When most people think about life insurance, what usually comes to mind is settling final expenses and providing financial support for your loved ones or death protection. That is what life insurance is commonly used for, but there are other benefits of life insurance other than for death protection:
1. Estate Planning.
If you have a large estate and want to ensure that estate is ‘intact’ and your beneficiaries don’t have to liquidate part to pay estate taxes to the IRS, life insurance can be used to pay estate taxes. Using life insurance for this purpose involves working with your attorney and tax professional to determine if this is an appropriate use of life insurance for your personal situation.
2. Business Succession Planning.
If you are a business owner and plan to pass on the business to a family member, life insurance can be used for the ‘purchase’ by the intended new owners. Business succession planning requires a tax professional (done through IRS code implications) and an attorney. They will help make sure the outcome is a benefit to all parties involved and it is done correctly. It also involves this succession being a part of the business owner’s retirement plan.
3. College Funding.
Parents and guardians can use life insurance as part or all of the education funding for the insured (child). This funding can be used without tax consequences (assuming interest applied to cash value) If you would like to consider this use of life insurance for your child or grandchild, contact me to discuss this in detail. If the policy isn’t used for education funding, you have given them the gift of life insurance. Check with the carrier to determine the requirements before the child becomes an adult.
4. Retirement Funding.
If you own whole life insurance, you can borrow against the policy’s cash value (without tax consequences). This is a great way to supplement your retirement. Just don’t use all of the cash value or surrender the policy, you will still have some remaining death benefit. Therefore you should talk to your insurance professional to understand the details of using life insurance for retirement funding. After that let us examine your given situation and see how it may or may not be an option for you.
Not just for Death Protection
In conclusion, there are many other instances that the cash value in a life insurance policy can be used for. Therefore, if you have questions about life insurance and how you can use it for any of the above situations other than death protection or for other financial obligations, feel free to contact me.
We specialize in providing strategies and guidance for those who are seeking a better lifestyle in retirement. Whether you have a retirement nest egg of five million dollars or $50,000, we can help you make sure it works as hard and as smart as you did in earning and saving it. At Robert Bailey Financial Management and Insurance Services, we know that it is your retirement, and you should have control over it. We offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!
Policy loans and withdrawals will reduce available cash values and death benefits. They may cause the policy to lapse, or affect guarantees against lapse. Unpaid loans are subject to ordinary income tax and, if taken before age 59 ½, may result in a tax penalty.
These are the opinions of the author and not necessarily those of the Registered Investment Adviser or Broker/Dealer. They are for informational purposes only. Do not be construe or act upon these opinions as individualized investment advice.