Using Life Insurance to Build and Protect Wealth

For families and individuals, life insurance can provide benefits that go beyond income replacement to support their loved ones upon their death. Life insurance can provide the necessary funds to cover taxes, secure a persons legacy, and allow the designated beneficiaries the right to assets like a business or property.

Let’s examine how life insurance can provide solutions for retirement planning strategies and wealth accumulation.

Is Life Insurance an Asset?

Assets such as your home, your investment portfolio, and your retirement accounts are assets that appreciate (gain value) over a period of time. And, certain types of life insurance policies, specifically permanent life insurance, can be considered an asset as well because they can be designed to build cash value. The accumulated cash value is an asset when calculating your net worth.

Although most people use life insurance to provide financial support for their loved ones upon their death, permanent life insurance can also offer many other benefits. Just like IRAs and mutual funds, life insurance can provide options when building a diversified portfolio. Permanent life insurance can also be used as a protection against riskier investments that are correlated to the stock market.

What Are a Few Common Ways to Use Life Insurance for Wealth Management?

For your retirement planning: Life insurance provides your loved ones with a tax-free death benefit upon your passing. When you work with a financial professional to design your policy, preferably with one who works with other professionals in your industry, your permanent life insurance can create an asset for enhancing your retirement strategies while providing an additional stream of tax advantaged income when needed.

The accumulated cash value of your permanent life insurance policy will grow tax-deferred, and build an asset in a tax-favorable manner, simply by paying your premium and keeping the policy in force. You can also access the policy’s cash value with tax-favored distributions when needed either before retirement, or during it.

Can Permanent Life Insurance Provide Stability During a Volatile Market?

When the stock market performs poorly, inheritance that you plan to provide for your loved ones will be greatly reduced. To protect against this volatility, your financial professional might suggest using a small percent of your income to fund your life insurance policy, which will in turn protect you against an underperforming market.

How Does Permanent Life Insurance Help Maximize Wealth Transfer?

Permanent life insurance is an efficient way to distribute assets to a spouse, child, or even a charity of the policy holder’s choice. When used in conjunction with a will or trust, permanent life insurance can help increase the amount you pass to your heirs. In addition, if your tax professional anticipates that your income and estate taxes will substantially increase in the near future, permanent life insurance will allow you to transfer wealth into a shelter that protects your assets from higher taxation.

Can I Use Permanent Life Insurance for Estate Planning?

For individuals with business or real estate assets, it is often complicated to sell and transform these illiquid assets into cash in a timely manner. However, permanent life insurance is an asset that can provide immediate liquidity to help cover estate taxes.

Can I Use My Permanent Life Insurance for Long-term Care Needs?

Depending on the type of policy you have, and how it is designed, you may be able to receive an advance on your permanent life insurance policy’s death benefit if you are terminally ill, are incapable of performing daily living activities, or if you require long-term care services for an extended period of time. Some permanent life insurance policies allow you to use accumulated funds to self-insure any future long-term care needs.

How Can Permanent Life Insurance Be Used During My Retirement?

During your retirement, your income will come from any number of investment accounts that you have put in place during your career, and they will be either fully or partially taxed. Using a combination of permanent life insurance with other types of investment accounts will allow you to use tax-free loans from the cash value in your policy for supplemental income while preserving assets and minimize taxes. At this point you will also be drawing non-discretionary income from Social Security and taking your required minimum distributions from taxable retirement funds. The income that you will be receiving from Social Security will fill your lower income tax brackets. This will allow you to begin supplementing your income from the cash value in your permanent life insurance, which is tax-free. It’s important to note that permanent life insurance assets inside your policy won’t increase the tax on your Social Security income.

What Do I Need to Know to Get Started?

Permanent life insurance can be a valuable asset when building and protecting the wealth that you will accumulate during your career, especially when it is a vital part of your overall financial planning strategy. If you want to see how permanent life insurance will fit into your own goals and objectives, consult with a financial professional who specializes in your industry today. The earlier you start, the better off you will be in the long run.

Get started today and take the first step toward building a safe and secure future for your family. Contact Glenn at WealthScope Financial for your no-cost consultation. www.wealthscopefinancial.com/contact

This post is for informational purposes only and should not be considered as specific financial, legal or tax advice. Depending on your individual circumstances, the strategies discussed in this presentation may not be appropriate for your situation. Always consult your legal or tax professionals for specific information regarding your individual situation.