Life insurance has long been a part of estate planning in the United States. Although life insurance does not need to be a part of every person's estate plan, it can be very useful for parents of young children and those who support a spouse or a disabled adult or child. In addition to helping to support dependents, life insurance can help solve several other common estate planning problems.

• Providing immediate cash at death. Insurance proceeds are a handy source of cash to pay the deceased's debts, funeral expenses, and income or estate taxes. (Federal estate taxes are due nine months after death, so cash to pay them doesn't have to be raised immediately.)
• Avoiding probate. The proceeds of a life insurance policy are not subject to probate unless you name your estate as the beneficiary of the policy. If anyone else, including a trust, is the beneficiary of the policy, the proceeds are not included in the probate estate, and can be quickly transferred to survivors with little red tape, cost, or delay.
• Reducing estate taxes. If you own your insurance policy at the time you die, the proceeds are included from your taxable estate. On the other hand, when an insured person does not legally own his or her life insurance policy, the proceeds are excluded from the insured's taxable estate. This can significantly reduce death tax liability of the insured's estate.