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June 27, 2014

Using Life Insurance to fund Wealth Transfers

June 26, 2014


Using Life Insurance to help fund Wealth Transfers


Recently a report showcased on CNBC news  sited a study from the Boston College Center on Wealth and Philanthropy .


The greatest wealth transfer in history is underway, according to the report.  Projecting that $59 trillion is expected to be passed down to heirs, charities and taxes between 2007 and 2061. The study said heirs will receive $36 trillion over that period, while federal estate taxes will receive $5.6 trillion.   Very interesting statistics; of course that amount will depend on many factors including: the future economic climate, interest rates and future stock markets performance. Gentleman,  start the debate…
But one thing is certain – a large amount of wealth will be handed over to charities and to surviving families.


For these above average consumers and investors, an old product with a new edge has found increased attention and interest as a method to help families retain more of their inherited wealth and help alleviate the burden of future death taxes.


Using Single Premium Life Insurance to Transfer Wealth

Regular whole Life Insurance has been a great way to help almost anybody create and leave a legacy as well as minimize estates problems. Life insurance program usually require periodic payments and pays an benefit at the death of the applicant determined first by the the health of the owner and the size of those periodic payments at application. The benefit to the owner is that at his or her death, the stated amount of insurance will go to his beneficiary free of federal taxes. The one important factor to determine that amount that will be available at death is the payment amount. The amount of the payment will generate a benefit. Unfortunately as we get older those payments can be substantially larger and the total amount of benefit can shrink.

So here’s where a single premium Life Insurance policy can help with older applicants concerned about wealth creation and the transfer of assets at death. 
This type of whole life insurance requires a single deposit of premium that creates an immediate death benefit guaranteed to be paid at the death of the policy owner. The death benefit amount will depend on the age of the policy owner and general health at application, but usually require much less medical requirements and are more liberal with the health of the applicant.  And the younger the owner, the larger the death benefit can be.

The immediate death benefit on a lump sum deposit can be substantial especially compared to today’s low interest rate environment, especially since fixed investments are yielding  historically low returns.

For example a healthy 65 year old woman could deposit $100,000 into a single premium life policy where the immediate death benefit could amount to $200,000 or more that would pass on to her beneficiaries, and the that benefit would be tax free to her recipients. If one were to leave Bank CDs or stocks, whatever those assets are worth at the death of the applicant will be fully taxable to the benificary. Life insurance proceeds pass onto the beneficiary tax free. Thus a comparison of liquid assets should be compared on an after tax basis.

Another interesting fact is that Single premium life insurance also has a present benefit for the owner of the policy while they are alive. The cash value in a fully funded policy can grow immediately and provide cash flow if needed. Thereafter the policy can always be surrendered at any time for its cash value. Some companies offer return of principal guarantees so if the policy needed to be surrendered, one knows exactly what they’d get back. There are also options for taking out loans.  Many say this is a policy for the living.

Some companies offer an option called, the accelerated death benefit meaning if the insured were diagnosed as terminally ill, a substanial amount of the death benefit can be paid out if death is anticipated in less than 12 months. Also another option allows funds to be withdrawn for payment of long term care coverage.

In our example, the 65 year old woman mentioned, would have that $200,000 death benefit to help pay for the long term care expenses in her home or a nursing home facility- and these benefits could be received income tax free. Thus in our example, she avoids having to pay for premiums into a traditional long term care policy yet still has money available for nursing home protection if need be.  Thus this type of insurance policy can improve an estate in several ways. The life insurance policy will pass increased wealth to the beneficiary or protect an estate from the considerable costs associated with long term care. Additionally funds can be saved and provide future growth for beneficiaries and leave a legacy to future generations

There are many options and various ways to get the premiums to grow through the use of indexed and whole life options. The best case is to sit down with your Trusted Choice Agent and develop a plan that suits your needs and desires.

About I & E Insurance Agency-

I & E Insurance Agency is a full service Insurance and retirement planning agency providing solutions for Home,  Life, Business, with special attention to retirement planning and  Affluent and coastal home insurance needs.    Whether you live in Warren  or Morristown , a  small cottage in Belmar , a 10,000 square foot mcmansion in  RUMSON , a rental home in Lavallette , a 110 year Old Victorian in  Ocean Grove, and Cape May  a colonial in  Paramus  or even a ocean view condo in ​​​​​​Atlantic City –we can help you get the proper coverage for Your Home, Business, retirement plan and the correct amount of Life Insurance.


In many cases we can package insurance needs such as home, Life boat, flood, primary and vacation coverage all together saving you time and money.

I & E Insurance Agency is an independent family owned and operated Agency serving all of NJ.  We have clients from Alpine to Cape May from Vernon Valley and High Point to Princeton. Many of Our customers have multiple homes, Autos, Boats, Life Insurance, Pension plans and Business polices with us and find that a one call for service and solutions can save them time and money.   Our Principals (2) have over 65 + years experience. 

As a Trusted Choice ® Agency  we provide a full range of Insurance and retirement plans for Business, Personal and Commercial clients. 

Just  Click Here  and we’ll get you a quote immediately.

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