Susan D. Marshall, CLU®, ChFC®, RICP®
Amanda and Jeramy are no strangers to success. Both have thriving businesses that they have built from the ground up—Amanda runs a high-end interior design firm, and Jeramy leads a cutting-edge tech startup. They take pride in their accomplishments, but as their wealth grows, so does the weight of the decisions they need to make about their future.
They find themselves in uncharted waters when it comes to protecting not just their businesses but also their family legacy.
They’re concerned about taxes, worried about protecting their legacy, and frustrated by the endless options they must choose from. One solution which I stumbled upon early in my career is insurance. It is often overlooked, ignored, and dismissed.
I encourage you to reconsider how it is the cornerstone, a secret weapon, a powerful tool for transferring wealth.
Let’s take a deeper dive into four key ways that insurance can work for you and your loved ones, ensuring a smoother, more efficient transfer of wealth.
Four ways you can use insurance to transfer wealth
Insurance can play a vital role in your wealth transfer plans. This month I’d like to delve into four of these tactics a little further.
Insurance can be used to…
1. Create lifetime income for yourself. The general consensus among economists is that using annuities as a portion of your retirement is one of the most efficient methods of distributing income in retirement. They are a unique insurance product. Why? Because annuities can provide guaranteed lifetime income for you. This helps you plan for consistent cash flow in retirement, eliminating the need to rely solely on your other assets. With this approach you gain more flexibility to allocate other resources for legacy planning, such as through trusts or direct gifts.
2. Establish a tax-efficient way to transfer wealth. Answer me this: Which would you rather inherit, a million dollar life insurance policy or a million dollar 401K that has never been taxed? Life insurance policies are uniquely suited for transferring wealth tax-efficiently. This is because they often bypass estate taxes and provide heirs with a death benefit that isn’t included in the taxable estate. This is especially the case when the insurance policy is held within an irrevocable life insurance trust, which keeps the policy outside the taxable estate. This is a great way to ensure your heirs receive more of the intended wealth.
3. Protect assets and your family legacy. You can use life insurance to protect your business and personal assets from creditors and legal claims, helping to secure your family’s financial legacy. Life insurance can also allow for structured payouts to your heirs, ensuring responsible management of assets over time.
For example, in many states, a life insurance policy’s cash value and death benefits are shielded from creditors. If you own a business, this protection can help safeguard your personal wealth that might otherwise be exposed to claims related to business liabilities.
4. Fund philanthropic goals. Many business owners use life insurance policies as a source for funding charitable gifts, whether through a donor-advised fund or a family foundation. By directing a policy’s proceeds toward philanthropic goals, you can support causes that reflect your values, leaving a lasting impact.
As your financial advisor, my education and experience make me extremely well-equipped to help you integrate insurance into your wealth transfer plans, balancing income needs with tax-efficient, protective strategies. If you want help adding meaningful depth to your legacy, aligning both financial security and values across generations, give me a call. I’m here for you.