What is the benefit of using life insurance to pay state inheritance and federal estate taxes?

Using life insurance to pay state inheritance and federal estate taxes is beneficial primarily because it eliminates the need to sell estate assets. When estate taxes are due, beneficiaries may face a situation where they need to liquidate valuable assets, such as property or investments, to cover these costs. This can lead to adverse consequences, such as selling in a down market or losing sentimental value associated with certain assets.

By having a life insurance policy that specifically covers these tax liabilities, the beneficiaries can receive a death benefit that provides the necessary funds to pay the taxes. This arrangement allows them to retain ownership of the estate assets, preserving their financial and emotional value for the heirs. This method simplifies the estate settlement process and can significantly alleviate the financial burden during a time of loss.