What is the term for purchasing life insurance to enable heirs to pay estate taxes?

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Study for the Louisiana Series 103 – Life, Health, and Accident or Sickness Insurance Exam. Familiarize yourself with key concepts through engaging questions and explanations. Prepare effectively for your exam!

Multiple Choice

What is the term for purchasing life insurance to enable heirs to pay estate taxes?

Explanation:
The concept here is using life insurance to create liquidity so heirs can pay estate taxes without being forced to liquidate valuable assets. This strategy preserves the estate’s overall value, and it’s specifically called estate conservation. It focuses on keeping the estate intact by providing funds dedicated to taxes and final expenses. Other terms don’t fit this purpose: tax planning is a broad approach to reducing taxes in various ways, cash surrender refers to accessing a policy’s cash value, and beneficiary designation is about who receives the death benefit, not funding for tax payments.

The concept here is using life insurance to create liquidity so heirs can pay estate taxes without being forced to liquidate valuable assets. This strategy preserves the estate’s overall value, and it’s specifically called estate conservation. It focuses on keeping the estate intact by providing funds dedicated to taxes and final expenses.

Other terms don’t fit this purpose: tax planning is a broad approach to reducing taxes in various ways, cash surrender refers to accessing a policy’s cash value, and beneficiary designation is about who receives the death benefit, not funding for tax payments.

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