Life insurance policies pay out immediately upon death and can help the family through difficult times. However, it is important to make sure that you do not mislead the insurance company.
If you decide to use life insurance as an estate planning tool, you may be required to fill out some medical history and life style forms or even undergo a medical examination. However, it is wise to be honest throughout the entire process, according to Cincinnati.com which recently reported on one extreme case of alleged fraud in “Feds: Mason family faked life insurance policies, collected $2.9 million and bought Bentley convertible.”
In this case, three members of a family purchased life insurance for another family member who was overweight and who had an extensive history of medical problems.
The family lied on the policy application about all of that and had another family member go to a medical exam and pretend to be the applicant. The insurance was approved and paid, when the family member passed away.
The family then tried to hide the proceeds by purchasing expensive items.
They are being charged with criminal fraud.
While this is obviously an extreme case, it illustrates that you can be caught, if you defraud a life insurance company. If life insurance is a part of your estate plan, make sure that you are honest on the application.
An estate planning attorney can advise you on the proper use of life insurance as an estate planning tool that meets your unique circumstances.