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Uses for Life Insurance
Retirement income
needs
As we live longer and count less on Government and company
pension plans to provide all the retirement we income that
we are going to need, life insurance is receiving a new
look as a funding vehicle. Life Insurance companies have
responded by developing new products that can be used effectively
to create additional retirement income. Variable Universal
Life has rapidly become the most popular, especially where
a need for life insurance exists. Usually, these are maximum
funded policies during the accumulation period, with payments
coming out at retirement. A broad range of investment options
that allow you to switch between options without triggering
taxes and tax sheltered growth for as long as the funds
remain in the policy facilitates rapid and tax-effective
growth for additional retirement income.
At retirement cash values are accessed through withdrawals
and/or policy loans. Loans are generally not taxable. Withdrawals
may be taxable under some circumstances. Unpaid loans and/or
withdrawals will cause a reduction in policy cash values
and death benefits. For policies that are Modified Endowment
Contracts, the loan or withdrawal is taxed at the time it
is taken on an income first basis, and there may be an additional
10% income tax penalty for early withdrawals prior to age
59 �. Consult your tax advisor for advice regarding your
particular situation.
Financial
planning opportunities
The combination of a broad range of new life insurance
products, creative financial planners and a thorough understanding
of the Internal Revenue code has led to a growing number
of attractive financial planning opportunities. They fit
personal and or business situations and cover areas such
as estate-friendly investing and charitable giving, just
to mention a couple.
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The Financial Planning Analyzer
(FPA) program on this site can assist you to determine
if these opportunities are applicable to your financial
circumstances. |
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Business Needs
Business continuation is helped considerably through life
insurance policies that are bought for specific uses.
Many small businesses rely heavily on the talent and knowledge
of a particular person. That key person, who could be the
owner or an employee, is vital to the success of the business.
Life insurance can help the business continue if that key
person died.
Life insurance is frequently used as a funding vehicle
to provide for additional retirement income for when selected
employees retire.
A buy-sell agreement simply means that if something happens
someone has agreed beforehand to buy all or part of a business
for an agreed price and someone else has agreed to sell.
If the agreement is triggered because of death, life insurance
is the only financial instrument that can deliver the money
when it is needed for a cost known in advance.
Family Income Needs
When a person dies, his/her assets are gathered by the
Executors and distributed to beneficiaries. The survivors
of a deceased may have income from several sources; Government
Benefits, Pension Benefits and Income Producing Assets.
For most survivors this is not enough. Life insurance can
provide the necessary capital at the moment it is needs
to produce the necessary additional income. For more information,
visit the "Preview
Your Planning Needs" section on this site.
Estate Preservation
and Maximization
When you die, your business and other capital assets in
your estate, such as stocks, bonds, real estate, jewelry
and so on, are subject to estate tax if the total value
is over a certain minimum. If it is, the value of your estate
may be eroded by the taxes. In addition, estate settlement
costs and final expenses such as funeral costs, probate
and legal fees may reduce the value of your legacy.
You can help yourself by getting answers to questions
such as "how much tax may have to be paid?" and "how can
you protect the value of you estate from erosion due to
taxes?" Just visit our "Preview
Your Planning Needs" section on this site.
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