Does Long Term Disability Have Any Bearing on Estate Planning?

long term disability estate planning

Contrary to what you may think, your most valuable asset is not your house, car or retirement account. It is your ability to make a living. Considering that they tend to pay between forty to sixty percent of your base salary for a number of years when an illness or injury prevents you from working, long term disability benefits can form a crucial part of your estate planning. For more information, please continue reading, then contact one of our experienced nation-wide LTD benefit lawyers as soon as possible.

How does long term disability insurance relate to estate planning?

Even though disability insurance benefits end at retirement age, the connection between disability and estate planning continues long after retirement. Usually, retirement comes after a lifetime of accumulating assets and building an estate with the intention of passing it on to beneficiaries. By having disability insurance, you can pay day-to-day expenses without having to dip into your retirement assets, thereby increasing the estate you pass on to your beneficiaries.

Is long term disability insurance absolutely essential to estate planning?

A responsible long-term personal financial plan should include sufficient disability insurance as a key planning element. With the proper balance and advance planning, you can collect disability insurance proceeds free of federal taxes. If you pay the premiums yourself, then the Internal Revenue Service will usually not tax the income. However, the Internal Revenue Service will tax you for income derived from long term disability benefits if your employer pays the premiums as a tax-free perk.

Can you prevent the Internal Revenue Service from taxing your long term disability insurance benefits?

In the event your employer pays your premiums, you may have premiums paid with after-tax dollars, withheld from your regular paychecks, to address this issue. That means that the Internal Revenue Service will treat the premiums as part of your taxable salary, causing a bit of an increase in your income tax bill. However, any long term disability benefits will be tax-free. With your own money, you can also buy a supplemental long term disability policy. Because you paid the premiums with your own money, benefits from your personal long term disability policy will be tax-free.

Why are disability insurance benefits critical to estate planning?

By including disability insurance, along with life insurance and other insurance policies, in your financial planning, you can help protect yourself and your loved ones from unanticipated events.

Before you create any estate planning documents, you should first consult with one of our skilled long term disability insurance attorneys for help making the most of your LTD benefits.

Contact our experienced nationwide firm

If you or someone you know is looking to receive long term disability benefits, contact Walker & Hern for a free consultation.

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