a legacy need does not end at a set date, permanent insurance is often what is considered. Larger estates may involve trusts and estate tax questions that require an attorney.

Life insurance on a child

A juvenile policy is usually a permanent policy owned by a parent or grandparent on the life of a child. Ownership can be transferred to the child as an adult. Some policies include an option to buy more coverage later without new medical underwriting, which may matter if the child's health changes.

Coverage on a child is usually a lower priority than coverage on the adults whose income the family relies on.

Cash value, realistically

A child's permanent policy may build cash value over time. It typically grows slowly in the early years because of policy charges, and it is not designed as a college fund. Loans and withdrawals reduce the death benefit and can lapse the policy if not managed.

Alternatives to evaluate

If the goal is to save for a child's future, life insurance is one option among several. 529 plans are built for education costs and have their own tax rules. Custodial accounts, savings accounts, and retirement accounts for a child with earned income are other vehicles.

Each has different tax treatment, flexibility, risk and effect on financial aid. Families should evaluate these with a financial or tax professional before deciding.

What you may have heard

Said often. Worth a second look.

A policy on a child is a great college fund.

What is actually trueA child's permanent policy may build cash value, slowly, after charges. It is not designed for education costs. 529 plans and other accounts are built for that and have their own rules. Compare them with a financial or tax professional before choosing.

Life insurance money is never taxed.

What is actually trueDeath benefits are generally excluded from a beneficiary's federal gross income, subject to exceptions. Estate tax, policy ownership and transfers of a policy can change the picture. For a larger estate that is a conversation with an attorney.

Concept names decoded

The names this goes by

Names you may have heard for what is on this page. Open one to see what it is and what it does not promise.

Legacy Planning“Leaving something behind.”

What it actually is: Using a death benefit to pass a defined amount to specific people or a cause, usually alongside a will or trust.
Common policy types: Usually permanent coverage, since the need has no end date.
What it may accomplish: Leave a set amount to named beneficiaries, generally outside probate.
What it does not guarantee: A particular tax result. Death benefits are generally excluded from a beneficiary's federal gross income, subject to exceptions, and estate rules are separate.

Questions to ask

Who should receive what?
Do my beneficiary designations match my will?
Have I spoken with an attorney?

Where this fits

Juvenile Life Insurance“A policy on my child that grows with them.”

What it actually is: A permanent policy on a child's life, owned by a parent or grandparent, that can be transferred to the child as an adult.
Common policy types: Whole life, sometimes with a rider to buy more coverage later.
What it may accomplish: Coverage that starts young, and where a rider applies, the option to add more later without new medical underwriting.
What it does not guarantee: A college fund. Cash value grows slowly after charges. Accounts built for education have their own rules and may suit that goal better.

Questions to ask

Are the adults in the household covered first?
What is the goal: coverage, or savings?
Have we compared a 529 plan?

Where this fits

AdvancedILIT“A trust that holds my life insurance.”

Advanced planning concept, coordinate with tax and legal professionals

What it actually is: An irrevocable life insurance trust. A trust, drafted by an attorney, that owns a policy so the proceeds are managed under the trust's terms.
Common policy types: Usually permanent coverage.
What it may accomplish: Control over how proceeds are used, and in some cases keeping proceeds out of the insured's taxable estate.
What it does not guarantee: A tax result. It cannot easily be changed once created, and the rules on transfers and timing are strict.

Questions to ask

Do I need this, given the size of my estate?
Who will be the trustee?
What happens if my circumstances change?

Where this fits

AdvancedEstate Liquidity“Cash so the family does not have to sell the farm.”

Advanced planning concept, coordinate with tax and legal professionals

What it actually is: Using a death benefit to give an estate cash for taxes, debts and costs, so property or a business does not have to be sold quickly.
Common policy types: Permanent coverage, sometimes a policy insuring two lives that pays at the second death.
What it may accomplish: Put cash in the right hands at the time it is needed.
What it does not guarantee: That proceeds stay outside the taxable estate. That depends on who owns the policy and how it is structured.

Questions to ask

What would my estate owe, and when?
Who should own the policy?
Has an estate attorney reviewed the plan?

Where this fits

See every name decoded

04Trade-offs

What it does, and what it does not

Advantages

A defined amount can be left to specific people or causes.
Proceeds paid to a named beneficiary generally avoid probate.
Death benefits are generally excluded from a beneficiary's federal gross income, subject to exceptions.
A juvenile policy may secure future insurability for a child, depending on the policy.
Coverage started at a young age is priced on that age.

Limitations

Permanent coverage requires a long premium commitment.
Cash value in a juvenile policy grows slowly and is reduced by policy charges.
Accounts designed for education or savings may suit those goals better.
Out-of-date beneficiary designations can send money to the wrong person.
Naming a minor directly as beneficiary can lead to court involvement.
Insurance does not replace a will, trust or estate plan.

05Fit

Who it may fit, and who it may not

Who it may fit

Parents and grandparents who want to leave a specific gift.
Families with a history of health conditions who value future insurability for a child.
People who want to balance an inheritance among heirs.
Households whose own protection and savings are already in place.

Who it may not fit

Families where the parents are uninsured or underinsured.
Those whose main goal is paying for education.
Households that would struggle to maintain premiums over many years.
Anyone expecting cash value to perform like an investment account.

How Cornerstone works

We are an independent brokerage, so we can look at more than one carrier, subject to appointments, product availability, licensing and eligibility. We ask about your situation first and explain the trade-offs. Keeping what you have is a fine outcome.

Our approach How we are paid Verify a license

Important to know

Life insurance is not a college savings plan or an investment. Families should evaluate 529 plans and other savings vehicles with a financial or tax professional. Cornerstone Capital does not provide tax, legal or investment advice.

Loans and withdrawals reduce cash value and death benefit and may have tax consequences. Non-guaranteed values shown in any illustration may not be achieved.

Eligibility and premium depend on the age and health of the insured, underwriting and carrier criteria. Approval is never guaranteed.

The Cornerstone Journal

Family

Starting Early for Children: Life Insurance, Cash Value, College Goals and the Alternatives

5 min read

Basics

How Much Life Insurance Does a Family Actually Need?

5 min read

Basics

Term vs. Whole vs. Universal Life: Start With the Problem, Not the Product

4 min read

Next step

Review your legacy plan.

Who you want to provide for, your time horizon and what you already have in place. We start with the goal.