Life insurance can be utilized to cover state inheritance and federal estate taxes, preventing asset liquidation. What is this known as?

The correct answer, estate conservation, refers to the strategic use of life insurance to protect the value of an estate from taxes, thereby preventing the need to liquidate assets to cover these obligations. This is particularly important when a significant portion of an estate's value is tied up in illiquid assets such as real estate or businesses. By having a life insurance policy in place, the beneficiaries receive a death benefit that can be used to pay state inheritance and federal estate taxes, ensuring that the estate can be maintained as a whole for heirs rather than being diminished through forced sales of assets.

This approach not only preserves the wealth for future generations but also provides peace of mind for the policyholder, knowing that their heirs will not face the financial burden of settling tax liabilities at the expense of losing valuable assets. It's an essential component of estate planning for individuals who want to ensure their legacy is well-protected and passed on intact.