Tuesday, August 19, 2014
Monday, August 18, 2014
A Fresh Look at Today’s Whole Life Insurance
A
Fresh Look at Today’s Whole Life Insurance
The
possibilities might surprise you
As
children, most of us were read stories designed to teach us about life. Among
the most popular of those stories was the one about the race between the
tortoise and the hare. As the story
goes, the slow and predictable tortoise had agreed to a race against the fast yet
unpredictable hare – a race he was not expected to win. Come race day, however,
the predictable tortoise – in unpredictable fashion - lumbered across the
finish line first, leaving the hare far behind in the dust. The life lessons to
be learned: “never judge a book by its cover” and “slow and steady wins the
race.”
Now
let’s consider another story, this one about a race between people trying to
build a secure financial future and some fairly intimidating opponents: time, discipline,
and consistency. Can we look for a lesson here from the tortoise and the hare? We
can. If we liken today’s whole life insurance policies to the tortoise, with steady,
if predictable qualities, we might be surprised to discover just how often that
age old story repeats itself. We might also discover how many of us are still ‘judging
the book by its cover’ when it comes to choosing life insurance to pursue our
financial goals.
Today’s
whole life insurance contracts provide much more than just a death benefit and predictable
cash value accumulation. Indeed, they have become fairly versatile financial
tools designed to meet a number of needs and objectives. Let’s consider just a
few:
Protection of assets
Of
course, the primary feature of whole life insurance is its income tax-free
death benefit. In the event of an early or unexpected death, life insurance
proceeds can be used to self-complete a retirement savings program, pay for a
child’s college education, buy out a deceased partner’s share of a business,
pay off a mortgage, provide ongoing income to a spouse or family member, and
generally help to ensure the financial stability of loved ones – especially if
the “race” to financial security is cut short by premature death. Minus the
relief that life insurance brings, thousands of homes, businesses, and
retirements would be lost each and every year.
Asset
Accumulation and Retirement Income Options
Secondary to the death benefit, but for
many people equally as important, is the accumulation of cash values permanent
life insurance provides. Slow, steady, and predictable at first – tortoise-like
one might even say - over the course of ten, twenty or thirty years, life
insurance cash values, especially given their tax-deferred accumulation, can
grow substantially. What’s more, most whole life policies offer guaranteed cash
values[1]
which can be borrowed from the policy at retirement to supplement other sources
of income.[2]
Of course, they can also be borrowed to help children pay for college, to meet
unexpected emergencies, or to take advantage of opportunities.
Business
continuity
According to a recent study, less than
35% of family-owned businesses survive to the second generation.[3]
Why is this? Because while many business owners have taken the time to spell
out how their business will be transferred, they have neglected to plan for how
the transfer will be funded. When a business owner dies, the other owners
generally get the first option to buy his or her shares. And even though
business interests are often willed to surviving family members, many buy-sell
agreements include the stipulation that surviving family members, if not
previously involved in the day-to-day business operations, must sell their
interest to surviving owners. The cash received for this interest generally
helps the family of the deceased meet its financial obligations while leaving
the business in the hands of people best qualified to run it.
There are basically three methods for
funding a buy-sell agreement: self-funding, borrowing, and life insurance. In a
self-funded buy-sell agreement, the surviving owners can either pay for the
business interest outright or through an installment plan. In reality, however,
many surviving owners don’t have the ready cash. Borrowing can be equally
risky, especially if interest rates are high or, if upon learning that one of
the principals has died, lenders become hesitant to loan. Life insurance, on
the other hand, can be an efficient (and possibly tax-deductible) method of
providing the money when it is needed.
Estate
preservation
Today’s estate taxes can consume a
considerable percentage of a deceased person’s total assets. And while estate
taxes don’t kick in until the value of an estate reaches $5.25 million (at 2013
rate), when you factor in the value of a large home or business, a significant
number of estates do exceed this amount[4].
An alternative to liquidating a business or selling off estate assets in order
to pay those taxes is often the purchase of life insurance in the amount of the
estimated tax liability calculated by your tax professional. There are a number
of strategies which can be used to keep the proceeds from the policy out of the
deceased’s estate, while simultaneously reducing the size of the estate for tax
purposes. (A qualified estate planning attorney can review these strategies
with you.)
If you’re among those who are concerned
about their future financial security, it may be time to give today’s whole
life insurance policies a second look. They offer protection of assets, a potentially
ready source of cash at retirement2, and protection for loved ones should
your “race” be cut short. So don’t judge the book by its cover - find out how today’s
whole life insurance can help you succeed in the pursuit of financial security.
This information is not intended as tax
or legal advice. Please consult with your Attorney or Accountant prior to
acting upon any of the information contained in this correspondence.
The views and
information contained herein have been prepared independently of the presenting
Representative and are presented for informational purposes only.
[1]
Guarantees are dependent on the claims paying ability of the insurer.
[2] Loans
and withdrawals will reduce the policy’s cash value and death benefit. If the
policy lapses with an outstanding loan, taxes may be owed on that portion of
the loan that exceeds the amount of premiums paid in.
[4] Estate
tax rates are subject to change at any time. The 2013 federal estate tax
exemption is $5.25million; estates with taxable values in excess of $5.25 are
subject to a top estate tax rate of 40%. An estate’s “taxable value” is its total value
minus the exemption and all other applicable deductions.
Wednesday, August 13, 2014
Charitable Giving Using Life Insurance
Many of us have charitable objectives. We would like to repay society for the
blessings we've received and, at the same time, fulfill a desire to “give back”
to those who have given us so much. But
many of us may feel somewhat frustrated—having the desire to make substantial
gifts and yet feeling that our resources will not permit it. The common perception is that any meaningful
charitable giving must be left to the wealthy. This is not necessarily so.
There is a method of giving that provides the opportunity
to do far more for a charitable organization than you might think possible,
even if your financial resources are limited.
The method is charitable giving using life insurance, and it is
effective, simple to accomplish and beneficial to you as well as your
designated charity.
To begin the process, you need only apply for the insurance
policy and pay the premiums. It is not
necessary to set up a trust fund with its associated expenses, unless you want
to do so. The gift does not require
constant attention as other types of investments may. There are a variety of ways to set-up a
charitable gift using life insurance:
· You may give a gift that becomes
self-completing. Life insurance can provide for a
self-completing gift in the event of your death or disability.
· You may give a bequest at death. The proceeds
of the policy will be paid to your charity free of any federal estate tax. This will be true whether you own the policy
or the charity owns the policy.
· You may continue to own the policy, and
name your favorite organization as beneficiary. If you are
concerned that your family’s circumstances may change in the future, you may
name the charity as “revocable” or “contingent” beneficiary and still retain
flexibility and control. The policy’s
proceeds will be passed free of both gift and estate taxes.
· You may give an existing policy. You may have
several insurance policies, each purchased at different times in your life to
satisfy a specific need at that time.
Some of those needs may no longer exist (e.g., home mortgage or
children’s education). Your gift of that
policy to charity allows you to take an income tax deduction for the amount of
the policy’s fair market value (approximately the policy’s cash value) in the
year you transfer the policy. Any future
premiums paid are also income tax deductible.
· You may give policy dividends. Life
insurance policy dividends received in cash can be donated to charity. This is an easy, economical way to make
charitable gifts and generate income tax savings.
Charitable giving using life insurance is both beneficial
and a favored means of making charitable contributions for a number of reasons:
· The death benefit going to your favorite
charity is guaranteed as long as premiums are paid. This means that the charity
will receive an amount which is fixed in value. (Guarantees are dependent upon
the claims-paying ability of the insurance company
· Life insurance provides an amplified gift
that can be purchased on the installment plan.
Through a relatively small annual
cost (premium), a large benefit can be provided for your charity. A large gift can be made without impairing or
diluting the control of your family business interest or other
investments. Assets earmarked for your
family can thus be kept intact.
· Life insurance is a self-completing gift. If you become
disabled, the policy can remain in full force through the waiver of premium
rider. Even if death occurs after only
one premium payment, the charity is assured of its full gift. Additionally, the
death proceeds can be received by your designated charity free of federal
income and estate taxes, probate and administrative costs and delays, brokerage
fees, or other transfer costs.
· Because of the contractual nature of a life
insurance contract, a large gift to charity is not subject to attack by
disgruntled heirs. Life insurance proceeds also do not run afoul
of the so-called mortmain statutes which prohibit or limit gifts made within a
short time prior to death.
· A substantial gift may be made with no
attending publicity. Since the life insurance proceeds paid to charity can
be arranged so that they will not be part of your probate estate, the proceeds
can be paid confidentially. Of course,
publicity may be given if desired.
If you've ever wondered how you might "give something
back", or felt drawn to support a particular charity, one of the most
affordable and beneficial ways, is through the use of life insurance.
Monday, August 11, 2014
Be my guest for lunch or dinner in August for Money 101!
August Wine, Women & Wealth Dates
| Wine, Women & Wealth | August 20 - NOTE NEW DATE |
Rancho Bernardo |
Bernardo Winery 13330 Paseo Del Verano Norte San Diego, CA 92128 Register here: http://goo.gl/BIjRkd |
6pm to 8pm |
August Money 101 Dates
| Event | Date | City | Location | Time |
| Money 101 | August 26 |
La Mesa |
Sammy's Woodfired Pizza
8555 Fletcher Pkwy
La Mesa, CA 91942
Register here: http://goo.gl/9Pu4Yh
|
6:30pm |
| Money 101 | August 27 |
San Marcos |
The Broken Yolk
101 South Las Posas Rd.
Register here: http://goo.gl/f7mjSK
|
Lunch Express 12pm to 1pm |
| Money 101 | August 27 |
San Marcos |
Old Spaghetti Factory
Register here: http://goo.gl/Syp9oq
|
Tuesday, August 5, 2014
Monday, August 4, 2014
Friday, August 1, 2014
Aug Wine Women and Wealth Dates, be my guest!
August Wine, Women & Wealth Dates
| Wine, Women & Wealth | August 4 | Carlsbad | Hera Hub Carlsbad 5205 Avenida Encinas Carlsbad, CA 92008 Register here: http://goo.gl/BlqICC | 6pm to 8pm |
| Wine, Women & Wealth | August 5 | San Juan Capistrano |
Rancho Capistrano Winery
26755 Verdugo St
Register here:Suite 100 San Juan Capistrano, CA 92675 http://goo.gl/jn8UiQ | 6pm to 8pm |
| Wine, Women & Wealth | August 6 | La Mesa | San Pasqual Winery 8364 La Mesa Blvd. La Mesa, CA 91941 Register here: http://goo.gl/uhwH7h | 6pm to 8pm |
| Wine, Women & Wealth | August 27 | Rancho Bernardo | Bernardo Winery 13330 Paseo Del Verano Norte San Diego, CA 92128 Register here: http://goo.gl/BIjRkd | 6pm to 8pm |
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