The Tax Benefits of Life Insurance

First and foremost, life insurance can provide significant tax benefits upon death. The death benefit the policy’s beneficiaries receive is tax-free and not subject to federal or state income taxes. Additionally, life insurance proceeds are not subject to probate, which can save both time and money and quickly pass to heirs.

However, life insurance’s tax benefits continue. Life insurance can be used to transfer assets to future generations without incurring gift or estate taxes. By setting up an irrevocable life insurance trust (ILIT) strategy, individuals can remove the value of their life insurance policies from their taxable estates. The death benefit paid to the trust’s beneficiaries may not be subject to either gift or estate taxes.

Life Insurance as Part of Business Planning

Life insurance can also help business owners lower their tax burden since premiums are deductible. Critical person insurance, also known as key man insurance, is a type of life insurance policy taken out by a business on the life of a key employee or owner. In the event of their death, the company receives the death benefit to help cover any financial losses or expenses incurred due to the loss of that individual. The death benefit is not taxable, making it an asset for the business.

Another way that business owners can use life insurance for tax planning is through buy-sell agreements. Buy-sell agreements outline what can happen to a business in the event of an owner’s death or disability. In these situations, the remaining business owners can use the life insurance proceeds to buy the deceased or disabled owner’s share of the business, providing independence for both parties. Again, the death benefit received is not taxable, saving the company from significant tax liabilities.

In conclusion, HNW individuals have many options for using life insurance as a tax planning tool. From minimizing income and estate taxes to transferring wealth to future generations and preserving their businesses, life insurance offers numerous benefits that may significantly lower their tax burden. Working with financial and tax professionals is essential when considering life insurance as part of your overall tax strategy to thoroughly understand the pros and cons outlined in this article.

Sources:

https://www.investopedia.com/articles/personal-finance/092315/7-reasons-own-life-insurance-irrevocable-trust.asp

https://www.forbes.com/advisor/life-insurance/life-insurance-for-business-owners/

https://www.investopedia.com/articles/pf/07/permanent_life_insurance_taxes.asp

Important Disclosures:

This material contains only general descriptions and is not a solicitation to sell any insurance product, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice, you should consult an insurance professional. You may also visit your state’s insurance department for more information.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by Fresh Finance.

LPL Tracking #552474

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What is Life Insurance?

When life insurance is purchased, a legally binding contract is formed between the policy owner and the insurance company that is meant to provide a sum of money paid to one or more beneficiaries in the event the insured individual dies.

There are many different types of life insurance depending on consumers’ wants and needs as well as their short- and long-term goals. One of the significant decisions a prospective policyholder must make is whether to buy term (temporary) or permanent life insurance. Multiple factors come into play with both types of insurance, such as which would work for your situation or whether you want both simultaneously. You may want to discuss these options with a financial professional who can help you align your policies with your financial goals. To get started, it might be helpful to consider the general differences between the two types of life insurance:

• Term Life Insurance – Temporary and designed to last a specified number of years, and then it concludes. The terms are typically 10, 20, or 30 years. You choose the term that works for you when you purchase a policy. This type of life insurance generally costs less than permanent life insurance.
• Permanent Life Insurance – Typically spans your entire life and has a cash value component you can use if necessary. This type of life insurance is more expensive than term life insurance.

What is Cash Value?

Cash value associated with life insurance could be considered an investment depending on your needs. At some insurance companies, a portion of the premium you pay gets put into a cash savings account. As long as you make your payments, you can access the cash value while you are alive via withdrawal, loan, or policy surrender. While money sits in a cash value account, it can then earn interest potentially tax-free. However, it is not guaranteed and, in some cases, you may owe taxes on the cash value. For example, if you withdraw on any gains, like dividends, they will most likely be taxed as ordinary income, but you are generally allowed to withdraw up to the amount of the total premiums you have already paid into the policy without owing taxes.

If the option of the cash value account is something that interests you, consider consulting a financial professional before making any financial decisions. Their expertise can help you understand the potential benefits and risks and guide you in making informed financial choices.

How are Payments Structured?

The policyholder pays regular premiums over time to keep the policy active. Payments are generally made monthly; however, many insurers also provide options to pay quarterly, semi-annually, or annually.

What is a Policy Rider?

When you hear the term “riders,” when discussing life insurance, these are the extra options a policyholder can purchase to enhance their life insurance policy, such as:

• Guaranteed Insurability Rider – This benefit add-on allows you to increase the coverage of your life insurance policy without another medical examination.
• Waiver of Premium Rider – An add-on that may pay or waive future life insurance premiums should you become disabled and can’t pay due to a severe illness or injury before a specific age.
• Long-Term Care (LTC) Rider – Should the insured find it necessary to be in a nursing home or receive home care, this benefit provides monthly payments. Long-term care insurance can be purchased individually; however, insurance companies do provide the option for riders that pick up your long-term care costs.
• And several others.

Where Should I Begin?

Life insurance can get complicated, and decisions you make now could impact you in the future. It is critical that you understand what type of life insurance would work for you and your family, and your financial goals. Even knowing the fundamentals, there are still many nuances within the different life insurance policies that could affect you and your financial future, so consider scheduling a consultation with a financial professional today.

Important Disclosures:

This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.

Riders are additional guarantee options that are available to an annuity or life insurance contract holder. While some riders are part of an existing contract, many others may carry additional fees, charges and restrictions, and the policy holder should review their contract carefully before purchasing.

Using withdrawals and loans on a life insurance policy may reduce the policy’s death benefit.

This article was prepared by LPL Marketing Solutions

LPL Tracking # 598143

Sources:

Life Insurance: What It Is, How It Works, and How To Buy a Policy

Term Life Insurance | Bankrate

Is the Cash Value of Life Insurance Taxable? | Aflac

What is a Life Insurance Premium and How Does it Work? | Bankrate

The post Life Insurance Simplified: Understanding the Fundamentals appeared first on Choice Bank.

1. Ensuring the Business Will Continue

One of the biggest reasons small business owners purchase life insurance is for the continued survival of their business after their death. When a small business owner passes, finding people to replace their responsibilities and manage all of the costs of succession may be an unnecessary struggle.

A life insurance policy will help your business to find a suitable replacement for your duties, help pay off business debts to improve company cash flow and provide the company with the funds to handle unexpected expenses that may come up. If you have a life insurance policy with a cash value, you will also have the ability to tap into those funds if the business is struggling. This is an added benefit many life insurance policies may bring.

2. Satisfying a Partnership Agreement

You probably have a partnership agreement if you own a small business with others. These agreements plan for the event of death or disability of one of the partners. In most agreements, the remaining partners will be able to buy out the shares of the partner who passed or became permanently disabled.

Even when business is good, it may be difficult for the other partners to buy the shares from the survivor’s family, depending on their equity. The life insurance policy will often be used to buy these shares from the deceased partner’s heirs.

3. It May Be Required for a Loan

Suppose you fund your business with a small business loan or have taken one out to gain additional capital. In that case, the bank may require a Buy/Sell agreement and life insurance policy for the business owners that are guaranteeing the loan.

While this is not always a requirement and will depend on the loan amount, the bank, and their underwriting requirements, it may be expected if the lender suspects the business may struggle if the owner were suddenly gone. Essentially, the bank will want to ensure that their debt will be covered in the event of your death, which means the policy will typically need to be a larger amount than the loan debt if required.

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual or business owner. To determine which insurance product(s) may be appropriate for you, consult your financial professional prior to purchasing.

This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #1-05361929

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Is My Coverage Up-to-Date?

To start, Judy may want to consider whether her original reasons for purchasing her policy are still applicable. She may also evaluate any additional needs. For instance, when Judy initially purchased her policy, she was newly married and owned a modest home. Now Judy and her husband, Jim, have four children and a much larger home. Is Judy’s existing policy appropriate for her new circumstances? She may need additional life insurance to help cover a larger mortgage, pay college expenses for four children, and contribute to her family’s financial future in the event of her death.

If Judy’s existing policy is term insurance, she may want to consider converting it to a permanent contract. Permanent insurance contains a cash value component that offers the potential for tax-deferred accumulation, as well as the same death benefit features of term insurance. In the future, the cash value could be accessed to help supplement retirement income needs. Keep in mind that withdrawals and loans taken against a policy’s cash value could reduce the death benefit, increase the chance that the policy will lapse, and may have tax consequences.

Have My Beneficiaries Changed?

Currently, the primary beneficiary of Judy’s life insurance policy is her husband, Jim. If Jim were to predecease Judy, the policy currently names Judy’s nephew as a contingent beneficiary. However, now that Judy has her own family, she may choose to update her policy’s beneficiary arrangement to name her children as contingent beneficiaries instead of her nephew. In addition, if Judy and Jim eventually set up a living trust, a legal professional may suggest naming their trust as the policy’s beneficiary.

Has My Estate Grown?

Regardless of the type of life insurance Judy owns and the beneficiary she chooses, the death benefit proceeds from the policy will be included in Judy’s estate. As their asset base increases, the family may want to periodically monitor and update their estate planning strategies to help minimize the effects of estate taxation.

Life insurance may play a significant role in solidifying the family finances of couples like Judy and Jim. But as with all financial matters, life insurance policies should be reviewed on a regular basis. Be sure to consult a qualified insurance professional to help you evaluate your present situation and determine an appropriate course of action.

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

This article was prepared by Liberty Publishing, Inc.

LPL Tracking #1-05166341

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Know What You Want—Compare Apples to Apples

Your first step should be to assess your life insurance needs. For instance, do you need $100,000 of coverage or $250,000? Would you be better off with term life or a cash value policy? If you’re buying term life, how many years of coverage do you want? Are there any special features that you want in a policy? How much can you afford to pay in premiums? If you haven’t answered questions like these yet, you probably should before you start comparing policies. Otherwise, you may end up comparing apples to oranges. For example, if you’re torn between a term life policy and a cash value policy, the decision you face isn’t really about two particular policies–it’s more about which type of insurance is best for you.

Detailed policy comparisons make the most sense when you know exactly what you’re looking for. This makes your job easier because you can narrow your choices down to policies that provide the same type and amount of coverage. The more similar the policies you’re comparing, the more accurate and useful your results will be.

Try to Get the Most Bang for Your Buck

Don’t make the mistake of comparing only insurance companies and not policies. Instead, choose a few reputable companies and get price quotes for the coverage you want. Premiums may vary widely among companies for comparable coverage, and even the same company may offer very similar policies at different prices. Should you buy the policy with the lowest annual premium? It depends. When comparing term policies that provide the same amount of coverage for the same period, a simple comparison of premiums may be sufficient. But this is the exception, not the rule.

The premium is an important factor when comparing policies, but often it doesn’t tell the whole story. What you really want is the best overall value for your money. To determine a policy’s true value, you have to dig a little deeper. Carefully read the fine print of each policy you’re considering, and ask lots of questions during sales presentations. A closer look at two or more policies may reveal key differences that would have gone unnoticed. Here are some things to look for and ask about:

• Do policy premiums or benefits vary from year to year? If so, what part of the premiums or benefits is guaranteed, and what part is not?
• If a cash value policy, what are the company’s projections of future cash value? How do those projections stack up against other cash value policies? Are the assumptions in those projections realistic?
• Can you access the cash value through a withdrawal or loan? What restrictions apply? What is the loan interest rate?
• If applicable, is there a guaranteed minimum interest credited on cash values? (Keep in mind that guarantees are subject to the claims-paying ability of the issuing insurance company.)
• What charges and fees are associated with the policy? For example, what surrender charge will you pay if you give up a policy and take out the cash value?
• Can you customize the policy to your needs with options or riders, and at what additional cost? For example, how much extra will you pay for a “waiver of premium in the event of disability or accidental death benefit” rider?

If a more expensive policy has features and provisions that are more favorable to you, it may sometimes be more cost-effective to pay the higher premium. Of course, comparing policies to find good value is also important when the policies you’re looking at all have roughly the same premium.

Run Some Numbers

Depending on how far you’re willing to go, comparing life insurance policies can become a complex numbers game. Insurance professionals use a number of methods to mathematically compare and evaluate policies. Most of these methods are designed to measure the true cost or value of a policy by taking into account factors other than premiums. These may include surrender charges, sales, and administrative expenses, taxes, rates of return on cash values, policy dividend projections, and the cost per $1,000 of pure protection, both guaranteed and projected.

Two cost-comparison methods are widely used in the industry: the net payment cost comparison index and the surrender cost comparison index. The National Association of Insurance Commissioners, a group of state regulators, adopted these indexes to help consumers compare life insurance policies. Most states require insurance sales professionals to run these numbers for you, so be sure to ask for this service if it’s not offered to you. However, these indexes will produce useful results only when you’re comparing similar types of policies.

The advantage of any comparison method is that it can help take some of the subjectivity out of comparing policies. But all of these methods have shortcomings and limitations. Most of them rely on the assumptions and projections of the company that wrote the policy. Some of them apply only when you’re comparing policies with the same premium outlay. Finally, no index tells you everything you need to know about a particular policy. Use the results only to supplement what you learn from reading the policy, from sales presentations, and from other sources.

Get Professional Help—You’ll Be Glad You Did

As you can see, comparing life insurance policies is not for the faint of heart. Doing it properly takes a combination of patience, persistence, and industry knowledge. Few consumers have the resources or expertise to do the necessary work on their own. In fact, it would probably take a full-time staff of experts just to compare and evaluate all of the life insurance policies on the market!

Obviously, such large-scale comparisons are not realistic, but having even one professional on your side can make a big difference. A qualified insurance professional can assess your insurance needs, make sense of complex sales illustrations, and conduct a cost-benefit analysis of similar policies. But don’t just pick any name out of the phone book–shop around for someone who’s qualified and trustworthy. With the right person working for you, you’ll be well on your way to finding a suitable policy that won’t break the bank.

One final word of caution about policy sales illustrations: It’s important to ask lots of questions about these illustrations because some of them can be misleading. For example, the illustrations of some companies are based on unrealistic assumptions about a policy’s future cash value.

Securities are offered through LPL Financial (LPL), a registered broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Investment advice offered through GWM Advisors LLC dba Goss Advisors, a registered investment advisor and separate entity from LPL Financial. Choice Financial Group and Choice Wealth are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Choice Wealth, and may also be employees of Choice Financial Group. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Choice Financial Group or Choice Wealth. Securities and insurance offered through LPL or its affiliates are:

• Not Insured by FDIC or Any Other Government Agency

• Not Bank Guaranteed

• Not Bank Deposits or Obligations

• May Lose Value

Content Provider:Broadridge

LPL Tracking 1-183420

The post Comparing Life Insurance Policies appeared first on Choice Bank.

September is National Life Insurance Awareness month. And while most of us likely recognize that life insurance provides us peace of mind and security, there may be a few things you don’t know.

Life Insurance is Not Just for the Young

Many people – but not enough – will buy life insurance in young adulthood. But life coverage provides some benefits even as you close in on age 60.

Let’s say you’re 57. Consider these four questions before deciding on a type of life insurance.

What Do You Need?

At 57, you are either retired early or close to retirement. Your family most likely depends less on you as your children, hopefully, live on their own, out of the house.

Regardless, you probably still want to provide in part for your family – the reason life insurance remains important. With luck, you suffer from no medical ailments. You easily think your good health will continue forever – but illness happens, and happens more with age.

Other events later in life bring reasons for life insurance too. Many young adults often secure coverage after marrying or having a baby. But the number of American women giving birth in their 40s continues to rise as does the number of men and women waiting longer to marry.

What is Term Life?

Life policy needs vary with your age. A term life policy appeals to many ages, particularly someone 57.

Once a term policy expires, you decide whether to renew it or to let the coverage end. In addition to being cheaper than whole life or other life insurance types, term offers protection against a number of different bad scenarios and sells for several different spans of time. It can, for example, cover a 57-year-old until death.

What are Rates for a 57-year-old?

That’s an impossible question to answer precisely because rates depend on factors aside from your health. If you are a non-smoker who can prove a clean bill of health, you might qualify for a preferred plus rate. This means you’re in the healthiest, less risky group for the insurance company and pay the lowest premiums.

Many providers perform a medical exam as well as obtain a history of your medical records before offering a final quote.

According to Quotacy, the average annual life insurance rates for men are as follows:

Again, monthly rates will vary according to gender, weight, alcohol and tobacco use, health and other factors.

What Coverage Does a 57-year-old Need?

Although some consider pushing 60 late to start shopping for life insurance, it’s never too late. Sooner the better, in fact, as rates increase with age and two decades can quadruple your premium.

Further, the coverage for a 57-year old is not too different from the coverage needed for a 47-year old.

But, just as your financial plan is customized to you and your needs, so is your insurance coverage. You might need less coverage compared to someone ten years younger and you might need more too.

If unsure of what coverage you need, seek the advice of a financial professional. You will save time and money in the short- and long-term (no pun intended).

Insurance gives you peace of mind at a time of life when you need peace most. And like having children and getting married, buying it isn’t just for the young anymore.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.

Please keep in mind that insurance companies alone determine insurability and some people may be deemed uninsurable because of health reasons, occupation, and lifestyle choices.

This article was published by RSW Publishing.

Securities are offered through LPL Financial (LPL), a registered broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Investment advice offered through GWM Advisors LLC dba Goss Advisors, a registered investment advisor and separate entity from LPL Financial. Choice Financial Group and Choice Wealth are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Choice Wealth, and may also be employees of Choice Financial Group. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Choice Financial Group or Choice Wealth. Securities and insurance offered through LPL or its affiliates are:

• Not Insured by FDIC or Any Other Government Agency

• Not Bank Guaranteed

• Not Bank Deposits or Obligations

• May Lose Value

LPL Tracking 01-05034978

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