Craig purchased a life insurance policy to enable his heirs to pay estate taxes. This is called

• A. Estate conservation
• B. Asset protection
• C. Tax deferral
• D. Bargain purchase

Answer: (A)

The main idea is providing liquidity to cover estate taxes so the estate’s value isn’t eroded by taxes at death. A life insurance policy used for this purpose supplies cash quickly when the insured dies, allowing heirs to pay any estate taxes without needing to sell off valuable assets. This approach is estate conservation—the goal is to preserve the estate’s value for beneficiaries by ensuring tax obligations can be met.

Other terms describe different concepts: asset protection focuses on shielding assets from creditors, tax deferral means delaying taxes on earnings, and bargain purchase isn’t relevant to funding estate taxes.