ESTATE & GIVING
A life insurance policy could help protect your estate while ensuring your heirs have the liquidity they need.
You might only think of life insurance as a way to provide financial assistance to loved ones after your passing.
Here’s what you may not have considered: Incorporating a life insurance policy into your estate plan could help mitigate potential complications for your heirs by ensuring they have the liquidity needed to pay estate taxes when the time comes.
Consider Arkansas chicken tycoon Don Tyson, who helped build Tyson Foods. Upon his passing on January 6, 2011, Don left behind $1 billion to his heirs. His death came just six days after the return of a 35% federal estate tax, which had essentially been 0% for anyone who died in 2010 through the Economic Growth and Tax Reconciliation Relief Act of 2001. According to Forbes, had Don died just six days earlier, the estimated tax bill from his estate could have been lower by as much as $350 million.
While not everyone has to worry about passing down a $1 billion inheritance, changes in tax laws could have an unfavorable impact on your beneficiaries. That’s why you should consider incorporating a borrowing strategy into your estate plan. You’ll just need to ensure you meet the necessary criteria, which can include factors like having a minimum amount of investable assets and net worth.
The step-by-step process
Taking out a permanent life insurance policy can enable your heirs to pay estate taxes with the proceeds from the policy, which would be held in a trust, separate from the rest of your estate. You can then use financing to pay for the policy’s annual insurance premiums.
Here’s a step-by-step breakdown of how the process works:
Breaking down the benefits
Incorporating a permanent life insurance policy into your estate plan offers several benefits:
An option worth considering
While life insurance premium financing doesn’t make sense for everyone, it could be an effective strategy to enhance your estate plan and better protect both your current financial situation and your heirs’ situations in the future.
Reach out to your advisor to learn more about your premium financing options.
Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.