What is the term for using life insurance to pay estate taxes?

The term that describes using life insurance to pay estate taxes is estate conservation. This strategy involves taking out a life insurance policy to ensure that there are sufficient funds available at the time of the policyholder's death to cover any estate taxes that may be owed. By doing this, beneficiaries can preserve the value of the estate without having to liquidate other assets, which could be necessary if there were insufficient funds available to cover tax liabilities.

Using life insurance in this manner is a common practice among individuals who want to protect their heirs from financial burdens associated with estate taxes. It helps ensure that the intended wealth is passed on to beneficiaries rather than being reduced by tax obligations. This concept emphasizes the importance of planning ahead in estate management and the role that life insurance can play in financial strategies for wealth transfer.