Wealth Transfer Using A Life Insurance Policy

Did You Know a Wealth Transfer Using a Life Insurance Policy is Possible?

Wealth transfer using a life insurance policy

Did You Know Your Money Can Last For Generations?

It might seem unusual, but life insurance can be used as a way to transfer wealth.

Typically when you get a life insurance policy it’s common to think about protecting your family or business, but it can also be used to generate and relocate wealth onto future generations to come!

Plus, it is completely tax free!

A wealth transfer using life insurance is the most cost effective way to maximize distribution on a fully valued tax-free asset upon the first premium receipt.

Still have questions? Let’s go into more detail!

Wealth transfer using a life insurance policy

Using life insurance for wealth transfer is a great strategy to use in order to pass assets while mitigating taxes.

With life insurance, you are paying pennies on the dollar. When you consider that a healthy 60 year old can create a $100,000 death benefit with a one-time deposit of around $25,000, the numbers make sense.

And of course, life insurance proceeds are income tax-free beneficiaries. Additionally, these policies can be structured to avoid federal estate and state inheritance taxes. There are very few asset classes that can do this much. That’s why life insurance policies are used so often in estate planning.

The proceeds and death benefit are paid out tax free, and not many other products can say that. When estate planning, advisors often turn clients to a permanent or whole life insurance policy.

Many of our clients often comment…“I’ll be gone, why would I care about taxes?”

Let us give you an example:

  • You’re a 55 year old who takes out a $1 million policy. Your premiums over time add up to $100,000. 
  • Ultimately, this a good return for your initial investment because when you die, your beneficiary will get the death benefit of $1 million.  
  • Normally with taxable income $300,000 would go to taxes, but with a life insurance policy your beneficiaries don’t have to pay this and they get to keep all the money!

When it comes to weighing the details of a wealth transfer policy, the first thing you need to decide on is the type of life insurance policy that makes the most sense for your family.

A Permanent life insurance policy does not have a set expiration date, but it does have a maturity date, which is typically based on the age of the insured and can vary based on when the policy was issued. These specific terms are defined in the contract. If the insured lives to the maturity date, the policy will pay out the maturity value (often equivalent to the cash value amount) to the owner, and the coverage ends.

If your maturity date is far into the future, permanent life insurance can be well suited for inheritance planning. As long as you keep paying the premiums, your beneficiaries will receive the death benefit. There are a few different versions of permanent life. Whole life insurance charges the exact premium the entire time, which helps with budgeting. On the other hand, Universal life allows you to adjust the premium up and down as long as you pay enough to cover the underlying insurance cost each year.

Wealth transfer using a life insurance policy

When it comes to age: the sooner the better!

The earlier you apply for a policy the easier and lower the premiums will be due to low health risk. However, if you are in your 60’s and have good health…it’s not too late! At Arlington Greene we strive to help anyone find the policy they need regardless of age. Our dedicated team has even helped client’s in their 80’s find good coverage.

Many healthy seniors can get a policy in no-time. Most cases have you fill out a simple online questionnaire, with no underwriting needed, if it comes back sufficient. Then the policy is yours!

If you are concerned about your health conditions, do not hesitate to reach out. We love to help “not so simple” clients find the right coverage needed to secure their financial future.

Thinking about a wealth transfer? These goals complement the policy perfectly:

  • Retired and have ore wealth than you’ll need in your lifetime.
  • Want to leave a larger legacy for your children or grandchildren without traditional investments.
  • Would like a tax-efficient way of transferring your wealth to the next generation.
  • Maximize your assets that bypass your estate to avoid probate/executor fees.
  • Maintain control of assets until you are ready to pass on.
  • Want to provide a gift for your children or grandchildren while your living and after you die
Wealth transfer using a life insurance policy

Wealth for Generations!

We can help you start looking for options today!

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