3 Ways To Use Life Insurance For Protection From Taxes
Life Insurance isn’t just for protecting your family when a breadwinner passes away unexpectedly. When you understand the special strengths of different types of life insurance policies, you will be able to choose the right one to help you defer unnecessary taxes or even avoid them all together. Check out the 3 tips below to see if a specialty life insurance policy would help your family.
Grow Tax Free Income
During earning years, begin growing retirement income by overfunding a permanent live insurance policy. Choosing a policy that offers indexed funds will protect your investment from losing ground in bad market conditions. When you reach retirement age, take advantage of interest free loans to draw non-taxable income. When you pass away, the loans are satisfied by the policy value.Create a Legacy
A guaranteed universal life policy is usually the most economical way to share the financial successes of your life with children or grandchildren. Life insurance usually pays beneficiaries before other assets in the estate. Having cash in hand while the estate is being processed can ease financial worries during what is typically many months of stressful paperwork. The income is usually tax free whereas other inheritance may not be and can help the beneficiaries handle estate-related tax burdens.NOTE: For those receiving Required Minimum Distributions (RMDs) consider buying life insurance to transfer the family wealth to the next generation.
Reduce Tax Burdens in Retirement
Before those Required Minimum Distributions (RMDs) begin at age 72, consider moving money you aren’t going to need for retirement into a single premium guaranteed universal life plan. Lowering the value of tax deferred accounts lowers RMDs which means less taxable income. The money transferred to life insurance will still be available for emergencies. It will also protect heirs from taxes since death benefits are typically non-taxable.Next Steps:
If you think one of these strategies might work for you, set a time to work with one of our experts. You will be able to quickly compare different options and clearly understand how you can take advantage of unique benefits.To discover more about how different types of insurance can help you, subscribe to our newsletter.