Life Insurance is the best way to transfer wealth tax free. The major advantage of life insurance is, if titled properly the death benefit is tax free. We are experts with over 75 years combined experience in this field, plus advanced degrees in law and accounting.
The purpose of life insurance is to:
a) Create Wealth for Heirs Instant Wealth:
Recently, we had a person approach us with some cash on hand, wanting to make an investment in the stock market that would provide the best possible returns for his granddaughter. He had little need for the money, had plenty of money outside this investment, and was quite clear that this money was being put to use for one reason and one reason only: to leave behind to his granddaughter. In his case, we told him to stay away from the stock markets and instead invest the money into a life insurance policy. Why?…..The investment into the life insurance policy instantly more than doubled his money and guaranteed it to his granddaughter upon his demise.
The risk of the market and the time it would take to potentially grow the money to equal the life insurance’s guaranteed death benefit were completely eliminated, thereby making the investment into the life policy well worth the effort and the monies left to her are tax free.
b) Replace Income:
If a pension and or social security doesn’t carry over to a spouse or special needs child upon death, life insurance is the best source to replace needed
c) Cover estate taxes:
Paying The Tax: In most cases, taxes are due at death, creating a burden for those who are left behind. Estates can be taxed; so can IRA’s, annuities and a long list of other investments. Needless to say, someone has to write a check to pay the tax, and the “liquidity” of an estate is sometimes limited, especially when one passes away with generally liquid large real estate holdings and relatively speaking low cash amounts. In many cases, a quality life insurance
policy can be a beneficial “gift” to leave behind so that taxes are paid from the tax-free death benefit the life insurance provides.
d) Tax Free Income Tax Free Income:
Depending on how the life insurance policy was designed, there could be significant cash buildup within the policy. With cash in the account, as mentioned above, it is highly possible that you could withdraw cash from a life policy tax-free. Generating income from the cash value within a low-cost, high-quality life insurance policy could make this one of the strongest benefits of adding some life into your life.
e) Free Up Principal:
We meet many people in retirement who are saving as much as they possibly can for their family. For a fraction of the estate value, they may want to consider investing a small portion of their investments into a life insurance policy that guarantees the value of the estate at death. Doing so often provides the insured peace of mind knowing that if they wind up spending all of their money down to the last penny, they will still leave the value of the estate behind thanks to the life insurance policy.