How can life insurance contribute to estate planning strategies for high-net-worth clients?

Life insurance provides a readily available source of cash to cover estate taxes, which can be a significant burden for high-net-worth individuals. By purchasing a life insurance policy, the death benefit can be used to pay estate taxes without having to liquidate other assets, potentially avoiding capital gains taxes and preserving the value of the estate. Life insurance can also be used to provide liquidity to family members who may not have immediate access to other assets. Furthermore, life insurance can be used to equalize inheritances among family members, particularly when certain assets are difficult to divide equally. For example, if a family business is being passed down to one child, life insurance can be used to provide an equivalent inheritance to other children. Irrevocable Life Insurance Trusts (ILITs) can be used to own life insurance policies, removing the policy from the taxable estate and further reducing estate tax liabilities.