What Are Some Other Uses For Life Insurance?

Income Replacement – The most common use of life insurance is income replacement.  If there are people who depend on you financially, it is most likely that you need life insurance.  Life insurance can provide your loved ones with the funds needed to replace your income if you pass away unexpectedly.

Estate Tax Planning – If you have amassed a large estate that will be the subject of estate taxes, life insurance could provide your beneficiaries with the means to pay estate taxes without liquidating assets.  This is especially important of the bulk of your estate is made up of real estate or a business.  Estate taxes are usually due 9 months after your death.  Life insurance can give your family the liquidity needed to pay your estate tax quickly.

Charitable Giving – Life insurance plays an important part in charitable giving.  You can use life insurance to leave a charitable bequest in a couple of different ways.  One, you could simply purchase a policy and make the charity the beneficiary.   Two, the charity could own the policy on your life and you can make premium payments.  If the charity owns the policy and you make premium payments, the premium payments could be tax deductible in some cases.  Most large charities have departments that specifically deal with life insurance for charitable giving.

Gifting – You can gift $14,000 per person for 2015 without tax consequences.  By utilizing these tax free limits to pay premiums on a life insurance policy, a person or a couple could pay premiums on a life insurance policy.  Careful planning needs to be done to in order to avoid potential tax consequences.

Retirement Planning – Permanent policies such as whole life and universal life build cash value that grows tax deferred.  These funds can be accessed tax free during your retirement years with proper planning.  These policies can be set up so that premiums are paid until age 65 at which time you can start an annual stream of income during your retirement.  This strategy must be set up properly in order to maximize cash value accumulation.

Long Term Care Planning – The cost of long term care is expensive and continues to rise.  You can purchase a life insurance policy that has a long term care rider to help you with these costs if needed.  A long term care rider allows you to access your death benefit early to pay for long term care costs.  Unlike most traditional long term care policies that require annual premiums that are lost if you never need coverage, life insurance with a long term care rider will still offer a death benefit and cash value access if you never need long term care.

Special Needs Planning – If you have a child with special needs, life insurance can give your child the funds necessary to live the quality of life you would want for them when you pass away.  Careful planning is required to ensure that any government benefits will not be lost.

Business Planning 

Buy/Sell Agreements – A buy/sell agreement is an excellent way to provide liquidity to surviving partners of a business to pay your loved ones for your shares.  This can be beneficial to both parties.  Your family members will not have to be partners in a business that they know nothing about.  Your partners can buy out your family with the proceeds of the life insurance policy and not have to worry about an unwanted partner.

Key Person – If your company has a key person that is vital to the company, a key person policy could be a smart option.  A key person policy can give your company the liquidity it needs to survive while it replaces the employee if they were to pass away.

Executive Bonus Arrangement – Permanent life insurance accumulates cash that can be accessed tax free in many cases.  This could be an excellent bonus option for a high earning executive.  In this arrangement, the company pays a cash bonus to the executive that is used to pay the premium on a life insurance policy.

Group Term Insurance – Group term insurance is a popular benefit among many companies in today’s marketplace.  Premiums are usually deductible to the employer up to $50,000 of coverage without any tax consequences to the employee as well.  Any additional amounts will usually have tax implications.

Life Insurance is a Versatile Panning Tool

Life insurance can be used for more than simply protecting your loved ones. Life insurance can offer living benefits as well as valuable protection for your business.  We can show you some valuable life insurance strategies to help you protect your assets.  Give us a call at 877-205-4172 or you can email us at info@termlifeanswers.com for more informtaion.

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