Life Insurance: It’s More Than Death Insurance

Life Insurance: It’s More Than Death Insurance

Life Insurance: It’s More Than Death Insurance

Ultra-high net worth (UHNW) individuals and business owners are familiar with the value of life insurance and the usefulness of death proceeds, which, when policies are properly positioned, are not subject to tax. A life insurance death benefit:

  • Generates immediate liquidity for highly illiquid estates.
  • Pays federal and state estate taxes to transfer wealth intact.
  • Creates special legacies or charitable bequests.
  • Funds business continuation agreements and indemnifies a key person loss.

On the other hand, the lifetime benefits and living applications of permanent cash value life insurance are less recognized and greatly under-utilized.

Life Insurance as Valuable Property

For UHNW individuals and business owners with a long-term or permanent need for protection, permanent cash value life insurance—whole life, universal life (UL), index UL, or variable UL—should be regarded as a valuable and versatile asset. A permanent policy is an asset that can deliver many collateral benefits and uses over the years. e ultimate death proceeds provide security for families, preserve estates, and stabilize businesses.

Valuable Features

The unique features and tax characteristics of permanent life insurance deliver powerful benefits and permit user flexibility in a wide variety of financial planning applications:

  • Tax-deferred cash value growth, often producing amounts greater than the annual premium payment during the period after initial policy years.
  • Ability to efficiently access the growing cash values (on a FIFO basis in the case of a non-MEC policy) by withdrawing up to basis and using loans for any excess.1
  • Exemption of policy values from the reach of creditors, amounts and limitations subject to certain federal laws and state insurance regulations.
    • In the case of variable life, the ability to position premium dollars in stocks, real estate, and other equity sub-accounts without realizing current gains for tax purposes. Variable life also provides the opportunity to perform portfolio re-allocation or rebalancing without current tax implications.

Click here for more information about the benefits of Life Insurance

This piece and linked article were prepared by M Financial Group to be distributed to clients and prospects. Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a Registered Broker/Dealer, Member FINRA/SIPC. The R.O.W. Group is independently owned and operated.

This information is for general and educational purposes and not intended as legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. Information obtained from third party sources are believed to be reliable but not guaranteed.


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