Life Insurance
Life Insurance policies can be used to:
Preserve Wealth: Proceeds from insurance create the liquidity to pay debts and establish a source of capital to generate income for surviving family members in the event of a tragedy.
Make Charitable Gifts: Instead of being given to the federal government via estate taxes, a portion of your assets and insurance could be used to fulfill charitable intent. Wealth replacement trusts, funded with life insurance, provide benefits to heirs in lieu of the gifted assets.
Pre-Pay Death Taxes/Settlement Costs: Even after you complete your estate planning documents, you still may owe estate taxes. A second-to-die policy can provide the proceeds to pay these federal estate taxes. These taxes vary from 3 percent to 55 percent of a person's estate. The future tax liability can be offset with current dollars, discounting future costs by using life insurance.
Fund a Business Transfer: Business owners often agree to buy out an associate's share from his or her estate. Business buy-sell agreements typically are funded with insurance, which provides the necessary cash flow for this transaction.
Protect Against Key Employee Loss: Key employees are difficult to attract and retain. Their untimely death may cause a severe financial strain on the business. Key employee insurance can provide the business with needed capital to recruit a new partner.
Equalize Inheritances: Passing a valuable business to an actively involved child can create the need to compensate other children. Life insurance can give equal amounts to other siblings who do not have interests in the business.