One of the most common motives people buy life insurance is to provide for their heirs upon their death, but did you know that life insurance can do· more than just replace someone’s income? Below are six important reasons to own life insurance:
- PAY ESTATE TAXES
Even billionaires purchase life insurance! Since everyone’s assets are not liquid, your heirs may have difficulty coming up with the money to pay the tax owed. Life insurance policies can help provide immediate liquidity to cover the cash shortage needed to pay estate taxes. - FUND OR SAVE A BUSINESS
The cash value of an insurance policy can serve as your bank to borrow from to fund or save a business. Successful businessman J.C. Penney used his policies to keep his company afloat when the Great Depression left his company in financial ruin by borrowing against the cash value of his life insurance policies. Innovative entrepreneurs Walt Disney and Ray Kroc used cash in their policies to fund the startup of their businesses. - PROVIDE FINANCIAL STABILITY FOR CHILDREN AND GRANDCHILDREN
A whole life insurance policy can provide basic life insurance coverage for children/ grandchildren and will build cash value. The cash value grows on a tax-favored basis and/or the cash value accrued is a financial resource that can be used to help pay for college, a wedding or a down payment on a home. - FUND IRREVOCABLE LIFE INSURANCE TRUST
Irrevocable Life Insurance Trusts are one of the best possible estate planning strategies. When properly structured in a trust, life insurance proceeds are free of gift tax, generation-skipping tax and income tax. This type of trust, commonly known as an “ILIT” has been recognized by the IRS for decades. An ILIT must be irrevocable, but there are several legitimate ways to change it. One of the greatest benefits of ILITs is that they can be set up to stay in the trust estate tax free for many generations. Also, money held in trust is protected from creditors and lawsuits. - PROTECT REAL ESTATE
Life insurance can do more than just pay off a mortgage after one’s death. It can help save your home or real estate investments during a financial downturn like 2008 by borrowing from the cash value in a whole life insurance policy. Also, a life insurance policy can provide another way to pay estate taxes if an inherited property is hard to sell or does not generate enough cash flow. - CONSIDER SECOND-TO-DIE LIFE INSURANCE
A second-to-die policy will provide money to a couple’s heirs that would be needed for various reasons, including paying estate taxes.
If any of the above reasons fit your situation, please contact one of our experienced advisors at 561.689.1000 ext.103 for a confidential consultation.
