Whether your heirs are in Mexico or the United States, life insurance can play a vital role in creating an estate plan that ensures financial security for your loved ones. At MEG International Counsel, we recommend that high-net-worth individuals with cross-border interests consider three essential factors when choosing a life insurance policy for estate planning: their personal needs, the desire for short-term or long-term coverage, and the stability of the insurance company providing the policy.
Consider Your Personal Needs
Estate planning is a highly personal process. Your life insurance policy should align with your unique circumstances and objectives. Consider the following aspects when evaluating your life insurance coverage needs:
- Estate tax obligations. As a high-net-worth individual, you’ll want to work with your attorney to evaluate the potential tax liabilities in both Mexico and the United States and how a life insurance policy can help prevent the forced sale of assets.
- Family size. Determine the number of family members who depend on your income and the financial support they require to estimate the coverage necessary to maintain their lifestyle in your absence.
- Future expenses. If you have children or grandchildren, consider their future expenses, such as college tuition fees, help with wedding costs, or support to start a business.
- Outstanding debts. Assess your outstanding debts, including mortgage loans, car loans, or credit card debts, to determine what would be needed to settle these obligations.
Determine if You Want Short-Term or Long-Term Coverage
If you have long-term objectives like providing ongoing financial support for your spouse or leaving a legacy for future generations, a permanent life insurance policy, such as whole life or universal life insurance, is the best choice. These policies offer lifelong coverage and accumulate cash value over time.
A term life insurance policy may be suitable if you are most concerned about short-term needs, such as paying off a mortgage or settling estate taxes. Term policies offer coverage for a specific period, typically 10, 20, or 30 years, and provide a higher coverage amount at a relatively lower premium.
Evaluate the Stability of the Company Providing Coverage
Choosing a life insurance company with a solid financial foundation ensures your beneficiaries receive the intended benefits. Consider the company's history and track record in the insurance industry. A long-standing company with a proven track record of delivering on its commitments is more likely to provide stability and reliability.
Many of our Mexican clients decide to purchase policies in the United States due to their lower cost and reputation for stability. Request our complimentary whitepaper, How Should Mexico Residents Hold Life Insurance Policies in the United States?, to learn more about incorporating a U.S. policy into your overall estate planning strategy. Attorney Antonio Gastélum also explores this issue in an article featured on WealthManagement.com.