Some people don’t have the habit of reviewing their life insurance policies. But bear in mind that an insurance could be a vital part of your financial strategy or estate plan.
You can buy a life insurance policy and make your spouse or children as beneficiaries. Business owners can also use a buy-sell agreement funded with an attached life insurance so that surviving owners may buy the company’s interest in case of a deceased partner. In the same token, key-person insurance assures business aid when one of the core employees passes away.
However, there is a downside to this. Life insurance proceeds form part of your taxable estate and your beneficiaries may be heavily taxed when you pass away. One alternative around this law would be to allow your children or other beneficiaries to own your policy. You can give gifts to your kids for the acquisition of the insurance - it’s like pooling their money and buying the policy for you. Another way you can remove the proceeds of your life insurance from your taxable estate is to get irrevocable life insurance trust.
Life insurance can help you build wealth. It can also be useful for employee benefits, business continuation, education planning, retirement planning, and estate planning.
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