5 Ways to Optimize Your Estate Planning With Insurance
Insurance is an important component to any estate plan, and it can be key in ensuring that your estate plan is tax-efficient. Talk to your investment advisor or accountant to find out if the following insurance options make sense for you.
1. Insure the Tax Liability On Your Investments. If you take a look at the cash value of the portfolio you have been growing all these years, you can be certain that not all of that will be passed onto your loved ones upon your death. The government will take their share leaving whatever is left to your beneficiaries. Depending on the value and types of investments, the taxes paid on your estate can be hefty. Working with your investment or tax professional, reasonable projections can be made about the amount of taxes that would be due. Purchasing a life insurance policy that will cover your anticipated bill can help to ensure that the value of your estate remains intact.
2. Insure the Tax Liability on Your Cottage. If you own a second home or a cottage, this can have a considerable impact on the amount of taxes due upon death. Unlike your primary residence which can be transferred to your children tax-free, second homes can result in significant tax liabilities that your beneficiaries will need to cover. Purchasing a life insurance policy that will cover the taxes incurred from the property's capital gains may be a smart way to protect the your estate.
3. Move Savings into an Estate Bond. It may be beneficial to consider insured estate transfers or estate bonds as a strategy to protect the value of your estate. Money is transferred from accounts that are exposed to taxes on their growth, into a life insurance policy that is exempt from growth taxes. This will allow your investment to grow tax-deferred, and your beneficiaries will not pay taxes on the proceeds.
4. Purchase an Insured Annuity. It is possible to combine a prescribed life annuity contract with an exempt life insurance policy. This can result in a probate free rollover to your beneficiaries. The prescribed life annuity contract provides a steady and guaranteed tax-efficient stream of income, the life insurance can be used to protect your principle, and a death benefit may be paid that is equivalent to the cost of the annuity. The strategy has the added benefit of maximizing your after tax income while you are still alive. If your beneficiary is a charity, this strategy can provide even greater tax efficiency.
5. Consider a Cascade Plan. If you already invest in a tax-advantaged life insurance policy that insures your adult child's life with your grandchild as the beneficiary, ownership of the policy can be transferred to your adult child after your death without any tax liability on the policy's cash value growth. Your adult child can access that cash value or keep the policy intact and transfer it to your grandchild tax-free upon their death.
Speak to your investment advisor or accountant to find out if these strategies can work for you
1. Insure the Tax Liability On Your Investments. If you take a look at the cash value of the portfolio you have been growing all these years, you can be certain that not all of that will be passed onto your loved ones upon your death. The government will take their share leaving whatever is left to your beneficiaries. Depending on the value and types of investments, the taxes paid on your estate can be hefty. Working with your investment or tax professional, reasonable projections can be made about the amount of taxes that would be due. Purchasing a life insurance policy that will cover your anticipated bill can help to ensure that the value of your estate remains intact.
2. Insure the Tax Liability on Your Cottage. If you own a second home or a cottage, this can have a considerable impact on the amount of taxes due upon death. Unlike your primary residence which can be transferred to your children tax-free, second homes can result in significant tax liabilities that your beneficiaries will need to cover. Purchasing a life insurance policy that will cover the taxes incurred from the property's capital gains may be a smart way to protect the your estate.
3. Move Savings into an Estate Bond. It may be beneficial to consider insured estate transfers or estate bonds as a strategy to protect the value of your estate. Money is transferred from accounts that are exposed to taxes on their growth, into a life insurance policy that is exempt from growth taxes. This will allow your investment to grow tax-deferred, and your beneficiaries will not pay taxes on the proceeds.
4. Purchase an Insured Annuity. It is possible to combine a prescribed life annuity contract with an exempt life insurance policy. This can result in a probate free rollover to your beneficiaries. The prescribed life annuity contract provides a steady and guaranteed tax-efficient stream of income, the life insurance can be used to protect your principle, and a death benefit may be paid that is equivalent to the cost of the annuity. The strategy has the added benefit of maximizing your after tax income while you are still alive. If your beneficiary is a charity, this strategy can provide even greater tax efficiency.
5. Consider a Cascade Plan. If you already invest in a tax-advantaged life insurance policy that insures your adult child's life with your grandchild as the beneficiary, ownership of the policy can be transferred to your adult child after your death without any tax liability on the policy's cash value growth. Your adult child can access that cash value or keep the policy intact and transfer it to your grandchild tax-free upon their death.
Speak to your investment advisor or accountant to find out if these strategies can work for you
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